From Kiplinger · · 1m 40s
Teachers Can Maximize Retirement Plans
Teachers can use both 403(b) and 457(b) plans to boost retirement savings without penalty.
In brief
Teachers can use both 403(b) and 457(b) plans to boost retirement savings without penalty. Educators can contribute to both 403(b) and 457(b) plans to increase retirement savings capacity and flexibility. Originally reported by Kiplinger.
Teachers' Retirement Options
Public school teachers and other K-12 employees often have access to both a 403(b) and governmental 457(b) retirement plan.
Both Plans Offer Tax Benefits
Each plan provides tax-deferred savings with potential for Roth contributions, allowing employees to save more flexibly.
Contribution Limits for 2026
For 2026, the standard employee contribution limit is $24,500 per plan, with catch-up contributions for those 50 and older.
457(b) Offers Withdrawal Flexibility
Distributions from 457(b) plans are not subject to the 10% early withdrawal penalty if leaving before age 59 and a half.
Career Stage Matters
Teachers early in their careers might prioritize 403(b) catch-up contributions, while later career stages benefit from 457(b) flexibility.
Maximizing Savings Capacity
Employees with access to both plans can contribute up to $49,000 annually before catch-up contributions, increasing retirement savings potential.
Strategic Retirement Planning
Educators should review retirement plan options years before retirement to coordinate savings with pension income and Social Security.
Key Differences in Plan Features
Investment choices, fees, and loan provisions vary between 403(b) and 457(b) plans, affecting retirement savings strategies.
Retirement Timing Impact
Teachers planning early retirement might value 457(b) withdrawal flexibility, while long-term employees might prioritize 403(b) catch-up provisions.
Long-Term Benefits
Combining both plans can provide greater retirement savings capacity and flexibility during peak earning years and retirement transitions.
The big picture
Educators can contribute to both 403(b) and 457(b) plans to increase retirement savings capacity and flexibility.
