Mayo Clinic 403(b) Plan Benefits Guide
As a Mayo Clinic employee, you have access to a robust 403(b) retirement plan. This tax-advantaged savings vehicle is a great opportunity to build your retirement security, especially when combined with Mayo's pension plan and other benefits.
Understanding how to maximize your 403(b) plan could make all the difference in your financial future. Here's everything you need to know about Mayo Clinic's 403(b) plan and how to make the most of it
What Is a 403(b) Plan?
A 403(b) plan is a retirement savings plan specifically designed for employees of tax-exempt organizations like nonprofits, public schools, and hospitals. As a Mayo Clinic employee, you're eligible for this plan because Mayo Clinic is a nonprofit organization.
The 403(b) works similarly to a 401(k) plan. Like a 401(k), your Mayo Clinic lets you invest in a tax-advantaged retirement account, complete with employer matching contributions.
Contribution Limits for 2025
For 2025, employees under 50 can contribute up to $23,500 to the Mayo Clinic 403(b) plan. This limit applies to your combined traditional pre-tax and Roth contributions.
If you're age 50 or older by the end of 2025, you can contribute an additional $7,500 in catch-up contributions, bringing your total to $31,000.
If you're between the ages of 60 and 63, you can invest even more with super catch-up limits, allowing total contributions of up to $34,750.
You can change your contribution amount at any time and contribute up to 50% of your pay, up to the IRS limits.
Traditional vs. Roth Contributions
Mayo Clinic's 403(b) plan offers both traditional pre-tax and Roth after-tax contribution options. You can choose to make traditional contributions, Roth contributions, or a combination of the two. Here’s a rundown of the differences.
Traditional Pre-Tax Contributions
Contributions are made before taxes are deducted from your paycheck
Reduces your current taxable income
Money grows tax-deferred until retirement
Withdrawals in retirement are taxed as ordinary income
Roth Contributions
Contributions are made with after-tax dollars
No immediate tax deduction
Money grows tax-free
Qualified withdrawals in retirement are completely tax-free
For most employees, making both pre-tax and Roth contributions will offer more flexibility in retirement, giving you the best of both worlds.
Employer Matching Contributions
One of the most valuable aspects of Mayo's 403(b) plan is the employer matching contribution. Mayo's matching formula is based on your years of service:
Less than 20 years of service: Mayo matches 50% of your contributions up to 4% of your pay
20-29 years of service: Mayo matches 75% of your contributions up to 4% of your pay
30+ years of service: Mayo matches 100% of your contributions up to 4% of your pay
For example, let’s say you earn $60,000 annually and contribute 4% of your salary ($2,400):
With less than 20 years of service: Mayo contributes $1,200 (50% match)
With 20-29 years: Mayo contributes $1,800 (75% match)
With 30+ years: Mayo contributes $2,400 (100% match)
This graduated matching system rewards long-term employees and provides some of the most generous matching in the healthcare field.
Vesting Schedule
The Mayo Clinic 403(b) has 100% immediate vesting for all employee contributions and earnings. The money you contribute is always yours, regardless of how long you work at Mayo Clinic.
Mayo's matching contributions vest 100% after three years of service. This means after three years, you're entitled to keep all of Mayo's contributions even if you leave the organization. If you leave before then, you will forfeit any employer matching funds.
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Investment Options
Mayo Clinic's 403(b) plan, administered by Fidelity Investments, offers quite a few options for investments.
Lifecycle Funds
Lifecycle funds, also known as target date funds, are professionally managed funds based on your expected retirement date. These funds automatically become more conservative as you approach retirement, making them a simple "set it and forget it" option that's particularly well-suited for busy healthcare professionals who don't want to actively manage their investments.
Core Investment Options
For those who prefer more control, Fidelity provides a diversified mix of stock, bond, and short-term investment funds to choose from. This allows you to build a customized portfolio with various risk levels and investment styles available, giving you the flexibility to tailor your investments to your specific goals and risk tolerance.
Self-Directed Brokerage
Experienced investors who want even broader choices can take advantage of the self-directed brokerage option. This feature provides access to individual mutual funds beyond the core options, though it requires more active management and investment knowledge to use effectively.
What Happens to Your 403(b) When You Leave Mayo Clinic
When you separate from Mayo Clinic, you have several options for your 403(b) account, and the choice you make can have a big impact on your retirement savings.
Keep Your Account at Mayo
If your account balance meets the minimum threshold (typically $5,000 or more), you can leave your money in Mayo's 403(b) plan. You'll continue to have access to the same investment options and can manage your account online, but you won't be able to make new contributions.
Roll Over to a New Employer's Plan
If your new employer offers a 401(k) or 403(b) plan that accepts rollovers, you can transfer your Mayo account directly to the new plan. This keeps your money in a tax-advantaged account and may provide new investment options.
Roll Over to an IRA
Rolling your 403(b) into an Individual Retirement Account (IRA) often provides the most investment flexibility and potentially lower fees. You can choose between a traditional IRA (for tax-deferred growth) or convert to a Roth IRA (paying taxes now for tax-free growth going forward).
Take a Cash Distribution
While you can withdraw your money directly, this option comes with significant drawbacks. You'll owe income taxes on the full amount, and if you're under age 59½, you'll also pay a 10% early withdrawal penalty. This should generally be avoided unless you're in severe financial distress.
Partial Options
You can also combine these approaches, perhaps rolling over most of your balance while taking a small distribution for immediate needs. Remember that any amount you don't roll over will be subject to taxes and potential penalties.
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Tips to Maximize Your Mayo Clinic 403(b)
Contribute Enough for the Full Match
The most important step is contributing at least enough to receive Mayo's full employer match. Even if money is tight, prioritize getting this match because it's essentially free money that can significantly boost your retirement savings over time. The match increases with your years of service, so long-term employees receive even more generous contributions.
Set Up Automatic Contributions
Set your account to automatically increase your contribution rate when you receive salary increases or annual raises. This helps you steadily increase your savings rate without having to remember to make changes each time your income grows. Many employees find this is the easiest way to gradually work up to maximizing their contributions.
Consider Roth Contributions for Tax Diversification
Don't automatically choose traditional pre-tax contributions without considering Roth options. While traditional contributions provide immediate tax savings, Roth contributions can be valuable for tax diversification in retirement.
Avoid Using Your 403(b) as a Bank Account
While loans are available, borrowing from your 403(b) too frequently can significantly harm your retirement savings. Every dollar you borrow stops growing for retirement, and if you leave Mayo with an outstanding loan, it may be treated as a taxable distribution. Save this option for true emergencies.
Review Your Account Regularly
Schedule a yearly "financial checkup" for your 403(b), ideally around the same time each year. During this review, check if your investment strategy still makes sense for your current age and retirement timeline. This becomes even more important as you near retirement age.
Use this time to update your beneficiary information as well, if you've had major life changes such as marriage, divorce, or new children in the family.
Work with a Financial Advisor
Given the complexity of coordinating your 403(b) with Mayo's other benefits, many employees benefit from professional financial advice. A fee-only fiduciary advisor can help you:
Determine optimal contribution levels
Choose appropriate investments
Coordinate with your pension and other benefits
Plan tax-efficient withdrawal strategies in retirement
Making the Most of Your Mayo Benefits
Your 403(b) plan is a powerful tool for building retirement security, especially when combined with Mayo Clinic's pension plan and other benefits. By understanding how the plan works and developing a strategic approach to contributions and investments, you can build substantial wealth over your career.
At TrueWealth Financial Partners, we specialize in helping you maximize your retirement benefits. As a fee-only fiduciary firm, we provide objective guidance on coordinating your 403(b) plan with your other Mayo benefits to create a comprehensive retirement strategy.
Ready to optimize your Mayo Clinic 403(b) plan?
Schedule a free consultation with TrueWealth Financial Partners today. We can help you develop a strategy that makes the most of Mayo's generous benefits and puts you on track for a secure retirement.
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