A type of defined contribution retirement plan offered to employees of state and municipal governments. As with a 401(k) plan, the money you contribute and any earnings are not taxed until you withdraw the money.
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403(b) plan
A type of defined contribution retirement plan offered to employees of nonprofit organizations and public school systems. Also known as a tax-sheltered annuity (TSA) or a tax-deferred annuity (TDA). As with a 401(k) plan, the money you contribute and any earnings are not taxed until you withdraw the money
401(k) plan
The most common type of retirement plan offered by employers to their employees. 401(k) plans are defined contribution plans, meaning that you make regular contributions into your individual account. Your contributions are automatically transferred from your paycheck before taxes are deducted, which lowers your tax bill. In some plans, the employer also makes contributions, matching the employee’s contributions up to a certain percentage.
You decide on the amount of your contributions, up to certain annual limits. You also decide how your money is invested by choosing from a selection of mutual funds and other investments offered by your employer.
You don’t pay taxes on the investment earnings in your account; your money grows tax-free through the years. When you withdraw the money at retirement, you will pay income tax on it.
12b-1 fee
A fee that is paid out of a mutual fund’s assets to cover marketing and distribution costs of the fund or to pay commissions to brokers. The fee is usually between 0.25 percent and 1 percent of assets annually. It is included in the fund’s expense ratio, which is deducted from your 401(k) account each year. You can find the 12b-1 fee listed in the mutual fund’s prospectus; look in the fee table..