Specializing in Teachers Retirement

Traditionally, educators are taught to use a 403(b) as a tax-advantaged retirement savings plan. Is this still the best option in the 20th century? Some advantages and disadvantages of using a 403(b) plan are:

Advantages:

1. Tax benefits: Contributions made to a 403(b) TSA plan are tax-deferred, meaning they reduce the employee's taxable income in the year they are made. Additionally, the earnings on the contributions grow tax-free until withdrawal, and taxes are only paid when withdrawals are made in retirement.
2. Investment options: 403(b) TSA plans typically offer a range of investment options, including mutual funds, annuities, and other investment vehicles, providing flexibility to employees to choose investments that align with their risk tolerance and financial goals. 

Disadvantages:

1. Limited access to funds: Unlike other retirement accounts 403(b) TSA plans may have restrictions on when employees can withdraw funds, limiting access to the money invested.
2. High fees: Some 403(b) TSA plans charge high fees, which can eat into the returns of the investment over time. It is important for employees to review the plan's fees and investment options before contributing.
3. 403(b) TSA is tax -deferred, however, tax trends have historically increased and this trend is more true today than ever. Paying taxes today will actually save you money rather than waiting till the year you retire.  
4.  Yes, you can lose any amount of money when you invest in 403(b) TSA. Your investments can fluctuate with the rise and fall of the stock market. You may want to consider your risk tolerance before you invest and adjust your investment accordingly. 

Overall, a 403(b) TSA plan can be a valuable tool for retirement savings, but employees should carefully review the plan's investment options, fees, and restrictions before contributing. 

Speak to one of our Licensed Advisors to better understand your situation.

A whooping 68% of teachers say their pensions and 403(b) TSA just isn't enough to survive retirement. So, what can I do? Speak with one of our Licensed Advisors. Each of our lives differ from one another so understanding yours is crucial. 

Here are the top four reasons in order:

1. Unexpected care for a family member
2. Debt - Credit Card, Student Loans
3. Poor Investment returns - Bad timing for retirement
4. Inflation - Growing faster than expected

Your state recognizes the importance of planning for a successful retirement and is dedicated to providing the highest quality service necessary to assist members in achieving their goals. Your state pension benefits, when combined with other income, are designed to provide you with the basis for financial security during your retirement years. 

Let’s take a closer look at the eligibility requirements, options and benefits of your state pension plan. 

Retirement Plan First and foremost, the retirement foundation for district employees is their state retirement system.  The California State Teachers Retirement System’s  (CalSTRS) primary responsibility is to provide retirement  benefits and services to teachers in public schools and  community colleges. Having a good understanding of how your state pension works and the benefits it can provide is essential to your retirement well being. The unfunded liability and budget shortfalls in state retirement plans are forcing states to take a hard look at the benefits being offered to plan participants. Be sure  to monitor your CalSTRS benefits for any changes. This  overview is designed to explain the Retirement System as it applies to most participants. 

Go to the CalSTRS website at www.CalSTRS.com for more information. 

How the Plan Works CalSTRS benefits are based on your age and years  of service under CalSTRS. Eligibility for a full lifetime retirement benefit is based on when you joined CALSTRS: 

Your monthly CalSTRS benefit is calculated by: 

1. Determining the Age Factor 

2. Multiply by total service credit 

3. Multiply by Final Average Compensation 

4. Divide annual payment by 12 to get monthly payment 

The average monthly annuity among civilian federal employees who retired under  Civil Service Retirement System (CSRS) in 2018 was $4,973, whereas new Federal Employee Retirement System (FERS) annuitants received an average annuity of $1,834. In short, pensions are a stretch to survive and need another source of income. So, what can I do? Speak with one of our Licensed Advisors so we may better understand your situation. 

The FERS is a three-tiered plan made up of: a basic annuity, Social Security, and a tax-deferred retirement savings and investment plan called the Thrift Savings Plan (TSP). The CSRS is a defined benefit, contributory retirement system. 

Is government pensions better than a 401K? Though there are pros and cons to both plans, pensions are generally considered better than 401Ks because all the investment and management risk is on your employer, while you are guaranteed a set income for life. 

What is a pension from the government? These public pension plans typically provide pensions based on members' years of service and average salary over a specified number of years of employment. Many members also receive cost-of-living adjustments that help maintain the purchasing power of their benefits in retirement. 

Ask our specialist questions and some additional options!