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401k v. 403b Retirement Plans

Understanding the differences between 401k and 403b plans shouldn't be too difficult, as they're quite similar in nature and purpose. While the majority of employers offer 401k plans, many state run or otherwise nonprofit organizations offer 403b plans - at their discretion.

It's worthwhile to note that you do not get to select which type of plan you want, and that over time should you switch employers that the same plan, if any, will not be guaranteed.

Regardless of whether you elect to enroll into a 401k or 403b plan, you can expect to pay some type of fees or costs associated with the retirement plan in which you've created and are contributing to.

A 403b plan in comparison to a 401k plan however can be seen as a disadvantage since they stand not to accept funding or any form of 'matching' for your annual or monthly payments to fund your 403b plan. That is, in doing so, per the Employee Retirement Income Security Act, (ERISA) they would not be qualified for their tax-deductible and other fee alleviations or deals in which they currently have through their 403b options and the federal government.


The federal act known as the Employee Retirement Income Security Act (ERISA) is in charge of 403b plans, however not 401k plans - understandably, as 403b plans can also include private organizations, not only nonprofit.

People choose to invest their money and accept deductions for their paychecks for the sake of a 401k or 403b plan for the simple-fact that, typically, they are non-taxed and in turn will accumulate more funds at a more rapid rate.

401k plans are considerably more dynamic than 403b plans in that they allow the account or investment holder to elect various forms of bonds or stocks directly through the 'host bank', or funding institution for that specific employer. That is, as different employers easily have different banking or credit institutions in which they use to 'host' the 401k plans for their employers.


By principle, it's worth noting that 403b plans are typically administered or protected by insurance companies, while 401k plans on the other hand are typically administered or maintained - as mentioned above - through mutual fund plans and institutions - such as investments, and even with the ability to offer interest rates on a case by case basis, such as the amount, etc. Lastly, keep in mind that unless you're 50 years or older - in which you can earn and contribute more annually, a $16,500 dollar cap is in effect for those otherwise under that age.

While the total cap for 401k and 403b plans might vary each year, they typically fall within an additional or less than $1000 $3000 dollars - if any fluctuation at all.






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