#schoolofpersonalfinance #403b #personalfinance #403b vs 401k #financialfreedom
A 403b plan is a retirement plan used by non-profit organizations, public school districts, certain religious groups, certain hospitals, and government organizations. It works very similarly to a 401k plan. For example, your contributions are made pre-tax and are payroll deducted, the funds grow tax-deferred during your working years and then withdrawals are taxed as ordinary income in retirement.
A major difference is most 403b plans use an annuity contract (Tax Shelter Annuity), which is provided through an insurance company. A big problem with these annuity 403b accounts are the fees. Most people have no idea how much they are actually paying in these accounts because it is hidden very well. If you currently contribute to a 403b plan your homework assignment is to go figure out how much in actual dollars you paid in fees over the last year.
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