Gain a comprehensive understanding of your 403(b) choices and optimize their potential advantages.

A 403(b) is a specialized retirement savings plan tailored for public school employees, serving as a complement to your pension and bridging the gap in your retirement income. Normally, contributions to a 403(b) are made pre-tax, allowing for tax-deferred growth within the plan, thereby maximizing the value of your retirement funds. Taxes are only incurred when withdrawing from the plan.

On the other hand, the Roth 403(b), another popular option, operates with a slight variation. Contributions are taxed upfront, but your funds experience tax-free growth and can be withdrawn without tax implications.

Saving in a 403(b) allows you to:

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  Secure your retirement by taking charge and making direct contributions to a 403(b) savings plan via convenient payroll deductions.
• 
  Build up funds in a tax-advantaged manner to augment your pension or any other retirement scheme.
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  Retain full control of your funds, regardless of your destination. Seamlessly transfer your savings to alternative employer plans
  or a traditional IRA in the event of a job change.

Discover the inquiries posed by fellow educators and school district staff, and uncover the solutions alongside them.

What is the process for making contributions?
Contributions are conveniently deducted from your paycheck, ensuring a consistent and effortless buildup of your retirement savings. To initiate this process, simply fill out a salary reduction agreement to notify your employer, and contributions will be automatically deducted from your earnings. If you wish to adjust the contribution amount, you can easily do so by completing a new salary reduction agreement. If you require guidance on your employer's specific plan, your financial professional will be able to assist you. In the event that you don't have a financial professional, we are here to offer our support.

What is the maximum amount I can contribute?
Every year, the IRS establishes limits on the amount that can be contributed as deferrals. However, if you are 50 years or older, or if you have been with the same employer for a substantial period, you may qualify for special catch-up provisions. Our team of local financial professionals is available to assist you in determining your Maximum Allowed Contribution through accurate calculations.

What occurs if I switch jobs?
One of the notable advantages of a 403(b) is the level of control it affords, even when transitioning to a different school district. The portability feature enables you to transfer your accumulated funds to your new retirement plan. Alternatively, you have the option to retain your account as is, with the potential for any remaining balance to continue growing tax-deferred.

What if I require funds? Can I access my savings?
Several factors come into play when addressing this inquiry, such as your employment status, age, and the access rules outlined in your employer's plan. To fully comprehend your options and determine the most suitable course of action for your situation, we strongly advise reaching out to your financial professional. They will be able to provide you with the necessary guidance and assistance tailored to your specific circumstances.

Nevertheless, it is essential to be aware of the following information:

•  • The IRS has established guidelines regarding the timing and methods for accessing your savings. In times of economic hardship, such as a global pandemic, temporary relief provisions may be implemented.


•  • In the scenario where you are presently employed and below the age of 59½:
•   - Loan Option: If your plan allows, it is possible to take a loan against the value of your 403(b) account. As per IRS regulations, you can borrow up to half of your cash value, with a maximum limit of $50,000. Generally, loans must be repaid within five years, unless the funds are used for purchasing a home.
•   - Hardship Withdrawals: Some plans offer hardship withdrawals to cover unexpected expenses such as medical expenses, funeral expenses and tuition to name a few. Hardship withdrawals are subject to taxes, policy charges and possibly the IRS 10% early distribution penalty.


•  • If you have separated from service or are currently employed and over the age of 59½:
•   -You have the flexibility to withdraw funds. However, it's important to note that all distributions are subject to taxes, policy charges, and potentially the IRS 10% early distribution penalty.
•   -Loan Option: If your 403(b) plan allows it, you have the option to take a loan against the value of your account. According to IRS rules, you can borrow up to half of your cash value, with a maximum limit of $50,000. Generally, loans must be repaid within five years, unless the borrowed funds are used for purchasing a home.

What choices do I have for saving in a 403(b) account?
You have several options, which may include:

•   -Mutual funds, allowing access to professionally managed portfolios of equities, bonds and other securities.
•   -Annuities that allow you to accumulate savings before retirement and convert these savings to guaranteed income during retirement.

Talk with a financial professional to help you assess your options and decide what’s right for you.

Understand how a 457(b) fits into your retirement plan.

While examining your employer's available choices, you might come across a 457(b) Plan. A 457(b) plan is an additional retirement plan that provides tax-deferred benefits, implying that you won't pay taxes on your funds until you make withdrawals. This plan offers the advantage of saving on a tax-deferred basis while retaining the flexibility to access your funds through loans or unforeseen emergency distributions if the need arises.

If your employer provides both a 403(b) plan and a 457(b) plan, making the maximum allowable contributions to both can optimize your retirement savings. To navigate this process, our team of financial professionals is available to provide expert guidance and assistance.