All about a 403b Retirement Plan

John Clouden Senior Vice President
Starting a new job is an exciting time. With it come new responsibilities, new income and lots of paperwork to fill out. From company information, insurance and benefits; you’re just signing it all to get your new career started. While filling out your retirement packet you might have come across 403b information instead of 401k. Nothing to be worried about, but let’s take a step back and go over what is a 403b.

The basics of a 403b

A 403b is a tax-deferred retirement plan. Contributions come out of your paycheck before income tax. This allows contributions and investment earnings to grow tax deferred until withdrawn, which is assumed to be after retirement. As of 2018, contributions can be up to $18,500 per year with some eligible for higher limits. In addition participants above the age of 50 can contribute an additional $6,000 per year. This is referred to the ‘Catch Up’ rule. Participants can select to invest in mutual funds or annuities.

Difference between 403b & 401k

The basic difference is that a 403b is a retirement plan for certain employees of public schools, nonprofit companies, religious groups, and governmental organizations. A 401k is a retirement plan set up for private sector workers.

Difference between 403b & Pension

A 403b is a voluntary, self-directed plan in which retirement assets are based upon how much money an individual accumulates. Pensions are formula-based retirement plans based on factors such as years of service and salary. The investment decisions are made by plan officials.

Getting set up with a 403b

Setting up a 403b can be done when you first start your new job or any time afterwards. There is no minimum contribution limit to begin so starting sooner rather than later is the best option. Also always check with your employer to see if they match a percentage of what you contribute to the plan. This is essentially ‘free money’ that you want to make sure you’re not missing out on.

If you’re ready to get your 403b set up, you can meet directly with our financial planning team. Sgroi Financial is in every public school district in Western New York. We will handle all the logistics for you to get set up. Also if you’re interested in more information on 403b, listen to my interview with Clay Moden on 106.5FM WYRK.

You can catch our weekly Plan.Protect.Invest. segment live on WYRK 106.5FM at 7:20am every Wednesday. Each week we will have a Sgroi Financial planner on with Clay Moden and the WYRK morning show to discuss financial topics to educate and help their listeners. Since 1971, Sgroi Financial has proudly served Buffalo, NY and the Western New York community from our West Seneca location.
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