A 401(k) is a retirement savings plan sponsored by an employed commonly used in the private sector.
A traditional 403(b) plan is a tax-deferred retirement plan for employees of a non-profit employer such as a school district and non-profit organizations. 403(b) accounts are established and maintained by public school districts for eligible employees.
Public school district employees also have the option of a 457(b) Governmental Deferred Compensation retirement plan.
* All Plans mentioned here reduce your taxable income through pre-tax contributions.
* Employee (and employer) contributions as well as interest earned grow tax-deferred.
* Possibility of paying less tax on distributions of funds if individual is in a lower tax bracket during retirement.
* The ability to take a tax-free loan from your own 403(b) or 457b account.
IRS Contribution Limits:
401(k), 403(b), and 457(b) Elective Deferral Limit for each plan participant may contribute (tax-shelter):
$18,000 per year
Additional Contribution Amounts:
*Age 50 and older Catch-Up:
+$6,000 per year
*Additional Catch-Up Provisions for 403b/457b plans please see advisor
Distribution of Retirement Account:
- 403(b) Plans are eligible for withdrawal without IRS penalties after age 59.5 or age 55 if retired from service
- 401(k) Plans are eligible for withdrawal with penalty only after age 59.5
- 457(b) plan are eligible for distribution after the employee has severed service with their employer