We know the last thing teachers often have time for is retirement planning. When it comes to planning for retirement, it’s best to have a diversified approach to your investments for retirement and tax planning. EFS Advisors® is experienced in crafting uniques strategies that make 403(b)s, 457(b)s, and annuities work for you.
UNDERSTAND YOUR 403(b) OPTIONS AND HOW BEST TO BENEFIT FROM THEM
A 403(b) is a retirement savings plan designed specifically for public school employees. They work alongside your pension, helping to fill your retirement income gap. Typically, 403(b) contributions are made pre-tax and grow taxdeferred while in the plan, allowing you to stretch your retirement dollars. You only pay taxes when you take it out of the plan. The Roth 403(b), another common plan, works slightly differently. You pay taxes on the contributions up front, but your money grows tax-free and can be withdrawn tax-free. Saving in a 403(b) allows you to:
Take control of your retirement security by contributing directly to a 403(b) savings plan through payroll deductions
Accumulate money on a taxfavored basis, to supplement your pension or another retirement plan
Transfer your savings to other employer plans or into a traditional IRA if you leave your job
OPTIMIZE YOUR 403(b) PLAN
A 403(b) gives you flexibility and control of your retirement savings. Most 403(b) plans allow you to change products within the plan that best match your risk profile. Have retirement savings from a former employer? Most plans allow you to move money from old employers’ retirement plans or IRAs into your 403(b), consolidating your savings into one place. Now might just be the perfect time to roll over your funds.
For most employers, to take advantage of employer matching contributions, you need to participate in their 403b plan. Please contact your employer or financial advisor to find out the specific rules for your employer plan.
When reviewing your employer’s options, you may notice they offer a 457(b) Plan. A 457(b) is a supplemental retirement plan that is tax-deferred meaning you don’t pay taxes on your money until withdrawal. A 457(b) plan offers flexibility to save on a tax-deferred basis, while still having access to your money through loans, and unforeseen emergency distributions if the need arises. If your employer offers both a 403(b) plan and a 457(b) plan, contributing the maximum allowed to both plans can maximize your retirement savings. Our advisors can help guide you through this process and recommend changes to your portfolio.
Even though you may have Minnesota State Retirement System, Minnesota Teachers Retirement Association, Public Employees Retirement Association and/or Social Security, those are fixed incomes and often not enough to support retirees and the risk of inflation during retirement. A tax advantage retirement plan through your employer could make up the difference. The earlier you take control of your future and start saving for retirement, the better.