It’s important to know the differences between retirement options. In this video, I discuss the key points you should know about 401(k)s and 403(b)s.
401(k) vs. 403(b): The Similarities
Both plans allow for pre-tax contributions, they allow for employers to match a contribution, they both make you wait until 591/2 to draw from them without penalty, and both of them allow you to roll over to an IRA or Roth IRA when you leave or when you retire. Money withdrawn prior to that is subject to a 10% penalty.
If you are under 50, you can contribute up to $18.5k. If you are over 50, you can add up to $24.5k to your account.
401(k) vs. 403(b): The Differences
Now for the differences:401(k)s are typically for private practices, where 403(b)s are typically for non-profit hospitals.
You may see more guaranteed options with a 403(b). You may be able to avoid the withdrawal period if your balance is low enough. Make sure to call them and confirm.
The investment selections are different for 403(b)s. Because they’re usually managed by insurance companies or TIAA-CREF, you will see the availability of an annuity to select while investing. If you get stuck in a TIAA-CREF annuity, it takes about 10 years to get out of it.
Many 403(b)s have what is called a maximum allow contribution, which allows you to put an additional $3,000 on top of what you can max out at if you work for the hospital for 15 years.
You can check more information about retirement accounts here.
Do you need help preparing for retirement? Contact me today to set up an initial meeting. You can also download my free ebook for physicians for tips and information about getting your finances on track.