How to Contribute to a 403(b) Plan

403(b) plans are popular investment products among employees at educational and nonprofit organizations. Unlike other retirement products that require you to send in payment to the investment company, contributions to 403(b) plans can be made automatically from your paychecks. Such arrangements can remain in place until you request changes, making it easy for you to contribute to a 403(b) plan.

Difficulty: Easy

Instructions

Things You'll Need:

• Established 403(b) plan

1. Determine the amount that you can contribute to your 403(b) plan from each paycheck. While there are financial benefits to making contributions to your 403(b) plan, your salary will be reduced by the amount that you contribute. Too lofty of a contribution could place a financial burden on you and your family now, while too small of a contribution could put you in a hard position during retirement.

2. Update your salary reduction agreement with your employer. This agreement, which was originally completed to set up your 403(b) plan, allows your employer to transfer a portion of your salary to the vendor administering your 403(b) plan. You can contribute no more than the annual maximum established by the IRS to your 403(b) plan.

3. Examine the statement that accompanies your paycheck each month. The amount that you specified on your salary reduction agreement should be deducted from the gross amount of your paycheck.

4. Consult your account statement from the investment company administrating your 403(b) plan. Many employers are able to transfer the funds within days of when you receive your paycheck. They do, however, have until the middle of the following month for the transfer to be completed.

5. Check the W-2 that you receive at the end of the year to ensure that the correct amount of your contributions has been recorded. The amount of your contributions should appear in box 12 with an E code, which indicates contributions to a 403(b) plan.

Tips & Warnings

• If you are at least 50 years old, the IRS allows for additional contributions to a 403(b) plan.
• If you want to contribute the maximum amount to your 403(b) plan, divide the maximum amount by the number of paychecks that you receive each year.
• If you wish not to contribute to a 403(b) plan any more, you must cancel your salary reduction agreement.
• While many employees receive a paycheck on a regular basis, such as biweekly or monthly, other employees may not receive paychecks at regular intervals. Check with your employer to determine the pay periods in which your salary will be reduced to contribute to your 403(b) plan.