401k and 403b are both types of retirement savings accounts. A 401k is an investment account that is generally set up by your employer and a predetermined amount is withdrawn from your payroll each week to contribute to your retirement savings. These are pre-tax deductions from your payroll and often your employer will match a certain amount of your contribution. Companies providing a 401k plan to their employees benefit as much as the employees do from such a plan. Offering additional benefits helps retain key employees and often the company itself will benefit from dividend payments made from the investments of their company plan.

403b retirement plans are retirement plans set up exclusively for people who work for non-profit agencies such as schools, charity organizations and hospitals. These plans, arranged by their employers work much the same as 401k plans do for the employee. The difference is that non-profit agencies are not allowed by law to maintain an investment account. 403b plans are maintained by an outside company so that dividends and profits from the investments are not received by the non profit agency. This is set up per the Internal Revenue’s code for maintaining non-profit tax exempt status.

When you invest into either plan you should be a ware that there are stipulations to withdrawing money prior to retirement. Any withdrawal prior to age 59 ½ can have steep penalties and tax liabilities. Employers may make the exception should a life situation cause the need to withdraw early, but this is rarely the case. In the event that you leave a company prior to retirement you will also have the option to roll over your account into a new one with the new employer or cash out the old one with only minor penalty.

You can invest into either of these plans through your human resource department if your company offers the service. If your company does not provide a retirement plan it is advisable to seek out an institution offering the private sale of such plans and invest in a plan that way. With the unstable conditions of government provided retirement benefits it is a wise choice to look out for your future.