403(B) Consultation

Light Financial Services, Inc. has been providing financial planning and investment advice to employees of public schools districts and their families since 1995. We are committed to providing our clients with clear and unbiased financial planning and investment advice.

Because we have focused on providing our services to employees of public school districts, we have developed a deep understanding of their financial concerns and needs. We believe that employees of school districts deserve ethical, independent advice, and access to quality 403b accounts with affordable prices.

The 403b was created in 1958 as a way for employees of non-profit organizations to save for their retirement. Some of the benefits of a 403b plan are as follows:

1. Pretax contributions

Participants set aside a certain percent or dollar amount of each paycheck on a pretax basis. In other words your district will subtract your contribution from your paycheck before they calculate your tax withholding. If you pay a combined (state & federal) 30% tax rate and you elected to save $300/month, your paycheck would be reduced by only $210. The difference is tax savings - $90 per paycheck. That $90 tax savings is now working for you in your 403b account.

2. Tax-deferred growth

Once your contributions are deposited into your 403b account the earnings will not be taxed until the money is withdrawn from the 403b account. Tax-deferred growth is important because it allows your account to grow more quickly than it would if the earnings were taxed every year. Withdrawals are taxed as ordinary income and may be subject to an additional 10% federal income tax penalty if made prior to age 59 ½.

3. Flexibility

You decide how much to contribute to your 403b plan. There are limits on how much you contribute (lesser of $17,500 or 100% of compensation in 2013 (+) $5,500 if age 50 or older). You can also change or stop contributions.

You also have control over what investment company handles your 403b account. This is a very important decision and should not be taken lightly.

4. 100% vesting of employee deposits

This means that the money you have deposited in your 403b account is always yours. If you change jobs or leave teaching for another profession your 403b account will follow you.

5. Employer Matching

Many school districts in the state of Minnesota offer some sort of matching contributions. This means that if you contribute a certain amount the district will also deposit the same amount to your 403b account. For example, your district offers a 2% match, and your salary is $40,000 per year, your district would deposit $800 per year into your 403b account if you did the same ( $40,000 x 2% = 800).

6. Easy way to save

For most people saving and investing money is a difficult thing to do. Once a person receives their paycheck there are many ways to spend those dollars (it’s the American thing to do). With a 403b plan the school district withdraws your contribution before you receive your paycheck. It is a very convenient way to save for retirement.

Give us a call or send us an email and we can help you start planning for a successful retirement.

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