FAQ – 403(b)/457 Costs and Surrender fees

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Are contributions to a 403(b) required to be in regular monthly paycheck deductions or are there provisions for dumping larger sums into the 403(b) once or twice a year (limited, of course, by the annual ceiling on contributions)?

Contributions to a 403(b) plan must be made through a salary reduction agreement, which requires regular contributions consistent with your pay schedule. You cannot contribute larger sums once or twice a year on an irregular basis.

There are many advantages to making regular monthly contributions to your 403(b) plan. 1) Since the money is taken automatically out of your pay, you are paying yourself first. It's easier for many people to save on a consistent basis this way rather than trying to save whatever is left over from a paycheck. 2) Your contributions to your 403(b) plan are made on a pretax basis, which lowers your current tax bill. 3) If you direct your 403(b) plan contributions to mutual funds, you are practicing systematic investing, also called dollar-cost averaging. Although systematic investing cannot guarantee a profit or protect against loss in a declining market, it does allow you to purchase more shares when prices are low and fewer when prices are high (you should consider your ability to continue investing during prolonged periods of low prices). When you buy more shares at low prices, you are in a position to benefit if the share prices go up. Dollar-cost averaging also helps take the emotion out of investing, since you aren't reacting to daily fluctuations in the market

The one exception that allows you to make a lump-sum contribution to a 403(b) plan is if you change employers. In that case, you may be able to roll over the entire amount of your existing 403(b) to your new employer's plan. However, both employers' plans must allow for a plan-to-plan transfer.

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