I’m fortunate to work for an employer who offers a pension plan. I have to work at this institution for 5 years before vesting into the pension plan. Each year, I contribute 7% of my gross income to my pension fund, while my employer contributes 14% of my gross income to the fund. I’ve put in 7 years at this institution so far (4 as a CRNA, 3 as an RN). Obviously, it goes without saying that the longer one works, the greater the percentage of income one receives during retirement.
Generally, the way this pension fund pays out retirees is as follows:
Service credit x Age Factor = Benefit %
Benefit % x Highest Average Annual Compensation over 36 Months = Annual Retirement Income (Pre-Tax)
Defined Contribution Plan (DCP) – 401(a)
At the institution I work at, the DCP is treated as after-tax retirement vehicle akin (but not entirely) to the Roth IRA. However, one is able to store up to $53,000 of after-tax money in this account. The only reason why I have money in there is from my time as an RN, during which I had no idea what I was doing when it came to contributing money to a retirement vehicle. The unique part of this vehicle is that as a CRNA, you’re phased out of being able to open a Roth IRA due to your high income. So, if you have excess money that you’d like to save after potentially maximizing your other retirement vehicles, this isn’t so bad. However, this is one vehicle that I am not focused on contributing to as I am allocating my savings to maximizing the profit potential of a rental property I purchased earlier in 2018.
403(b) & 457(b)
There are two pre-tax retirement vehicles that my employer offers: the 403(b), which is akin to the 401(k), and then there’s the 457(b). Why is the 403(b) and 457(b) offered to me as opposed to the 401(k). Simply put, if you’re a public employee or part of a non-governmental organization, the 403(b) and 457(b) are generally offered are investment vehicles to save your money for retirement. If you work for a private corporation, a 401(k) is offered. I’m being very reductive with that explanation though.
My current approach is maximizing my annual contributions to my 403(b), which for 2018, is $18,500. In years past, I’ve maximized my annual contributions to my 457(b), but again, because of this new rental property I purchased, my plan is to save as much after-tax money as possible and work on building up the rental property to increase my earnings now as opposed to waiting until retirement to collect.