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A 403(b) plan is a retirement savings plan for employees of public schools and certain tax-exempt organizations (hospitals, charities, churches, etc.) — as determined by Section 501(c)(3) of the Internal Revenue Code.

In a 403(b) program, you have the opportunity to contribute pre-tax dollars, reducing your taxable salary, and both your contributions and earnings grow tax-deferred until they are withdrawn.  Taxes are paid when the money is taken out, which is typically, in retirement when you will likely be in a lower tax bracket.

As a 403(b) plan participant, you make contributions, typically through payroll deductions which are placed in a participant-directed account. Contributions are limited to an annual maximum dollar amount set by the Internal Revenue Code. You decide where you want to invest your contributions from options selected by your employer, the plan sponsor. Investing involves market risk, including possible loss of principal.

A 403(b) can be a good way to save for retirement, especially if your employer matches your contribution and the investment options are relatively low cost.