How to Open a 403(b) Plan

by Scott Damon ; Updated July 27, 2017
Learn how to open a 403(b) and save for your retirement.

There are several different retirement savings plans available to people in the United States. Certain retirement savings plans are available for people who work certain types of jobs. For instance, the 403(b) is available to certain employees of public school systems, tax exempt organizations and ministers. These accounts allow the money that is placed in them to grow tax free until it is withdrawn at a later date. A 403(b) account is maintained by the account holder.

Step 1

Ask your employer for a vendor list. The vendor list will be the list of participating investment companies which offer products such as mutual funds which you can invest in with your 403(b).

Step 2

Select the investment products you want to invest your money in. From the vendor list decide which investment vehicles make sense for your overall portfolio. Some of these investment vehicles may require you to contact a sales representative, while others will allow you to directly invest. See the specifics of each product for more details.

Step 3

Open a 403(b) investment account with the investment company or sales representative for your 403(b) account. Information such as your name, address, social security number, and employer will be required. This investment company or sales representative will verify that your employer does in fact participate in 403(b) accounts.

Step 4

Determine how much money you want to invest in your 403(b) plan. In 2010, individuals can contribute up to $16,500. This number may be revised each year by the IRS. Additionally, investors over 50 can contribute an additional $5,500 of their salary. Some companies also require employees to contribute at least $50 per month to open a plan.

Step 5

Fill out a salary reduction form. The salary reduction form is an agreement between you and your employer which states that the money that will be deducted from your salary will be directly deposited into a 403(b) account. This is also known as an "elective deferral." This form will include information such as the amount of money that will be deducted and which investments that money will be placed in.

Step 6

Monitor the 403(b) account. Money will now be automatically withdrawn from your check and placed into the investment vehicles you have chosen. Monitor the account to make sure the money is properly being transferred.

Tips

  • Once the salary reduction form is filled out, you will not pay taxes on the money that is withdrawn from your paycheck and placed in the 403(b) account.

About the Author

Scott Damon is a Web content specialist who has written for a multitude of websites dating back to 2007. Damon covers a variety of topics including personal finance, small business, sports, food and travel, among many others.

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