What is a 403(b) Plan ?
A 403(b) plan is a retirement plan for certain employees of public schools, employees of certain Code Section 501(c)(3) tax-exempt organizations and certain ministers.
How THE 403(b) Plan WorkS ?
403(b) plan allows employees to contribute some of their salary to the plan. Contributions you make aren’t taxed until you withdraw the money. Your investment grows tax-deferred.
Who is Eligible for a 403(b) Plan ?
403(b) plans are offered to employees of public schools and universities, as well as code section 501(c)(3) tax-exempt organizations, including churches and charities.
Borrowing Rules from a 403(b) Plan
You can take a loan with 403(b) plans up to $50,000, or 50% of your account balance. Some plans have an exception for participants with less than $10,000 in their account.
Contribute Limits of a 403(b) Plan
According to the IRS, the annual contribution limit for 403(b) plan is $22,500 for 2023. Those 50 or older can make an additional catch-up contribution of $7,500 in 2023.
If you have been contributing for at least 15 years you are also eligible for catch-up provision. You may contribute an additional $3,000 a year up to a lifetime limit of $15,000.
403(b) Plan Catch-up Contributions
Withdrawal Rules of 403(b) Plan
403(b) account holders can start taking distributions in the year they leave work as long as they turn 55 or older in that same year. Holders need to take RMD after reaching age 72.
403(b) Plan Rollover Options
If you change jobs or retire, you can roll over a 403(b) into an IRA, a SEP IRA, a SIMPLE IRA, a 457(b), a 401(k), or even another 403(b).
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How to Invest in a 403(b) Plan ?
Investment options offered in 403(b) plans include mutual funds and annuities.