A 403(b) plan is a retirement savings plan that is available to employees of certain non-profit organizations, including schools, hospitals, and religious organizations. Similar to a 401(k) plan, a 403(b) plan allows employees to save for retirement through pre-tax contributions, which can help to lower their taxable income and grow their savings over time.

There are some key differences between a 403(b) plan and a 401(k) plan. For example, in a 403(b) plan, only employees of certain tax-exempt organizations are eligible to participate, whereas a 401(k) plan is typically available to employees of for-profit companies. Additionally, 403(b) plans may offer different investment options, such as annuities, in addition to traditional mutual funds or exchange-traded funds.

One of the main benefits of a 403(b) plan is that contributions are made on a pre-tax basis, which means that the money is deducted from an employee’s paycheck before taxes are taken out. This can help employees to save more for retirement, as their contributions will grow tax-deferred until they are withdrawn in retirement. Additionally, some 403(b) plans may offer employer matching contributions, which can help to boost an employee’s retirement savings even further.

In general, the IRS limits the amount that employees can contribute to a 403(b) plan each year. As of 2021, the annual contribution limit is $19,500 for individuals under the age of 50, with an additional catch-up contribution of $6,500 for those age 50 and older.

Overall, a 403(b) plan can be a valuable tool for non-profit employees to save for retirement and secure their financial future. By taking advantage of the tax benefits and investment options offered by a 403(b) plan, employees can work towards building a comfortable retirement nest egg.

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