Time to review 403(b) and IRA contribution limits
Contribution limits for both the 403(b) and the IRA have increased for 2023. The contribution limit for the 403(b) has increased from $20,500 in 2022 to $22,500. The limit on annual contributions to an IRA has increased from $6,000 in 2022 to $6,500.
If you’re not maximizing your contributions, you may wish to re-evaluate the amount you’re putting toward retirement. Not only do you lower your taxable income, you ensure that you’re doing everything you can to reach your retirement goals.
If maxing out contributions is not realistic for you right now, remember: With compound interest, even a small amount invested today can grow to a large sum by retirement.
Elective 403(b) Contribution Limits
|Calendar year||Salary Reduction Contribution Limit||15 Years of Service Catch-Up||Age 50 and Over Catch-Up||Possible maximum|
- Not all districts offer the 15 years of service catch-up provision in their 403(b) plan. Contact your district office to learn more.
- Some employers only allow changes at the start of the school year and then again in January. Others allow more frequent changes. Call Member Benefits to assist you with updating your salary deferral amount.
- Some districts may allow Roth 403(b) contributions. Your Roth contributions and your pre-tax contributions combined must not exceed the $22,500 limit for participants under age 50, or $30,000 for participants age 50 and above.
IRA (Roth and Traditional) Contribution Limits
|Calendar year||Under age 50||Age 50 or older|
- You may contribute to both a Roth and Traditional IRA, but your combined contributions must not exceed the annual limits.
- If you make automatic IRA contributions using SmartPlan or through payroll deduction (if available in your district), your contributions do not adjust automatically to meet the new limits. To make adjustments, call 1-800-279-4030 or print out an IRA Contribution Form.
NOTE: Because the maximum Roth IRA contribution may be reduced depending on MAGI (Modified Adjusted Gross Income), some high-income taxpayers may not be able to make Roth IRA contributions; however, they could make Traditional IRA contributions.
Proposed changes to required minimum distributions (RMD)
Let’s break it down into:
- Changes that took place in 2020.
- Changes that may be coming.
What happened in 2020?
The Setting Every Community Up for Retirement Enhancement (SECURE) Act was enacted on December 20, 2019, with many provisions effective beginning January 1, 2020. The law included changes to RMDs for both account holders and their beneficiaries.*
Account owners who turned age 70½ after December 31, 2019, now start taking their RMDs at age 72. The SECURE Act provides additional time to do Roth IRA conversions without having to worry about the impact of RMDs. However, once RMDs begin, those RMDs cannot be converted to a Roth IRA.
Certain beneficiaries who inherit from someone who died after December 31, 2019, must take the money out and pay any taxes due within 10 years. The rule generally exempts surviving spouses, minors, and some others (eligible designated beneficiaries (EDBs)). The 10-year rule only affects beneficiary accounts of those not considered EDBs. EDB account owners can still stretch their accounts according to their life expectancy.
For more in-depth information about the 2020 provisions that impact beneficiary accounts, read our SECURE Act 2020 FAQs.
*This provision is not retroactive, so it does not affect those who inherited a retirement account and/or IRA in 2019 or in prior years.
What changes might be coming?
At this time, no action is needed. In March 2022, the U.S. House of Representatives passed the Securing a Strong Retirement Act of 2022. In June, The Enhancing American Retirement Now (EARN) Act and the Retirement Improvement and Savings Enhancement to Supplement Healthy Investment for the Nest Egg (RISE & SHINE) Act achieved approval. These three bills are collectively known as the SECURE Act 2.0. There are similarities between all three bills that must be reconciled into one bill before a vote on the final bill.
Some of the proposed provisions** that may impact retirees or those close to retirement include:
- The age required to begin taking RMDs may be pushed back from age 72 to age 73, then age 74 starting in 2029, and to age 75 in 2032.
- Employees between the ages of 62 and 64 would be able to contribute additional catch-up contributions up to $10,000 to their employer retirement plan. This is an increase from the current age 50 catch-up contribution of $6,500.
- All age-based catch-up contributions made to a retirement plan would be required to be designated as Roth contributions and will be subject to the Roth rules for distribution purposes.
- Part of the RISE and SHINE Act includes a provision that would amend the cash-out limit from $5,000 to $7,000. Employers would be allowed to transfer employee’s retirement accounts out of the employer plan to an IRA if their balance is between $1,000 and $7,000. Very few school districts have a cash out provision in their plan.
- Reducing the required years of service from three to two for part-time employees to be allowed to participate in an employer’s retirement savings plan.
**Subject to change through the legislative process.
Questions or concerns? Talk to us
Email our Retirement and Investment Specialists
How can you keep your money working for you in retirement?
Member Benefits offers several strategies to help you manage your assets in retirement through yourINCOME PATH.
What is yourINCOME PATH?
yourINCOME PATH is the suite of options and support we offer to help turn your retirement savings account balance into income during retirement. Examples include:
- A range of flexible withdrawal options to meet cash flow needs.
- Required minimum distribution (RMD) support.
- Qualified charitable distributions (QCD).
- Roth conversion strategies.
- And more.
There are no additional costs for these services.
Learn more about yourINCOME PATH
Retirement income strategies aren’t one-size-fits all. A personal income strategy is crucial to keep your money working for you in retirement, even as you start to withdraw from your retirement account(s).
Visit the yourINCOME PATH page to learn more about retirement income management strategies available and how we can help you set up your own strategy.
Q&A with Joanna Rizzotto
The first thing you notice about Joanna Rizzotto is her smile. You can’t help but be drawn in. She is shrouded in an aura of positive energy.
It’s been five years since the last interview, but her hug and cheery greeting are familiar—it’s like meeting up with an old friend. “Your hair! You changed it,” I say. “Always!” she laughs. “I change it up often. My hair is naturally very dark, so it’s a process to get to the lighter color. But once I get to bleach blond, I can easily hop to the fun colors. The kids sometimes make suggestions.”
I discover she isn’t joking about her hair as I look through a brochure she gave me about the REAL Academy—the program that she operates and teaches at in the South Milwaukee High School. In a photo, she is in a circle with her teenage students. She’s the one with purple hair.
And so, our “catching up” begins. The conversation reflects her passion for teaching, love for her students, concerns about her profession, and hope for the future. It’s the perfect prelude to the school year as well as the last in the “where are they now” member-story series we started in January as part of WEA Member Benefits’ 50th anniversary celebration.
How long have you been with the REAL Academy? What is it?
I have been a public school teacher for 27 years and operating the REAL Academy for 11 years. I love it. It’s an alternative program with a holistic approach to learning—we focus on personal well-being and learning and cultivate a safe space where students know they belong and practice healthy communication.
In our last interview, you had such an eloquent way of describing the students (teens) you teach and how you feel about what you do. You said…
“As a high school teacher, I feel honored to work with students during this transitional time in their lives. Teens are largely mischaracterized. I find them to be compassionate, creative, generous, and very curious about the world. I get energy from their thoughts and ideas. Teaching is a very human profession and I’m fortunate to be surrounded by great people.”
…But that was five years ago, and we’ve since had the experience with COVID. Can you speak to its impact? Would your statement be different now?
COVID, of course, had an impact on everything. It provided me and my students the opportunity to really put our skills into practice. As a program that focuses on the integration of well-being and learning—not one or the other—we were able to stay connected as a community, take care of ourselves, and continue growing during the closures. The transition back to school was difficult. We had to regain our stamina—physical and social habits needed tending to.
I still stand by what I said about the students in 2017. I find it fascinating to observe and study how they see the world and respond to it. I can tell you this—they are seeking harmony and connection, and they remind me that “schooling” must be dynamic and relevant.
In 2017, you were very active in the union. Are you today?
Yes. In fact, I ran for Vice President of WEAC this past spring. I did not win, but I came close! Locally and regionally, I am part of my executive boards. I am still focused on membership. I love being a part of my union because we define issues facing public education and develop solutions together.
COVID certainly altered education in the classroom, adding stress for educators and increased financial pressures. What do you see as the greatest financial challenges for educators today?
The greatest financial challenges today are that salaries generally are not keeping up with inflation. Last year the Consumer Price Index was 4.7%. Some districts adjusted salaries to reflect that, but others could not. In my district, my inflationary salary increase was .03%. It’s been 1% or below for the past ten years.
It’s also a concern that teachers are not incentivized to continue their education. Most of my early-career education friends are not pursuing master’s degrees because the cost of a degree outweighs any financial gains they might receive. And sadly, many do not see themselves retiring from education. The financial challenges contribute to the teacher recruitment and retention problem.
Personally, what’s the greatest financial challenge you’ve had in the last five years?
I’ve had three!
- My husband was unemployed for five months during the pandemic. He works as a camera operator for professional sports, and when all the leagues were shut down, so was his source of income.
- Financing our son’s college education.
- My mom developed dementia and I am her primary caretaker. I also provide financial support for her needs which total about $500 a month.
Have you made any financial changes you didn’t expect or plan to make?
Yes. In May of 2020, we refinanced our mortgage to a much lower rate and reduced the term of our loan to generate savings. I also put off buying a new vehicle. I’m still driving my ‘05 minivan with over 200,000 miles on it!
Before COVID, you were instrumental in bringing financial education to your district. You spoke about how important having access to trusted information and programs is for public school employees. You said…
“Time and again, staff had a good experience with Member Benefits, trusted it and had faith in the fact that it was specifically designed to support public school employees. When people come to the Member Benefits presentations, they always walk away feeling hopeful—really feeling good. People who are educators want to be educators. So having this support from an organization dedicated to our profession makes that job easier.”
…But in-person presentations came to a halt for the last two years. Do you expect to bring them back this year? What do you think would be topics of interest?
I can remember the last in-person financial session we had in December of 2019. It was packed! COVID put an end to that. I continued to pass on information within the union and through our district newsletter to colleagues, but we lost a lot of ground in our efforts to help staff feel financially secure.
I’d be open to in-person presentations, although I think most people now prefer anything after school to be virtual. I don’t have a pulse yet on what would be interesting to people. Hopefully, we can find a way to do it.
I always find connecting with Member Benefits helpful and worthwhile. It has this built-in credibility of being for public employees school employees. I still contribute to my 403(b) and am sure to encourage educators to set them up for themselves.
Any new insights or advice for educators today? How about for young people who are thinking about going into education?
We need to reinvest in the human side of education.
Educators today need to support each other and stay connected. When looking for power, don’t necessarily look up the chain of command—look around. Your colleagues understand and will help you.
I still encourage young people to join the profession. We need good people. Our students deserve more great school experiences.
How old are your children now? How have you shared your financial experiences and knowledge with them?
My “kids” are now 21, a senior in college, and 16, a junior in high school.
We share information about saving, budgeting, loans, and saving for retirement. More so with our son because he is close to graduating from college and is more interested. He is responsible for a portion of his educational costs, so he works full-time every summer to meet his obligation.
My daughter will be getting a job this school year and we’re starting to talk about future schooling and careers.
Our kids know that their parents both appreciate the living we have been able to make based on our skill set and education, and that we do not live beyond our means.
What does the future hold for Joanna?
The future looks good. I am grateful to have a happy, healthy family. I plan to continue my career in education and work for improvements that will draw young, talented people into the profession. Things can and will change, if we come together and put in the work.
Prudential Financial completes sale of full-service retirement business to Empower
Effective January 1, 2023, the Prudential Guaranteed Investment was renamed to the Guaranteed Stable Investment. The Prudential Retirement Insurance & Annuity Company (PRIAC) was purchased by Empower Annuity Insurance Company (EIC). Any reference to PRIAC should be replaced with EIC. Any reference to Prudential should be replaced by Empower.
Prudential Financial announced in April the completion of the sale of its full-service retirement business to Empower, the second-largest retirement plan recordkeeper in the U.S. Here are a few things you need to know regarding your retirement account through WEA Member Benefits.
Does the acquisition include the Prudential Guaranteed Investment*?
Yes. Empower acquired Prudential’s defined contribution, defined benefit, non-qualified, and rollover IRA business in addition to its stable value and separate account investment products and platforms.
Who will guarantee the Prudential Guaranteed Investment?
Prudential Retirement & Annuity Company (PRIAC), which is now owned by Great-West Life & Annuity Insurance Company, continues to provide the guarantee. PRIAC and Great-West Life & Annuity Company have consistently received high marks from industry sources for financial strength from major rating agencies.
What else do I need to know?
Our stable value contract with PRIAC is unchanged, and the entire client service team from Prudential Retirement that supports our Guaranteed Investment program remains in place at Empower. Empower leadership has reinforced the importance of our relationship as well as their commitment to continue the existing terms of our stable value contract.
As always, Member Benefits continues to strive to offer best-in-class programs to members. We will continue with the same due diligence process moving forward that we have always employed.
*Interest is compounded daily to produce a yield net of Empower’s administrative fee of 0.60%. Empower Annuity Insurance Company (EIC) is compensated in connection with this product by deducting an amount for investment expenses and risk from the investment experience of certain assets held in EIC’s general account. For more information, go to weabenefits.com/empower.
Moving to a new school district this fall?
Moving to a new district requires you to open a new 403(b) account in order to contribute to your retirement savings. We can help you enroll in your new plan and assist with consolidating your accounts (if allowed by the plan).
Call us at 1-800-279-4030.
Nick’s strategy for cultivating financial independence
In 2010, Nick Havlik was 24 and an extreme saver, putting as much as 40% of his income into retirement savings. (No, that’s not a typo!) He was focused on the retirement long-game and committed to saving upfront to maximize the impact of compound interest and increase his chances of an early retirement. As he said then, “I’m saving now so I have more freedom later. I don’t want to have to work part-time in retirement to supplement my income.”
Nick’s approach is solid and based on sound financial practices. Andrea (Andie) Hartwig, WEA Member Benefits Financial Planning Consultant, agrees that saving as early as possible and saving as much as you can will help ensure a financially secure retirement. “However,” she says, “Nick is a saving anomaly. The idea of saving forty percent of your income, while admirable, probably isn’t going to work for most people,” she says. “What is important is to start saving something—even a small amount—as soon as you can.”
Time, she says, is your greatest asset—something Nick understood early on and took to heart. “It allows you to maximize the benefits of compound interest. Contributions will grow and grow over the years, earning interest on interest on interest. Even small contributions can make a significant difference down the road,” Andie explains. And Nick has used his time wisely.
Catching up with Nick
Twelve years have passed since we last talked with Nick. One has to wonder how long a 24-year-old can continue such a rigorous regiment of saving—a regiment, Nick said at the time, that others considered a little crazy, unreasonable, or impossible to maintain with all the temptations dangled in front of fresh-faced 20 somethings with so much life to live.
Andie adds, “It’s especially hard for young educators to plan for a retirement that is decades away because there’s a lot of competition for the earned dollar. They typically have student loans, they’re trying to launch their career, they’re setting up a place to live and the expenses that go along with that, and perhaps buying a car. And then there’s a social life that may vie for a piece of the pie…restaurants, concerts, and trips. Later it might be a wedding, a house, and kids. It’s a lot to manage.”
So, the big question now is: Was Nick’s approach sustainable? How committed has he been to his plan? To feed our curiosity, we checked in with Nick to see what his life looks like 12 years later.
Tending to his grapes…and his plan
We tracked Nick down not in a classroom, but in a vineyard. No, he wasn’t on a wine tasting tour. He was working…in his vineyard. This is where he spends most of his summer, between rows of grapevines, tending to his crop. Nick still teaches—now with the Port Washington school district—but he says, “I’m essentially a farmer as well.”
The vineyard is the result of a decision to stop working for other people during the summer. “It’s all part of the plan,” he says, the same plan he had at 24—retire early. Only now it’s a plan he shares with his wife, Andrea, and together they’ve made a few tweaks.
“There was an opportunity and we took it. In 2014, we planted our first vines—just 500—and now we have 5,500. Small local vineyards are increasingly popular,” he says. And he’s right. According to the Wisconsin Winery Association, in 2000 there were fewer than 100 acres of vineyards planted. In 2019, it was well over 1,000. The number of Wisconsin wineries also increased from 13 to 110 in that time. “There’s a market for the grapes right here in Wisconsin,” Nick adds.
The sooner you start planning, the better your odds of retiring with the money you’ll need to enjoy it.
When asked about the risk of the venture, Nick doesn’t hesitate. “Like farming, it’s a risky business for sure. We could get one hail storm and lose it all. But life is full of risk. The best you can do is prepare for it. We would be distraught if that happened, but financially, we would be fine.”
Risk is part of the investment equation. All investments carry some degree of risk. “The key is knowing what the potential loss is, what that might mean for our situation, weighing it against the potential for gain, and then deciding what we can stomach,” he says.
Like most investments, the vineyard wasn’t an instant money-maker. “We didn’t make a penny for three years. And what we did make went back into the vineyard. But it’s what we expected,” he said.
He worked the vineyard for two years while still teaching and living in Brookfield, but in 2016 he and his family moved to Port Washington. “It was a good move. I really like the district. Financially, it made sense and it’s closer to the vineyard, which is in Fredonia.”
Balancing compound efforts
In addition to the vineyard, Nick and his wife Andrea have dabbled in a few other ventures to help toward their goal. As one can imagine, he is busy all the time—also part of the plan. “I’m 37. We only have so many years to continue at this pace. Too many people live by a ‘work to grave’ concept. Our plan is to get the time back later by putting the time in now. At this point, we have a ten-year window to stretch ourselves. Time is our biggest asset,” he emphasizes.
Some might think Nick’s life balance is out of whack, but he assures us that is not the case. He is married with two young daughters. “I’m 100% satisfied with my life balance. My number one priority is to raise good, happy, successful kids. I always make time for my family. We sit down for supper every night as a family.
“There are times when it’s go, go, go, but then it slows down,” he says. “For example, September stinks. I work every single day at the vineyard during harvest. But then things settle down a bit.”
He admits to missing out on some things he enjoys, like fishing. “I love to fish, but I don’t have time. I’m banking time for that in the future.”
It’s hard to imagine Nick slowing down too much in retirement, but then, his notion of retirement may not match up with most. “The word retirement may be out,” he suggests. “Maybe it should be changed to ‘finding your second calling.’” Thus, the vineyard—but he’s hoping he won’t be doing all the work at that point.
Nick says none of this would be possible if he and his wife weren’t in lockstep when it comes to finances. “We have the same goals and we have conversations regularly about our finances. It’s a partnership.”
It turns out that having a financially compatible spouse makes for a strong marriage. Studies show that opposing attitudes about money, conflicting priorities and goals, and different spending behaviors are among the top reasons couples divorce (2019 Ramsey Solutions study).
“I wouldn’t be where I am without her. Marrying my wife was the best financial decision I’ve ever made.”
Get yourself a plan
And so it seems that Nick has remained committed to his original plan: Do what it takes to retire early. “Nick offers good tips for building financial security,” Andie says, “but most people won’t likely practice them with the fervor and discipline that he has. Everyone’s circumstances are different, as are their retirement goals. How much you need to retire depends on many factors: when you retire, your lifestyle, and what you plan to do in retirement. Will you travel? Do you have expensive hobbies? Additionally, will you retire with debt, like a mortgage? And, don’t forget about health insurance costs before Medicare kicks in. If you are not planning to step out of the workforce early, a less rigorous approach may work. In any case, everyone should have a retirement plan.”
If you don’t have a plan or want to review your current plan, remember you have a resource at Member Benefits. Our financial planning services are designed to fit your style and needs—including Do It Yourself, Financial Coaching, and Financial Planning Advice. “The sooner you start planning, the better your odds of retiring with the money you’ll need to enjoy it.”
Andie is quick to point out that even if you didn’t start saving with a 403(b) or IRA as early as Nick, it doesn’t mean you can’t start now. She encourages public school employees of any age to focus less on the amount they can save right away and more on getting started. “If you haven’t started saving, don’t wait any longer. Make today the day,” she emphasizes. “Increasing contributions when you can is important, but getting started is critical because it’s extremely difficult and costly to make up for the lost time.”
As for Nick, it appears he is on track to becoming financially secure and making his early retirement dream come true. With any luck, he’ll be enjoying the fruits of his labor, and maybe a glass of wine, while someone else tends to his grapes.
Nick’s financial credo
The credo by which Nick and his wife Andrea operate is fairly simple…and it hasn’t changed much in 12 years.
We don’t overextend ourselves. It has nothing to do with how much you make, it’s about choices and priorities. We don’t take extravagant vacations, and I’m driving a 2000 Buick.
We save and plan like there will be no Social Security and no pension when we retire. We fully fund our retirement accounts. It’s probably the most important thing you can do.
We try to live frugally. We don’t try to keep up with the Joneses. It’s an easy trap to fall into.
We don’t take risks we can’t recover from. You have to understand the risks you are taking and what the impact of loss would be on your finances.
Get more of the story!
Read the original story about Nick and how saving big for retirement and taking advantage of compound interest put him ahead of the game. View the Summer 2010 magazine.
We’re here for you
Learn more about Member Benefits’ programs and services by exploring our website or calling 1-800-279-4030.
*For illustrative purposes only. Your actual situation may be different depending on future rates. No guarantees are expressed or implied.
New addition to target retirement funds
The Vanguard Target Retirement 2070 Fund will launch on August 8, 2022, joining the existing lineup of Vanguard Target Retirement funds at WEA Member Benefits. It will be an age appropriate investment option for anyone born on January 1, 2003, or later.
The fund will be mixture of the following: 54% U.S. Stock, 36% Foreign Stocks, 7% U.S. Fixed Income Securities (i.e., Bonds), and 3% Foreign Fixed Income Securities (i.e., Bonds). The initial allocation in the fund is considered to be an aggressive portfolio with an expense ratio of 0.08%.
The 2070 fund will begin with this allocation mix and, like all target retirement funds, slowly rebalance over time to become more conservative—transitioning from more stocks to more bonds in order to reduce market risk as the target date approaches.
If you have any questions about the fund, please call us at 1-800-279-4030.
Do you know these IRA facts?
Did you know:
- You can contribute to as many IRA accounts as you want. However, the total you can deposit across all of your accounts is limited to the annual maximum of $6,000 ($7,000 if 50 or older) in 2022.
- Age is no longer a limitation. Most anyone with earned income can contribute to a Traditional IRA, including minors. And the passage of the SECURE Act means most people can contribute to a Traditional IRA past age 70½ as long as they have earned income.
- You don’t need to take RMDs from all of your IRAs. In most cases, you can choose to take it all from one IRA or from a combination of IRA accounts.
- You can roll over old accounts into an IRA. If you have an old 403(b) or 401(k), you may be able to move that money into an IRA.
- Member Benefits has expanded our IRA eligibility guidelines. If you live in one of the eligible states outside of Wisconsin, you and your family* may enjoy the benefits of saving with a WEA Member Benefits IRA.
P.S. The deadline for putting money into IRAs for this year is April 15, 2022. This includes both Roth and Traditional IRAs. If you didn’t max out your 2021 IRA contributions, now’s your chance. (Consult your personal advisor or attorney for advice specific to your unique circumstances before taking action.)
*To be eligible for this program, you must meet the IRS eligibility requirements for contributing to an IRA. Restrictions may apply. Certain state residency required. Your spouse/domestic partner, parents, parents-in-law, and children and their spouses may also participate in our IRA program if they live in one of the approved states.
Exciting new feature in yourMONEY Snapshot mobile app
For those of you who utilize the yourMONEY Snapshot mobile app, we have some great news!
If your school district allows online salary reduction agreement changes in your 403(b) account, you can now change your deferral through the mobile app. We’re very pleased to be able to offer this convenient option to our members.
The yourMONEY Snapshot app lets you toggle between goal forecasting, balances, transactions, investment performance, quarterly statements, and more.