What are the Differences Between a 401(k) and a 403(b)?
While many people are familiar with the basic concept of the 401(k), not everyone knows or understands how a 403(b) functions. In many ways, the 403(b) plan resembles the 401(k) plan. Both are workable retirement plans, and each approach represents a viable component in responsible financial planning. However, there is one very significant difference to keep in mind. Perhaps the single most important difference between a 401(k) and a 403(b) is who may qualify for each plan. In general, a 401(k) is a retirement plan option that is made available to persons who work for a business that is classified as a for-profit entity. Many corporations have gone to this type of program in order to allow employees the chance to assume greater responsibility in building a nest egg for later years. Because the contributions made by the employee are exempt from taxes, it is possible to reduce the amount of the annual tax obligation. While there are some limits on the amount that an employee can defer to
