In addition to the Florida Pension options, you'll also have the option to contribute to an optional employer plan. We discuss the difference between 403(b), 457, and Roth. We also discuss some tricks you can use to help you save more and to pick the right investments for you.
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Show transcription:
Don Anders: Hello, this is Don Anders, and welcome to the Florida Retirement System Podcast. This is episode number two of 15. Here with us as the last episode we have Alex Dingman. How you're doing Alex?
Alex Dingman: I am doing pretty well. You know, the firefighter gig just getting it underway, and I'm feeling pretty good about it.
Don Anders: As you know, if you listened to episode one, Alex is our fictional new firefighter.
Alex Dingman: Yes, and if you looked at me, you would tell that I'm not actually a firefighter.
Don Anders: You won't be able to get the gas mask on with that beard.
Alex Dingman: No, no, I don't think I'd work out.
Don Anders: All right. So what we're going to get into now is you just got hired. We chose the investment plan or the pension plan last time, went over the options. Now let's talk about your optional retirement plan. If you're ... so firefighters, police officers, most state employees will have a 457. Teachers also usually have a 457, but they also usually have a 403(b) as well. A 403(b) is kind of the default for any kind of school board person. 457 is the default for anyone else in the state.
Don Anders: So you're going to have a 457 available to you. There might be one option, there might be two, three, four different options that you can go with depending on your agency, who you're working with. So the big question that I'm guessing you have is, who should you contribute to?
Alex Dingman: Yeah. I mean, I've heard of 401ks before now, but these are specific to public employees then?
Don Anders: Yeah. And if you have ... so a 457, another name it's basically I like to call that a public employee's 401k. A 403(b) I like to call it a teacher or a school board or a nonprofit's 401k.
There's a little differences, but when you're just getting started, the big thing that you want to look for, first off, if there's just one option, then you contribute to that option. Usually just retiring with pension, social security is not going to be enough, so you want to make sure you contribute with something. And if you can, I really want you to make sure that you contribute a percentage of your salary, not an actual dollar amount because if you contribute a percentage, let's say it's 6%, every time you get a raise, the amount that's going in is going to go up as well.
Don Anders: If you can do that, please do it. If you can't, sometimes they just allow you to just contribute $50 or $100. This is actually how I got started, was signing people up for these types of plans. If you can just contribute $100, next time you get a raise, let's say it's $200 per paycheck, can take half of that, so take $100, send that to your retirement and then give yourself the other $100 raise because you want an extra cup of coffee a day
Alex Dingman: Well, and this goes back to the old saying of paying yourself first, right?
Don Anders: Yeah.
Alex Dingman: And that's the big reason why you do this, because you're the first one that gets money from your paycheck that you earned.
Don Anders: Yeah. When you first start, you're not paid a lot as a state employee. That's not... You did not become a firefighter to get rich.
Alex Dingman: No.
Don Anders: If you did, that was a bad scheme. The reason that is it's passion or you did it because of job security or something like that. So you need to make sure you pay yourself so you can retire,
