Supplemental Savings

Overview

STRS Ohio may provide a substantial amount of your retirement income; however, supplemental retirement plans are essential for building a financially secure future. The time to start saving is now and enrollment is simple. Watch this brief video that addresses common questions about supplemental retirement plans.

Resources

Plan Features and Contribution Limits

Tax regulations favor those who want to save for retirement. Tax-deferred accounts, such as a 403(b), a 457(b) governmental plan or a 401(k) enable you to avoid current taxation on your contributions and put the full pretax amount to work for you before it is reduced by taxes. See below for an overview of account features.

  403(b) 457(b) Governmental Plan Traditional Deductible IRA
Eligibility1 Employees of public school systems and tax-exempt organizations under Section 501(c)(3) of the Internal Revenue Code State and municipal workers and public teachers
  • Under age 70-1/2
  • No income limits (see deductibility rules)
  • Nonwage earning spouse eligible to participate
Deductibility Not applicable Not applicable
  • Single: Full deduction if covered by a retirement plan at work and AGI* is $63,000 or less; partial deduction if AGI is more than $63,000 but less than $73,000
  • Joint: Full deduction if covered by a retirement plan at work and AGI is $101,000 or less; partial deduction if AGI is more than $101,000 but less than $121,000
Contribution Limits Under Age 502 2018: $18,500
2019 and after: Indexed for inflation
2018: $18,500
2019 and after: Indexed for inflation
2018: $5,500
2019 and after: Indexed for inflation
Age 50 or Older Catch-Up Provision3 2018: $6,000
2019 and after: Indexed for inflation
2018: $6,000
2019 and after: Indexed for inflation
2018: $1,000
2019 and after: Indexed for inflation
Final Three-Year Catch-Up Provision4 None 2018: $18,500
2019 and after: Indexed for inflation
None
15-Year Rule Catch-Up Provision5 2018: $3,000 None None
Early Distribution Penalties6 10% of distributions before age 59-1/2 None 10% of distributions before age 59-1/2
Required Minimum Distribution7 Generally begins April 1 of the year following the year in which you reach age 70-1/2 Generally begins April 1 of the year following the year in which you reach age 70-1/2 Generally begins April 1 of the year following the year in which you reach age 70-1/2

*Adjusted gross income

  Traditional Nondeductible IRA Roth IRA
Eligibility1
  • Under age 70-1/2
  • No income limits
  • Nonwage earning spouse eligible to participate
  • No age limits
  • Income limits
    • Single: Full contribution with AGI* less than $120,000; partial contribution with AGI at least $120,000 but less than $135,000
    • Joint: Full contribution with AGI less than $189,000; partial contribution with AGI at least $189,000 but less than $199,000
    • Nonwage earning spouse eligible to participate
Deductibility No No
Contribution Limits Under Age 502 2018: $5,500
2019 and after: Indexed for inflation
2018: $5,500
2019 and after: Indexed for inflation
Age 50 or Older Catch-Up Provision3 2018: $1,000
2019 and after: Indexed for inflation
2018: $1,000
2019 and after: Indexed for inflation
Final Three-Year Catch-Up Provision4 None None
15-Year Rule Catch-Up Provision5 None None
Early Distribution Penalties6 10% of distributions before age 59-1/2 10% of distributions before age 59-1/2 and held less than 5 years
Required Minimum Distribution7 Generally begins April 1 of the year following the year in which you reach age 70-1/2 None

*Adjusted gross income

1Eligibility — IRA plan participants who participate in an eligible retirement plan at work and meet certain income requirements may receive at least a partial deduction. See your tax advisor for more detailed information.

2Contribution limits under age 50 — For IRAs, contributions are limited to the lesser of the contribution limit or earned income in a given year. The 403(b) and 457(b) governmental plan allow participants to defer 100% of includable compensation — not to exceed the limits indicated in the table above. The coordination of contributions is eliminated between eligible employer plans.

Example: If in 2018 you contribute $18,500 to your 403(b), you can also contribute up to $18,500 to a 457(b) governmental plan.

3Age 50 or older catch-up provision — Applicable to 403(b), 457(b) governmental plans and IRAs, this provision allows participants age 50 and older to contribute additional amounts as specified above.

Example: An educator, age 50 or older, could conceivably contribute $49,000 during 2018 ($18,500 + $6,000 to the 403(b) + $18,500 + $6,000 to the 457(b) = $49,000).

4Final three-year catch-up provision — This provision, for the 457(b) governmental plan, favors participants who haven’t contributed the maximum amount in prior years and are approaching retirement. The provision permits twice the maximum contribution limit and applies to the three years prior to retirement age. If 457(b) governmental plan participants use the “final three-year” provision, they cannot also use the “age 50 catch-up” provision.

Example: An educator planning to retire in 2021 could take advantage of the “final three-year” provision in 2018, 2019 and 2020. Beginning with 2018, the educator could contribute the contribution limit of $18,500 plus the $18,500 three-year provision limit, for a total of $37,000. Then, this individual could also contribute the contribution limit plus the three-year provision limit in 2019 and 2020. As the tables above indicate, the limits for 2019 and after may differ from 2018 depending on inflation.

5The 15-year rule catch-up provision — This provision allows 403(b) plan participants with 15 years or more of service with an employer, and an annual average contribution of $5,000 per year, to contribute an additional $3,000 per year up to a lifetime maximum of $15,000. If an employee qualifies for the 15-year rule, that individual could have elective deferrals to the 403(b) as high as $21,500 for 2018 under this rule ($18,500 plus $3,000 — the catch-up for 15 years of service).

6Early distribution penalties — IRA participants may make penalty-free withdrawals for higher education costs or a first-home purchase ($10,000 maximum for home expenses).

7Required minimum distribution — Roth IRA participants may continue to make contributions to the plan if they are over age 70-1/2 and working.