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Retirement Catch-Up Options for Public School Employees

Public school employees, are eligible for two tax-favorable retirement plans. A 403(b) and a 457.

Your school system provides you with a list of 403(b) companies. The 457 is different. The city/town usually provides one company.403b Plan Advisor for Massachusetts Educators

Both provide you with a broad range of investment options

You decide what plan to use and the amount that you want to save before taxes from your paycheck.

In 2019, the basic limit is $19,000, and an educator age fifty or over can save an additional $6,000.

The IRS, however, allows educators to contribute $19,000 to a 403(b) and a 457.

Both plans have unique additional catch-up options

The 403(b) catch-up allows some public school employees with 15 years of service with the same employer to contribute an additional $3,000 a year for five years.

One problem with this catch-up is any amounts contributed over $19,000 are credited first against the 15-year rule. So, a teacher who is age fifty or above could use up the fifteen-year catch-up without knowing it.*

The 457 plan has a much larger catch-up. It allows eligible employees to contribute $37,000 a year for three years before they reach their “normal retirement date.” *

Both provide a tax-friendly opportunity to build wealth and supplement your state pension.


  • The ability to put in the maximum pre-tax into two retirement plans is unique to the 403(b) and 457.
  • School systems should think about eliminating the 15-year catch-up from their 403(b) plan, especially if there is no system in place to track if the catch-up contribution is from it or the age fifty.
  • Any employee who is saving the maximum in a 403(b) and wants to save additional money can usually open up a 457 plan.
  • The SMART Plan defines normal retirement age as age 70 1/2 or such earlier age as selected by the participant.
  • In choosing an alternate Normal Retirement Age, a participant may choose any age that is 1) not earlier than the earliest age that the participant has the right to retire and receive unreduced retirement benefits from the employer’s basic pension plan, and 2) not later than the date the participant attains age 70 1/2.
  • For most, “normal retirement” seems to mean three years before they reach 80% of the salary threshold for MTRS.
  • Remember, if eligible, you can use the 457 catch-ups with the 403(b) plus the age fifty catch-up making it an excellent option for any educator who wants to defer sick buybacks.

These are the opinions of 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.