What Are The Differences Between 403b Plans And Other Retirement Accounts?
If you've been looking at your options regarding retirement savings, 403b accounts are one of the possibilities that you may have run across in the course of your research. While these retirement plans have many similarities to 401k plans or a Roth IRA, there are also some important differences between 403b plans and other retirement planning options which you should be aware of, starting with the criteria for eligibility.
Unlike 401k plans, 403b retirement plans are available only to teachers and other school staff, librarians, nurses, self-employed members of the clergy and other employees of non-profit organization, public schools and cooperative hospitals/health care providers. These are a specific type of retirement savings account which are designed with the needs of public sector workers in mind; and if you work for a non-profit organization yourself, it's probably not news to you that funds are scarce, especially for employee retirement benefits. In recognition of this fact, 403b retirement accounts were developed to give public sector employees another way to plan for their retirement which is analogous to 401k plans in the private sector.
Like many other kinds of retirement accounts available, employee contributions to a 403b account are made on a pre-tax basis. No taxes are assessed on contributions made to the plan until distributions are made by the account holder; and as of 2006, 403b account holders are also allowed to make withdrawals without tax, provided certain requirements are met - one of which being that these funds must be deposited into a Roth individual retirement account and stay in this account for five tax years or longer.
In many ways, 403b retirement plans are less complicated than 401k plans, especially in terms of the rules and regulations which cover these retirement accounts. For instance, there are far fewer restrictions in place in terms of how much your employer (generally a government agency or a non-profit organization for 403b account holders) may contribute to your account. 403b plans are also less costly to administer and have less onerous reporting requirements than do 401k retirement plans, which is good news for often cash-strapped local and state governments and non-profits. For plans which cover less than 100 employees, there is also no requirement for an independent auditor, which further reduces the complexity (and cost) of managing a 403b plan compared to a 401k employee retirement plan.
It is best to speak to a financial advisor so he can tell you which plan would best suit your circumstances and would be in your best interest for your future and retirement.
Unlike 401k plans, 403b retirement plans are available only to teachers and other school staff, librarians, nurses, self-employed members of the clergy and other employees of non-profit organization, public schools and cooperative hospitals/health care providers. These are a specific type of retirement savings account which are designed with the needs of public sector workers in mind; and if you work for a non-profit organization yourself, it's probably not news to you that funds are scarce, especially for employee retirement benefits. In recognition of this fact, 403b retirement accounts were developed to give public sector employees another way to plan for their retirement which is analogous to 401k plans in the private sector.
Like many other kinds of retirement accounts available, employee contributions to a 403b account are made on a pre-tax basis. No taxes are assessed on contributions made to the plan until distributions are made by the account holder; and as of 2006, 403b account holders are also allowed to make withdrawals without tax, provided certain requirements are met - one of which being that these funds must be deposited into a Roth individual retirement account and stay in this account for five tax years or longer.
In many ways, 403b retirement plans are less complicated than 401k plans, especially in terms of the rules and regulations which cover these retirement accounts. For instance, there are far fewer restrictions in place in terms of how much your employer (generally a government agency or a non-profit organization for 403b account holders) may contribute to your account. 403b plans are also less costly to administer and have less onerous reporting requirements than do 401k retirement plans, which is good news for often cash-strapped local and state governments and non-profits. For plans which cover less than 100 employees, there is also no requirement for an independent auditor, which further reduces the complexity (and cost) of managing a 403b plan compared to a 401k employee retirement plan.
It is best to speak to a financial advisor so he can tell you which plan would best suit your circumstances and would be in your best interest for your future and retirement.
Source...