The 403(b) plan has been around for a long time, but 澳洲幸运5官方开奖结果体彩网:compared to the 401(k)—its more famous retirement plan cousin—it get꧂s little🐼 attention. This quick question and answer session can help you get the most out of your 403(b) plan.

Who Can Invest in a 403(b) Plan?

Think of 澳洲幸运5官方开奖结果体彩网:403(b) plans as 401(k) plans designed for public school, college, and university employees, as well as for employees of certain 澳洲幸运5官方开奖结果体彩网:tax-exempt organizations, including churches and charities. The analogy isn't perfect because 401(k) and 403(b) plans have different rules, but it's close. Both of these plans offer participants a 澳洲幸运5官方开奖结果体彩网:tax-advantaged way to save for retirement.

Can Part-Time Workers Participate?

If you are a part-time worker, you can participate in a 403(b) plan provided you generally work at least 20 hours per week. You must contribute at least $200 per year to the plan, and you must not be participating in another 403(b) plan.

Why Should I Invest in a 403(b) Plan?

Like IRAs and 401(k) plans, 403(b) plans help investors build up a nest egg that can be used as income during retirement. Employers generally offer 澳洲幸运5官方开奖结果体彩网:matching contributions to 403(b) plan investors, essentially giving you free money to help fund your retirement. Even if you are affluent or extremely 澳洲幸运5官方开奖结果体彩网:risk-averse, passing up free money is probably not a wise decision.

Since most 403(b) plans offer a 澳洲幸运5官方开奖结果体彩网:money market fund as one of the investment options, you could tuck your contribution and your match in there and hold it with relatively little risk compared to the potential fluctuations of mutual funds that invest in stocks and bonds.

My 403(b) Plan Offe🅺rs an🎀 Annuity. Should I Invest in It?

When the 403(b) was invented in 1958, it was known as a 澳洲幸运5官方开奖结果体彩网:tax-sheltered annuity. While times have changed, and 403(b) plans can now offer a full suite of mutual funds similar to those available in 401(k) plans, many still offer annuities. Financial advisors often recommend against investing in annuities in a 403(b) and other 澳洲幸运5官方开奖结果体彩网:tax-deferred investment plans for a variety of reasons.

The first reason is that annuities are designed to provide tax-deferred growth. Since tax-deferred investment plans already offer that feature, investing in💙 a vehicle (annuity) designed to provide the same feature is redundant.

Second, annuities often charge high fees. High fees detract from investment performance, as every penny spent on fees is a penny taken away from your invℱestment returns. In addition, paying a high fee for🍒 an investment that offers a benefit (tax deferral) that you already get from the provisions of the 403(b) plan is not generally viewed as a wise way to spend money.

Third, annuities often levy 澳洲幸运5官方开奖结果体彩网:surrender charges if you transfer your assets out of them prior to the passage of a predetermined period that is often set at several years. Locking up your money for such a long period of time severely limits your flexibility in making investment decisions. At the same time, 澳洲幸运5官方开奖结果体彩网:annuities are complex investments that often inc🌼lude a signific🌜ant amount of fine print.

Finally, 澳洲幸运5官方开奖结果体彩网:variable annuities, which offer a variable payout based on the performance of underlying investments, can lose money. Investing in an overprඣiced vehicle that can lose money is generally not aಞ good idea.

Of course, annuities also come in another flavor—the 澳洲幸运5官方开奖结果体彩网:fixed annuity. Fixed annuities offer a guaranteed payout. If you are a conservative investor and your 403(b) offers a fixed annuity, it 澳洲幸运5官方开奖结果体彩网:may be an appealing place to put your money.

Do 403(b) Plans Offer a Brokera🦩ge Account Option?

Under the rules that govern 403(b) plans, the only permissible investments are mutual funds and annuities. Participants in 403(b) plans can invest in stocks indirectly through mutual funds, but cannot invest directly in stocks.

How Does the Catch-Up Provision Work?

Contribution limits for 403(b) plans are the same as for 401(k)s. According t🥃o the IRS, the annual contribution limit is $22,500 in 2023 and rises to $23,000 for 2024.

Participants in 403(b) plans can also enjoy the benefits of two catch-up provisions. If you are age 50 or above, you are eligible to make the same catch-up contribution that 401(k)澳洲幸运5官方开奖结果体彩网: plan participants can make. In 2023, that means an extra $7,500, and for 2024, the catch-up contribution is $8,000.

If you have been contributing to the plan for at least 15 years you are also eligible for another catch-up provision. Under this provision, you may contribute an additional $3,000 a year up to a lifetime limit of $15,000. And unlike the usual retirement-plan catch-up provisions, you don't have to be 50 or older to take advantage of this.

Required Minimum Distributions

Like 401(k) accounts, holders of 403(b) accounts need to take required minimum distributions (RMD) after reaching age 73 in 2023 and 75 in 2033.

The Bottom Line

The 403(b) is less popular than the 401(k) plan, as it is only available to certain types of em🎶ployees. It has a lot to offer for those who are able to contribute. The common questions answered above will help you take advantage of the benefits of a 403(b) plan.