What is a 403b Plan?
A 403b plan is a Tax-Sheltered Annuity (TSA) plan. This kind of retirement savings plan is designed for employees who specifically are into tax-exempted organizations, public schools, and non-profit organizations. As close to the 401(k) plan offered by profit companies, a 403b plan allows employees to contribute a small portion of their salary on a pre-tax deductions basis to save for retirement.
How Does a 403b Work When You Retire?
When you retire and begin withdrawing funds from your 403b plans, the amount and timing of withdrawals will solely depend upon your plan’s rules. There are two options:
- Lump-Sum Distributions: You can withdraw the whole balance of your 403(b) method in a single lump-sum payment. This option may seem attractive only if you need a lot of money to cover expenses.
- Periodic Payments: You can receive periodic payments from your 403(b) plan, either as a fixed amount or as a percentage of your account balance. This option can help ensure a steady income stream throughout your retirement years.
What is the Difference Between 401k and 403b?
The main point of Difference between a 403(b) plan and a 401(k) plan is that 403(b) plans are only available to employees of tax-exempt organizations. In contrast, 401(k) plans are available to employees of for-profit companies.
How Much to Contribute to 403b?
The amount you should contribute to your 403(b) plan will depend on a variety of factors, including your financial goals, current financial situation, and other retirement savings you may have. However, as a general guideline, financial experts often recommend contributing 10-15% of your income to retirement plan savings, including contributions to your 403(b) plan.