401(k) vs. 403(b)

QHow do 403(b) plans and 401(k) plans differ?

- R.W., Vero Beach, Fla.

AWhile 401(k) plans are tax-deferred retirement plans for workers at private sector companies, 403(b) plans are similar, meant for employees of educational institutions and some nonprofit organizations. With both plans, you contribute "pre-tax" dollars, which are invested and grow tax-free until withdrawal, at which time taxes enter the picture.

While 401(k)-providing employers are responsible for administering the plan (or for paying a firm to do so), 403(b)- providing employers have no such burden. So they often permit ex-employees to continue to participate.

With both plans, employers often offer to match employee contributions to some degree. If your employer does so, be sure to take maximum advantage, as this is free money. Employer contributions to 401(k) plans can have vesting periods of up to several years, while 403(b) plans typically feature immediate vesting of any employer contributions. In both cases, employee contributions are immediately fully vested.

Learn more at www.fool.com/ money/401k and www.403bwise.com.

Q What are the real names of "Freddie Mac" and "Fannie Mae"?

- John G., Petaluma, Calif.

AOriginally known as the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp., Fannie Mae and Freddie Mac are federally chartered, public companies that make mortgage money available for Americans. Instead of actually lending money, they operate in the secondary mortgage market, buying from lenders most loans under $227,000 or so (with money raised by issuing debt), so that the lenders can make additional loans with the proceeds. They then package together bundles of similar loans and "securitize" them as "mortgage-backed securities," so they can be sold and traded.

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