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Britt Erica Tunick is an award winning financial journalist who has spent the past 17 years writing about virtually every aspect of finance. She has mastered the art of boiling down complicated financial topics for readers to understand. |
The pros and cons of a 403(b) plan. What is a 403 B Plan? By Britt Erica Tunick If you are a public school teacher or another sort of public employees, a church employee or if you work for a non-profit organization, don’t expect your employer to offer you a 401(k) plan. What you’ll mostly likely get instead is a 403(b) plan. For the most part, 403(b) plans are essentially 401(k) plans for public and non-profit employees, providing their owners with the ability to invest pre-tax money into an investment portfolio geared towards long-term retirement savings. There are, however, a few key differences. While most 401(k) plans provide the individuals who invest in them multiple options for the types of investments, 403(b) plans tend to be far more restrictive, often forcing their holders into annuity plans. In most cases, annuities tend to be more limited when comes to the types of investment instruments they utilize and they usually have much higher fees than traditional mutual funds. Similarly, it can be extremely difficult to change the investments you’ve allocated the savings in a 403(b) plan to. As such, people seeking a greater range of investment opportunities, or those employed by organizations that do not match contributions, may want to stick with traditional IRAs that can be invested in through any bank. Another unique feature of 403(b) plans is they provide earlier access to retirement money than their 401(k) and IRA peers, enabling anyone who retires at age 55 or older to withdraw their savings penalty-free. Comparatively, owners of 401(k) plans and IRAs must be at least 59½ years old before they can access their holdings without facing a penalty for doing so. |
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