Is there a difference between 401(k) and a tax sheltered annuity?

[bertha katzenengel]

It's listed as a benefit of a place I'm going to apply for a job.

Gotta go now - Mrs. V. has to go to work here. BBL!

:bounce:

[Rabrrrrrr]

1. Yes, very much.

And if they have the 401(k) for you, and especially if they allow you to have some control over how it's invested, sock everything you legally can into it.

p.s. - I didn't offer an answer about the difference because I don't understand annuities enough to offer anything helpful (I could point out a couple differences, but that would be misleading because I know I can't point out ALL the differences), though I do know that they are very different.

[RebelOne]

2. Yes, definitely get the 401K as soon as you can.

Many employers will match what you put in. My company only matches half. But it still adds up. And usually, you have a choice of what to invest in.

[bertha katzenengel]

3. I have a 401(k) through my former employer. I don't know what to do with

it. Thanks for the advice, Rabrrrrrrr.

[Midlodemocrat]

5. Don't do anything until you get another job.

Then you can possibly roll it into the new employer's 401K if the plan allows for it, OR if not, you can just research IRA rates and roll it into an IRA. We have actually done both. We both left jobs in CT to move here, and rolled both 401Ks into IRAs, and when my husband left one company for his present one, he was able to roll his 401K into his present one.

I would highly advise maxing out your 401K. After a certain age, you get to play 'catch up' which means you can contribute more than the maximum. Any match from your new company, even a 50% match, which isn't that hot these days, is a great rate of return.


Good luck, Bertha! You'll do great!

:bounce:

[bertha katzenengel]

6. Thank you, Midlo! Once again, thanks.

I really appreciate this advice. Oh, the things mother never taught me . . . ;)

[jmowreader]

4. I take it this employer is a tax-exempt of some sort

We know this because only the following groups of employees can participate in these:

* employees of public educational systems
* employees of tax-exempt charitable organizations--churches, hospitals, museums and the like
* self-employed ministers
* employees of Indian tribal governments

(This from the IRS.)

The IRS line item that covers tax-sheltered annuities is 403(b).

403(b) has the same maximum investment limits as 401(k) and the employer contribution rules are identical.

So what's the difference? 401(k) contributions are invested in securities--normally mutual funds--and the employee is responsible for choosing the ones to invest in. 403(b) contributions are invested in one of three things that are chosen by the plan administrator: annuity contracts with insurance companies, custodial accounts maintained by custodians (normally banks) that invest either in mutual funds or (if the custodian is a bank) in short-term loans, and special accounts for churches only.

If you quit working at this place, you can roll your account over to an IRA or a 401(k).

[bertha katzenengel]

7. yes, it's a public school

oh, god, let it be a custodial account . . . I loathe insurance companies.

thanks, jmow!