June 29, 2008

Learning How to Start a 403(b)

Yesterday, I went to a large family gathering, and many people asked me about investing, the market, different financial questions, etc. While talking with several of my relatives, two of my favorite people (one of my cousins and his wife) asked me about what she needed to do to start planning for her retirement. Well, it just so happens that she is also an educator, so you see how this pertains to you.

The first thing to do is to estimate what you can afford to contribute. Remember if you are going to contribute to a 403(b), it will be a "pre-tax" contribution, thus you will pay less in taxes now. Simply put, a $100 contribution will cost you about $70 on your paycheck. For example, if you think you can afford $200 less a month in "net" pay, divide it by 0.70, and see what you get. The answer will be $285, but let's just round it up to an even $300 contribution. On to step 2...

Next, find out which 403(b) companies you have to choose from. These can vary greatly system by system, and the different companies can have a great impact on your account. Try to find one that does not charge "mortality" fees (insurance fees), has a very simple withdrawal policy that does not penalize you no matter how long you use the company, and lastly... ask questions. Fees do matter.

Once you have the list of companies, have all of your questions answered, and have figured out how much you can contribute, then you are ready to start. Contact your HR department and the company you have selected. You will need to fill out an application and sign up for monthly contributions directly from your paycheck.

I would suggest referring back to the 403(b) Investments blog and remember to diversify!

Congratulations! You are on your way to building a great retirement with your pension and 403(b) working hand in hand!

What more help? Just e-mail me at rschultz@rollinsfinancial.com.

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