A 403(b) plan is an employer-sponsored retirement plan available to employees of certain tax-exempt organizations and public schools. Just like its more commonly known counterpart, the 401(k), maximizing your 403(b) can play an important role in achieving your retirement goals. Here are some essential steps to take control of your 403(b) and make the most out of it.
1. Understand your investment options: In a 403(b) plan, your investment choices may include annuities or mutual funds. Research each option carefully and understand their fees, risks, and potential returns before making a decision. Don’t be afraid to consult a financial advisor to help you choose the right investments based on your goals, time horizon, and risk tolerance.
2. Contribute as much as possible: The more money you put into your 403(b), the better your retirement savings will grow over time. In 2021, the contribution limit for a 403(b) plan is $19,500 for employees under age 50 and $26,000 for employees aged 50 or older. Aim to maximize your contributions up to these limits to take full advantage of tax-deferred growth.
3. Utilize employer matching: If your employer offers matching contributions to your 403(b), don’t leave free money on the table. Find out what percentage your employer matches and commit to contributing at least that much from each paycheck.
4. Monitor asset allocation: Over time, different types of investments perform differently, which can throw off your original asset allocation strategy. Rebalance your portfolio periodically (at least once a year) to adjust for changes in performance and sticking to your investment strategy.
5. Minimize investment fees: Keep an eye on the fees charged by individual funds within your plan – these can eat away at your long-term returns if left unchecked. Seek low-cost index funds or exchange-traded funds (ETFs) when available, as these tend to have lower fees than actively managed funds.
6. Plan for required minimum distributions (RMDs): Once you reach age 72, you will need to start taking RMDs from your 403(b) account. Strategize with a financial professional on how to handle these withdrawals, including the possibility of rolling over your 403(b) into an IRA.
7. Stay disciplined and patient: Retirement investing is a long-term game. Stick to your strategy and avoid making emotional decisions about market fluctuations. Stay the course, and you’ll be in a better position to maximize your 403(b)s growth potential.
By proactively taking control of your 403(b), you’re putting yourself on the path to a more secure financial future. Utilize these tips and consult with a financial professional as needed to make the most out of this valuable retirement savings vehicle.
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1. Understand your investment options: In a 403(b) plan, your investment choices may include annuities or mutual funds. Research each option carefully and understand their fees, risks, and potential returns before making a decision. Don’t be afraid to consult a financial advisor to help you choose the right investments based on your goals, time horizon, and risk tolerance.
2. Contribute as much as possible: The more money you put into your 403(b), the better your retirement savings will grow over time. In 2021, the contribution limit for a 403(b) plan is $19,500 for employees under age 50 and $26,000 for employees aged 50 or older. Aim to maximize your contributions up to these limits to take full advantage of tax-deferred growth.
3. Utilize employer matching: If your employer offers matching contributions to your 403(b), don’t leave free money on the table. Find out what percentage your employer matches and commit to contributing at least that much from each paycheck.
4. Monitor asset allocation: Over time, different types of investments perform differently, which can throw off your original asset allocation strategy. Rebalance your portfolio periodically (at least once a year) to adjust for changes in performance and sticking to your investment strategy.
5. Minimize investment fees: Keep an eye on the fees charged by individual funds within your plan – these can eat away at your long-term returns if left unchecked. Seek low-cost index funds or exchange-traded funds (ETFs) when available, as these tend to have lower fees than actively managed funds.
6. Plan for required minimum distributions (RMDs): Once you reach age 72, you will need to start taking RMDs from your 403(b) account. Strategize with a financial professional on how to handle these withdrawals, including the possibility of rolling over your 403(b) into an IRA.
7. Stay disciplined and patient: Retirement investing is a long-term game. Stick to your strategy and avoid making emotional decisions about market fluctuations. Stay the course, and you’ll be in a better position to maximize your 403(b)s growth potential.
By proactively taking control of your 403(b), you’re putting yourself on the path to a more secure financial future. Utilize these tips and consult with a financial professional as needed to make the most out of this valuable retirement savings vehicle.
The post appeared first on .