What Is a 403b Retirement Account?
A 403b retirement account is similar to a 401k retirement plan. Generally, 403b plans are available to employees of educational institutions and nonprofit organizations who are governed by 501c(3) of the Internal Revenue Code.
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Tax-Deferred
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As with a 401k, contributions to a 403b grow as tax-deferred income until the money is withdrawn.
Ordinary Income
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Upon retirement, the government taxes withdrawals from 403b retirement accounts as ordinary income.
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Eligibility
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Most employees of tax-exempt organizations can contribute to a 403b retirement account.
Pension Supplement
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Most employees of these types of organizations receive a pension that is often less than the retiree's salary. A 403b retirement account can help supplement the retiree's pension.
Tax Liability
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Contributions to a 403b retirement account reduce your tax liability. In addition, all interest, dividends and capital gains accrued in a 403b retirement account grow tax-free until retirement or other withdrawal.
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