403(b)
A tax-advantaged retirement plan similar to a 401(k) but available to employees of public schools, non-profit organizations, and certain other tax-exempt employers.
Understanding 403(b)
403(b) plans have the same contribution limits as 401(k)s ($23,000/$30,500 for 50+ in 2024) and similar tax treatment. Teachers, nurses, and hospital workers commonly have access to 403(b) plans. Like 401(k)s, traditional 403(b) distributions are taxed as ordinary income and subject to RMDs. The investment options in 403(b) plans are often more limited and can include higher-fee annuity products.
Why This Matters for Retirement: Understanding 403(b) is essential for making informed decisions about tax-free retirement income strategies. Whether you are evaluating an IUL policy, planning Roth conversions, or comparing retirement vehicles, this concept directly affects your outcomes.