With the right budgeting, a nurse's salary can support a healthy retirement plan, where tax-advantaged retirement accounts offer ways for nurses to maximize savings.
Published June 16, 2022
As a nurse, building a savings and retirement plan that’s aligned with your career path and financial goals comes with its own unique challenges. The good news is that whether you work for the government, a non-profit, a private organization or yourself, there are different types of retirement plans you can start taking advantage of to prepare for your post-career life.
Before you start contributing to a retirement account, it’s important to take inventory of your finances, set a budget, and clearly define your financial goals in the near and short term. This will allow you to set accurate, realistic retirement goals so you can align your accounts and manage your risk while saving for retirement.
Depending on your employer, there are different types of retirement plans with unique features and benefits available to you. Nurses working in public sectors, for example, can benefit from exclusive plans. Pensions as well as private (non-employer) methods of building retirement savings may also be available.
If you’re employed by the Federal government, you’ll have access to the Thrift Savings Plan (TSP), a tax-deferred retirement savings and investment plan that gives Federal employees the same type of savings and tax benefits that many private corporations offer their employees under 401(k) plans. By taking advantage of the TSP, Federal employees can save a portion of their income for retirement, receive matching agency contributions, and reduce their current taxes.
As a nurse employed by a public school (including state colleges and universities) or certain 501(c)(3) tax-exempt organizations, you can enroll in a 403(b) plan, also known as a tax-sheltered annuity plan. Employees eligible for a 403(b) plan can take advantage of tax-exempt contributions by setting aside some of their salary each paycheck to be automatically put in their retirement account. Additionally, employers may contribute to the plan for employees through a match program.
Nurses employed by state or local governments can take advantage of 457(b), 401(a) or pension plans to save for retirement. Plans eligible under 457(b) give employees the benefit of deferring income taxation on retirement savings into future years.
With a 401a plan, your employer is required to contribute to the plan. Typically, employers offering a 401(a) plan will set their employees’ contribution amount, and usually employee participation is mandatory. If you leave the organization, you can usually withdraw your vested money by rolling it over into another qualified retirement savings plan or purchasing an annuity. As for less common pension plans, the main difference between them and other employer-sponsored retirement plans is that a pension guarantees you a set monthly income for life after you retire. In a pension plan, contributions are made by the employer to an investment portfolio managed by an investment professional and come with significantly less market risk for employees compared to a 401(k). In some cases, employees may also make contributions.
In the private sector, one of the most common types of retirement plan benefits offered is a 401(k). In a 401(k) plan, you have the freedom to choose how much pre-tax income you want to contribute (up to a certain limit set by the IRS) and your employer may or may not offer a matching contribution.
Once the above tax-advantage and employer-sponsored plans are maximized for contributions, you can also look at private plans to meet and exceed your retirement savings goals.
Investment Retirement Accounts (IRAs) come in for different types:
Once you’ve decided on your retirement account type, make sure you understand your options for investing those funds. You may be able to talk to a financial professional through your retirement benefits plan and have an opportunity to get all of your questions answered.
Once you have selected the best retirement plan and cadence for saving that works with your budget, you can focus on reducing debt via options like student loan refinancing or consolidation loans. Once you have a strategy for reducing debt, you can create an emergency savings fund while also regularly contributing to a retirement savings plan that maximizes contributions.
Regularly reviewing retirement investments for adjustments as you move through different stages of life and your financial goals change is important. Make sure changes in your income (i.e. when you get a raise) are reflected in your retirement savings strategy.
In providing this information, neither Laurel Road or KeyBank nor its affiliates are acting as your agent or is offering any tax, financial, accounting, or legal advice.
Any third-party linked content is provided for informational purposes and should not be viewed as an endorsement by Laurel Road or KeyBank of any third-party product or service mentioned. Laurel Road’s Online Privacy Statement does not apply to third-party linked websites and you should consult the privacy disclosures of each site you visit for further information.