teacher and 403b deduction

Do the math. What is your current marginal rate? Is her pension (and yours, perhaps) along with any other taxable income at retirement enough to put you into a higher bracket? Probably not. So saving now at your marginal rate is probably a good idea.

403(b) 'can' have matching contributions, similar to 401(k) accounts. She needs to ask if her particular school district/state offers that perk.

You don't mention her age, if she turns 50 this year or prior, the limit is $22,000 for her deposits, if not, $16,500. Joe

Probably no matching from the school district. She is already getting a defined benefits retirement plan. She should've gone to the district's benefits faire more often, or paid more attention.

Whether it's worth it or not depends on your family's financial situation. Personally I always want to pay taxes as late as possible. Thus I always take the maximum deduction.

Yes, it's a good idea. You might check to see if she can do a 457 and do both. When she retires she can move the money to a Roth.

-- Ron

Just as a follow on question.... Is the 403b like an personal IRA ?

Where you setup a personal, self managed account at one of the "approved vendors" ie - Fidelity - and you then select/pick the various funds, as available, then the deduction merely goes directly to the account like a direct deposit.

My concern - is there an account agent or manager, or is it just self-directed ? Is there a constraint on which funds can be used, or is it pretty much mirror the IRA funds selection ?

A 403b is like a 401k (private employer) or a 457 (public employer) giving similar contribution limits and are usually restricted to a few funds. An IRA or Roth has much lower contribution limits but allows one to pick individual stocks or bonds.

IIRC, someone working for a state university can have both a 403b and a 457 with full contribution limits.

-- Ron

My wife had a 403b option when she was working in our local school district (in Ohio). There were several providers each offering selected options. All of them were sub-standard (in my opinion). They were load funds with high expenses. I believe the idea was the providers were available to help (i.e., they were available to provide financial planning advice). I assume the sales charges were their only compensation.

A 457 option was also available. It was like a 401k with a set of available funds from which to choose. They included active and index funds, including some institutional class shares of Vanguard index funds. She/we invested in these index funds while managing our overall asset allocation across all our various accounts.

Neither option included any contributions other than the employee's.

The 403b plan at your district may have better options. As suggested by others, you need to read through the information and decide what makes sense for you considering your goals, needs, and all available options.

Good luck.

How does this impact the Pension calc using the last couple years salary ? If we slice off $22k for the 403b - is the Pension calc include that... ie - is the Pension salary calc using the gross or the net after all pre-tax deductions ?

It should have NO impact on how much THEY put into her state pension. The state pension contribution is generally based on her gross earnings (think W-2 Box 5) not her taxable earnings (W-2 Box 1). I am not familiar with your state's teacher retirement plan so I'd suggest you check with someone in her HR department for confirmation.

Gene E. Utterback, EA, RFC, ABA

My teacher wife also had both, a pension and an opportunity to contribute to a 403(b). She only stayed in that system for 8 yrs. Since the school matched a bit of the 403 contribution and we could afford the money, we contributed the max. Makes a nice way to diversify the retirement money. Never regretted it now that we both are retired.

Chip