What is another name for a 403(b) plan?

A 403(b) plan is also known as a tax-sheltered annuity plan. This is a specific type of retirement savings plan available to employees of certain tax-exempt organizations, such as schools, hospitals, and non-profit organizations. The term "tax-sheltered" highlights that contributions made to this plan are made on a pre-tax basis, meaning they are excluded from the employee's taxable income for that year. This allows for tax-deferred growth of investments until funds are withdrawn during retirement.

The use of "annuity" in this context emphasizes the fact that many 403(b) plans are often structured using annuity contracts or mutual funds. Employees can choose to allocate their contributions among various investment options available within the plan, which typically offers tax advantages designed to encourage retirement savings. Understanding this terminology and the mechanics of how 403(b) plans operate is crucial for effective retirement planning, especially for those in eligible professions.