Pros and Cons of 403(b) Plans

Employees may be able to make extra catch-up contributions with 403(b) plans, but fees can be high.

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Millions of public school employees, along with some employees at colleges and universities, hospitals, charities, and other nonprofit organizations, use 403(b) plans to save for retirement. 

As is the case with employer-provided 401(k) plans, 403(b) plans are tax-advantaged. Contributions are typically deducted from your paycheck and invested, providing an important source of income in retirement. Pretax contributions will reduce your taxable income, and your investments will grow tax-deferred until you retire. If your plan offers a Roth option, contributions are after-tax, but withdrawals will be tax-free as long as you’re 59.5 or older and have owned the account for at least five years. 

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Emma Patch
Staff Writer, Kiplinger's Personal Finance

Emma Patch joined Kiplinger in 2020. She previously interned for Kiplinger's Retirement Report and before that, for a boutique investment firm in New York City. She served as editor-at-large and features editor for Middlebury College's student newspaper, The Campus. She specializes in travel, student debt and a number of other personal finance topics. Born in London, Emma grew up in Connecticut and now lives in Washington, D.C.