You may have seen the term 403b mentioned here and there before but never had an interest or a need to know what it is. But, if you are taking a position or have a job such as a civil government employee, a University employee, or will be working for a not-for-profit company, then you will need to become familiar and aware of what a 403b retirement plan is.
Simply put, a 403 b retirement plan is a type of retirement plan that was built for tax exempt organizations. Religious ministers who are self employed, public school employees and others are types of people and entities that the plan is tailored to. It is comparable to the 401k plan that other businesses offer their employees.
What Options Does a 403b Retirement Plan Give an Individual?
A traditional 401k plan offers several great options to all company employees that participate in the program. The same can be said for 403b retirement plans. This type of plan offers several options for someone who is involved.
Matching Benefits: More often than not a company will match the individual’s monetary donation (up to 3%), which allows the employee to build even more money.
Company Tax Write Off: The not-for-profit companies that participate in the 403b plan can write off matching employee contributions on their taxes at the end of the year.
Tax Deferred Status: Money that is contributed to a 403b can grow tax-deferred for a long period of time (decades). This allows the owner of the account to accumulate much more wealth. The owner will pay taxes on the account when he/she starts to withdraw the money, but by then it may not matter.
Emergency Loans: Individuals that have a 403b retirement account can take a loan out against the account in times of an emergency. The loans will need to be paid back to avoid any tax consequences.