403(b) vs. 457(b): Which Is Best for Teacher Retirement? - National Educational Services
 403(b) vs. 457(b): Which Is Best for Teacher Retirement?

403(b) vs. 457(b): Which Is Best for Teacher Retirement?

For public school educators, the most common retirement plan is a pension. 

Unfortunately, today, these pension plans do not provide educators with enough funds to live off during retirement, so a supplemental retirement plan may be a great option. 

When it comes to deciding which supplemental retirement plan is right for you, there are two popular options. 

  • 403(b) Plan 
  • 457(b) Plan

Understanding the difference between these two retirement savings accounts can be difficult, especially for those not familiar with the world of retirement finances. National Educational Services’ advisors are here to help you understand this world of retirement savings. 

The 403(b) Plan 

A 403(b) retirement savings plan is one that is offered to employees of non-profit companies, such as schools and teachers. These retirement plans are similar to the popular 401(k) plan in many ways. 

  • Contributions are made with pre-tax funds that come directly from income,
  • Employers have the option to match contributions made by employees,
  • You must take the minimum withdrawal from the account starting at age 70,
  • Given the opportunity to start withdrawing funds at age 59.5,
  • Tax-deferred plan until funds are withdrawn.
  • Read 5 Reasons Why Teachers Need 403b Plans Here.

To learn more about 403(b) retirement savings plans visit our page ALL about 403(b)’s HERE.

The 457(b) Plan

A 457(b) plan is also very similar to the 403(b) plan, yet there are some main differences between the two retirement plans. 

  • Contributions are made with pre-tax funds that come directly from income,
  • Employers have the option to match contributions made by employees, but these funds count towards the annual limit of the account,
  • You are able to start withdrawing funds at age 59.5 but you must be retried in order to withdraw,
  • This retirement account can be rolled over to an Individual Retirement Account (IRA),
  • Tax-deferred plan until funds are withdrawn.

To learn more about 457(b) plans visit our informational page about it HERE.

Benefits of Each Plan 

Both the 403(b) plan and the 457(b) plan are great options for educators looking to expand their retirement account savings. Each of these plans have their own benefits, especially the 403(b) plan. 

The funds that are matched by your employer do not have the same requirements. This means that the funds your employer contributes do not count towards your annual contribution limit.

On the other hand, the 457(b) plan gives you the opportunity to practically double your savings if you are close to retirement age. You have the option to withdraw before age 59.5 if you are retired is an amazing benefit that is unique to the 457(b) plan.

Get the Best 403(b) or 457(b) Plans from National Educational Services

In the grand scheme of things, you really cannot go wrong with either retirement plan you choose. Although, the 403(b) plan or the 457(b) plan may be better depending on your individual circumstances and retirement savings plan wants and needs. 

Generally speaking, if you are not nearing retirement age, a 403(b) plan may be a great option for you. On the other hand, if you are very close to retirement age, the 457(b) plan may be the better option for you. Either way, contacting an advisor at National Educational Services today is a great way to determine which plan is the best fit for your individual needs. Fill out the form below and we will be in touch with you soon!

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