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403(b)
Plans: Summary and Resources
A 403(b) plan is
a retirement plan for certain employees of public schools, employees of certain
tax-exempt organizations, and certain ministers.
Let's recap:
- Individual
accounts in a 403(b) plan can be any of the following types:
- An annuity
contract, which is a contract provided through an insurance company.
- A custodial
account, which is an account invested in mutual funds.
- A retirement
income account set up for church employees. Generally, retirement income
accounts can invest in either annuities or mutual funds.
- The features
of the 403(b) plan are very similar to the 401(k) plan.
- Employees'
compensation is based on W-2 wages, and an employee's compensation in excess
of $200,000 may not be considered for purposes of making a 403(b)
contribution.
- The investment
options for a 403(b) account are determined by the 403(b) product.
- A 403(b)
annuity contract must invest in an annuity product provided through an
insurance company.
- A custodial
account, which is provided through a retirement account custodian, must invest in regulated investment
companies, such as mutual funds.
- A retirement
income account may invest in vehicles such as annuities and publicly-traded
securities. Only churches and church- related organizations may establish
retirement income accounts.
- Distributions
while the employee is under age 59 ½ is subject to a ten-percent
early-distribution penalty unless the employee qualifies for an exception.
Related Links
I have a 403b
plan, can I switch it to a different provider?
Supplementing your Retirement Income with IRAs
- According to the Trustee of the Social Security Fund, the fund will be
depleted by 2034, are you ready?
Retirement Planning - A tutorial by Investopedia.com on the
importance of planning for the golden years.
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