403B's

What It Is

A 403(b) is a tax-deferred investment and savings program for employees of certain tax-exempt employers. It allows employees of hospitals, educational institutions, and other non-profit organizations to save and invest for their own retirement. Depending on your program, you authorize pre-tax payroll deductions to be invested in a tax-sheltered annuity (TSA) contract or in a custodial account made up of mutual funds offered by your organization. Both the contributions and the investment earnings can grow tax-deferred until withdrawal (assumed to be retirement), at which time they are taxed as ordinary income.

403(b)s were established by the federal government to encourage workers in certain tax-exempt organizations to establish retirement savings programs. The name refers to the relevant section in the Internal Revenue Code.

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