What a 403(b) Is, In Plain English
A 403(b) is a supplemental retirement savings account available to employees of public schools and certain nonprofits - the rough equivalent of a 401(k) in the private sector. Contributions are typically made through payroll deduction, often on a tax-deferred basis.
Why Teachers May Use Supplemental Savings
Your CalSTRS pension is a strong foundation, but as discussed in our retirement income gap guide, it may not fully replace your working income. A 403(b) is one tool some teachers use to build savings outside the pension system, giving them an additional source of retirement income they control directly.
How It Relates to the Pension Gap
If a projected gap exists between your pension and your expected retirement expenses, supplemental savings - whether through a 403(b), other accounts, or protected strategies - is one of the more common ways teachers choose to address it. The right amount and approach depends entirely on your personal situation and timeline.
Tax-Sheltered Annuities
403(b) plans are sometimes referred to as tax-sheltered annuity (TSA) plans. Some 403(b) options are annuity-based; others are not. Protected strategies may include insurance and annuity-based options offered by licensed insurance professionals, and the right structure depends on your goals, timeline, and risk tolerance.
An Educational Starting Point
This page is intended to introduce the concept, not to recommend a specific product or contribution amount. Whether a 403(b) makes sense for you, and how it should be structured, is worth discussing in the context of your full retirement picture.