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Understanding Retirement Plans: 403(b), 457, 401(k)

If you’re having a hard time sorting out the “alphabet soup” of retirement plans, you’re not alone. While most people have heard of the different kinds of retirement plans, few can tell you all the differences between them. While it’s not important to be an expert, a working knowledge of different retirement plans and the advantages of each is helpful to anyone wanting to save for the future.

Individual Versus Employer-Sponsored Plans

As a rule, retirement plans fall into 2 general categories: individual and employer-sponsored. On the individual side are plans such as the IRA, 403(b) and 403(b)(7). Employer-sponsored plans include the 457, 401(k) and 401(a). Each plan is designed for a particular market and has its own rules. Here are some of the differences:

 

Name of plan: 403(b) & 403(b)(7) (TSA)

Target market: Employees in public education, churches, non-profit hospitals and other qualifying non-profit organizations

Annual Participant Salary Deferral Limit*: $18,000; $6,000 catch-up provision for contributors age 50 and over

 

Name of plan: 457

Target market: Employees of government agencies (including public schools) and certain non-profit organizations

Annual Participant Salary Deferral Limit*: $18,000; $6,000 catch-up provision for contributors age 50 and over (Government 457 only)

 

Name of plan: IRA (Traditional and Roth)

Target market: Anyone within earned income limits

Annual Participant Deferral Limit*: $5,500; $6,500 for contributors age 50 and over

 

Name of plan: 401(k)

Target market: Typically employees of private for-profit businesses

Annual Participant Salary Deferral Limit*: $18,000; $6,000 catch-up provision for contributors age 50 and over

 

Name of plan: 401(a)

Target market: Employees of private for-profit businesses and government agencies (including public schools) and certain non-profit organizations

Annual Participant Salary Deferral Limit*: Not applicable

Annual Employer Contribution Limit*: 25% of eligible employee compensation to a maximum of $54,000

 

Learn More About Retirement Plans

To learn more about the different retirement plans and which ones may be right for you, call 1-800-NEA-VALU to speak with your local NEA Retirement Specialist.

 

* Contribution limits for 2017.

For informational purposes only. Not intended to be legal or tax advice.
 

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