| 403(b) plans, also known as tax sheltered annuities | | | | employers can offer these plans to all employees, |
| (TSAs), and 457 plans are quite similar to 401(k) plans. | | | | particular groups, or just individual employees whom |
| Both plans allow employees to defer income and | | | | the employer wants to benefit. |
| benefit from tax deferred growth, and both plans | | | | Public education systems and tax-exempt |
| enable employers to provide matching contributions. | | | | organizations also have the ability to offer Roth |
| 403(b)s and 457 plans, like 401(k)s, have a 2009 | | | | 403(b)s, which lack the benefits of an initial tax |
| contribution limit of $16,500 with an additional $5,500 | | | | deduction, but offer tax-free growth. All 403(b) plans |
| "catch-up" contribution available to employees over 50 | | | | can invest in three types of assets: |
| years of age. In most cases, withdrawals from both | | | | 1. Annuity contracts (both fixed and variable) |
| plans before the age of 59.5 will be subject to a 10% | | | | 2. Mutual funds |
| penalty. Finally, required minimum distributions (RMDs) | | | | 3. Life insurance |
| are required from both accounts once the investor | | | | An employee who participates in an |
| reaches age 70.5. | | | | employee-sponsored 403(b) plan cannot also |
| 403(b) accounts, however, are only available to public | | | | participate in a 401(k) account. However, 457 plan |
| educational systems and certain tax-exempt | | | | participants do have the ability to make additional |
| organizations. Meanwhile, 457 plans are only available | | | | contributions to other employer-sponsored plans. Thus, |
| to certain government entities. These plans are | | | | certain government employees have the ability to |
| attractive to nonprofit and government employers | | | | contribute as much as $16,500 to their 457 plan, and an |
| because they are exempt from the Employer | | | | additional $16,500 to a 401(k). |
| Retirement Income Security Act (ERISA), so | | | | |