Day: May 17, 2021

Paul Haarman

Can you enroll in both 401(k) and 403(b) retirement plans?

By  Paul Haarman Are you looking for ways to boost your retirement savings? If you work at a place where you get both 403(b) and 401(k) plans to contribute, you can expect to achieve your goal. However, there would be a combined contribution limit that you would need to stick to for a tax year. In 2020, you can contribute $19,500 from your income. And if you are more than 50 years of age, you can make a catch-up contribution of $6,500. These limits are valid for individual plans also. Paul Haarman explains that means you can use both these accounts to save for your future. It is just that the contributions will have a cap. An overview of a 401(k) and a 403(b) plan 403(b) plan is mainly for nonprofit company employees working for a public school, religious group, or an organization that qualifies for tax exemption. You pay before-tax dollars towards contributions, and this amount comes from your salary. For this, the option of an employer match can be available. As far as employee contribution goes, you would have choices for investing your money. This plan can feel similar to 401(k) to an employee. But there are differences. You can open a 403(b) account with an insurance company, while the other is commonly accessible with a mutual fund company. Paul Haarman says nobody can deny that both these accounts can be accessible only to some people. 401(k) plan’s popularity is because of its generous employer match feature. Since large companies can afford larger sums in benefits, they offer this choice. For a charitable or nonprofit organization, it cannot be possible. Besides, a 403(b)…

Paul Haarman

An Overview of 401(k) and 403(b) Plans

By Paul Haarman If you are looking for tax benefits for your retirement accounts, plans 401(k) and 403(b) can seem to be the right option. They derive their name from specific tax codes. 401(k) and 403(b) plans have some similarities and a few differences. For example, 401(k) is for people serving for-profit organizations. Simultaneously, Paul Haarman explains the other one is accessible to public school staff, individuals on specific ministerial posts, and professionals working in nonprofit companies or places that don’t need to pay taxes. Here is a quick comparative study of these two to help you choose a suitable retirement plan. The standard features of 401(k) and 403(b)  When you talk about similarities between the two, you should assess contribution limits, availability of loans, penalties, and other aspects. The good news is some 401(k) or 403(b) plans allow you to obtain loans, which you can repay over a period. With traditional plans, you can expect tax benefits on your income for one year. However, taxes may apply to the amount you receive from your retirement account. Then, whether it is a 401(k) or a 403(b) plan, an individual under age 50 can contribute up to $19,500. However, older adults can invest an extra $6,500 in their retirement savings contribution that you can refer to as catch-up contributions. If you choose either of them as Roth accounts, the first-year contributions will be taxable, and then the amount would grow tax-free. Paul Haarman tells people to be smart with their retirement savings and avoid penalties as much as possible. For instance, if you withdraw money from any of these accounts before maturity, you may have to…