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A 403(b) plan is an employer-sponsored retirement plan thats very similar to a 401(k) plan. The key difference is that 403(b) plans are offered by public schools, churches, and 501(c)(3) non-profit organizations. The 403(b) plan was originally created in 1958, but its been expanded and adapted since then.
The difference is that 401(k)s are offered through private, for-profit companies, whereas TSAs are offered through public schools and charitable organizations. If you work for both types of organizations, you could have both a TSA and a 401(k).
With a 401(k), your gains and losses are uncapped, which means theres no limit on what you stand to gain or lose on your investment. Many types of annuities cap both gains and losses. This protects your initial investment but also creates the danger of missing out on some of the markets upside.
The main drawbacks are around limited growth, penalties for early withdrawals and taxation of earnings. Their growth is sheltered from the market. There are penalties for early withdrawals. Youll pay ordinary income tax on earnings. Fixed annuities are not inflation-proof. Your payouts can end abruptly.
Plans funded with TIAA-CREF annuities and 401(k) plans are both based on the fundamental principle of defined contribution financing. There are other forms of DC plans, such as 403(b)s and ESOPs, but in the for-profit sector, the 401(k) model is the dominant DC plan.
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A 403(b) plan (tax-sheltered annuity plan or TSA) is a retirement plan offered by public schools and certain charities. Its similar to a 401(k) plan maintained by a for-profit entity. Just as with a 401(k) plan, a 403(b) plan lets employees defer some of their salary into individual accounts.
Under the Contributory Retirement Plan, you establish an account into which Carnegie makes a monthly contribution, the amount of which is based on your age and is a percentage of your salary between 10 to 20 percent, increasing annually as you grow older.
Although 401(k)s often are called retirement plans, they dont provide a stream of regular income in the way that traditional pensions or Social Security benefits do. Annuities, on the other hand, can provide guaranteed regular income for life through a process known as annuitization.

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