Click here to share encouragement, questions and feedback

Retirement Terms Explained: Quick Guide for Educators

Many educators hear retirement terms like 403(b) or Roth IRA but aren’t always sure how they work or how they fit together. Here’s a quick, plain-English overview.

A 403(b) is a retirement savings plan for public school employees and some nonprofits. Contributions usually come out of your paycheck before taxes, which lowers your taxable income now. Many plans also offer a Roth option, where you pay taxes now and withdraw tax-free later. Annual contribution limits apply, and educators with long service or over age 50 may qualify for catch-up contributions.

A 457(b) is another employer-sponsored retirement plan commonly available to public educators. It works similarly to a 403(b), but one key difference is flexibility—if you leave your job, withdrawals are not subject to the usual early-withdrawal penalty. If you have access to both a 403(b) and a 457(b), you may be able to contribute to each separately.

A Traditional IRA is an individual retirement account you open on your own. Contributions may be tax-deductible depending on your income and whether you have a workplace plan. The money grows tax-deferred, and you pay taxes when you withdraw it in retirement. Annual contribution limits apply.

A Roth IRA is also an individual retirement account, but contributions are made with after-tax dollars. The benefit is that qualified withdrawals in retirement are completely tax-free. Roth IRAs have income limits—above certain salary thresholds, you may not be eligible to contribute directly.

A Roth conversion is when you move money from a pre-tax account, like a Traditional IRA or 403(b), into a Roth IRA. You pay taxes on the amount converted in the year you do it, but future growth and withdrawals can be tax-free. There are no income limits on Roth conversions, but tax planning is important.

One key reminder: Contribution limits, income thresholds, and plan rules change over time and vary by district and state. Educators should always review their specific plan details and consider talking with a qualified financial professional before making decisions.

For tools that help educators compare plans, vendors, and fees, we recommend educator-focused resources like 403bCompare, 403bwise, and Investor.gov.

Our guest for the episode: Mr. Eric Lorenz. You can reach Mr. Lorenz at www.newpennwealth.com

Link for the example discussed on the episode:

Send us a text

Dr. Vincent Gravina is the Director of Curriculum and Instruction, K-12 for the Woodbury City Public Schools in Gloucester County New Jersey. Dr. Gravina is in his 23 year as an educator and works with teachers and administrators who serve students in grade k-12.

In this episode, Dr. Gravina walks us through the steps his district took to prohibit the use of cell phones during the school-day. From the initial conversations with stakeholders to changing the Board of Education Policy, Dr. Gravina carefully examines the challenges faced and rewards obtained through the new initiative.

The book Dr. Gravina noted: “The Anxious Generation” Jonathan Haidt

Dr. Gravina can be reached by email at Vgravina@woodburysch.com

Send us a text

Great Conversation on how Artificial Intelligence is changing the landscape of education. Vince Doud is a teacher, educational coach and owner of "DoudWorks". Vince has provided PD to many school districts and is at the top of the field when it comes to mindful AI integration in schools.

Vince can reached at:

https://doudworks.com

doudworks@gmail.com