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The Benefits of Investing in a 403(b) Plan

If you are an employee of a hospital, educational institution, or certain other not-for-profit organization, you may be eligible to benefit from a 403(b) a tax-advantaged retirement program. While these plans resemble 401(k) plans in many respects, they are specially designed for nonprofit entities. Participants may fund their accounts with pre-tax payroll deductions1 that can be invested in either a tax-sheltered annuity (TSA) or a custodial account composed of mutual funds. A 403(b) plan provides an opportunity to maximize your retirement savings. Here are some of the benefits:


Convenient Payroll Deduction/Built-in Dollar Cost Averaging2

When you open a 403(b) account, you may decide to defer a certain percentage of your compensation each pay period to be invested in your 403(b) account. As this amount is automatically deducted from your paycheck at regular intervals, dollar cost averaging is built in to your investment plan. With dollar cost averaging, you buy more shares when prices are low and fewer when prices are high. Over time, the average amount paid (average cost) for each share may be less than the average price per share. Furthermore, this strategy may eliminate the need to decide when is the best time to buy.

Pre-tax Savings

Participants who defer compensation into a 403(b) account realize immediate tax savings on their contributions. Before any taxes are taken out, your paycheck is reduced by the amount you decide to invest; therefore, your total taxable income is less.

Tax-deferred Growth Potential

Just as important, taxes on your investment earnings are deferred as well. This way, you don’t pay taxes on anything that your deferred compensation may earn until you retire or decide to take a distribution. While withdrawals are taxed as ordinary income, the impact may be minimized as many investors find themselves in a lower tax bracket at retirement.3

Optional Employer Contributions

Your employer may elect to match a certain percentage of your 403(b) plan contributions. This can be a major incentive to participate, as the amount your employer contributes to your account is money you receive above and beyond your regular salary.

Choice and Portability

Employees who decide to participate may select from the investment options approved by their employers for their plans. This may include fixed annuities, variable annuities and mutual funds. This variety of options enables you to create a plan designed to reflect your investment time horizon and tolerance for risk. Also, your 403(b) account is portable. Should you leave your job, your account can be rolled into another employer’s 403(b) or 401(k) program, or an IRA.

Professional Investment Management

Many 403(b) plan participants have access to professional investment management programs through Legend Advisory. The programs provide built-in diversification, asset allocation techniques, professional investment selection and ongoing investment management through actively managed portfolios. The portfolios are monitored regularly and reallocated as deemed necessary in an attempt to capitalize on potential market opportunities.

Loan Provision4

Once you reach your plan’s minimum balance, some employers’ 403(b) plans allow you to take a loan from your 403(b) account to meet certain types of expenses. The beauty of this feature lies in the fact that both principal and interest are paid back to your account via ACH.


Some employers’ 403(b) plans allow penalty-free in-service distributions of 403(b) account assets after age 59½. Upon withdrawal, ordinary income taxes apply. Distributions must begin no later than April 1 of the calendar year following the calendar year in which you attain age 70½ unless you are still working for the 403(b) eligible employer.

While it is often difficult to get started saving for retirement, contributing early and frequently is key. Even relatively small contributions made consistently over time can add up. Contact your Financial Professional today to learn more about saving for retirement with a 403(b) account.

Before investing in a mutual fund or variable annuity, consider its investment objectives, risks, charges and expenses carefully. The prospectus for a mutual fund or the policy prospectus and prospectuses for the underlying investments of a variable annuity, which contains this and other information, can be obtained by contacting Legend Equities Corporation. Please read the prospectus carefully before you invest or send money.

1 Some §403(b) plans offer after-tax Roth 403(b) accounts. Ask your Legend Financial Professional for more information about this type of deferral, if your plan offers this option.

2Dollar cost averaging does not assure a profit and does not protect against a loss in declining markets. Investors should consider their ability to purchase shares continuously during periods
of falling share prices.

3Distributions from a traditional retirement account are subject to ordinary income taxes in the year distributed. Distributions prior to age 59½ may incur an additional 10% penalty.

4Defaulting on a loan from a retirement plan constitutes a distribution from that plan. Distributions from a retirement plan are subject to federal income tax and may incur an additional 10% penalty
if the participant is under the age 59½.

Diversification does not assure a profit or protect against market loss.

The principal value of an investment will fluctuate so that an investor’s shares, when sold, may be worth more or less than their original cost.

Interested in finding out more?

It's easy! Contact a Legend Group Financial Professional today.

Interested in finding out more? It's easy! Contact a Legend Group Financial Professional today.
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