Shelton State Community C0llege 403b
What is a 403(b) Supplemental Retirement Plan
A 403(b) plan is a retirement plan offered by public schools and certain charities. It's similar to a 401(k) plan maintained by a for-profit entity. Just as with a 401(k) plan, a 403(b) plan allows employees to defer a portion of their salary into individual accounts. The deferred salary is generally not subject to federal or state income tax until it's distributed. However, a 403(b) plan may also offer designated Roth accounts. Salary contributed to a Roth account is taxed currently but is tax-free (including earnings) when distributed. Eligible employers are a:
- public school, college, or university,
- church, or
- charitable entity tax-exempt under Section 501(c)(3) of the Internal Revenue Code
Pros and Cons:
- Flexibility in contributions
- Investment options are limited to those chosen by the employer
- may have high administrative costs
- optional loans and hardship distributions add flexibility for employees
Contribution Type - Employee salary deferrals; employer may contribute.
Contribution limits - Total contributions to each employee’s 403(b) account are limited.
For additional information on the income tax consequences, please consult a tax professional. You may also find general tax information about these plans on the Internal Revenue Service’s (“IRS”) website (IRS, IRS 403(b) webpage).
Contributions
The IRS determines the annual contribution limits for 403(b) plans. In 2023, the annual contribution limit for 403(b) plans is $22,500. In addition to that amount, the 403(b) allows “catch-up contributions” of up to $7,500 for eligible participants (those age 50 or older or turning 50 that year). 403(b) plans have specific rules governing contribution limits and “catch-up contributions.” You can review these rules on the IRS’s website (403(b) contributions).
Contributions can be made on a pre-tax basis. Roth contributions may also be available to 403(b) plans.
IMPORTANT! Contribution limits for 403(b) plans may change each year. Please remember to confirm the current contribution limits for each plan on the IRS’s website (403(b) contributions).
Investment Options
As a participant in a 403(b) plan, you can choose among different investments, including a wide variety of mutual funds and a fixed account. These investment choices span all size categories including large companies, middle sized companies, and small sized companies, as well as the investment categories of growth, blend and value. In addition, a wide selection of fixed income choices are available.
Within the Security Benefit SFR Program, you have access to more than 75 diversified investment options, and over 20 nationally recognized fund managers.
Why Save
Investing in a 403(b) plan can help you build supplemental retirement savings for your future. The Rule of 72 dates back to the 1400s by Luca Pacioli. Simply, the rule of 72 shows how your money can double given a set interest rate.
The Rule of 72
| Percentage of return | Number of years to Double |
| 6% | 12 |
| 8% | 9 |
| 10% | 7.2 |
| 12% | 6 |
| 15% | 4.8 |
Rule of 72 Example:
Investor #1: A moderate conservative investor places $1,000 into an investment earning 6% annual rate of return. Based on the rule of 72, the principal should double every 12 years. After 12 years, the value would be $2,000. After 24 years, the value would be $4,000. And after 36 years, the value would be $8,000.
Investor #2: A moderate aggressive investor places $1,000 into an investment earning 12% annual rate of return. Based on the rule of 72, the principal should double every 6 years. After 6 years, the value would be $2,000. After 12 years, the value would be $4,000. After 18 years, the value would be $8,000. After 24 years, the value would be $16,000. After 30 years, the value would be $32,000. And finally, after 36 years, the value would be $64,000.
What's the difference? The difference is the amount of risk that Investor #1 took as compared to Investor #2. Investor #1 had a moderate conservative risk tolerance and had a lower return than that of Investor #2 with a moderate aggressive risk tolerance. Their time frame was the same, but 6% doubled only three times as compared to 12% doubling 6 times.
Purchase Options
| Administration | $35 per year administrative fees | |
| Fund Expenses | 0.50% to 1.77% (net) depending on fund | |
| Withdrawal Fee | A $25 fee may apply | |
| Participants can take withdrawals without a sales charge for qualified distributable events (e.g. retirement, separation of service) |
Please Complete the Shelton State Community College 403(b) Application Questionnaire below if you are interested in participating in this new plan. Once we receive this information from you, someone from our office will reach out with additional instructions for e-sign capability.
Shelton State Community College 403(b) Application Questionnaire
The Lance Hocutt Financial Group is here to help you save for your future! We look forward to assisting you.
Services offered through Security Distributors, a subsidiary of Security Benefit Corporation (Security Benefit). The SFR 401(k) and 401(a) Programs are Trust Accounts under § 401 of the Internal Revenue Code. The SFR 403(b)(7) ERISA and 403(b)(7) Voluntary Programs are Custodial Accounts under §403(b)(7) of the Internal Revenue Code.
