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A 403(b) is a retirement savings plan that is typically offered to employees of non-profit organizations, schools, and government entities. Similar to a 401(k), a 403(b) allows employees to save and invest for their retirement on a tax-deferred basis. This means that the money contributed to a 403(b) plan is not taxed until it is withdrawn in retirement, allowing the investments to grow without being taxed each year.

One of the key benefits of a 403(b) plan is that contributions are taken directly from an employee’s paycheck, making it an easy and convenient way to save for retirement. Many employers also offer matching contributions to a 403(b) plan, meaning that they will match a certain percentage of the employee’s contributions, effectively doubling their retirement savings.

Unlike a 401(k), which is offered by for-profit companies, 403(b) plans are subject to different regulations and have some unique features. For example, 403(b) plans may offer the option to make after-tax contributions, which can provide some tax diversification in retirement. Additionally, 403(b) plans typically offer a wider array of investment options, including annuities and mutual funds.

Another important feature of a 403(b) plan is that it allows for special catch-up contributions for employees who have been with the organization for a certain number of years. This can be particularly valuable for long-term employees who want to boost their retirement savings in the years leading up to retirement.

It’s important to note that while 403(b) plans offer valuable tax benefits and employer contributions, there are also limits on how much an employee can contribute each year. As of 2021, the annual contribution limit for a 403(b) plan is $19,500, with an additional catch-up contribution of $6,500 for employees age 50 and older.

Overall, a 403(b) plan can be a valuable tool for non-profit and government employees to save for retirement. By taking advantage of the tax benefits and potential employer matching contributions, employees can build a strong financial foundation for their future. It’s important for employees to carefully consider their investment options within the plan and regularly review their contributions to ensure they are on track to meet their retirement goals.