A 403(b) strategy is really a type of defined contribution retirement strategy. It might be provided to workers of government and tax-exempt groups, like schools, hospitals and churches.
Workers who're eligible can defer cash from their paychecks into their 403(b) accounts, which function exactly the same as way as 401(k) plans. 403(b) plans are also occasionally provided as Roth versions.
You are able to contribute a maximum of $16,500 in 2010 in the event you are younger than 50 years old. In the event you are 50 or older, you are able to make an extra catch-up contribution of as a lot as $5,500, to get a total of as much as $22,000. These contribution limits are scheduled to adjust annually in line with inflation.
The primary distinction will be the kind of employers who can provide them. In contrast to 401(k) plans that are provided by for-profit businesses, 403(b) plans are only accessible to workers of tax-exempt organizations. They are generally either schools, hospitals or religious groups. The names merely refer towards the section from the tax code that outlines these plans.
For probably the most component, the two kinds of plans function exactly the same way. But you will find other subtle variations. For instance, 403(b) plans will occasionally provide much more restricted investments options than corporate plans, which may consist of annuity contracts and mutual funds. But that might alter because of new regulations set to go into impact in 2009, which aim to create 403(b)s much more like 401(k)s. Whilst 401(k)s often have vesting schedules spread out more than a couple of years, numerous 403(b)s vest instantly, or more than a shorter time period than in their cousins within the for-profit globe.
When investing to get a long-term objective like retirement, you usually wish to emphasize stocks, which possess the very best opportunity to produce returns that outpace inflation. Adding some bonds or money for your mix might help decrease your investments' general volatility. See the Investing section for much more on investment methods. You may also use our asset allocator and retirement planner calculators to figure out the very best mix of stocks, bonds and money for the retirement cash.