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Vito Prosciutto: Teaching community college math on the road to a PhD.

Monday, August 23, 2004

11:35
Signing contracts and filling out forms 

(The laptop's not quite gone yet. I'm heading to the apple store this afternoon.)

So this morning I spent a bit over an hour doing my contract signing. Because of all of my schooling, I'll be starting in the upper right corner of the salary schedule. No experience, but as much education as they'll give me. The only way to boost my salary besides time is to get a PhD or teach bilingual. Both are possibilities, I suppose, although if I were to do a doctorate, I'd lean towards an Ed Leadership... I'll have to research what my options are in the interim.

The 403(b) information is completely confusing, although it looks like the option through the state teacher's retirement system offers me the low-cost mutual funds that I'd like. There's a whole page of annuity contracts in the 403(b) packet, and some names of investment companies, but no specific information.

For readers out there who might be wondering about this stuff, here's what I can tell you from my own life experience:

The 403(b) is the non-profit equivalent of the 401(k), a retirement set-up, similar to an IRA where pre-tax income is put aside for retirement savings. Unlike the 401(k), there's generally no employer match, and the investment choices are often pretty weak.

You can put aside a maximum of $13,000 per year (increasing $1000 per year until 2006, then $500/year afterwards, higher limits apply for long-term employees who have not been contributing enough, or old folks in a panic). It appears that the 403(b) does not have the percentage limitation that the 401(k) does, so I need to talk with my wife about exactly how much we want to put aside (I've been bugging her to put money into a 401(k) with no effect).

Once the money's in, what to do? I'd recommend against the annuity unless you're really close to retirement. For young teachers, you want to look at the options and try to find something along the lines of a low-cost index fund. The more you pay in costs, the less you'll actually make. Furthermore, no actively managed fund beats the market on the long-term so you may as well just invest in the market. Most fund companies now have low-cost index funds. Vanguard is the granddaddy of this one with their index funds. It looks like I'll be parking mine in their S&P 400 index fund.

Older investers should consider diversifying investments a bit more, putting some in bond funds (although I'm personally not that enamored with bond funds... if it's at all possible, bonds are generally a better investment than bond funds since you can just buy a bond and hold it to maturity rather than deal with the fluctuations in the market that impair the returns of even bond index funds) and perhaps a smaller percentage into a money market. Anything that you won't be needing in 10 years should be in stocks (remember that we're not talking retirement date here, we're talking, the time when you'll actually be withdrawing the money to buy food, clothes, vacations, etc.).

One last thing, if your district is anything like mine, they barely even acknowledge the existence of the 403(b) plan. I've never heard of a district which didn't offer one. It's a great deal: Get in on it.

Update (8/23/04) There was a link provided in the comments to 403b wise that looks to be rather helpful. Also, if you click on the "link" link below you'll see this post on its own page, which may make the ads for the page a bit more relevant than you get on the big page that you're (probably) looking at now.

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