Understanding the Basics: Your University Retirement Plan Explained
- Heather Asteriou
- Jun 2
- 4 min read
Retirement planning can seem complicated, especially when you have multiple University-specific accounts to choose from. But understanding the basics of your University retirement plans can set you up for financial confidence now and security later. At Provizr, we specialize in helping University employees like you manage your Fidelity and TIAA accounts with clarity and confidence, without any complicated jargon. Let’s dive in!
What Is a University Retirement Plan, Anyway?
Simply put, a University retirement plan is an account sponsored by your employer, designed to help you save and invest for retirement. As a University employee, you typically have access to several plan types, each offering unique benefits, tax advantages, and savings opportunities. The most common include:
403(b)
401(a)
457(b)
403(b) Supplemental Retirement Account (SRA)
Each offers tax-deferred growth, meaning your money grows tax-free until you withdraw it during retirement, allowing your savings to accumulate faster.
A Quick Breakdown of Your Retirement Plan Options
Here’s a simple, easy-to-understand overview:
403(b) Plan
A 403(b) is essentially a retirement savings account designed specifically for employees at universities and nonprofits.
Highlights:
Voluntary contributions from your paycheck, typically with employer matching.
Your money grows tax-deferred, meaning you pay no taxes on growth until retirement.
Usually offers diverse investment options like mutual funds or annuities.
401(a) Plan
Typically, a mandatory savings account funded by employer contributions.
Highlights:
Contributions set by your University, often a fixed percentage.
Immediate, predictable retirement savings, your University does the heavy lifting.
Tax-deferred growth, similar to the 403(b).
457(b) Plan
This supplemental retirement plan gives you extra flexibility.
Highlights:
Voluntary contributions separate from your 403(b) or 401(a).
Withdrawals are more flexible, particularly useful if you retire early.
Ideal for boosting your savings above and beyond your primary retirement plan.
403(b) Supplemental Retirement Account (SRA)
A great choice if you want additional savings power and flexibility.
Highlights:
Entirely voluntary—you decide exactly how much you contribute per pay period.
Easily adjustable contributions—you can change amounts based on your needs.
Also grows tax-deferred until retirement.
Why It Matters—A Lot!
Understanding these plans isn’t just about being financially savvy. It’s about maximizing your hard-earned money. For instance, making informed decisions helps you:
Maximize free money: If your University offers matching funds and you aren’t contributing enough to get the full match, you’re leaving FREE money on the table.
Reduce your taxes: Contributions lower your taxable income today, potentially reducing your tax bill.
Plan confidently for retirement: Knowing your accounts helps you feel secure that you’ll have enough when you retire.
Unfortunately, many University employees unknowingly make common mistakes, like neglecting to fully utilize employer matches or misunderstanding withdrawal rules, potentially leaving them short in retirement.
Quick Tips to Maximize Your Retirement Savings
Here are easy, practical ways to make the most of your retirement accounts:
Always Maximize Employer Matching:
Contribute at least enough to your 403(b) to fully utilize your University’s match—it’s essentially free money for retirement.
Regularly Review and Adjust Your Contributions:
Got a raise or paying off debt soon? Increase your contributions! This small step now can pay off massively later.
Leverage Supplemental Plans (457(b) or 403(b) SRA):
These give you greater flexibility and allow you to save beyond standard contribution limits, preparing you even better for retirement.
Understand Withdrawal Rules:
Knowing when and how you can access your funds helps you avoid unnecessary penalties and taxes.
Real-Life Example: How Jane Made Her Retirement Plan Work Harder
Meet Jane, a professor at her local University. Jane contributes 5% to her 403(b) plan, enough to secure the full University matching contributions. Recognizing the value of tax-deferred growth and flexible withdrawals, Jane also contributes regularly to a 457(b) plan. As her salary increases over the years, she slowly increases these contributions to maximize her retirement nest egg.
Today, Jane feels secure knowing she’ll have multiple income streams during retirement, each one optimized for her future needs.
Common Questions About University Retirement Plans
Q: Can I contribute to both a 403(b) and a 457(b)?
A: Absolutely, and doing so can significantly boost your retirement savings!
Q: When can I start withdrawing funds without penalties?
A: Generally, penalty-free withdrawals from 403(b), 401(a), and 403(b) SRA accounts begin at age 59½. The 457(b) offers more flexibility, allowing penalty-free withdrawals upon separation from your University, regardless of age.
Q: How will taxes affect my retirement savings?
A: Contributions to these accounts are made pre-tax, lowering your taxable income today. You pay taxes later, when you withdraw money in retirement (usually at a potentially lower tax rate).
Ready to Take the Next Step?
Want to dive even deeper into how to make your retirement accounts work harder for you? Download our comprehensive “Investing 101 Guide”. It covers these topics in greater depth, helping you secure a retirement you can truly look forward to.
Next up in our Investing 101 series:
“Understanding Your Investment Options—Mutual Funds, ETFs, and Annuities”
Stay tuned!
