403b Plan for Educators and Public Servants

403b Plan for Educators and Public Servants

As a teacher, professor, school administrator, or any other public servant, you have most likely been offered the opportunity to invest in a 403(b) retirement savings plan through your employer. Learning the ins and outs of these plans can be very difficult, but the experts at National Educational Services are here to help.

Knowing how much to contribute to your 403(b) plan is a great starting point on your long journey to understanding the entirety of your retirement savings account.

What is a 403(B) Plan? 

The 403(b) retirement plan is a tax-sheltered annuity plan. With this plan, employees and their employers are able to contribute in the same way as one would with a 401(k) plan, but employer participation varies from district to district. Additionally, the 403(b) plan allows for pre-tax contributions and the maximum contribution limit is $19,500 for 2021. 

What is the Difference Between a 403(B) and a 401(K)? 

While there are many differences between the 403(b) retirement plan and the 401(k) retirement plan, the main difference between the two is that the 403(b) plan is only offered to employees of 501(c)(3) organizations. Organizations that fall within this category are public schools, government agencies, and co-op hospitals. Employees of 501(c)(3) organizations may also be able to invest in a 401(k) plan, but the opposite is not true. 

So, How Much Should I Contribute to a 403(B) Plan?  

There is no set answer to this specific question, as the answer varies from person to person. There are many factors that play into how much each person should contribute to their 403(b) retirement plan. One must consider their salary, overall budget, living expenses, current age and intended retirement age, retirement goals, and the maximum contribution limit, in order to determine how much to contribute to the retirement fund. 

403(B) Contributions and Age 

As a young individual who is just starting out in the workforce, you may decide to contribute less money towards your 403(b) retirement plan in the beginning of your career. As time goes on, you can work your way up to making larger contributions as you finish paying off student loans and becoming more financially stable. Because your salary may be lower in the first few years of your employment, it may be wise to wait until your salary is larger before you decide to make larger contributions to your retirement account. 

403(B) Maximum Contributions Limits 

Each year, the IRS determines the maximum amount you are able to contribute to your 403(b) plan. For the year 2021, the maximum amount that one individual can contribute to their own 403(b) plan is $19,500. 

If you are over the age of 50, you can invest an additional $6,500 in “catch-up” contributions on top of the $19,500. If you opt in to the catch-up contributions, you cannot exceed $26,000 in total contributions. 

Additionally, employers may contribute to their employees’ 403(b) plans. The maximum contribution for employers is $38,500, assuming that the employee has maxed out on their individual contributions. Although not all employers offer contribution matching or employer contributions at all, so it is important to check with your employer. 

Assess Your Options with a Retirement Advisor 

If you still feel you may need or want some additional help determining how much you should contribute to your 403(b) plan, contact National Educational Services today to be paired with a trusted advisor.

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