Supplemental Retirement Account

In addition to the money that the university contributes for you, Carnegie Mellon provides payroll deduction for you to make your own retirement contributions to a 403(b) Supplemental Retirement Account (SRA). Experts recommned setting aside 10%-20% of your salary for retirement. Even with the university's contributions, you should still save of your own funds in an SRA in order to achieve your retirement lifestyle goals.

Two Ways to Contribute: Traditional or Roth 403(b) Accounts

In a tradition 403(b) plan, you set aside pre-tax dollars to reduce the amount you pay in taxes, while building your retirement savings! You'll pay taxes on your contributions and their earnings when you withdraw the funds at retirement, but you will see a smaller impact on your take-home pay now.

In a Roth 403(b) plan, you make SRA contributions with after-tax dollars, so you'll pay more in taxes now. But as long as you participate in the plan for at least 5 years and are age 59 1/2 when you withdraw the funds, your contributions and their earnings will be completely tax free in retirement!

There are advantages and disadvantages to both kinds of accounts, and your individual circumstances impact which is the right choice for you. Factors to consider include: your tax bracket today versus your tax bracket in retirement, how much time you have until you retire, and how much you can afford to save under each type of plan. See the Roth 403(b) Announcement (.pdf) for more information.

You may contribute to one or both kinds of accounts. Just like the Faculty and Staff Retirement Plan, you control into which funds you will invest the money under either type of account.

To begin participating in a Supplemental Retirement Account, begin investing with a different carrier, or initiate a new type of account (Roth, Traditional) with your carrier:

Complete the New Supplemental Retirement Account Salary Reduction Agreement (.pdf)
Complete the appropriate carrier enrollment form to enroll in a Supplemental Retirement Account. (You must complete the carrier enrollment form to begin a Roth account, even if you already have a traditional 403(b) account with the same carrier.)

Once you have enrolled in an SRA, you can update the amount you contribute to your retirement or the carrier with whom you invest through HR Connection. (See also the Enrolling in Your Carnegie Mellon Retirement Benefits (.pdf) helpsheet.)

How much can you contribute?

Carnegie Mellon's contributions are probably not sufficient on their own to provide the level of retirement income you desire. Financial planners say you'll have to replace 80% to 90% of your pre-retirement income to maintain the same standard of living. The earlier you start saving, the longer your money has to grow.

You may contribute as little as $25 per month to the SRA, up to the annual amount allowed by the IRS (see below). Recognizing that as individuals get closer to retirement, they may wish to increase their savings rate, individuals who are at least age 50 during the calendar year are permitted by the IRS to invest additional money as a "catch-up contribution." In all cases, however, your total deferral limit cannot exceed your annual salary: (See the SRA Limit Notification (.pdf).)

Year	Annual Contribution Limit	Catch-Up Contribution Levels
2007	Up to $15,000	Up to an additional $5,000
2008	Up to $15,500	Up to an additional $5,000

Investment Example:

This is an example of how your SRA contributions can turn out to be tax savings in the end under both kinds of accounts.

	Contributes to a Roth SRA	Contributes to a Traditional SRA
Annual Income	$30,000	$30,000
Pre-Tax Retirement Contributions	$0	$6,000 ($500/month)
Taxable Income	$30,000	$24,000
Federal taxes paid annually*	$4,500*	$3,600* ($900 saved)
Annual Take-Home Pay	$25,500	$26,400
Post-Tax Retirement Contributions	$6,000 ($500/month)	$0
Total Retirement Savings After 30 Years**	$474,349**	$474,349**
Federal taxes owed at withdrawl*	$0	$71,152*
Take-Home Retirement Savings	$474,349	$403,197
Federal Taxes Paid Annually on Retirement Savings Over 30 Years *	$27,000*	$0*

*Based on a federal tax withholding rate of 15%. **Based on a contribution rate of $6,000 per year, and 6% annual return rate.

The person who contributes to a traditional SRA account saves $27,000 in taxes over 30 years, giving her $900 more per year in spendable income. However, at retirement, she will owe $71,152 on her retirement contributions and their earnings. This example assumes that someone will be in the same tax bracket (15%) at retirement and for every year during their working years. This may not be the case for you, and would alter the figures for your situation. See the Roth 403(b) Announcement (.pdf) for more information and factors to consider when deciding which account is right for you.

TIAA-CREF forms and information:

Vanguard forms and information:

Other retirement forms:

New Supplemental Retirement Account - Salary Reduction Agreement (.pdf) - to initiate a Supplemental Retirement Account
Prior Retirement Plan Participation form (.pdf) - if you already have a retirement account elsewhere.
Retirement Plan Change form (.pdf) - to switch contributions from one administrator to the other.

For more information:

Enrolling in Your Carnegie Mellon Retirement Benefits (.pdf) - helpsheet
SRA Limit Notification (.pdf)
Roth 403(b) Announcement (.pdf)
Retiree Medical Benefits
Retirement Cookbook (.pdf) (Cultivating Your Retirement Options; Picking Your Distribution Options; Reaping Your Social Security Benefits)
Contact the Benefit Office's at hrhelp@andrew.cmu.edu or 412-268-2047