Tim Hayes Financial Advisor for Teachers and 403b Plan Advisor In Boston

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403b Teacher Retirement

Public school educators, including university professors and administrators, can save more pre-tax than any other public or private-sector employee.

That’s because educators are eligible for two retirement plans with unique catch-up options.

In 2023, educators can save $22,500 into a 403(b) and a 457 plan (Smart Plan). Those fifty years or older can contribute an additional $7,500 to both.

The 403(b) catch-up allows educators with low 403(b) savings who have worked fifteen years with the same employer to save an additional $3,000 per year for five years.

One problem with this catch-up is that contributions over $22,500 are credited first against the 15-year rule. A teacher aged fifty or above could use their 15-year catch-up without knowing it.

The 457 plan has a more considerable catch-up. It allows eligible employees to contribute,000 per year for three years before their “regular retirement date.”

The 403(b) catch-up can be used with the age fifty catch-up and 457 plan. However, the 457 plan catch-up cannot be used with the age fifty catch-up, although the employee could still contribute to a 403(b).

Putting considerable savings into a 403(b) and 457 plan does not reduce your income for the Massachusetts Retirement System calculations.

Not everyone can afford to save the maximum; however, it is good to know that educators have a well-deserved potential benefit.

Your school system provides a list of 403(b) companies. The 457 plan is different. The city/town usually provides one company. Both typically give you a broad range of investment options.

Plan Considerations

• School systems should consider eliminating the fifteen-year catch-up from their 403(b) plan, especially if there is no tracking system when the catch-up contribution starts.
• Any employee saving the maximum in a 403(b) plan and wanting to save more money can open up a 457 program.
• Remember, if you are eligible, you can use the 457 catch-ups with the 403(b) plan, plus the age fifty catch-up, making it an excellent option for any educator who wants to defer sick buybacks.

Finding the Best 403b Companies for Teachers

Since 1990, I’ve been a financial advisor helping educators set up, invest, and service their 403(b) plans.

During this time, I have accumulated knowledge on your retirement system, the social security offset/windfall elimination, 403(b) plans, and other financial issues specific to educators.

Because I am an independent financial advisor and provide flexible payment options (fee-only, hourly rate, or commission), I can work with most of the companies in your school system’s 403(b) plan. (Partial list of companies I work with Fidelity, American Funds, Putnam, MFS, Aspire, Security Benefit, Axa, Oppenheimer).

I can meet you at work either before, during, or after the school day.

These are the opinions of Financial Advisor Tim Hayes and not necessarily those of Cambridge Investment Research. They are for informational purposes only and should not be construed or acted upon as individualized investment advice.