Categories: General Tax Terms
403(b) Plan
A 403(b) Plan is a tax-advantaged retirement savings plan available to certain employees of public schools, tax-exempt organizations, and some ministers.
It allows participants to make contributions from their salary on a pre-tax basis, reducing their taxable income for the year. Employers may also contribute to the plan, and the investment earnings grow tax-deferred until withdrawal, typically during retirement.
Withdrawals made before age 59½ may incur a 10% early withdrawal penalty, in addition to regular income tax. Similar to 401(k) plans, 403(b) Plans are subject to contribution limits set by the IRS, which are adjusted annually.
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