403b Retirement Plans
A 403b retirement plan is a tax deferred retirement plan that is mainly offered to government employees. Because 403b retirement plans are tax deferred, your annual gross income is lowered by the amount of your contribution, which lowers the total amount of your federal income tax liability. Most 403b retirement plans are fully funded by employees, and not by employers. The retirement plan cannot be directly funded; it can only be funded by a direct payroll deduction. All participants in 403b retirement plans are one hundred percent vested from the first day that they enroll in the plan.
The IRS approved the rules, regulations, and usage of 403b retirement plans in 1961. Since then, many people have decided to invest in 403b retirement plans as a way to plan for the future. As with most retirement plans, there are restrictions on the total annual amount that can be contributed and penalties for any money that is withdrawn before the participant retires. For any amount of money that is withdrawn from the 403b retirement plan before the participant retires, a ten percent penalty charge will accrue.
The money that is contributed to 403b retirement plans can only be invested in mutual funds, variable annuities, and fixed rate annuities. The funds can be moved to different investments at any time. But, always keep in mind that stocks, bonds, mutual funds, and variable rate annuities are not insured by the FDIC. All 403b retirement plans have a rollover option, in case the participant decides to leave their present place of employment.
Contributing National Payday Staff Writer
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