403b Plans

The 403b retirement plans is a kind of retirement plan that is specially made for tax-exempt organizations, religious ministers, and workers of public schools. Lots of people would compare this to the 401k plans, which is given by business and corporations to their workers.

People who wish to get the 403 plan normally have a few choices to go for when it comes to the kind of assets that their employees can endow into their personal accounts. This includes the following:

  • Tax Deferred Annuities, otherwise the Tax-Sheltered Annuities. These refer to the kind of annuity contract given by insurance companies in order to give income later on in life.
  • A custodial account at the right institutions like the brokerage firm that possess the securities enjoyed by registered investment companies like mutual funds. Basically, this is the most frequently understood kind of 403 retirement plan.
  • A plan that enlists either kind of investment preference as an option for the owners; that is, they are allowed to invest in eligible annuities or in securities like no load mutual funds.

When talking about the benefits given by the 403 retirement plan, it is safe to say that everything is just like what the 401k plan has to offer. First of all, it provides the ability to attract as well as retain employees because it offers matching benefits. A good example of this is that a company can endow the ability to match the contributions of employees to the 403 plan during the first 3 percent of the payroll.

Furthermore, the money in this plan can grow tax deferred for years which may even continue to decades which result to more savings for the account owner. It is only that time when the person who owns the account starts to make withdrawals from their account that they will have to pay the taxes on the funds.

Also, the account owner can get loans against their 403 retirement plan in case they found themselves in an emergency situation wherein they badly needed the cash to spare. The loan must be paid in return; this is the same with the regulation imposed by the 401k counterpart. If loan is not paid, significant tax consequences will be imposed.

When talking about the contribution limit of this plan, the government actually gives a high contribution limit for people who wish to get this. The ceiling potential contribution would equal to $49,000 each year for the fiscal year of 2009 as long as the person can meet all of the conditions imposed.

At the age of 59.5 years old, the person can start to get 403 withdrawals without any penalty. There is just a need to pay for regular income taxes. In case a person is younger that the said age, he or she will be subjected to 10% tax penalty. There is however a chance to prevent this penalty, a person just needs to meet the special consideration imposed by the law for early withdrawal penalty exemption.

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