Guide to Teacher and Educator Retirement Plans

 403(b) Retirement Plan

What is a 403(b)?

A 403(b) is an employer sponsored retirement plan for teachers and employees of non-profit organizations.

 What are the tax advantages of a 403(b)?

Contributions are pre-tax, lowering your taxable income today, and grow tax deferred.

 How is the 403(b) plan funded?

Tax deductible contributions to the retirement plan can only come from salary deductions and these deducted monies can only be placed into plans offered through and made available through the employer. An employee cannot directly fund his/her own plan.

What are the investment options of a 403(b)?

Several investments can be under a 403(b):

·         Mutual Funds

·         Variable Annuities

·         Fixed Annuities

·         Index Annuities

Is there a vesting schedule?

Employees are always 100% vested with their own contributions

 How much can I contribute to a 403(b)?

You can contribute up to $23,000 per year into the plan in 2024.

If you are over age 50, you can contribute an extra $7,500 per year for a total of $30,500!

Employees with 15 years or more of service may be able to contribute more! Please contact Matthew Kasa for more information.

 What is a Roth 403(b)?  

A Roth 403(b) is where the contribution into the 403(b) is after tax, grows tax deferred, and comes out tax free (subject to certain conditions, please see your tax advisor).

 Should I choose a Traditional or Roth 403(b)?

The reasons to choose one or the other are your current income tax bracket and your expected income tax bracket in retirement.

Can I take a loan from my 403(b)?

Loans can usually be taken, up to 50%, and paid back over five or 15 years depending on the purpose of the loan.

 Is there an employer match on a 403(B)?

Most 403(b)'s for educators do not have an employer match.

When can I have access to my money?

If you withdraw assets prior to age 59 1/2, the IRS will impose a 10% penalty tax, in addition to the normal tax consequences.

 What do I do if I leave the organization where my 403(b) is located?

You can roll it over into your own IRA or into your next employers plan.

What investment companies are available to invest with?

Since it is an employer sponsored retirement plan, you are only permitted to invest with a company offered through your employer.

Everyone's situation is different, so please seek the advice of a qualified financial advisor and tax advisor before making decisions on your retirement plan. Woodbury Financial Services, Inc does not offer tax or legal advice