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A recent study conducted by Zety showed that 40% of Americans are more fearful of retirement than any other life-changing event. This is despite the estimated 42 years of employment during which they can build a retirement fund. While there are many things that can negatively impact even the best savings plans, there are also several options that can work to your advantage if you focus on retirement goals early and put good financial habits into action. A professional financial planner can provide helpful assistance in understanding and evaluating the merits of different retirement plans based on your individual saving needs and abilities. One example is the 403(b) retirement plan available to educators and certain employees of public schools, as well as employees of other tax-exempt organizations and ministries. Let's look at what 403(b) plans are all about and consider what they have to offer.
The most common employer-sponsored retirement plans are 401(k), 403(b), and 457. The primary difference between these plans is the type of organization that can offer the plan. A 401(k) plan is typically offered by for-profit companies, 403(b) by educational institutions and other nonprofits such as churches, and 457 plan by state or local governments.
A 403(b) retirement plan is a tax-deferred retirement account that allows pre-tax contributions. Employee contributions are fully upon deposit to the plan and earnings grow tax-free. Taxes are not paid until funds are withdrawn. Actively contributing to a 403(b) account will help you build retirement savings that can supplement other income during retirement.
Like other tax-deferred retirement accounts, withdrawals from 403(b) plans must begin in the year that you turn 72. If you terminate your employment, any unvested balances in the plan will go back to your employer. Withdrawals prior to age 59.5 are subject to a 10% penalty in addition to income taxes owed.
403(b) investment choices are limited to mutual funds and annuities. It's sometimes difficult to ascertain which to invest in - this is where a professional investment advisor from Plan 4, Inc. can help work through the advantages and disadvantages of each.
Selecting the best teacher retirement plan for your needs has never been easier. For eligible New York State teachers and school district employees, the good news is that some NYS school districts are flexible when choosing a financial advisor. Plan 4, Inc., located in Garden City, can work with you to identify the advantages of contributing to a 403(b) plan and help determine the optimal investments for your needs.
Plan 4, Inc. can help you maximize your 403(b) plan benefits to supplement your pension when you retire and roll over your plan into a separate IRA. Whether you work as an educator or public employee, Plan 4, Inc.'s professional financial planners in Garden City, NY, are ready to discuss your individual needs to reach your retirement goals. Contact us to take the worry out of your retirement and let our team manage your retirement portfolio today!
So what happens to your 403(b) when you retire or change employers? In general, you will have several options including:
There are pros and cons to each choice, and a Plan 4, Inc. financial advisor can help you evaluate the relative merits of each. Let’s look at the choices in more detail:
LEAVE YOUR MONEY IN YOUR PREVIOUS EMPLOYER’S PLAN
Perhaps the simplest course of action when leaving an employer is to just leave your 403(b) where it is. This may seem especially true if the underlying investments have done well. However, before you decide to keep your money invested through your old employer’s plan, you should speak with an advisor from Plan 4, Inc. about the implications of this decision. Our advisors can help you explore investment opportunities that may not be available through your old plan.
ROLL YOUR 403(b) INTO A NEW EMPLOYER'S 403(b)
Some 403(b) plans allow employees to roll prior employer’s 403(b) monies into their plans. This type of rollover allows you to transfer your old 403(b) to a plan administered by your new employer. The benefits of doing this include potentially lower administration costs, continued tax deferment, and potential access to investment vehicles not offered through your old plan. A financial professional from Plan 4, Inc. can help you determine whether this type of 403(b) rollover is right for you.
ROLL YOUR 403(b) INTO AN IRA
IRAs offer the same tax deferred growth as 403(b)s, but they are not managed by an employer. If you are retiring, changing employers, becoming self-employed, or otherwise do not have the option or desire to roll your existing 403(b) into a new 403(b), rolling your retirement funds into an IRA can be a great way to maintain some of the tax advantages you had with your 403(b).
Get in touch with us today to take a closer look at the options available to you and the potential benefits of each!