Your pension will be a great source of income in retirement, but for many people, their pension will not be enough to cover their costs of living in retirement. Having a supplemental source of income from a 403(b) plan will help make sure you have income to live on in retirement.

What is a 403(b) plan?

A 403(b) plan is a voluntary retirement plan with tax advantages that are similar to a 401(k) plan, but 403(b) plans are available only to employees of public schools and other tax-exempt organizations.

Why would I need a 403(b) plan if I have CalSTRS or CalPERS?

Your pension will be a reliable source of income in retirement; however, it will cover on average 50% to 60%* of what you'll need for income. In simple terms, it will be like receiving 50% to 65% of your current salary. Having a 403(b) plan can help you make up the difference.

How does a 403(b) plan work?

With a 403(b) plan, you make the decisions about which plan provider to use, how much to save, and which investment options to use. Your savings contributions will happen automatically through your payroll.

It’s important to remember that you must submit your salary reduction agreement (SRA) that will authorize your employer to facilitate your contributions

How do I select the right 403(b) plan?

Do not assume that your employer has approved or checked out any product or firm selling 403(b) plans, as they most likely have not. That is why it is important for you to do your homework on your options. Remember that asking questions before you start will help ensure you don't make a decision with irreversible consequences.

Here are three important questions to ask:

1- Will I have penalties if I change my investment choices? If so, how much?

Depending on the type of product you choose, you could pay surrender charges, redemption fees, and other types of fees if you change your investment choice.

2- What are the annual fees I pay?

Fees can vary widely on investments. Remember that even a seemingly small amount in fees can have a corrosive impact on your overall savings.

3- Does the person selling the product make more money by selling one product or another?

You should always find out how the person selling you the plan is getting paid.

The CTA 403(b) plan

Because CTA is committed to helping educators have a secure financial future, we have created the CTA retirement savings plan–the only plan endorsed by your union and created for California educators.

The plan features high-quality investments and low fees.

You can find more information on the CTA 403(b) plan by going to: The Plan

*CalSTRS Member Handbook 2023