By Denise Appleby
What Is a 403(b) Plan?
A 403(b) plan is a retirement plan for certain public school employees, employees of tax-exempt organizations and ministers. Individual 403(b) accounts are established and maintained by eligible employees.
Accounts under a 403(b) plan can be one of the three following types:
- An annuity contract provided through an insurance company; these 403(b) annuity plans are also known as tax-sheltered annuities (TSAs) and tax-deferred annuities (TDAs).
- A custodial account provided through a retirement account custodian; investments are limited to regulated investment companies, such as mutual funds.
- A retirement income account, for which investments options are either annuities or mutual funds.
Why Establish a 403(b) Account?
The following are advantages of maintaining a 403(b) plan or account:
For the employer:
- Attractive benefits that help keep high-quality employees happy.
- A shared cost of funding between employers and employees (in some cases, only employees contribute to the 403(b) plan).
For the employee:
- Reduced taxable income through pretax contributions,
- Tax-deferred earnings on plan contributions. If the contributions are made to a Roth 403(b) account, earnings can be tax-free.
- The likelihood of paying less tax on assets as distributions usually occur during retirement, when an employee may be in a lower tax bracket.
- The ability to take loans from the 403(b) accounts.
RetirementA 403(b) plan is a tax-sheltered retirement plan for employees of many non-profit entities, including public safety and educational organizations.
RetirementA retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers.
RetirementEverything you need to know (don't be afraid to ask) about handling your 403(b) plan when you retire.
RetirementThere's plenty of advice about 401(k) plans, but what about 457 and 403(b) plans?
RetirementLearn about the two types of deferred compensation plans that nonprofit companies can use to allow high-ranking employees to increase their retirement savings.
RetirementA defined contribution plan is a company retirement plan that specifies the amount of money contributed to it.
RetirementEmployers establish qualified retirement plans to help their employees save money.
RetirementDon't hesitate to adopt a smart plan for you and your employees.
RetirementThese eight tips can help your retirement savings grow.
Retirement457 retirement plans are complicated. Here's a quick guide to how they work after you retire.