A 403(b) plan, also known as a tax-sheltered annuity (TSA) plan, is a retirement plan offered by public schools, certain 501(c)(3) tax-exempt organizations, and certain faith-based organizations. The plan is designed for certain employees of these organizations, such as teachers, school administrators, professors, government employees, nurses, doctors, and librarians. Participants can save money for retirement through payroll deductions while enjoying certain tax benefits. The employer may also match part of the employees contribution.

Here are some key features of a 403(b) plan:

• Traditional and Roth 403(b) plans: There are generally two broad types of 403(b) plans: the traditional and the Roth. 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 has put away some money for the future and at the same time reduced his or her gross income (and income taxes owed for the year). The taxes will be due on that money only when the employee withdraws it. A Roth 403(b) plan allows the employee to contribute after-tax dollars to the account, and qualified withdrawals are tax-free.

• Investment options: Participants in a 403(b) plan can invest their contributions in assets like mutual funds and annuities.

• Contribution limits: Most 403(b) plans have guardrails that keep participants from overcontributing each year. The contribution limit for 2023 is $22,500.

• Withdrawal rules: Since 403(b) plans provide tax incentives to help participants save for retirement, they set strict guidelines for when withdrawals can be made. Like traditional IRAs and all other workplace retirement accounts, 403(b) plans eventually require that participants make withdrawals.

Overall, a 403(b) plan can be an excellent way to help build retirement security, whether its the only option for retirement saving or its supplementing another retirement account.