403(b) Plans

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 Taxes are not paid until funds are withdrawn.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.

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.

So what happens to your 403(b) when you retire or change employers?  In general, you will have several options including:

• Leave your money in your previous employer’s plan
• Roll the money it into a new employer’s retirement plan
• Roll the plan balance into an Individual Retirement Account (IRA)

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!