Save up to $20,500 with a 403(b) plan.
Some charities and most public school systems offer 403(b) retirement plans, which are thrift savings plans or tax-sheltered annuity plans. It is comparable to a 401(k) program. As an employee, you can make a contribution, your employer may match it, and you can choose to have money taken out of your paycheck and put into your retirement plan. In the tax year 2022, a 403(b) plan participant's maximum elective deferral contribution is $20,500. Up from $19,500 in 2021, this amount. If you are 50 years or older, you are eligible to make a "catch-up" contribution of an additional $6,500. Employers may match an employee's annual contribution.Note:
You might be eligible to make additional contributions of up to $3,000 for five years if you've worked for a qualifying organization for 15 or more years and satisfy specific requirements. For the 2022 tax year, the combined elective deferrals and matching contributions are limited to $61,000, up from $58,000 in 2021. These restrictions are indexed for inflation, so they are expected to rise to keep up with the economy occasionally.Limits Applicable to Two Plans
If you work two or more jobs or switch jobs in the middle of the year, you may need to spend some time keeping track of your contributions to your 401(k), and 403(b) plans to ensure that you don't contribute more than is permitted. Any 403(b) and 401(k) account that a taxpayer may have during the year are subject to these limits. There may be significant annual penalties for disregarding these limits across accounts.Tip:
If you discover that you've made excessive contributions to these accounts, you have until the tax filing deadline the following year to correct the error by withdrawing the excess funds.Some Advice for Reducing the Limit
If you intend to contribute the maximum amount permitted, dividing the annual limit into equal dollar amounts for each pay period might be more straightforward. Thanks to this, you will be able to save the same amount each pay period. Your contributions to your retirement investments will also be dollar-cost-averaged. You can do this by multiplying your annual contribution by the number of pay periods you receive in a given year.The Control of Elective Deferrals
Elective deferrals and employer matching contributions are handled differently. Each has its restrictions and taxation policies. May use 4 A tax-deferred traditional 403(b), a post-tax Roth 403(b), or a combination of traditional and Roth accounts to hold elective salary deferrals. The sum of all salary deferrals cannot exceed the annual maximum. The tax-deferred portion of your 403(b) plan is continuously funded with matching funds. Your total elective salary deferral for 2022 cannot exceed $61,000 when combined with employer matching contributions. From the $58,000 cap in place in 2021, this amount increased by $3,000 that year.Frequently Asked Questions (FAQs)
A 403(b) retirement plan is open to anyone
Employees of most public school districts and nonprofit organizations like churches, hospitals, and health service providers have access to 403(b) plans.A 403(b) and a 401(k) are permissible
You might be able to have both a 401(k) and a 403(b), depending on the company you work for (b). Make sure not to contribute more than the combined annual contribution cap for the two plans.