Most people are familiar with the term 401(k), but they don’t know about 403(b) options that are available. What are these retirement plans and how do they differ? As you are planning for retirement, it is essential that you understand all of your options to pick the plan that will work best for your individual needs.
401(k) and 403(b) SimilaritiesBoth of these investments are designed to help individuals save for retirement. There are certain rules and regulations that need to be followed, such as a maximum amount of contributions that can occur each year.The advantage to these retirement savings plans is that you can make contributions with pre-tax dollars. The money is taken from your paycheck before taxes are calculated, helping you to have a higher contribution rate since you don’t have to pay taxes on the money that is invested into the fund.
401(k) and 403(b) DifferencesThe main difference between a 401(k) and 403(b) is that the 403(b) is used by school districts, government organizations, nonprofit companies, and religious groups. So, if you work for one of these organizations, then you might be offered the option for a 403(b) investment instead of the standard 401(k) options. The benefit for the company is that they can avoid certain administrative processes that are applicable to 401(k) plans.
Choosing the Right Retirement Savings PlanWhen you are choosing a plan for your retirement savings, it is essential that you have a conversation with an experienced financial advisor. This conversation will help you to understand the difference between the options that are available, helping you to maximize your investment and minimize tax burden.
A financial advisor can help you learn more about 401(k) and 403(b) plans so that you can use these tools to build your financial future. The advisor will also talk with you about other options that might be available to help with your retirement goals.
The professionals at FBA Wealth Management (FBAWM) help understand your 401(k), 403(b), and other types of retirement strategies so you can make educated decisions regarding your future. Contact us right away to find a financial advisor that you can work with.