Independent Financial Advisor Tim Hayes Offers Savvy 403(b) Advice From an Objective Perspective
He’s helped educators achieve successful investing outcomes with their retirement planning for over 25 years. And both of his parents happened to be public school teachers.
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A 403b, also known as a tax-sheltered annuity, is one of the best retirement savings vehicles available for educators. It has a tax treatment similar to a 401k plan; employee salary deferrals are invested before taxes and the accounts grow tax-deferred.
403b Vendors Tim Works With:
- Fidelity Investments
- American Funds
- Oppenheimer Funds
- Putnam Funds
- Security Benefit Life (NEA ValueBuilder)
- AXA Equitable
- Aspire Financial
Some of these companies might not be in your plan.
Being an independent financial advisor means Tim has the freedom to choose from the 403b providers available to you and recommend the one best suited to your needs.
403(b)s, Vendors, Financial Advisors, and Educators
Investing Is Risky Business. Give Yourself a Fighting Chance for Success With Your 403b Account
Your 403(b) is potentially one of the best retirement saving vehicles you have. An ongoing relationship with a financial consultant may help you to realize that potential, and help you to avoid impulsive decisions that could have a negative impact on your 403(b) account.
How Much Can I Put Into a 403b?
In 2019 educators can save up to $19,000 and if they are age 50 or older, they can save an additional $6,000.
Some educators with 15 years of service with the same employer might be save an additional $3,000 a year for five years for a total of $15,000.
Educators are also eligible to use a 457 plan which has the same maximum and age fifty catch-up. It also has a much bigger special catch-up that allows some educators to save $37,000 per year the last three years before their normal retirement age.
Can I Change the Amount?
The government doesn’t put limits on the number of times you can change your contribution; however, some employer’s do so we need to check with your plan.
Can I Change the Vendor That I Am Using?
Yes, you can change vendors for your contributions. Most plans also allow you to exchange your existing account balance into a new vendor. However, we must first check if there are any fees or costs in doing so.
What If I Need the Money Before I Retire?
The 403b is a retirement account; thus it has restrictions on how you can get money without a penalty before age 591/2. Some 403b plans do allow participants to borrow a percentage of their account’s value before they retire.
What Happens at Retirement?
At retirement, you have the option of staying in your 403b plan or rolling it over to an IRA. This decision depends on such factors as costs, choices, and control.
Public School Employees Are Eligible for Two Tax-Favorable Retirement Plans
Both Have Catch-op Options
- The 403(b) 15 year catch-up allows some public-school employees with 15 years of service with the same employer to contribute an extra $3,000 a year for five years.
- One problem with this catch-up is any amounts contributed over $18,500 are credited first against the 15-year rule. So, a teacher who is age fifty or over could use up the fifteen-year catch-up without knowing it
- The 457 plan has a larger catch-up. It allows eligible employees to contribute $36,500 a year for three years before they reach their “normal retirement date.
- Your school system provides you with a list of 403(b) companies. ↑
- The 457 is different. The city/town usually provides one company.
- Both give you 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 2018, the basic limit is $18,500 and an educator age fifty or over can save an extra $6,000.
- The IRS, however, allows educators to contribute $18,500 to a 403(b) and a 457.*
- The ability to put in the most pre-tax into two retirement plans is unique to the 403(b) and 457.
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Social Security & Pension from MTRS
Public employees in Massachusetts do not contribute to Social Security; however, many do contribute through other jobs. Also, some have spouses who take part in the Social Security system.
- 1. The windfall elimination reduces any Social Security earned by an educator by about 55%. For example, a retired teacher receiving a pension from MTRS also qualifies for a monthly Social Security benefit of $1,000 might only receive $450 a month from Social Security.
- 2. The offset provision affects Social Security spouse’s or widow’s or widower’s benefits. For example, if a married teacher receives a pension from MTRS of $6,000 a month two-thirds of that amount ($4,000) will be credited against any benefit from their spouse’s Social Security.
- So, if a spouse dies and the retired teacher is eligible for $2,000 survivor benefit from Social Security they would receive none of it because the $4,000 would eat into all of it.
- Very few married people who retire with a pension from MTRS will receive anything from their spouse’s Social Security.
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Want to Find Out More About Your School District?
Tim has already done the work!
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- 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 greatest in a 403(b) and wants to save more money can usually open up a 457 plan.
- 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.