Every so often I meet a school employee who has extra money left over each month. Maybe the house is paid off. Maybe the kids are out on their own. Maybe a spouse earns a good income. Whatever the reason, they ask me the same question: “What’s the most I can save for retirement and still get a tax break?”
It’s a good question, and the answer surprises most people. If you work for a Washington school district, you have more tax-advantaged places to put money than almost anyone else in the workforce. A single person can put away more than $60,000 a year. A married couple who both work for a district can save well over $120,000.
In this post we’ll walk through each account one at a time, add them up, and look at how the totals change once you turn 50, 55, and 60. This works the same whether you’re in Plan 2 or Plan 3, and whether you’re a teacher in TRS or classified staff in SERS.
A quick note on numbers: the video above was recorded a few years ago, when the limits were lower. The IRS raises these limits most years to keep up with inflation. The numbers in this article use the 2026 limits, so they’re higher than what you’ll hear in the video. The way the accounts stack together hasn’t changed.
Think of your savings like four buckets
Picture four buckets lined up in a row. Each bucket has its own size limit set by the IRS. When one bucket is full, you can start filling the next one. The important part is that filling one bucket does not shrink the others. They each have their own separate limit.
For a Washington school employee, the four buckets are:
- The DCP (Washington’s Deferred Compensation Program, a 457(b) plan)
- A 403(b) through your school district
- A Roth IRA you open on your own
- A Health Savings Account (HSA), if you’re on a high deductible health plan
Most people only know about one or two of these. Let’s go through them in order.
Bucket 1: the DCP (457 plan)
The DCP is the state’s voluntary savings plan. It’s a 457(b) plan, and it’s open to school employees as well as state agency workers. You choose how much comes out of each paycheck, and you can pick traditional (pre-tax) or Roth (after-tax) contributions.
For 2026, you can put in up to $24,500. If you’re 50 or older, you get an extra “catch-up” amount of $8,000, which brings your total to $32,500.
One nice thing about a 457 plan: when you leave your job, you can take money out without the 10% early withdrawal penalty, even if you’re under 59 and a half. That makes the DCP handy for people who plan to retire early.
Bucket 2: the 403(b)
Here’s where school employees get a real advantage. Your district also offers a 403(b). It falls under a different section of the tax code than the DCP, so it has its own limit. Contributing to one doesn’t use up room in the other.
The 403(b) has the same limits as the DCP: $24,500 for 2026, plus the $8,000 catch-up if you’re 50 or older. So between the DCP and the 403(b) together, someone under 50 can put away $49,000 a year. Someone 50 or older can put away $65,000.
Most people who work for a private company only get a 401(k), and the 401(k) and 403(b) share one limit. Having a 457 on top of a 403(b) is what lets school employees save so much more.
The extra catch-up for ages 60 to 63
Newer rules from the SECURE 2.0 law give people aged 60, 61, 62, and 63 an even bigger catch-up. For 2026 it’s $11,250 instead of $8,000. That means each plan’s limit goes up to $35,750 during those four years. Once you turn 64, it drops back to the regular catch-up amount.
A Roth rule for higher earners
Starting in 2026, if you earned more than $150,000 in wages from your employer the year before, your catch-up contributions have to go in as Roth money. Your regular contributions can still be pre-tax. Most school employees fall under that line, but it’s worth knowing if you do earn more.
Bucket 3: a Roth IRA
The Roth IRA isn’t run by your employer. You open it yourself at a bank or brokerage. Money goes in after taxes, then grows tax-free. If you follow the rules, you won’t pay any tax when you take it out in retirement.
For 2026, you can put in $7,500 if you’re under 50, or $8,600 if you’re 50 or older.
There’s a catch. The Roth IRA has income limits. For 2026, the amount you’re allowed to put in starts to shrink once your modified adjusted gross income passes $153,000 if you’re single, or $242,000 if you’re married filing jointly. Above $168,000 (single) or $252,000 (married), you can’t contribute directly at all.
Check where your income lands before you open one. If you put money in when you’re over the limit, the IRS charges a 6% penalty every year until you fix it. If your income is too high, the Roth options inside your DCP and 403(b) have no income limit, so you can still get Roth money that way.
Bucket 4: the Health Savings Account
If you pick a high deductible health plan through SEBB, you can also open an HSA. Many people think of an HSA as a medical spending account. It can also be one of the best retirement accounts you’ll ever have.
Money goes in tax-free. It grows tax-free. And if you spend it on medical costs, it comes out tax-free. No other account gets a tax break at all three steps. Since everyone has medical bills in retirement, money saved in an HSA almost always gets put to use.
For 2026, the HSA limit is $4,400 if only you are covered on your plan, or $8,750 if your plan covers more than one person (family coverage). At age 55, you can add an extra $1,000 per year.
Note that the HSA catch-up starts at 55, not 50 like the other accounts. And once you enroll in Medicare, you can’t put new money into an HSA anymore, though you can keep spending what’s already there.
Adding it all up: how much can you save in 2026?
Now let’s fill every bucket to the top and see the total. This table is for a single person with self-only HSA coverage whose income is low enough to use a Roth IRA.
| Account | Under 50 | Age 50 to 54 | Age 55 to 59 | Age 60 to 63 |
|---|---|---|---|---|
| DCP (457) | $24,500 | $32,500 | $32,500 | $35,750 |
| 403(b) | $24,500 | $32,500 | $32,500 | $35,750 |
| Roth IRA | $7,500 | $8,600 | $8,600 | $8,600 |
| HSA (self-only) | $4,400 | $4,400 | $5,400 | $5,400 |
| Total per year | $60,900 | $78,000 | $79,000 | $85,500 |
That’s a lot of room. A 45-year-old teacher could tuck away $60,900 a year. A 61-year-old could save $85,500. Very few people will ever fill all four buckets, and that’s fine. The point is that if you have extra money, you have plenty of tax-friendly places to put it.
What if you’re married and both work for a school district?
The DCP, 403(b), and Roth IRA limits are per person. If your spouse also works for a district, they get their own set of buckets. That roughly doubles what the two of you can save.
The HSA is a little different. If you each have self-only coverage, you can each put in $4,400. If you’re on one family plan together, you share the single family limit of $8,750. Here’s what a couple could do if both are on self-only HSA coverage:
| Couple’s ages | Combined yearly total |
|---|---|
| Both under 50 | $121,800 |
| Both 50 to 54 | $156,000 |
| Both 55 to 59 | $158,000 |
| Both 60 to 63 | $171,000 |
Those limits cover just about everyone. If you have the means to save more than this, the tax code isn’t what’s holding you back.
A worked example: Maria, age 52
Let’s make it real. Maria is a 52-year-old teacher in TRS Plan 3. She’s single, earns $95,000 a year, and her house is paid off. Her kids just finished college, and she wants to catch up on retirement savings for the next ten years.
Maria decides she can save $3,000 a month, or $36,000 a year. Where should it go? She doesn’t need to fill every bucket. She can choose the order that fits her.
- She puts $4,400 into her HSA first, because it’s tax-free going in and coming out for medical costs.
- She puts $8,600 into a Roth IRA, since her income is well under the limit.
- She puts the remaining $23,000 into her DCP as pre-tax money, which lowers her taxable income now.
She still has room left in both her DCP and her 403(b) if she gets a raise or wants to save more later. And because she’s in Plan 3, she’s also making her required contributions to the Plan 3 investment account. Those come out separately and don’t count against the DCP or 403(b) limits.
If Maria keeps this up for 10 years and earns 6% a year on average, $36,000 a year would grow to about $475,000. That’s on top of her pension. Ten years of steady saving can change what retirement looks like.
Which bucket should you fill first?
There’s no single right order. It depends on your tax bracket today, the bracket you expect in retirement, your health plan, and when you want to retire. A few general ideas many people use:
- If you’re on a high deductible plan, the HSA is often worth filling early because of its triple tax break.
- If you might retire before 59 and a half, the DCP is useful because you can get to it without the early withdrawal penalty once you leave.
- If you’re in a lower tax bracket now than you expect later, Roth money (Roth IRA, Roth DCP, or Roth 403(b)) can make sense.
- If you’re in a high bracket now, pre-tax contributions lower your tax bill today.
Pay attention to the investment options and fees inside each plan too. 403(b) plans in particular can vary a lot from one provider to another. Know what you’re paying and what you’re getting for it. Some providers give you little more than an account, while others include ongoing help and planning.
If you’d like help figuring out the right order for your situation, you can schedule a personal meeting and we’ll walk through it together.
Common mistakes to avoid
- Thinking the DCP and 403(b) share one limit. They don’t. Each has its own.
- Opening a Roth IRA without checking your income first, then owing the 6% penalty.
- Starting the HSA catch-up at 50. It starts at 55.
- Adding to an HSA after enrolling in Medicare.
- Forgetting to raise contributions when you hit 50 or 60 and new catch-up room opens up.
Frequently Asked Questions
Can I contribute to both the DCP and a 403(b) at the same time?
Yes. The DCP is a 457(b) plan and the 403(b) is a separate plan with its own limit. For 2026 you can put up to $24,500 in each, for $49,000 total before catch-up contributions.
Does it matter if I’m in Plan 2 or Plan 3?
No. School employees in Plan 2 and Plan 3, in both TRS and SERS, have the same DCP, 403(b), Roth IRA, and HSA options. Plan 3 members also make contributions to their Plan 3 investment account, which are separate from these limits.
What happens if I earn too much for a Roth IRA?
You can’t contribute directly once your income is above the IRS limit. You can still choose the Roth option inside your DCP or 403(b), which has no income limit. Some people also use a “backdoor” Roth IRA, which is worth talking through with a professional first.
When do catch-up contributions start?
For the DCP, 403(b), and Roth IRA, catch-up contributions start the year you turn 50. The bigger catch-up for the DCP and 403(b) applies in the years you turn 60 through 63. The HSA catch-up starts at 55.
Do these limits change every year?
Usually, yes. The IRS adjusts most of these limits for inflation each fall for the next year. It’s a good habit to check the new numbers every January and update your payroll elections.
The bottom line
Washington school employees have four separate tax-advantaged buckets: the DCP, a 403(b), a Roth IRA, and an HSA. Stacked together, a single person can save $60,900 or more a year in 2026, and a married couple who both work for a district can save over $120,000. You don’t have to fill all of them. But if you have extra money to save, there are plenty of places to put it.
Your future depends on what you do today.
P.S. It’s free to join. Over 150 members are already in it, plus you’ll get free courses and resources to help you plan your retirement with confidence.
