by 
The Curious Bag
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A 403b plan is a tax-advantaged retirement account that a nonprofit employer offers its employees. It is similar to a 401k plan that a for-profit company offers its employees.
Eligibility
You can contribute to a 403b plan if you are employed by a public educational facility or a tax-exempt nonprofit organization. You can make contributions from your first day of employment.
Contributions
You make contributions to a 403b plan through your employer. The employer deducts the money from your paycheck and deposits it directly into your 403b account.
Contribution Limits
The annual limit for contributions to a 403b adjusts each year for inflation. You can contribute up to $16,500 to your 403b account in 2010.
Advantages
You do not pay taxes on the money you put into the account, or the earnings that the account generates, until you take distributions from the account at retirement.
Time Frame
Generally, you must wait until you are 59.5 years of age before you can withdraw money from your 403b--otherwise you have to pay a 10 percent early withdrawal penalty on the amount that you withdraw. For example, if you take an early distribution of $10,000 you must pay a one-time penalty of $1,000.
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