What is a 403(b) Plan?
While those who work for private companies often have access to a 401(k) plan, employees who work for public institutions like schools, hospitals and government agencies might have access to a 403(b) plan instead. The 403(b) plan works much the same as the 401(k), and it provides the same sorts of benefits, from company matches and immediate tax savings to long term tax deferred growth of earnings. If your company does offer a 403(b) plan, you should receive information about the plan and how to sign up not long after you are hired. You should receive an enrollment form and an application, and you can use those forms to choose the percentage of your income you want to direct toward the plan.
Max Out the Company MatchIf the agency or institution you work for provides a company match, it is a good idea to contribute at least enough to get the full match. For instance, if the school or hospital you work for matches 50 cents on the dollar up to the first 6% of contributions, it is definitely to your benefit to contribute that full 6%. Contributing less, or none at all, literally means leaving free money on the table. Beyond that minimum contribution, you might want to look at increasing your contribution percentage to 10% or even 15% of your salary. It can be a challenge to save so much, especially if you just started working, but you can set this as a goal and build up to it over time. For instance, when you get a raise you can put a percent or two of that raise toward the 403(b), helping you bulk up your contributions and your earnings.
Investment ChoicesMost 403(b) plans offer a number of investment choices to their workers, including several stock funds, a number of bond funds, a stable value fund and perhaps an international fund as well. It is important to review the prospectuses for each of these funds carefully before you invest, and to examine the fees and expenses associated with each fund. But no matter how you ultimately choose to invest your money, the first step is still the most important. Simply signing up and getting started is critical, since the sooner you start saving for your future the more successful you can be.