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Introduction: What's A 403b Supplemental Retirement Plan?

403b`s are a supplemental retirement savings plan for employees that work for non-profit organizations.  They provide a defined contribution (401k-like) program as a supplement to an employee’s defined benefit (such as a state pension or social security) program.

These programs provide important tax preferences (pretax or roth – See article below if you need further explanation) to help employees save in addition to their primary retirement plan (state pension or social security).  With the trend of public pensions reducing benefits and the probable likelihood that Social Security will reduce future benefits, it is becoming increasingly more important for employees to understand and utilize these programs.

403b Supplemental Retirement

Who Can Contribute To A 403b?

Generally, any employee of a 501(c)3 who works more than 20hrs a week and contributes more than $200/yr must be allowed to participate in the organization’s 403b, but in practice most institutions will let almost any employee contribute.

How much can be contributed (as of January 2019)?

  • Employee deferrals – $19,000/yr.
  • Plus $6,000/yr in catch-up contribution if you’re over 50 or over.
  • With employer contributions the total cannot exceed $56,000/yr. (62,000 if you are over 50).

 

How Should I Invest?

Investing is not simple and there is no easy silver bullet to apply to all situations.  However, having a balanced, disciplined, and diversified approach can help you on your way to a successful financial future:

Remember, each individual is different and needs to devise (or consult with a professional) a strategy that meets his/her’s individual circumstances.

 

Pretax or Roth?

As of 2006, the IRS has given you the option (although many employers still may not offer this option) to save pretax or roth.  Depending on what your income/tax circumstances are today versus where you perceive them to be in the future, this choice could make a huge difference in the amount of retirement savings you will have after-taxes in retirement. Furthermore, it is important to note that changing personal circumstances, tax laws/rates, and other variables could change the option(s) that are best for you.

 

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