Author: Natalie Pine
One of the perks of being a university professor is access to great benefits. Surprisingly though, as financial planners to many faculty members, we often find people not taking full advantage of these programs.
Of course, who has time to wade through a voluminous benefit guide? Since we do that for our clients, here’s a quick reminder to help you see if you’re missing out on anything.
Maximizing Your Retirement Savings
As a university professional, you have more opportunities to save money in tax-advantaged accounts than most people. This is a massive advantage that you should put to full use. Here’s an overview of common university retirement savings benefits.
Pension or Defined Contribution Plan
A pension gives you the comfort of a steady income stream during retirement but does not give you the investment flexibility of a defined contribution plan. A defined contribution plan on the other hand is more like a 401(k) you’ll encounter in the private sector. As the participant in a defined contribution plan you do not receive a set income stream during retirement but you have the flexibility to control the investments and take distributions as needed from your plan. (See our previous article for more information.)
Voluntary 403(b) Plan
In addition, you can usually contribute to a 403(b) account, either a traditional or a Roth option. (With a Roth, you contribute after-tax dollars, but your money grows tax-deferred and you can take tax-free distributions in retirement.) You can contribute up to $20,500 of your salary in 2022. If you’re 50 or older, you can add a $6,500 “catchup” contribution. ¹
In addition, you may also be able to contribute to a 457 plan. Contribution levels are the same: $20,500 if under 50, or $27,000 if you’re 50 or older. The plan might offer a Roth option as well.
Some plans also allow a “super catch up” contribution of $41,000 if you are within three years of retirement eligibility.
This ability to defer significant money enables you to build retirement savings rapidly. (And if you do any consulting work outside the university, there are other ways you can further increase your retirement savings.)
Potential Savings on Insurance
A big part of financial planning is protecting against common life events that can change your financial future. But protection can be expensive.
University benefits usually include access to insurance often at significant discounts.
Also, at some institutions, you may be eligible for lifelong retiree health insurance coverage. This is a significant benefit given today’s rapidly rising costs of health care, so it’s worth investigating if and when you would qualify.
These are the core benefits many universities offer, and much more may be available. Bottom line? Taking time to consult your employee benefits manual or a financial planner familiar with university benefits can help ensure you’re not missing out on valuable perks.