A teacher with a CalSTRS (California State Teachers’ Retirement System) pension might consider getting a 403(b) plan for several reasons:

1. Supplement Retirement Income:
CalSTRS Pension Limitations: While CalSTRS provides a defined benefit pension, it may not fully replace your
pre-retirement income. A 403(b) can help fill any gaps and provide additional financial security.

2. Tax Advantages:
Pre-Tax Contributions: Contributions to a traditional 403(b) plan are made with pre-tax dollars, which can
reduce your taxable income in the years you make contributions.
Tax-Deferred Growth: Earnings on the investments in a 403(b) plan grow tax-deferred, meaning you don’t pay
taxes on the gains until you withdraw the money in retirement.

3. Investment Flexibility:
Diverse Investment Options: A 403(b) plan often offers a variety of investment options, including mutual funds
and annuities, allowing you to tailor your portfolio to match your risk tolerance and retirement goals.

4. Catch-Up Contributions:
Higher Contribution Limits: If you’re 50 or older, 403(b) plans allow for catch-up contributions, letting you
save more as you approach retirement. 15-Year Rule: Some 403(b) plans also have a special provision that
allows employees with 15 or more years of service to make additional catch-up contributions.

5. Employer Matching:
Potential Employer Contributions: Some employers offer matching contributions to 403(b) plans, which can
significantly boost your retirement savings.

6. Control Over Savings:
Personal Contributions and Withdrawals: Unlike a pension, where the benefits are predetermined, a 403(b) allows
you to control how much you contribute and when you make withdrawals, offering greater flexibility in managing
your retirement income.

7. Emergency Fund:
Loan and Hardship Withdrawals: Some 403(b) plans allow for loans or hardship withdrawals, providing access to
funds in case of an emergency, though this should be approached with caution due to potential penalties and

Combining a 403(b) with your CalSTRS pension can enhance your financial security in retirement by offering additional savings, tax benefits, and greater flexibility in managing your retirement funds.

Teachers Retire Young With a Good 403b click here to see them.


CalSTRS Member Handbook

IRS – 403(b) Tax-Sheltered Annuity Plans

IRS – Catch-Up Contributions