Identification

• A 403(b) plan is an employer sponsored teacher's retirement plan. The plan allows teachers to defer money to a retirement account from their paycheck. This money is contributed on a pretax basis. The money is then invested and withdrawn during retirement.
  
  

Features

• The account normally uses an annuity as the financial product. The annuity may be fixed or variable. Fixed annuities pay a fixed rate of return. Variable annuities invest in mutual funds. The mutual funds offer no guarantee, but offer the opportunity to earn interest in excess of the fixed interest rate.
  
  

Benefit

• Contribution rates on 403(b) annuities are higher than for IRAs. Contributions are capped at $49,000 per year or 100 percent of the teacher's annual compensation. The retirement plan also offers the option to guarantee the teacher a retirement income at retirement. On top of this, the 403(b) is a supplemental retirement plan. A teacher gets a state pension plan along with the 403(b) annuity.
  
  

Consideration

• Consider contributing as much as you can into your 403(b) plan. These plans are there to help you save additional money over and above your pension plan. The retirement plan may be taken with you if you change jobs, but you will need to roll the plan over into the new plan since it is not an individual plan that you can take with you regardless of your employer. The 403(b) plan must be part of the employer's retirement plan.