What is a 403(b)?

2 min readPublished Jan 16, 2024

Discover the 403(b) retirement plan, a tax-advantaged savings option for educators and nonprofit employees, and how it can contribute to achieving your retirement goals.

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A 403(b) plan is a tax-advantaged retirement savings program designed primarily for employees of public schools, certain non-profit organizations, and religious ministers. Similar to 401(k) plans, 403(b) plans offer a beneficial way for employees in these sectors to save for retirement.

Key Features of a 403(b) Plan

Tax Benefits

  • Pre-Tax Contributions: Contributions are made before tax, reducing taxable income.
  • Tax-Deferred Growth: Earnings grow tax-deferred, with taxes paid only upon withdrawal.

Employer Contributions

While not mandatory, many 403(b) plans include employer contributions, which can significantly enhance retirement savings.

Example: Maximizing Your 403(b)

Jordan, a non-profit employee earning $45,000 annually, contributes 4% to her 403(b). Her employer matches 100% of her contributions up to 4%. Here’s her potential growth:

  • Annual Employee Contribution: $1,800
  • Annual Employer Match: $1,800
  • Total Annual Contribution: $3,600
  • Growth Over Time: With a 5% annual growth rate, Jordan’s savings could amount to approximately $19,783.63 in 5 years, $44,899.60 in 10 years, and $150,487.73 in 30 years.

Contribution Limits for 2024

The IRS sets annual contribution limits for 403(b) plans. In 2024, the limit is $23,000 for individuals under 50, with an additional $7,500 catch-up contribution for those 50 and over, totaling $30,500.

Integrating Your 403(b) with ProjectionLab

A 403(b) plan can be an integral part of your retirement strategy, especially when combined with other retirement vehicles like IRAs. ProjectionLab offers tools to help you assess how your 403(b) contributions, along with other factors, fit into your overall financial plan. By understanding your unique situation and goals, ProjectionLab can guide you in optimizing your contributions and investment choices. Start planning your retirement effectively with ProjectionLab.

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