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What is a 403(b) Retirement Plan?

by Jeremy Holcombe

Most of us are familiar with the common 401(k) retirement plans. But you may have also heard the term “403(b) retirement plan.” Whether you saw it online, heard someone talking about it, or know someone who participates in one, you may be wondering what they are, and who is eligible to participate in them.

Basically, a 403(b) retirement plan is for a civil government or university employee, or someone who works at a not-for-profit company. This type of retirement plan was specifically built for tax-exempt organizations. It benefits people like religious ministers who are self-employed, and public school employees. It is comparable to the 401(k) plans that for-profit businesses offer their employees.

403(b) Retirement Plan Options

As with a traditional 401(k), the 403(b) retirement plan offers many great options to the employees that choose to participate. Here are some of the most asked about  options that the 403(b) offers participants.

Matching Benefits: Yes, the 403(b) plan offers matching benefits just like the traditional 401(k). Most companies will match up to 4%.

Tax Write Off for Company: All non-profit companies that participate in the 403(b) retirement plans can write off matching employee contributions on their taxes at the end of the year.

Tax Deferred Status: Money that is contributed to a 403(b) retirement plan may grow tax-deferred for a long period of time (decades). This allows the owner of the account to accumulate much more wealth over time, without having to worry about getting slammed with taxes. The owner will only pay taxes on the account when he/she starts to withdraw the money.

Emergency Loans Available: Participants in the 403(b) retirement plan option are able to take out an emergency loan if the situation calls for one. Note that the loans will need to be paid back to avoid any tax issues or consequences.

These are just some of the great options that a 403(b) retirement plan offers. If you are an employee for an outfit that is able to use this option then it is definitely worth looking in to. A 403(b) retirement plan was created to benefit those who work with non-profits and other government and university jobs. Take advantage of it, it is there for a reason.

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