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A 403(b) plan is a tax-deferred, employer-sponsored retirement savings plan available to public schools and other tax-exempt organizations. It allows educators, government employees, and nonprofit employees to make pretax contributions up to a certain limit.
These 403(b) plans are tax advantaged, meaning that plan holders contribute funds that grow tax free until withdrawals are made. Contributions are usually made by taking deductions from the employeeâs payroll. Some employers may offer a Roth option, where contributions are taxed up front and plan holders can withdraw money tax free in the future.
Withdrawals made before age 59œ are, with some exceptions, subject to a 10% penalty. In general, 403(b) plans are available for employees of nonprofit organizations, which include (but are not limited to):
