If you work for the government, in a public school or for another organization that is non-profit or exempt from tax, you may qualify for a 403(b) retirement savings plan. When comparing this type of plan to the more widely used 401(k) option, you will notice a lot of similarities. They are essentially the same type of retirement savings account, but they are offered to different groups of employees.
There are two types of 403(b) plan: the traditional 403(b) and the Roth 403(b). The latter allows you to make contributions after tax and does not charge a tax fee upon withdrawal.
There are many options for this type of plan, and and some of the best 403(b) plans come from well-known financial services companies such as Fidelity Investments and TIAA.
As with the 401(k), you should not withdraw from your 403(b) account until you are 59- and six-months years of age. It also has the same annual contribution maximum as the 401(k): $19,500 annually for people under 50 years of age and $26,000 for people 50 years of age or older (not including employer contributions).
You may wish to switch your 403(b) or 401(k) to a Roth IRA. This is known as a “rollover.” To avoid a penalty for your rollover, you must meet one of the following conditions:
- You are at least 59- and six-months years of age.
- You no longer work for the employer who sponsored your 403(b) or 401(k).