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Most people who work for educational organizations are provided with a pension. However, this pension is not sufficient to maintain good standard of living. If a person saves money through the 403b retirement plan, the person will have sufficient money to have a good life and do whatever he wants to do after retirement -- buy a beach house or go for a holiday to an exotic location or just spend time indulging in a retirement hobby.
In addition, a 403b plan helps to lower your taxes all contributions to the plan are on a pre-tax basis. For instance, if a person was to contribute $100 a month to the plan, he would end up reducing his federal income tax by $25 supposing he is in the 25 percent tax bracket.
Any interest, dividends or capital gains are under tax-deferred basis. Your income will grow until you decide to withdraw it.
However, there are legal limits to the contribution and this limit keeps changing each year. In 2007, 403b maximum contribution was $15,500 annually. In 2008, the 403b maximum contribution is as follows:
- If you are younger than 50 years, the maximum amount you can contribute is $15,500
- If you are 50 years and above, in addition to $15,500, you can contribute another $5,000
Having a good retirement saving plan will ensure that you have financial security when you are no longer able to work. It is always wise to have a sound retirement plan so that your funds can grow unhindered.
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