403(b) Plan

403(b) Plan

While 401(k) plans exist exclusively in the corporate world, government employees aren’t exactly left out in the cold. The 403(b) plan, also referred to as Tax-Sheltered Annuity (TSA), is offered to teachers and other employees of government and non-profit agencies. With a 403(b), you may:

  • Contribute as much as 25% of your salary up to a maximum amount each year (individual plans differ and may impose limitations or allow even higher annual contributions in special circumstances).
  • Make additional contributions as you approach retirement if you have not taken full advantage of the program in the past.
  • Invest in either mutual funds or annuities.

As with a 401(k) plan, premature withdrawals (before age 59 ½) are subject to the 10% federal penalty tax. However, you may tap your money for qualifying “hardship withdrawals” and, in some cases, even loans.

 

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