Embarking on the journey of retirement planning can be both exciting and overwhelming, especially when faced with a myriad of options. In this insightful video series, we kick off with part one, unraveling the intricacies of 403(b) retirement plans. Let’s delve into the essential aspects, tax advantages, and key considerations that make 403(b) plans a unique proposition.
Understanding the Basics: What is a 403(b)? A 403(b) is a tax-advantaged retirement plan tailored for public employees, university and hospital staff, religious leaders, and workers in non-governmental organizations. Similar to a 401(k), contributions to a 403(b) plan are not taxed immediately, offering a deferred tax benefit. These plans are sometimes mandatory for certain employees and optional for others.
The Mechanics of a 403(b) Plan Contributions to a 403(b) plan are deducted from your wages before taxes, a process known as “elective salary deferral.” This not only fosters disciplined savings but also lowers your taxable income. However, taxes are applicable when you start withdrawing your funds during retirement.
Investment Options: Annuities and Mutual Funds Participating individuals can choose to invest their contributions in either annuities or mutual funds. While mutual funds are diversified portfolios of securities, annuities come in various types such as fixed, equity-indexed, and variable. The key lies in making informed choices that align with your financial goals.
Navigating Contribution Limits and Catch-up Opportunities It’s crucial to be aware of IRS rules for 2019, which cap elective deferrals for those under 50 at $19,000. Individuals over 50 have the option to make additional catch-up contributions of up to $6,000. Employers may also contribute to the 403(b) account, known as “nonelective employer contributions,” subject to certain limits.
The Pathfinder Retirement Approach: Honest Guidance for Your Journey At Pathfinder Retirement, we understand the significance of securing a fulfilling retirement. Founded on principles of integrity, compassion, and service, we aim to empower individuals with the knowledge and resources needed for financial security. As we explore 403(b) plans in this video series, consider taking our retirement assessment quiz for personalized insights. Stay tuned for part two, where we delve deeper into 403(b)s, offering continued education on wages and benefits in 2019. Your retirement journey begins with knowledge and understanding – let us guide you every step of the way.