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Traditional Pre-Tax 403(b) Option

Participating in the University of Illinois traditional pre-tax 403(b) option gives you the opportunity to accumulate additional retirement savings with the following tax advantages:

  • The money you save through the traditional plan is automatically deducted from your pay before taxes are calculated on your income. In other words, your taxable income is lowered by the amount you save through the plan.
  • Because you pay Federal taxes on your investments during your retirement years, when your income is presumed to be lower, you are able to accumulate more wealth by saving on a pretax rather than an after-tax basis.
  • Another valuable tax advantage is that you pay no taxes on the investment earnings in your 403(b) account until the year you begin making withdrawals at retirement. At that time, contributions and earnings are subject to Federal taxes.
  • Also, qualified distributions, if taken in accordance with plan provisions, at full retirement age, and while a legal resident of the State of Illinois are not subject to Illinois state taxes. For further information on the taxation of 403(b) distributions, please visit the State Taxation of Retirement Income page.

Please return to the main University of Illinois Supplemental 403(b) Retirement Plan page for enrollment information and additional information on the 403(b) plan.

This information is provided with the understanding that it is a source of information and does not constitute legal, tax, or other professional advice. If legal advice or other professional assistance is required, the services of a professional advisor should be sought.


Maintained by University Human Resources | Contact Information | Last Update: 16-November-2009 | ID: 3994