Saving with a 403(b) plan

A 403(b) retirement plan lets you save and invest for the future with tax advantages you can’t get from regular savings and investment accounts. It works much like a 401(k) plan, but it is tailored to those working in the nonprofit and government sectors.
 

A 403(b) plan is one of your most important employee benefits. The sooner you enroll, the sooner you can take advantage of its many features.

• Convenience: When you enroll in your retirement plan, contributions are deducted from your paycheck—it’s automatic.

• Tax advantages: You can choose traditional pretax contributions or, if offered by your retirement plan, designated Roth after-tax contributions—or both. Each has unique benefits that may help you save more with less (see next section).

• Growth potential: A 403(b) plan gives you the opportunity to invest your account for growth potential. This allows you to take advantage of the power of compounding, which may help multiply your savings through the potential for earnings on your earnings.

• Choice and flexibility: You’ll have an array of investment options selected by your employer so you can design a strategy that’s right for you. You can choose from “do it for me” or “do it myself” options, depending on your needs. Either way, a Corebridge financial professional can help you with your planning.¹

• Portability: If you leave your employer, you can generally move your funds to another employer-sponsored retirement plan that accepts rollovers or to an IRA.

• Support: You’ll have access to Corebridge’s wide variety of planning and learning resources to help you take action for your future. This includes one-on-one help from a Corebridge financial professional.
   

A 403(b) plan can have two types of contributions. You can choose traditional pretax contributions, designated Roth contributions (if offered by your plan) or both. Consult with a tax advisor for assistance based on your personal situation.

Traditional pretax contributions (taxes later)

With the pretax option, contributions are made before taxes are calculated and are deducted dollar for dollar from your taxable income in the year they are made. That means potentially lower annual taxes while you’re saving. Contributions and earnings are taxed when withdrawn. Funds withdrawn prior to age 59½ may be taxable and subject to an additional 10% penalty tax.

When to consider this option

• You are in a higher tax bracket now than you expect to be in retirement.

• You want to reduce your current taxable income.

Designated Roth after-tax contributions (taxes now)

With this option, contributions are made after taxes are calculated and are not deducted from your taxable income in the year they are made. Contributions are tax free when withdrawn, and any earnings can be withdrawn tax free as long as (1) it’s been at least five years from the beginning of the first year in which a designated Roth contribution was made and (2) you’re at least 59½, you’re disabled, or the payment is made after your death to your beneficiary. Otherwise, distributed earnings may be taxable and subject to an additional 10% tax.

When to consider this option

• You are in a lower tax bracket now than you are likely to be in later, including in retirement.

• You cannot contribute to a Roth IRA due to the income limits.

• You want tax diversity and flexibility in retirement, with a mix of taxable and tax-free income sources.
   

Saving any amount in a 403(b) plan may make a difference for your future. If you’re able, consider saving to the limit for the maximum benefit. You can change your contribution amount at any time.

Annual limits

Generally, you may contribute as much as 100% of your annual includible compensation—which includes salary, bonuses and any other taxable benefits—up to the annual contribution limits set by the IRS. The limits apply to the combined total of traditional pretax and designated Roth after-tax contributions. Take a look at the annual contribution limits.

Catch-up contributions

Starting in the year you turn 50, you can save even more in your retirement plan with catch-up contributions—if you’re already saving the maximum. You may also qualify for extra service-based catch-up contributions with 15 years of service. If you’re eligible for both, you must use the service-based catch-up first. A Corebridge financial professional can help calculate your annual contribution limits. Learn more about catch-up contributions.

While your retirement plan is here to help you save for retirement, there may be cases where you need access to your money sooner. Here are the general rules for withdrawals prior to age 59½. These rules generally apply to withdrawals on all pretax amounts and on the earnings only for Roth after-tax contributions. Your 403(b) plan rules may differ.

Withdrawals allowed, subject to tax (no 10% tax penalty)

• Severance from employment in or after the year you turn 55

• Your death or disability 

• Certain unreimbursed medical expenses

Withdrawals allowed, subject to tax (plus 10% tax penalty)

• Severance from employment prior to age 55

• Financial hardship such as purchase of a primary residence, qualifying higher education costs, payments to prevent eviction from or foreclosure on a primary residence, funeral expenses and certain medical bills or expenses²

Tax-free loans may be available³
 

Ready to make the most of your 403(b) plan? Enroll and start contributing today.

For specific questions regarding your situation, speak with a tax professional or contact your Corebridge financial professional. Reach out to us if you don’t have an assigned financial advisor.
 

¹Remember all investment involves risk, including possible loss of principal.

²A plan may permit hardship distributions to be taken from elective deferrals, qualified nonelective contributions and/or qualified matching contributions, and the earnings associated with any of those contribution types.

³Any loan amount not repaid on time will be taxed as ordinary income and may be subject to a 10% tax penalty if you are under age 59½.

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