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Qualification
Section 403(b) plans are only available to employees at public education and 501(c)(3) tax exempt organizations. Public Education employees include teachers, school administrators and other non-academic positions held within the school system, while 501(c)(3) participants would be employed by colleges and universities, certain charitable institutions, hospitals and nursing homes.
403(b) plans are commonly referred to as "Tax Deferred Annuities" and therefore, are generally purchased through an insurance company in the form of a Fixed, Variable or Equity Linked annuity plan.
As with most tax-qualified plans, they share the commonality of voluntary
salary reduction, pre-tax contributions, tax deferred accumulation until withdrawn .
Current contribution limits are generally $15,000 annually and this amount may be exceeded under certain conditions. Generally, the formula is as follows: 16-2/3 of compensation x years of service, not to exceed $12,000.
However, depending on your age and circumstances, you may be eligible under a "catch-up" provision and other allowances which could increase your allowable elective deferral amount even more.
For example, Employees 50 years old and older may make a
$5,000 catch-up contribution and Employees with 15 or more years of service may increase
their contribution up to an additional $5,000 annually. Please call
us for details on "catch-up" provisions at 1-800-480-7526.
Generally, 403(b) plan assets can be distributed after the participant attains age 59-1/2 to avoid a premature withdrawal penalty. However, certain conditions will allow withdrawals prior to that age to be made without penalty, which include death, disability, hardship and/or service separation (after age 55).
Distributions for 403(b) plans are also generally taxed at ordinary income tax rates when received, presumably when you are in a lower tax bracket.
Action
To Take We work with many 403(b) providers. In fact, we have found that many of the plans we recommend are already on the 'approved list' of the employer you work for. If you are interested in evaluating the 403(b) eligible plans we offer, please click HERE.
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Copyright © 1998
Fielder Financial Management, LTD.
All Rights Reserved.
Securities are offered through Girard Securities, Inc.
member FINRA, SIPC.
Mark R. Fielder, Registered Principal. CA. Insurance Lic. # 0690576.
Disclosure: Variable Annuities are long-term investments designed for retirement purposes and are subject to market fluctuations, investment risks and possible loss of principal. For more complete information about variable annuities, including charges and expenses, obtain a prospectus by calling 1-800-480-7526. Read it carefully before you invest or send money. Withdrawals may be subject to income tax and a 10% IRS imposed penalty may apply on withdrawals made prior to age 59-1/2. Consult your tax advisor.
