Your 403(b) provider deserves a second look
By your 30s you probably have some real money accumulated in your 403(b). If you have never looked at what you are actually paying in fees, now is the time.
Call your provider and ask them to send you a full fee disclosure. Look for a number called the expense ratio or the total annual fund operating expense. If you are in a variable annuity product the all-in cost might be 1.5% or higher annually. That is a meaningful drag on your long-term returns.
What Your 403(b) Provider Is Actually Costing You
$200/month invested for 30 years. The only difference is the fee.
Typical 403(b) Vendor
$166,452
5.5% net return after ~1.5% in fees
Low-Cost Alternative
$243,994
7% net return with low-cost index funds
The difference: $77,542, just on $200 a month over 30 years. Fees are not a small thing. They are the thing.
The good news is that most districts have multiple 403(b) vendors on their approved list and many of them offer low-cost index fund options. You are not locked into a bad product. You just might have to ask the right questions to get out of one.
Know your pension thresholds
If you were hired before January 1, 2013 two numbers matter more than anything else in your CalSTRS planning: 25 and 30.
At 25 years of service your final compensation calculation switches from a three-year average to your single highest year of earnings. For teachers whose salary has grown significantly over their career this can meaningfully increase the pension benefit.
At 30 years you pick up a career factor enhancement that adds an additional percentage to your benefit calculation. The difference in lifetime pension income between retiring at 29 years versus 30 years can be significant.
Know where you are relative to these thresholds. If you are at 22 years and thinking about retiring at 54 the calculus changes if you understand what 25 and 30 years actually unlocks.
Get life insurance while you are young and healthy
This is not a morbid suggestion. It is a practical one.
If you ever want to consider pension maximization at retirement, which is a strategy that can generate tens of thousands in additional lifetime income, it requires you to be insurable at a rate that makes the math work. The younger and healthier you are when you get that policy the cheaper it is. Significantly cheaper.
Even if you are not thinking about pension maximization yet, a term life insurance policy in your 30s is inexpensive and protects your family. The cost goes up meaningfully as you get older. This is one of those things where waiting has a real price tag.
Learn more about pension maximization →
Think about a Roth 403(b) or Roth IRA if you do not have one
If you are not already making Roth contributions, whether through a Roth option in your 403(b) or a separate Roth IRA, it is worth considering. Your tax rate in your 30s is likely lower than it will be in your peak earning years and lower than the rate you might face in retirement if you have significant pre-tax savings being forced out as required minimum distributions.
Roth contributions grow tax-free and come out tax-free in retirement. A Roth 403(b), if your district offers one, has no income limit. A Roth IRA does have income limits, so whether that specific option is available depends on your situation. But for most teachers in their 30s, some form of Roth contribution is worth at least exploring.
A mid-30s financial review typically surfaces two or three things most people did not know they were missing. Let's find yours.
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