Best States for Teachers Seeking Financial Independence

I’m a big believer that educators can build wealth while doing the work we love. I constantly push back on the myth that educators are doomed to poverty. That said, location matters: salary, cost of living, and retirement benefits all matter. 

There are states where it’s incredibly difficult to get ahead as a teacher and others where being a teacher is actually a benefit. It’s dangerous to pretend that our profession, and its opportunities, are available consistently. That just leads to an equally dangerous myth – that it’s only about will and mindset.

There are ways for a teacher to make more money, but a teacher looking to build wealth must take location into account. So, which state is best for teachers seeking financial independence?

Let’s see if we can answer this question… 

How Did I Decide Which State Was Best?

This is a complex topic. Just as statewide assessments measure only a part of what a student can do, a look at statewide indicators paint an incomplete picture. 

It’s misleading to provide a concrete answer to a question that depends on individual district data. So, I’ve done my best to provide you with some directions to look.

I looked at three primary indicators that are important to an educator pursuing financial independence:

• Income
• Cost of living
• Pension

I’ll go through each indicator, explain what data point I used, and where you can find the background information.

I show each indicator in both chart and map form, sorted into five groups (quintiles). This gives you the range of states that are good, bad, or somewhere in the middle.

Finally, I combine the indicators for all 51 (states and District of Columbia) to create a ranking system. This is intended to point you to states you may want to explore – not to be a “You should move to New York” directive. Every individual and their priorities is different as are each individual district in a state. 

The results are interesting. There are definitely some states with clear advantages for teachers pursuing FI. By the same token, there are some states that should be avoided if finances are your priority. Let’s see what they are.

Income

For income, I looked at two separate metrics: starting salary for new teachers and actual average salary earned in each state.

Average salary is more applicable to in-career teachers, but is ultimately flawed because experience and education levels of the teacher workforce in each state impact the numbers. The first-year number isn’t as applicable to most teachers, but is a straightforward comparison for a career point in time.

Neither is perfect, but looking at both can give you some idea as to which states are better for those looking to earn more.

Average Salary

Data Source: EdWeek: Which States Have the Highest and Lowest Teacher Salaries?

The map above shows the states colored by quintile level. The darker the green the higher the salary. The red are the states with lowest average salary.

Some regional patterns jump out, but average salary is mostly a jumble. States right next to each other land in dramatically different spots. Here’s the full table with salaries:

Starting Teacher Salary

Source: World Population Review: Teacher Pay by State 2020

Starting salary is interesting to compare against average salary. Some of the higher average salary states fall into the 4th and 5th quintiles of starting salary (Oregon and Michigan for example both go from 2nd to 4th). This may indicate either that the salary schedules climb rapidly in those states or the workforces in those states are more experienced or have higher education levels.

New York, California, Hawaii, Maryland, and Massachusetts are in the top quintile of both metrics. Those are higher earning states for sure!

Here’s the full table for your information.

Cost of Living

Source: Missouri Economic Research and Information Center (2019)

Of course, earning is only one side of the financial independence equation – spending is the other. There are definitely huge variations here. For this data, we looked at the cost-of-living index in each state.

The average cost of living is 1.0. Arizona and South Dakota straddle that line. If the index is below 1, it’s a cheaper state to live. If higher than 1, it’s higher.

This map has much clearer geographic trends. One region of the country is almost universally below 1.

Not surprisingly, you’ll see that some of the lower cost-of-living states also had lower salaries in the first section. The reverse is also true – those states I named before as obvious higher earning states show up in the most expensive states. Hawaii in particular boasts a cost-of-living almost twice the baseline!

Now we’re starting to build a more complete picture of the financial benefits and pitfalls of working and living in each state.

Pension

Source: Retirement Reality Check: Grading State Teacher Pension Plans (2017)

Of course, the teacher pension is a critical component of our overall financial plan. Even if you don’t count on your pension, it’s good to know what the pension situation is in each state.

Unfortunately, it is even harder to compare teacher pensions due to the variables and the ever-increasing number of tiers in each state. For this section, I used a report that ranked (and graded) each plan.

I listed the grades – but you’ll note that most got an F. For the comparison, I used the ordered ranking and broke the states into quintiles. Here’s the full list below.

Factors Not Considered – But Still Important

Before we get to the final composite ranking, it’s important to say again that this is just a starting analysis based on a few factors. It gives us a general idea of what states you may want to live and work in as a teacher, but does not capture all the factors.

Here are some of the factors not included in this comparison that would also impact your search for financial independence.

Working Conditions

This is not a financial number. You may believe you can accept any working conditions as long as the other numbers work out. Good for you if so.

I would consider the working conditions in any job I selected. Teaching is unlikely to be a fast path to financial independence, so make sure you don’t choose to work in a district that makes the job miserable. You won’t last.

403b and 457b Options

Teachers can have dual tax-advantaged investment accounts! The 403b and 457b options are pillars of my financial independence plan.

I couldn’t locate a nationwide map of 403b and 457b options. They simply vary too much by state and district. In some districts, the investment options and fees will be so awful the plans are unusable. Other states have state-provided plans with excellent options and relatively low fees. That matters.

Healthcare Benefits / Costs

I don’t think I need to explain how critical these costs are OR how difficult it is to compare from employer to employer. Yet, as you start narrowing your search you’d be wise to do your research.

Ability to Get a Job

The comparison doesn’t include workforce and employment data. State job markets will vary.

Individual District Data

Finally, every statewide source simply provides an overview. In virtually all cases, the numbers and benefits will vary by district.

District salary structures are different. Pension benefits may be different if not provided by a statewide plan. The cost-of-living will vary widely by metro area.

The Best States for Teachers Seeking Financial Independence

Okay, now that we’ve looked at each individual variable (and named the ones not included) it’s time to put them all together.

For this final analysis, I used the rank of each of the four indicators examined. Yes, by including both starting and average wages, income is weighted more heavily. That is intentional, because income is the most challenging part of pursuing financial independence as an educator.

Then, I averaged across the four for each state. This allowed me to rank the states in order from best to worst across the four indicators.

The top 10 best states for teachers seeking financial independence are:

1. Washington
2. Alaska
3. New York
4. Michigan
5. Pennsylvania
6. Tennessee
7. New Jersey
8. Deleware
9. Iowa
10. Maryland

Interestingly, none of these states ranked in the top 20 across every indicator. Each of them though, had three solid areas of performance. Alaska and New York both had three top 10s.

Below, you will find the full list. I’ve also included the data (colored by quintile) so you can review the indicators that are most important to you. (For example, if cost-of-living matters highly to your decision then Alaska and New York’s top 10s don’t matter.)

The final list included some surprises for me. The biggest were Massachusetts slipping into the middle of the pack due to cost-of-living and pension and Colorado showing up second from the bottom. Colorado may be a mecca for the FI movement, but teachers may want to think twice before choosing to work there!

SUMMARY

By reviewing income, cost-of-living, and pensions in each state, I was able to produce a general analysis of the best states for teachers pursuing financial independence.

The rankings are helpful for a quick comparison, but you’d be wise to look more closely at individual districts and metro areas before using it to make any real financial choices. If you are open to moving states, or even just switch school districts, you might improve your finances.

What do you think? Were there any surprises for you? Where does your state rank?