What Is 403b ?   

       A 403b is a retirement savings plan that allows you to make contributions to so that they money can grow tax-deferred until you decide to withdraw the amount on retirement. All contributions to a 403b plan pre-tax contribution. This means that the contributions are made from your gross wages.

       A 403b plan is also know as tax-deferred annuities or TDAs.

       People who are working for tax exempt organizations are entitled to contribute to a 403b plan. The plan is usually offered by employers and the following organizations are allowed to offer this retirement savings plan:

  • Church
  • High School
  • College
  • University
  • Museum
  • Hospital
  • Public Welfare Society
  • Social Welfare Society

         As you make contributions from your gross wages to a 403b plan, you end up lowering your taxable income. As a result you pay lower taxes. A 403b plan also has other advantages and they are listed below:

  • The funds in the account are allowed to grow tax-free. This includes capital gains, dividends and interest. You pay taxes only when you withdraw the funds.
  • The possibility of you falling into a lower tax bracket on retirement is very high. Therefore, by saving money for retirement using a 403b, you get dual advantage. One is lower current taxes and lower taxes on retirement.
  • Contributions to a 403b plan happen automatically from your paycheck. You do not have worry about sending money to your account.
  • You can choose where you want your money to be invested. There various options to choose from and you can select the ones that will help your money grow fast.

         In 2007, those under 50 years could contribute a maximum of $15,500. While those people who are 50 and above could contribute an additional $5,000 as a part of the catch up plan. The annual limits for contributions are the same for 2008.

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