401(a) vs 403(b)

Shawn Plummer

CEO, The Annuity Expert

What is a 401(a) Plan?

A 401(a) plan is a type of retirement savings plan primarily offered by government and nonprofit employers. Key characteristics include:

  • Employer Contributions: Employers often make contributions, which can be mandatory or voluntary.
  • Employee Contributions: May or may not be allowed, depending on the plan specifics.
  • Investment Choices: Limited, often determined by the employer.
  • Tax Benefits: Contributions are typically pre-tax, reducing taxable income.

Helpful Tool: The 401(a) payout calculator calculates your lifetime monthly income using annuities

What is a 403(b) Plan?

A 403(b) plan is a retirement plan for certain employees of public schools, tax-exempt organizations, and ministers. Its features include:

  • Employee Contributions: Employees can contribute part of their salary.
  • Employer Contributions: Employers can match contributions, but it’s less common than in 401(k) plans.
  • Investment Choices: Often limited to annuities and mutual funds.
  • Tax Benefits: Contributions are made pre-tax, lowering current taxable income.

Helpful Tool: Find out how much income your 403(b) plan can give you monthly with our 403(b) payout calculator

401(a) vs 403(b)

Feature401(a) Plan403(b) Plan
ContributorsEmployer, sometimes employeeEmployee, sometimes employer
EligibilityGovernment and nonprofit employeesEmployees of public schools, nonprofits, and ministers
Investment OptionsLimited, employer-selectedAnnuities, mutual funds
Tax TreatmentPre-tax contributionsPre-tax contributions
Withdrawal RulesDepends on plan termsPenalties for early withdrawal before age 59½

Conclusion

Choosing between a 401(a) and a 403(b) plan depends on your employment and the specific features of each plan offered by your employer. Both plans offer tax advantages and encourage long-term savings for retirement. Understand your plan’s specifics to maximize your benefits.

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Shawn Plummer

CEO, The Annuity Expert

Shawn Plummer is a licensed financial professional, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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