403b retirement plans, also known as a tax-sheltered annuity plan, is a retirement plan for employees of public schools, employees of certain tax-exempt organizations and some ministers. The actual accounts in a 403(b) plan can be any of the following types, among others:
- An annuity contract, which is usually provided through an insurance-based company.
- A custodial account, which is invested in mutual funds, and usually based at a company like Fidelity, Schwab or TDAmeritrade.
- A retirement income account set up for church-based employees.
Generally, retirement income accounts can invest in either annuities or mutual funds. These portfolios may follow an asset allocation approach, buy and hold, or even a more tactical active type of investment strategy. The investments could be ETFs, stocks, money market funds or stable value funds.
403(b) plans are designed to act like money-purchase pension plans, in which the employer contributes a percentage of the worker's income each year. Like money purchase plans, they may have various formulas that are in some way integrated with Social Security, and based on their age or years of service. Recent changes in 403b plans have occurred so it is useful to monitor investment news sites for the latest products from the major providers.
Saturday, February 14, 2009
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