retirement

10 reasons to review your 403(b)

5. To make sure you're maximizing your savings

For 2009, the maximum you can contribute to your 403(b) plan, or a 401(k) through elective deferrals from your paycheck is $16,500, plus an extra $5,500 per year if you're 50 or older. The maximum total that can be contributed to your plan for 2009, from you and your employer combined, is $49,000.

(There is one additional catch-up provision just for 403(b)s that applies only to public school systems and certain health-related and religious organizations. If you have 15 years of service with one of those organizations, see IRS Publication 571 or ask your plan administrator for more information about the 15-year rule.)

6. To be aware of your vesting schedule

By law, you are always 100 percent vested in your own salary deferrals. And at many places, employer contributions vest immediately as well. When it comes to those, however, some discretion is allowed, so this is an important item to check in your plan document.

Under ERISA, there are two options for employers who want to use retirement contributions as an incentive to stay with the company. They can use three-year "cliff" vesting, which means you don't own any of the money they contribute for you until you have completed three years of service. Or they can apply a six-year, gradual schedule under which you're entitled to 20 percent of the employer contributions after two years, and an additional 20 percent each year for the next four years.

7. To decide to change your mind

You can always decide to stop contributing to your 403(b), but some employers limit the number of times you can change the amount.

8. To be ready for an emergency

Many 403(b) plans allow you to take out a loan. This way you can use your retirement savings for an emergency, or a major purchase, such as a home, without suffering the taxes and penalties that are triggered by a premature withdrawal. This is another area where plans vary, though. Either your employer or one or more of the mutual funds in which your money is invested may prohibit, or impose restrictions on, loans.

Some 403(b) plans allow you to access your money (with some penalties) in the case of "hardships," which can include medical expenses, eviction or foreclosure on your primary residence, and a few other things. Employers have discretion over whether a plan allows for hardship withdrawals though, and they also have the authority to pass judgment on whether or not your particular hardship qualifies. If you have an idea in the back of your head that you might need this money someday to cover expenses, make sure you understand all these restrictions beforehand.

9. So you'll know your options when you leave

Generally, if you leave a company before retirement age, you have several options regarding the money in your 403(b). You can often leave it where it is, roll it over into a new employer's 403(b) or 401(k), or roll it into an IRA. Restrictions may exist with regard to any of those options, though, so it's good to ask for specifics about how it works at your company.

10. To be sure of when you can withdraw your money

The IRS still gets to decide when you can take your money out of a retirement plan without incurring penalties, and the simplest answer is: when you turn 59½. But it doesn't hurt to check your plan and see if it includes any more specifics.

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