What is a 403(b) Plan?
A 403(b) plan is a type of retirement savings plan specifically designed for employees of certain public schools, tax-exempt organizations, and some government entities. It is similar to a 401(k) plan but comes with unique features and benefits tailored to eligible employees, such as teachers, nurses, and non-profit staff.
Key Features
- Tax-Deferred Growth: Contributions made to a 403(b) plan are typically made on a pre-tax basis, allowing for tax-deferred growth until funds are withdrawn during retirement.
- Contribution Limits: The IRS sets annual contribution limits for 403(b) plans, which can vary depending on factors like age and years of service.
- Investment Options: Participants can choose from various investment options, including mutual funds and annuities, depending on the plan provider.
Withdrawals and Loans
Withdrawals from a 403(b) plan can generally be made penalty-free after age 59½. However, early withdrawals may incur taxes and penalties. Some plans also allow participants to take loans against their balance, providing a financial safety net when needed.
Beneficiary Designation
One important feature of a 403(b) plan is the ability to designate beneficiaries. Participants can ensure their savings are passed on to chosen individuals in the event of their death.
Overall, a 403(b) plan offers a valuable retirement savings option for eligible employees, helping them build a secure financial future.