403(b) Plans - The Good and The Bad

(and The Game Plan)

Author

Mike Klinzing
August 13, 2025

In partnership with

Hey Coach,

Your 403(b) Can Be a Star Player - If You Know How to Use It

If you’re a coach working in a public school, private school, or non-profit, you’ve probably been offered a 403(b) retirement plan.
It’s a powerful tool - but like any player on your team, it needs the right role to shine.

Let’s break down the benefits and potential pitfalls so you can run the right plays.

✅ The Benefits of a 403(b)

1. Tax Advantages
Your contributions are made before taxes, which means you reduce your taxable income now.
Example: Earn $60,000, contribute $6,000 → You only pay tax on $54,000 this year.

2. Automatic Payroll Deductions
Set it once, and contributions happen every paycheck.
It’s like automatic practice reps - effortless consistency.

3. Employer Match (Sometimes)
If your school offers a match, take it. It’s free money for your retirement.

4. Higher Contribution Limits
For 2025:

  • Up to $23,000/year (under 50)

  • Up to $30,500/year (50+) with catch-up contributions
    That’s more than you can put in a Roth IRA.

5. Catch-Up for Long-Term Employees
If you’ve worked 15+ years for the same employer, you may get an extra $3,000/year.

Looking for unbiased, fact-based news? Join 1440 today.

Join over 4 million Americans who start their day with 1440 – your daily digest for unbiased, fact-centric news. From politics to sports, we cover it all by analyzing over 100 sources. Our concise, 5-minute read lands in your inbox each morning at no cost. Experience news without the noise; let 1440 help you make up your own mind. Sign up now and invite your friends and family to be part of the informed.

⚠️ The Potential Negatives

1. High Fees
Many 403(b) plans - especially those sold by insurance companies - have high administrative fees and expensive investment options (think annuities with 2–3% annual costs).
That’s like spotting the other team 10 points every quarter.

2. Limited Investment Choices
Some 403(b)s only offer a small menu of funds, and not always the best low-cost ones.

3. Withdrawal Restrictions
If you take money out before age 59½, you’ll likely pay taxes + a 10% penalty (unless you meet specific exceptions).

4. Vendor Quality Varies
In some districts, the “approved vendors” list can be filled with high-cost providers and aggressive sales reps.

🧠 How to Play the 403(b) Smart

  1. Check the fees  -  Ask for the expense ratio of your investments and any annuity surrender charges.

  2. Look for index funds  -  Low-cost funds that track the market often outperform most expensive active funds over time.

  3. Max the match first  -  If your school offers one, always contribute at least enough to get the full match.

  4. Avoid locking yourself in  -  If the plan forces you into a high-cost annuity, consider contributing only to the match and putting extra savings in a Roth IRA instead.

  5. Review annually  -  Treat it like reviewing game film. Make sure your lineup (investments) is still competitive.

🏆 The Bottom Line

A 403(b) can be a powerful starting player in your financial lineup, but it’s not an automatic win.
Understand the rules, watch out for high fees, and keep your strategy flexible.

📝 Coach’s Challenge This Week:

  • Pull up your 403(b) statement

  • Find the fees (expense ratios, admin costs, surrender charges)

  • Decide if it’s helping you win - or if you need to sub in another strategy

Share this with another coach in your district - especially one who’s just starting to invest.
The right play now can mean a much stronger retirement score later.

See you next week,
Coach Mike Klinzing
Founder, Wealth4Coaches
"Coach smarter. Save better. Live freer."

#Wealth4Coaches #CoachMoney #CoachSmarter