403(b) Plan
“Non-profit employees can transfer the accumulated
savings in their plans to individual 403(b) custodial accounts,
even without employer approval. That can be a significant
privilege if the annuities in an employer’s menu of
selections are poor performers.”
-- C. Frederic Wiegold, Editor
The Wall Street Journal’s Lifetime Guide to Money
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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