In the United States of America the so-called 403b retirement plans are
for employees of educational institutions, churches, public hospitals
and certain nonprofit organizations.
These Retirement Plans were established in 1958 by the US federal government to encourage employees in certain tax-exempt organizations to establish retirement savings programs. The rather strange sounding name refers to a section in the US Internal Revenue Code: Section 403 Paragraph b.
Plans based on this reference of the US Internal Revenue Code became generally known as 403b Retirement Plans.
Most employees of educational institutions, churches, public hospitals and other non-profit organizations are provided with a pension upon retirement. Few pension plans, however, provide enough for retirement.
In short a 403b Plan is a defined contribution plan that permits you as an employee to have a portion of your salary deducted from your paycheck and contributed to an account. Your employer may also make contributions to this account.
Tax on your, as well as your employer's, contributions plus the income earned on the account is deferred until your retirement or until you draw against this account.
The Internal Revenue Service sets a maximum amount you can contribute annually to your 403b plan. The smart thing to do is to contribute as much as you can within the limits allowed.
403b Plans make provision for 'rollover' when you change your employer. That means you can move your assets from your old 403b plan to your new 403b plan, to an Individual Retirement Account, or to a 401k retirement plan.
You decide how your money is invested inside your 403b plan. The smart thing is to diversify your investment spread and to remain cautious and conservative rather than aggressive.
Your retirement plan is only one component of your comprehensive retirement plan. Do consider a retirement income planner in your research and choose a retirement calculator by visiting these pages on our Web site.
However, you cannot rely on these tools entirely for your retirement planning decisions. You'll need a qualified advisor for that.
403b Plans are for employees of educational institutions, churches, public hospitals and certain nonprofit organizations in the United States of America. For employees of private companies please refer to 401k retirement plans. For state or local government employees please refer to 457 retirement plans.
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