What is a 403b Plan?
A 403(b) plan is a type of retirement savings plan that is similar to a 401(k) contribution plan but is only available to employees of certain types of organizations, such as public schools, colleges, universities, and non-profit organizations.
How Does a 403b Work When You Retire?
When you retire and begin withdrawing funds from your 403(b) plan, the amount and timing of your withdrawals will depend on the specific rules of your plan. In general, there are two options for withdrawing funds from a 403(b) plan:
Lump-sum distribution: You can withdraw the entire balance of your 403(b) plan in a single lump-sum payment. This option can be attractive if you need a large sum of money to cover an expense or if you want to transfer your savings to another retirement account.
Periodic payments: You can also choose to 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 that you have a steady stream of income throughout your retirement years.
What is the Difference Between 401k and 403b?
The main 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, while 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 at least 10-15% of your income to retirement plan savings, including contributions to your 403(b) plan.
Also, See: 401(k) Contribution | Roth 401(k)