A 403(b) allows employees to make elective deferrals towards a retirement plan (these are contributions made under a salary reduction agreement). The employer withholds money from the employee’s paycheck to contribute directly into a 403(b) account. The employee does not pay taxes on these contributions until the money is withdrawn, usually after the employee retires.

The limit on elective deferrals for 2021 is $19,500. Employees at the age of 50 or older may contribute up to an additional $6,500 for a total of $26,000. Deferrals may not exceed 100% of your wages.