August 2023

WEALTH... from page 18.

centage. Nonetheless, reviewing your contribution elections is important to ensure you are taking full advantage of this benefit! 403(b): This option is very similar to the 401k discussed above but is designed specifically for public edu cators and employees of tax-exempt entities such as churches and charita ble organizations. The common differences that set a 403(b) apart from a 401k are out lined below: Administrative Fees: Both 401k’s and 403(b)’s utilize what is known as a “plan sponsor” to oversee the operation of the retirement plan. The sponsors handle all operation al aspects of the fund and charge the employer a fee. 403(b) plans typically have lower administrative fees than those of 401k’s, meaning that a more significant portion of the plans profits are reinvested into the plan itself. Catch-Up Contributions: The IRS places an annual limit on how much money an employee can contribute to a 401k or 403(b). As employees begin to approach their retirement age, the IRS will allow them to make “catch up” contri butions, which are more than the annual limits, to help them prepare for their nearing retirement. These “catch-up” contributions typically become eligible to individuals par ticipating in a 403(b) earlier than they do in a 401k. The reasoning is because many 403(b) plans define the eligibility for these catch

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AUGUST 2023