Basics of employer retirement plans

The US Congress first authorized 401(k) and 403(b) plans in 1980. The numbers refer to the part of the US Tax Code where information on the plans can be found. 401(k) plans are offered to employees in the private sector. 403(b) plans are available to workers in nonprofit organizations. Public employees can tap into 457 plans.

Contributions are from pre-tax dollars - that is, the money is withdrawn from your gross pay and thus lowers the total amount of your income subject to taxes. Taxes on contributions and earnings are not paid until withdrawn.

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