what is a 403 b tax sheltered annuity plan 
a 403 b is a retirement plan offered by public schools and non profit organizations and is similar to a 401 k plan a 403 b plan is designed for certain employees of tax exempt organizations participants may include teachers school administrators professors government employees nurses doctors and librarians 403 b contributionsthe 403 b tax sheltered annuity plan operates like a 401 k plan allowing participants to save money for retirement through payroll deductions while enjoying certain tax benefits there s also an option for the employer to match part of the employee s contribution with contribution limits set by the internal revenue service irs a 403 b is akin to a 401 k plan for private sector employees participants must reach 59 before withdrawing funds or face an early withdrawal penalty 1 those who contribute to a 403 b include if an employer offers a 403 b and a 401 k individuals can contribute to both but their aggregate contribution cannot exceed the annual irs limit of 23 000 in 2024 individuals aged 50 and over can contribute an additional 7 500 as a catch up contribution 3types of 403 b tax sheltered annuity planstwo 403 b plans include traditional and roth not all employers allow employees access to the roth version a traditional 403 b plan allows the employee to have pretax money automatically deducted from each paycheck and paid into a personal retirement account the employee reduces their gross income and income tax for the contribution year taxes will be due on the money only when the employee withdraws it 2a roth 403 b requires that after tax money be paid into the retirement account there s no immediate tax advantage but the employee will not owe any more taxes on that money or the profit it accrues when it is withdrawn 4clergy can also participate in a 403 b but there s a special plan type that s designed specifically for employees of religious institutions this plan is called the 403 b 9 advantages of 403 b plansearnings and returns on amounts in a regular 403 b plan are tax deferred until they are withdrawn earnings and returns on amounts in a roth 403 b are tax deferred if the withdrawals are qualified distributions 2many 403 b plans vest funds over a shorter period than 401 k s and some even allow immediate vesting of funds which 401 k s rarely do an employee with 15 or more years of service with certain nonprofits or government agencies may be able to make additional catch up contributions to a 403 b plan such as 3 000 a year up to a lifetime limit of 15 000 unlike the usual retirement plan catch up provisions individuals don t have to be 50 or older to take advantage of this as long as they have worked for the same eligible employer for 15 years 5disadvantages of 403 b plansfunds withdrawn from a 403 b plan before age 59 are subject to a 10 tax penalty individuals may avoid the penalty under certain circumstances such as separating from an employer at age 55 or older needing to pay a qualified medical expense or becoming disabled 1