The 403(b) Plan

Since I have a part-time gig instructing at a community college, I'm eligible for its 403(b) contribution plan. As someone who has contributed to a 401(k) for nearly 10 years, I'm familiar with the way retirement plans work in the private sector, but had to do some research on this new retirement option.

The 403(b) is defined as a TSA or tax-sheltered annuity plan for those working in the non-profit sector, including educational institutions and churches. (I usually cringe at the word "annuity" and nearly left the website as soon as I read this.) Thankfully, my interest in saving for retirement and hope that I might just be able to contribute all of my part-time earnings kept me reading.

There are three possibilities in a 403(b): 1) a retirement account for church employees; 2) an annuity contract through an insurance company; and 3) a custodial account with mutual funds. Number three is my winner! And I was very pleased to find that my vendor company of choice offers index funds.

The 403(b) and 401(k) are actually pretty similar other than the sectors they serve. The deduction is for pre-tax earnings and the contribution limits for 2009 are a cool $16,500 for those under age 59 and $22,000 for those over. In both cases, the investor owns the account -- the institution (or employer sponsor in the latter) only holds the assets and facilitates transactions. Some 403(b) plans allow for employer contributions -- sometimes matching, although sadly, mine does not do so. And just like the 401(k), there are usually penalties for early withdrawals unless the transaction qualifies under the hardship rules. Finally, when you change jobs, you need to decide whether to leave the funds in the plan, roll them into an IRA, or roll them into a new employer's 403(b). (Notice I don't mention the fourth option, taking the lump sum payment. The penalties are too stiff and most importantly, it's a RETIREMENT ACCOUNT, not a bank account! One rare exception is the LMF4HMW reader who has actually reached retirement, and depending on the balance, a lump sum may or may not be advisable.)

So if you're eligible for a 403(b), I'd recommend funding it to the maximum allowable amount. Just know that a LMF4HMW reader who works full-time in the private sector and is already contributing the maximum allowable amount to her 401(k) can not participate in a 403(b). It's a shame, but the USG doesn't want you doing that -- too much lost "revenue" for them, I suppose.

How about a nice Barbera from Italy's Piemonte to warm the soul on the cold winter nights? I particularly like the value in the Briccotondo from Fontanafredda -- a steal for $11! Nice zippy red fruit, earth, licorice and a surprising amount of depth for this price. And the powers that be even scored it at that sooo important 90 point benchmark. (FYI, if I ever open a wine shop it will be called 87 thru 89.)