It’s more important than ever to start saving for retirement early in life; this is especially the case for teachers. From shaky grounds on pension payouts to salary restraints, teachers are being encouraged more and more to take their retirement planning in their own hands. To help better examine the importance of educators utilizing their 403(b) plan options, we are sharing three reasons teachers benefit from investing in their employer-sponsored 403(b) plan.
The most obvious reason that anyone, including teachers, should be utilizing their employer-sponsored retirement plan is for savings. Over the past 10 years, the importance of saving has grown exponentially and teachers are especially feeling the push. With the security of pensions sitting on shaky ground in some states, teachers are being encouraged to create their own financial safety net. While some argue that low salaries prevent teachers from saving, financial experts push back using this very reason to fuel the need for educators to think ahead and invest a portion of their income into a their retirement plan.
Retirement plans don’t just allow people to save their own pre-tax money. In fact some of the added benefits that retirement plans provide to employees allow people to grow their accounts by receiving employer match on their investments and/or savings on future withdrawal taxes based on the deferral sources allowed in the plan. Here are just a few of those added benefits:
Some 403(b) plans available to educators allow Roth money which means you get to invest post-tax money now and forgo paying taxes on those monies at retirement. (Note: There are rules around the taxes paid on contributions vs. earnings. For additional information regarding this, contact ADMIN Partners at 856-755-3518)
There are also employers who provide an employer match to the 403(b) plan – meaning you get a percentage of your total investment matched by your employer – did someone say “free money?”
Investing in a 403(b) lets you save more versus using an Individual Retirement Account (IRA) as 403(b) plans hold a much higher contribution limit. For 2019 the contribution limit on a 403(b) Plan is $19,000 whereas the 2019 limit on contributions to an IRA is $6,000.
One common reason those working in education are not investing in their employer-sponsored retirement plan is because they are not aware there is a plan they can utilize. With this in mind, Financial Advisors and TPA firms (like ADMIN) are providing Plan Sponsors with continuous education as it relates to the plan and the eligible employees. This level of education allows teachers to get a better understanding of what their options are and how they can use the plan to prepare for their retirement years. We work hand-in-hand with the plan’s advisor(s) to ensure that each participant of the 403(b) is benefiting from their investments and working towards a secure financial future.