Getting the Most Out of Public-Sector Employee Retirement Plans

The school system where I work offers both a 403(b) and a 457 retirement plan. Can I invest in both plans?

Yes. Some public-sector employees – such as teachers in public schools and colleges – may have the option to save for retirement in both a 403(b) and a 457 plan. You can contribute the maximum to both plans –– $17,000 for each plan in 2012. Contributions to a 403(b) and 457 are made pretax and grow tax-deferred for retirement.

Under some circumstances, you can also make catch-up contributions to both plans. For instance, you can boost your 403(b) contributions by $5,500 starting in the year you turn age 50, bringing your contribution limit to $22,500 for 2012. Or, if you have 15 years of service with the same system, you might qualify for a catch-up contribution of $3,000 a year, for a total annual contribution of $20,000. If you’re eligible for both types of catch-up contributions, you can contribute up to $25,500. For more information, see 403(b)wise.com.

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You can also take advantage of the catch-up contributions for 457 plans, boosting your 457 contributions by $5,500 starting in the year you turn 50. Or, if you’re within three years of the normal retirement age specified in the plan documents (often the age when you can collect full benefits in your pension plan, which is age 60 for many employees and in the fifties for some public-safety workers), you can double your contributions for three years if you haven’t maxed out your contributions in the past. (You can’t take both types of 457 catch-up contributions in the same year, but you can take the 457 and the 403(b) catch-up contributions simultaneously.) For more information, see the 403(b)wise.com 457 information resources.

For more information about making the most of your 403(b) options, see Fighting for a Better 403(b).