403b Retirement Plans: 5 Things You Should Know

403b retirement plans are a popular way for individuals to save for retirement. If you are considering this plan among the many different retirement plans that are available to you, you should find out some basic information about it first. Here are a few things that you need to know about 403b retirement plans.

1. Who Can Contribute?

It is important for you to understand that not everyone will be able to contribute to this type of retirement plan. This is a type of retirement plan that is only available to employees of tax exempt companies. For example, doctors and nurses can contribute if they work for a hospital. Ministers and other church employees can also contribute to this type of plan. Teachers and librarians can also contribute to this type of account.

2. Why Contribute to a 403B?

Contributing to this type of account can provide you with a number of benefits when you are saving for retirement. One of the primary reasons to contribute to this type of account is because contributions can be made on a pretax basis. This means that you will be able to deduct a portion of your income from your paycheck before taxes are withdrawn. This has the ability to lower your taxable income for the year significantly. Another big advantage of this type of account is that you can allow your gains from investments to grow tax-free as well. You will not have to start paying taxes on the money from your account until you begin taking withdrawals during retirement. Even if you are already going to receive a pension plan, using a 403B can be a good way to supplement your income.

3. How Much to Contribute

When you open this type of retirement account, you can contribute money every year. You will be subject to annual contribution limits. As of 2010, you can contribute as much as $16,500 per year to your account. If you are over the age of 50, you can contribute a maximum of $22,000 per year.

4. Investment Options

When you set aside money for your 403B account, you will be able to use the money to invest in various securities. In most cases, you will have the same investment options as a 401(k) or another type of retirement account. You will be able to choose from a variety of stocks, mutual funds and bonds. Some accounts will even provide you more unique options to choose from. Many plans will also provide you with a selection of annuities to choose from as well.

5. Are There Fees Involved?

In order to benefit from this type of account, you will have to pay fees. The provider of the account will charge you something in order to keep the account open. Many times, this will come in the form of an annual fee, or an account maintenance fee.



403(b) Plan



The 403(b) plan is a type of retirement plan that is very similar to a 401(k) in that individuals can make pretax contributions to their accounts. This type of retirement account is only for certain people who qualify for it, for example, school teachers, ministers and employees of other tax exempt organizations. Once an individual puts money into this type of account, she can invest in different types of securities and the interest will grow tax-free. The account holder is allowed to invest in annuity contracts with insurance companies, or she can invest in a variety of mutual funds.

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