What Is a 403(b) Plan? — Retirement Planning

With an MBA in finance from Georgia State University, Cubby Bice is an experienced financial advisor who has worked with families and small businesses for over two decades. Cubby Bice serves as president of Bice Wealth Management, a full-service financial consulting firm that offers various financial planning services, including business planning, tax planning, and retirement planning.

Employees in certain organizations and institutions have access to special retirement plans. For example, employees of public schools, some churches, and charities have access to 403(b) plans in the United States.

A 403(b) plan is a retirement plan that enables the contribution of a portion of income to a retirement account pre-tax. The income is saved for retirement and can be invested in high-return assets like stock funds in hopes of generating profits. An employer may also contribute a certain percentage of the amount an employee deposits in their 403(b) account up to a matching contribution threshold. A maximum amount of monthly income can be deposited in a 403(b) account.

A 403(b) plan optimizes the amount of money investable in securities because tax is not removed from the income. Account owners will pay income tax when they withdraw money from the account in the future. Early withdrawal (withdrawal before age 59 and a half) typically results in additional taxes and penalties if the reason for withdrawal is not a qualified emergency. A 403(b) plan also constrains investment options to the choices offered in the plan.

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