The 401K…er…403B

So, one of the many decisions you need to make when you change employers is deciding if and how much to contribute to retirement savings plans. While there are many different investment vehicles, in higher education, the most common is the 403(b). At some colleges and universities, there are compulsory contributions. In fact, my former employer had such a requirement. It could be waived your first year of employment, and even a second year if you were under the age of 35, however, after 35, first year of employment or not, you were compelled to contribute. My new employer does not have compulsory contributions, however, I do plan to contribute. The why…

For most of my adult life I did not work for companies/institutions with retirement savings plans (I lived and worked abroad, ran a small business, did gig work, was a student, etc.). And it was only with my immediate former employer, University A, that I began contributing. Initially, I was planning to take Dave Ramsey’s advice and not save for retirement until my debt was paid off. However, while University A, a mid-sized public university on the west coast, had a relatively standard match (6%), their 403(b) was relatively unique in that you were immediately vested. (Many employers require you to work for them for a period of time, often a year or more, before you are vested and can take not only your own contributions but employer contributions to your 403(b) with you if you leave their employment). So I contributed. I worked at University A for a little more than an academic year and my 403(b) account with them is just a little more than $3600.00. Not a lot. More than I had.

My new employer, University B, is a midsize private university that is relatively well funded and their match is pretty good. Without getting into too many details, a 2% contribution from me would result in an 8% match from the university for a 10% total contribution to my 403(b). They have a two three year period until you are vested but even given my uncertainty as to exactly what I want to do in the future, I more than expect I will be here that long.

I know that some folks will not agree with this decision and I will admit as someone who intended to do the Dave Ramsey Baby Steps, I was not initially planning to contribute. However, as I said in my Why I’m Not Doing the Ramsey Plan (i.e. The Baby Steps), unlike most of Dave’s followers who will be out of debt in just a couple of years, it will take me at least twice that long and time is something you don’t get back.

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