In today’s economy, it’s difficult to save for retirement, but 403(b) plans like those available from MetLife can help you save the money you need to live comfortably after you cease working. You need to know what it takes to become eligible for retirement. Here are a few ways that Americans can live longer and still have the funds to take care of it:
Who is Eligible for the 403(b) Plan?
Employees of tax-exempt groups are eligible for 403(b) plans. These groups include hospitals, libraries, social service agencies, colleges, and universities. Many different types of groups are eligible.
How the Program Works
People who participate in the 403(b) plan can have employers withdraw money for retirement savings before taxes. Since you will not pay taxes on the money, it is more beneficial to you and allows you to get the full benefits of your contribution, which will grow annually. Your employer will give you a list of vendors that will help you invest your contribution. You can select from fixed annuities, mutual funds, and variable annuities.
It is advisable to get advice from a benefits specialist or tax professionals to help you determine which investment vehicles are best for you. When you reach 59.5, you can access the funds in your retirement plan without any penalty. When the money is removed, you’ll be taxed at your typical tax rate, which could possibly be lower at retirement age. If you access any funds before that time, it will be subject to a 10 percent tax penalty. The money can only be withdrawn under special circumstances. You should always be aware of the tax rules to determine how they apply to you.
The Types of Funding Options
Funding options include fixed annuities and also variable annuities. With variable annuities, contributions are not guaranteed. Keep in mind that inflation may cause the power of the fixed rate instrument to decline. Check the financial health of the company issuing the annuity before determining if its a good investment. You can check the financial ratings of the companies through Moody’s, A.M. Best, or Standard and Poor’s.
Money market mutual funds are a low risk way to fund retirement. They are high quality investments that are issued by the United States government. Banks and blue chip companies may also issue money market funds. You can lose money with money market mutual funds. Thus, it’s not wise to invest 100 percent of your retirement money into a money market.
Bond mutual funds are typically government or corporate bonds. They can also be a combination of both. These bonds can come from companies around the world. Holding bonds with longer than average maturity periods will have higher yield potential and also higher risk. Bonds are considered low to moderate risk investments.
Checking the Ratings
You want to select a bond that’s ranked high quality or AAA. If it’s ranked a D, it means it’s in default and is not a good investment. Therefore, choose a stock that will perform well over a long period of time. Stock mutual fund prices tend to have a lot of fluctuation, which means they are subject to the same risks as regular stocks.
How The 403(b) Plans Work
If you want a retirement savings plan, this may just be the solution for you. It’s not the only solution, but it is an option of pre-tax savings. Many people prefer a tax deferred vehicle to save more and pay taxes later. Since 403(b) plans are not well known, it’s best to do as much research as possible to ensure that you make the best retirement decision for you.