If you’re one of the many pre-K through community college educators here in California, then your retirement is likely connected to CalSTRS – the California State Teachers’ Retirement System.
But even with CalSTRS, you may be wondering if you need to supplement your retirement income down the road. That’s where 403(b) plans can come into play.
Let’s break it all down…
CalSTRS – Benefits, Funding, and Sustainability
CalSTRS is a big deal for California educators like you and me. Let’s look at why:
What you need to know about CalSTRS
- Started in: 1913, so over 100 years of experience under its belt.
- Members: Over 965,000 active and retired educators and their family members. That’s a lot of folks!
- Purpose: It gives disability, retirement, and survivor benefits to us teachers working in California public schools, from pre-kindergarten all the way up through community college.
Programs:
- Defined Benefit Program: Traditional monthly pension payment based on your age, years taught, and pay.
- Defined Benefit Supplement Program: Extra benefits from your contributions and interest earned.
- Cash Balance Benefit Program: For substitute, part-time, and adjunct teachers.
- Pension2: Voluntary 403(b) and 457(b) savings plans.
Funding:
- Contributions from members like us, our employers, and the State of California.
- Investing: Manages a diverse investment portfolio to maintain strength.
- Largest Educator Fund: Second largest pension fund in the entire country!
The big takeaway is that CalSTRS offers retirement planning designed specifically for folks in the education field. The crown jewel is the defined benefit pension program.
Is It Safe?
But how does CalSTRS remain financially healthy over time? The answer is having diverse sources of funding:
- Member contributions: As working teachers, we contribute a percentage of each paycheck. So we have skin in the game for our own retirement.
- Employer contributions: The state and school districts contribute too, which provides stability.
- Investment returns: CalSTRS invests wisely to grow the fund and includes stocks, bonds, real estate, and more.
- State contributions: The California legislature sometimes provides extra funding as needed.
The huge size of the fund also helps it weather ups and downs in the market. Careful management keeps CalSTRS going strong.
Fill Retirement Gaps with a 403(b) Plan
Though CalSTRS gives your retirement security a sturdy foundation, you may still have some gaps in retirement income.
This is where contributing voluntarily to a 403(b) plan can round out your CalSTRS pension. Let’s look at how 403(b) plans work and what goodies they offer educators like us.
Explore a Safe Retirement with Teachers Retirement Solutions’ Indexed 403(b)
As an educator, you have enough on your plate without the added stress of navigating complex retirement options. At Teachers Retirement Solutions, we simplify your retirement planning with an indexed 403(b) plan designed to keep your money safe—regardless of market conditions.
Unlike traditional 403(b) plans, our indexed option guarantees that your hard-earned savings won’t be affected by market downturns, giving you peace of mind that your nest egg is secure. Whether the market is up or down, your savings remain protected, allowing you to focus on what matters most—your career and your future.
Our experienced agents will work with you one-on-one to design a retirement strategy tailored to your unique goals and financial situation. We take the time to understand your needs, ensuring that your plan grows with you, offering stability and growth potential over time.
With Teachers Retirement Solutions, you’re not just choosing a retirement plan—you’re choosing a partner committed to securing your financial future.
Maximize Tax-Deferred Retirement Savings
The big appeal of 403(b) plans is they allow you to save more money for retirement by delaying taxes until you withdraw the money. Some prime benefits include:
- Tax-deferred growth: Your contributions come out before taxes, so your savings and investment returns grow tax-free until later.
- Higher contribution limits: In 2023, you can contribute $22,500 to a 403(b), plus an extra $6,500 if over age 50.
- Flexibility: You can adjust your contribution percentage or stop contributing if needed.
- Portability: You can roll over your 403(b) savings if you change employers.
Potential Drawbacks to Understand
While 403(b) plans can really help grow your retirement nest egg, they aren’t flawless. Ponder these factors:
- Fees: Some providers charge high insurance fees, commissions, and penalties for withdrawing early. Know the fine print first.
- Accessibility: Unlike pensions, taking out 403(b) funds before age 59.5 results in big penalties. Understand the withdrawal rules.
The bottom line is a 403(b) allows you to take advantage of tax-deferral and invest more for retirement. But choose your provider carefully and save consistently. Enroll and start small if needed – even $50 a month can make a real difference over decades.
