Perks and Pitfalls of 403b plans

Public school educators have a distinct advantage over private sector employees in their ability to
accumulate retirement assets.  In addition to the defined-benefit pension plan available to Massachusetts
Teachers, there is also the opportunity to contribute tax-free dollars into a 403b plan.   403b plans are
great vehicles for tax deferral and growth; however, near or upon retirement, it's important to be aware of
the taxes associated with these qualified funds.

Funds in a 403b or other qualified plan are taxed upon distribution from the plan - usually upon retirement
as you begin deriving an income.  Upon death, any funds remaining in the 403b are taxed between
50-81%, depending upon the size of your estate.  That means without planning, at least 50% of your
retirement savings goes to the IRS instead of your loved ones.  With proper planning, these taxes can be
substantially reduced or eliminated.  Who would you rather leave your unused retirement funds to -
the IRS or your family?

As with any investment vehicle, fees within the plans can range dramatically.  It's not uncommon for
different mutual fund portfolios offering similar or exactly the same investment options to have vastly
different internal costs - 403b plans are no different in this respect.  As you contemplate retirement, or if
you are recently retired, it is prudent to conduct a review of the plan document to assess the fees and find
our what opportunities exist to mitigate or eliminate the potential estate and income taxes created by this
asset.
“ It Requires a great deal of boldness and a great deal of caution to make a great   
fortune, and when you have got it, it requires ten times as much wit to keep it.”

                                                                                     Ralph Waldo Emerson
Teachers First Financial
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Suite A2
Hingham, MA  02043
(781) 331-2275
(800) 593-2275



Teachers First Financial ... "The Retirement Resource for Massachusetts Educators"