The 403(b) can be an excellent way to save money for retirement. It can serve as a supplement to a traditional pension plan or other retirement plan(s), or as a stand-alone plan. The 403(b) is a tax deferred retirement plan available to employees of educational institutions and certain non-profit organizations as determined by section 501(c)(3) of the Internal Revenue Code. Contributions and investment earnings in a 403(b) grow tax deferred until withdrawal (assumed to be retirement), at which time they are taxed as ordinary income. The 403(b) is named after the section of the IRS code governing it. Roth (after-tax) deductions are also available. How a 403(b) Works Employees enroll and participate through their employer. Contributions to a 403(b) are made on a pre-tax basis through a Salary Reduction Agreement. This is an arrangement where the participating employee agrees to take a reduction in salary. The amount by which the salary is reduced is directed to investments offered through the employer and selected by the employee. These contributions are called elective deferrals and are excluded from the employee’s taxable income. Contributions grow tax-deferred until the time of retirement, when withdrawals are taxed as ordinary income. Roth 403(b) Your district’s retirement plan also offers Roth (after-tax) deductions. Making an after–tax (Roth) contribution means your money goes into your 403(b) account after federal and state taxes (if applicable) are withdrawn. With this type of contribution, your withdrawals in retirement are not taxed (provided certain conditions are met: you have held the Roth 403(b) account for at least 5 taxable years, you are age 59.5 or older, and you are no longer employed with the sponsoring employer). While this will not lower your current income tax bill, you can later withdraw your contributions plus any plan earnings tax free—if certain law requirements are met. Benefits Include:

• Tax deferred growth: no annual taxation on earnings (taxes due when you withdraw money from your account)

• Ability to contribute on a Roth after-tax basis (You pay taxes today on Roth contributions, but Roth contributions and any earnings they produce can be withdrawn tax-free (if certain conditions are met.
• Investment options: fixed annuities, variable annuities, or mutual funds
• Competitive interest rates
• Flexibility: start, stop, and adjust your contributions as allowed by your employer’s plan.
• Receive periodic account statements

Contribution Limits

• 2023: $22,500
• 2024: $23,000
• Participants aged 50 and older at any time during the calendar year are permitted to contribute an additional $7,500.

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