What Is A 403BRetirement Plan

Although almost everyone has heard of the typical 401K retirement plan, fewer are aware of the Federal 403B retirement plan.  The 403B plan offers some great potential, and should be invested in if at all possible.  Government employees such as teachers, school personnel, and librarians are usually eligible for benefits under 403B.  The program requirements vary but they are most often designed for educational employee's.  Some nonprofits are also eligible for benefits under the 403B plan.

The details of the plan are intricate, but tax exemption acts as the main attraction of the investment.  All contributions made to a 403B are set aside from Federal taxes until retirement.  In addition to the savings made on the investment itself, the sum of tax paid is also reduced, as your whole pretax income will be lower.  This plan is available to the majority of people in any organization that qualifies under the IRS 501(c)(3) tax provision. 

Employers enter into a contract with their employees to take out a set amount of their income each paycheck, marking it for their 403B retirement plan.You are no taxed on the contributed amount and the pretax amount of your check is reduced so you pay less in taxes for the week.  Despite pretax income reductions, FICA contributions are not reduced, leaving your social security benefits at the same level they would be without 403B.  The contribution is entered into an investment account, where a vendor of the employee's choosing will ensure a minimum rate of return.   

With the universal availability clause, almost all employees of a 501C eligible organization can set aside money.The only reasons for denial into the program are for those with an already existing retirement plan and those who work less than 20 hrs per week.  The elective deferral limit for the 403B plan is $15,500 per year, or 100% of compensation.  The deferral limit can be raised if the employer makes matching contributions, increasing the cap to $46,000 or 100% of compensation (the lesser of the two). 

The 403B retirement plan is a worthwhile savings that every qualifying employee should consider.  The tax deferral status alone makes the 403B plan an attractive investment.  Should your employer offer matching benefits, that is even more of a reason to start making contributions.  If you are worried about the safety of your investment, check into fixed annuities.  With a fixed annuity program, your investment is guaranteed to return a minimum.  Post retirement payments are also guaranteed by fixed annuity insurance programs.