403(b) Tax Sheltered Annuity Overview

A 403(b) plan, also known as a tax sheltered annuity plan (TSA), is a retirement savings plan that allows employees to defer some of their salary into individual accounts. These plans are offered by public schools and certain charities, such as churches and nonprofit organizations, and are like 401(k) plans.

With a 403(b) plan, employees can contribute pre- or after-tax dollars from their paychecks, and employers may also contribute. Pre-tax contributions can lower taxable income and reduce current income taxes.

The deferred salary is generally not subject to federal or state income tax until it's withdrawn, but some plans may offer Roth accounts that are taxed currently but tax-free when withdrawn during retirement.

403(b) plans can offer tax advantages and high contribution limits, but they may also have some disadvantages:

Investment choices: 403(b) plans may have fewer investment choices than other plans.

Fees: 403(b) plans may have high fees.

Early withdrawals: Withdrawals before age 59½ may be subject to a 10% tax penalty and income tax on the withdrawal amount.

Creditor protection: Accounts within a 403(b) may lack the creditor protection provided by other plans.

Click here to enroll in your organization's 403(b) plan.

Click here to increase your contributions to your 403(b) plan.