Which feature of your employer’s 403(b) plan is right for you?
Whichever you choose is a great choice as long as you’re saving now for your future.
| 403(b) | Roth 403(b) | |
| Contributions | Pre-tax | After-tax |
| Earnings | Tax deferred | Tax deferred |
| Access | At retirement, separation from service | At retirement, separation from service |
| Withdrawals | Taxable income | Contributions: Tax free Earnings: Tax free if over age 59 1/2 and had Roth 403(b) for 5 years |
| Required minimum distributions | Yes, at age 70 1/2 | Yes, at age 70 1/2 |
Contribution – Paycheck comparison:
| Without 403(b) | With 403(b) | |
| Gross pay | $1,000 | $1000 |
| 403(b) salary reduction | 0 | $200 |
| Income subject to federal tax | $1,000 | $800 |
| Federal tax rate on income | 25% | 25% |
| Net pay | $750 | $600 |
| After-tax difference | $150 |
How much can I contribute?
Generally, the lesser of:
— 100% of eligible compensation, or
— $19,000
Your district may offer:
$21,500 if eligible for 15 years of service catch-up
$25,000 if eligible for age 50 or older catch-up
(Ask your employer if these are available.)
What is a 403(b)?
–Only for the educational community
–Pre-tax (tax deferred)
–Designed for retirement
–Can only withdraw money:
- Upon reaching age 59½;
- If severed from employment;
- In case of disability; or
- In case of certain hardships – (if allowed by the plan document)
–10% penalty tax for early withdrawal
–Taxes are payable when amounts are withdrawn
(consult with your tax advisor regarding tax-favored products)
We do not give tax advice and recommend consulting with a tax adviser for your specific situation