If you are a teacher in California, you have probably heard about the 403b plan. Maybe someone at your school mentioned it during an enrollment meeting, or a plan representative stopped by your district to talk about retirement savings. But most educators walk away from those conversations with more questions than answers.
This guide breaks it all down in plain language. You will learn what a 403b plan for California teachers actually is, how it works alongside CalSTRS, what fees to watch out for, and how to make decisions that genuinely serve your best interests. You will also find out how working with a qualified advisor can help you build a financially secure future.
What Is a 403b Plan and Why Should California Teachers Care?
A 403b is a tax-advantaged retirement savings account available to employees of public schools, non-profits, and certain other organizations. For California teachers, it serves as a supplemental retirement account on top of your CalSTRS pension.
Here is the important thing to understand: your CalSTRS pension is valuable, but it was never designed to replace 100% of your salary. According to PEAK Solutions Financial, most public school employees do not realize they will lose up to 40% of their income when they retire. A 403b plan helps close that gap.
When you contribute to a 403b, your money goes in before taxes are taken out of your paycheck. That means you reduce your taxable income today while building savings for tomorrow. Your contributions grow tax-deferred, meaning you only pay taxes when you withdraw the money in retirement. For many educators, this results in significant savings over time.
How Do 403b Plans Work for Educators in California?
How Do You Enroll in a 403b Plan?
Enrollment typically happens through your school district. Your district will have a list of approved 403b plan providers. You submit a salary reduction agreement and an enrollment form to get started. Contributions come directly out of your paycheck as a set percentage of your salary.
You can contribute up to IRS limits each year. In 2025, the standard limit is $23,500. Educators who are age 50 or older may be eligible to contribute more through catch-up contributions. If you have worked for the same employer for 15 or more years, there may be an additional special catch-up provision available to you.
Your contributions are invested in products offered by your chosen provider. Common investment options include mutual funds and annuities. More on those in a moment.
What Is the Difference Between Traditional and Roth 403b Contributions?
A traditional 403b lets you contribute pre-tax dollars, reducing your taxable income now. You pay taxes when you withdraw in retirement. A Roth 403b takes after-tax contributions, so you pay taxes now but your withdrawals in retirement are tax-free.
Which is better depends on your current income, your expected income in retirement, and your overall financial picture. This is one area where personalized guidance from a retirement-focused advisor makes a real difference. Contact PEAK Solutions Financial to discuss which approach fits your situation.
What Investment Options Are Available Inside a 403b?
What Are Mutual Funds in a 403b Plan?
Mutual funds pool money from many investors to buy a collection of stocks, bonds, or other assets. They are managed by professional fund managers. Inside a 403b, mutual funds offer diversification, which means your money is spread across many different investments rather than tied to one company or asset.
Mutual funds typically charge an expense ratio, which is a percentage of your account value taken each year to cover management costs. Some charge higher fees than others. Over a 20- or 30-year career, even a small difference in fees can have a big impact on your retirement account balance.
What Are Annuities in a 403b Plan and Are They Right for Teachers?
Annuities are insurance products that can be included in a 403b. Variable annuities invest your money in sub-accounts that work similarly to mutual funds. Fixed annuities guarantee a set rate of return. Some products combine elements of both.
Annuities often come with additional benefits like guaranteed income riders, but they also tend to carry higher costs. These can include administrative fees, mortality and expense charges, and surrender fees if you withdraw money early or transfer to a different provider.
Not all annuities are a poor choice, but many teachers have enrolled in products without fully understanding the costs or restrictions. Before you invest, make sure you understand exactly what you are paying and what limitations apply to your account.
What Fees Should California Teachers Watch Out For in a 403b?
This is one of the most important sections of this article. Fees are one of the biggest factors that determine how much money you actually end up with in retirement. Unfortunately, many educators never learn about the fees in their 403b until significant damage has already been done.
Here are the most common fees to watch for:
- Administrative fees: These are charged by your plan provider to manage the account. They can be a flat dollar amount or a percentage of your assets.
- Fund expense ratios: Every mutual fund or sub-account charges an annual fee expressed as a percentage. Even 1% per year adds up dramatically over decades.
- Surrender fees: If you move money out of an annuity product before a set period ends, you may owe a surrender charge. These can range from a few percent to as high as 10% or more in the early years of the contract.
- Hidden fees: Some products include layers of charges that are not clearly disclosed. Commission-based plan representatives may sell products that pay them a high commission without clearly explaining the full cost to you.
When comparing 403b plans, always ask for a full breakdown of all fees. Then compare total costs across providers before you make a decision.
How Does a 403b Fit Alongside CalSTRS for California Teachers?
Does Your CalSTRS Pension Replace All of Your Income?
The short answer is no. Your CalSTRS pension is calculated based on your years of service, age at retirement, and final compensation. While it provides a reliable base of income, many educators find that their pension alone does not cover all their expenses in retirement, especially when you factor in rising costs of living, health insurance expenses, and the lifestyle they want to maintain.
A 403b allows you to build additional retirement savings on top of your pension. When used wisely, it can be a powerful tool for creating the financially secure future you have worked toward throughout your career.
What Happens to Your 403b When You Change Districts?
One of the questions that comes up frequently among California teachers is what happens to a 403b account when moving from one district to another. Your 403b is yours. It stays with you regardless of where you work. However, depending on the product you chose, you may face surrender fees or restrictions if you try to move your account or change providers.
This is another reason why understanding your plan’s terms before you enroll matters so much. Explore PEAK Solutions Financial’s services to learn how their team helps educators navigate these kinds of transitions.
What Is the California Teachers Association’s Role in 403b Plans?
The California Teachers Association, often called CTA, is the largest union representing public school teachers in California. The CTA has a retirement savings plan available to its members. If you are a member of the CTA, this may be one of the 403b options presented to you.
Union-endorsed plans can be worth considering, but membership in the union does not guarantee that the plan’s investment options or fees are the lowest available. It is still your responsibility as a participant to review the plan costs and compare them to other options available through your district.
Always ask plan representatives to show you a complete fee disclosure before you enroll in any 403b product.
What Are Fiduciary Standards and Why Do They Matter for Teachers?
A fiduciary is someone who is legally required to act in your best interests. Not all financial advisors or plan representatives are held to this standard. Some operate under a less strict requirement that only requires them to recommend products that are “suitable” for you, even if something cheaper or better might exist.
When choosing who to work with on your retirement account, it is worth asking directly whether they operate as a fiduciary. An advisor who acts in your best interests will help you compare plan decisions objectively, identify hidden fees, and choose investment options that align with your goals rather than their commission.
PEAK Solutions Financial works specifically with California educators to provide clarity and guidance around retirement decisions. Their mission is rooted in service, trust, and long-term thinking, not in selling products for commission.
How Can California Teachers Make Smarter 403b Decisions?
Here are practical steps you can take to make more informed choices about your 403b:
- Ask for full fee disclosure. Before you enroll, request a breakdown of every fee including administrative fees, fund expense ratios, surrender fees, and any other charges.
- Compare multiple providers. Your district likely has several approved vendors. Do not just go with the first plan representative who contacts you.
- Understand what you are investing in. Whether it is a mutual fund or an annuity, make sure you understand the product before you contribute.
- Review your account regularly. Plan costs and your investment mix can both affect your long-term outcome. Check in at least once a year.
- Work with a fiduciary advisor. An advisor who is required to act in your best interests can help you navigate your options clearly.
- Do not ignore the impact of fees. A difference of 1% in annual fees may seem small but can reduce your retirement balance by tens of thousands of dollars over your career.
For personalized guidance, visit PEAK Solutions Financial or contact their team directly.
Who Helps California Teachers Navigate 403b Plans?
Many teachers feel overwhelmed by the number of options, the complexity of the products, and the pressure they sometimes feel from plan representatives during enrollment. It helps to have a trusted advisor in your corner before making any decisions.
PEAK Solutions Financial was built specifically to serve educators and public employees navigating retirement. Their services include personalized retirement income plans, payout option comparisons, supplemental pension account education, and guidance on accessing retirement income efficiently. You can learn more by visiting their About Us page or reading their educator-focused resources on the PEAK Solutions Financial blog.
Their advisors help educators understand how 403b plans interact with CalSTRS and CalPERS benefits, identify gaps in coverage, and create a complete retirement strategy that works for their real lives.
Works Cited
California State Teachers’ Retirement System. CalSTRS Home. CalSTRS, www.calstrs.com.
Internal Revenue Service. IRC Section 403(b) Tax-Sheltered Annuity Plans. IRS, www.irs.gov/retirement-plans/irc-403b-tax-sheltered-annuity-plans.
California Teachers Association. CTA Retirement Services. CTA, www.cta.org.
U.S. Department of Labor. Understanding Retirement Plan Fees and Expenses. DOL, www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/understanding-retirement-plan-fees-and-expenses.
