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So the University that I work for offers a 403(b) plan and a 457 plan. Neither has a match, as I am part of a pension plan that the University contributes too. I already put up to the max in a Roth IRA, so I am currently trying to decide between starting a 403(b) or a 457 plan. Both plans offers different investment options, but they both include the same investment options that I want to use. So the only decision comes from the benefits/drawbacks of each plan. Any opinions?
403(b) PLAN:
How Do I Withdraw My Money?
For the most part, funds may not be withdrawn before your retirement or termination of employment. The IRS restricts when funds may be paid from your account. You may withdraw your money only under these circumstances:
You are at least age 59 1/2
You encounter a severe financial hardship (foreclosure on your home, purchase of a primary residence, college expenses for a child, or significant out-of-pocket medical expenses)
You are required to make payment to a former spouse, according to the provisions of a Qualified Domestic Relations Order
You become totally disabled
You die
Hardship withdrawals are subject to a 10% penalty tax unless they are for out-of-pocket medical expenses totaling more than 7.5% of your adjusted gross income.
Please note that IRS rules are subject to change.
What Taxes Must Be Paid When I Withdraw My Savings?
Money withdrawn is subject to federal and state income tax. Except for "rollovers," annuities, and regular installments over 10 years or more, all other payments will have 20% withheld automatically for federal taxes. If you are under age 55 when you terminate, payments that are not part of a "rollover" will be subject to an additional 10% penalty tax.
457 PLAN:
Restrictions on Withdrawals
Under the Internal Revenue Code, funds in a 457 Plan may be made available to you under one or more of the following circumstances:
upon severance from service
retirement
attaining the age of 70½
death
when you encounter an "unforeseeable emergency" as defined by IRC Section 457
Any amount you receive will be treated as ordinary income for federal tax purposes.
Payment OptionsYou may begin payments anytime following severance from service or you may wait until retirement to begin receiving payments. However, distributions must begin by April 1 of the calendar year following the year in which you turn 70½.
You will be able to access your 457 plan accumulations in a variety of ways, from cash to lifetime income. You can choose from the following payment options:
Lump-sum withdrawal
Fixed-period annuity
Lifetime annuity income
Systematic withdrawals
Minimum distribution option
Money withdrawn is subject to federal and state income tax.
What Taxes Must Be Paid When I Withdraw My Savings?Money withdrawn is subject to federal and state income tax. Except for "rollovers," annuities, and regular installments over 10 years or more, all other payments will have 20% withheld automatically for federal taxes. If you are under age 55 when you terminate, payments that are not part of a "rollover" will be subject to an additional 10% penalty tax.
403(b) PLAN:
How Do I Withdraw My Money?
For the most part, funds may not be withdrawn before your retirement or termination of employment. The IRS restricts when funds may be paid from your account. You may withdraw your money only under these circumstances:
You are at least age 59 1/2
You encounter a severe financial hardship (foreclosure on your home, purchase of a primary residence, college expenses for a child, or significant out-of-pocket medical expenses)
You are required to make payment to a former spouse, according to the provisions of a Qualified Domestic Relations Order
You become totally disabled
You die
Hardship withdrawals are subject to a 10% penalty tax unless they are for out-of-pocket medical expenses totaling more than 7.5% of your adjusted gross income.
Please note that IRS rules are subject to change.
What Taxes Must Be Paid When I Withdraw My Savings?
Money withdrawn is subject to federal and state income tax. Except for "rollovers," annuities, and regular installments over 10 years or more, all other payments will have 20% withheld automatically for federal taxes. If you are under age 55 when you terminate, payments that are not part of a "rollover" will be subject to an additional 10% penalty tax.
457 PLAN:
Restrictions on Withdrawals
Under the Internal Revenue Code, funds in a 457 Plan may be made available to you under one or more of the following circumstances:
upon severance from service
retirement
attaining the age of 70½
death
when you encounter an "unforeseeable emergency" as defined by IRC Section 457
Any amount you receive will be treated as ordinary income for federal tax purposes.
Payment OptionsYou may begin payments anytime following severance from service or you may wait until retirement to begin receiving payments. However, distributions must begin by April 1 of the calendar year following the year in which you turn 70½.
You will be able to access your 457 plan accumulations in a variety of ways, from cash to lifetime income. You can choose from the following payment options:
Lump-sum withdrawal
Fixed-period annuity
Lifetime annuity income
Systematic withdrawals
Minimum distribution option
Money withdrawn is subject to federal and state income tax.
What Taxes Must Be Paid When I Withdraw My Savings?Money withdrawn is subject to federal and state income tax. Except for "rollovers," annuities, and regular installments over 10 years or more, all other payments will have 20% withheld automatically for federal taxes. If you are under age 55 when you terminate, payments that are not part of a "rollover" will be subject to an additional 10% penalty tax.
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