A 403(b) plan is the retirement savings plan equivalent of a 401(k) for employees of public schools, nonprofits, and certain other tax-exempt employers. If you’re a teacher, professor, nurse, hospital employee, or work for a charity or religious organization, your retirement plan is probably a 403(b). In 2026, you can contribute up to $23,500 — or $31,000 if you’re 50 or older.
Key takeaway: The 403(b) works like a 401(k) with the same contribution limits, the same pre-tax vs Roth options, and the same tax advantages. The main difference is who qualifies (public school and nonprofit employees) and the investment options available.
2026 403(b) Contribution Limits
| Contribution Type | 2026 Limit |
|---|---|
| Employee elective deferrals | $23,500 |
| Catch-up (age 50–59 and 64+) | +$7,500 → $31,000 total |
| Special catch-up (ages 60–63) | +$11,250 → $34,750 total |
| Total limit (including employer contributions) | $70,000 |
The ages 60–63 special catch-up: Under SECURE 2.0 Act provisions effective 2025, workers ages 60–63 can contribute a higher catch-up amount ($11,250 instead of $7,500). This is designed to help workers in their peak earning and savings years before retirement.
Who Can Contribute to a 403(b)?
403(b) plans are offered by:
- Public schools and school districts (most K-12 teachers)
- Universities and colleges (both public and private)
- Nonprofit organizations (501(c)(3) charitable organizations)
- Churches and religious organizations
- Public hospitals and health systems
- Cooperative hospital service organizations
If your employer is a for-profit company, you have a 401(k), not a 403(b).
Traditional 403(b) vs Roth 403(b)
Many 403(b) plans now offer both traditional and Roth contribution options:
| Traditional 403(b) | Roth 403(b) | |
|---|---|---|
| Contributions | Pre-tax | After-tax |
| Tax benefit | Reduces taxable income now | Tax-free in retirement |
| Growth | Tax-deferred | Tax-free |
| Withdrawals | Taxed as ordinary income | Tax-free (qualified) |
| RMDs | Required at age 73 | Required at age 73* |
*Unlike Roth IRAs, Roth 403(b)s are subject to RMDs. However, you can roll a Roth 403(b) to a Roth IRA (which has no RMDs) upon retirement or job change.
Choosing between traditional and Roth: If you expect to be in a lower tax bracket in retirement than now, traditional contributions likely save more. If you expect higher taxes in retirement, Roth is advantageous. Many financial planners recommend splitting contributions between both for tax diversification.
The 15-Year Rule: 403(b)-Specific Catch-Up
In addition to the standard age-50+ catch-up, some long-term 403(b) employees qualify for a special 15-year rule catch-up:
- Applies if you’ve worked for the same eligible employer for at least 15 years
- Lets you contribute an additional $3,000/year above the standard limit
- Lifetime maximum: $15,000 under this rule
- This stacks with age-50 catch-up in some cases (check with your plan administrator)
The 15-year rule is often overlooked. Teachers who’ve been with the same district for 15+ years should specifically ask their plan administrator if they qualify.
403(b) Investment Options
403(b) plan investment menus vary widely. Historically, many 403(b) plans offered only annuity products, which typically carry higher fees than mutual funds. Regulations have improved, and most modern plans now include mutual fund options.
What to look for:
- Low-cost index funds: Expense ratios below 0.20% — Vanguard, Fidelity, or Schwab index funds
- Target-date funds: Automatically rebalance as you approach retirement — convenient but check the expense ratio
- Avoid: High-commission variable annuities inside a 403(b) — double-fee structure (plan fees + annuity fees)
If your 403(b) options are limited or expensive: Contribute enough to get any employer match, then max out a Roth IRA or traditional IRA before returning to additional 403(b) contributions.
Employer Match in 403(b) Plans
Not all 403(b) plans include an employer match. Common structures:
- Many public school districts offer a defined benefit pension instead of a 403(b) match
- Nonprofits may match 3–5% of salary
- Universities often match 5–10%
Always contribute enough to get the full employer match. A 50% match on your first 6% of salary is an immediate 50% return on that money — no investment can guarantee that.
Withdrawals, Loans, and Early Distribution Rules
Qualified withdrawals: Start after age 59½. Taxed as ordinary income on traditional contributions; tax-free on Roth 403(b) qualified distributions.
Required Minimum Distributions (RMDs): Begin at age 73 under SECURE 2.0 rules.
Early withdrawal: Before 59½, withdrawals face ordinary income tax + a 10% penalty, with exceptions for:
- Disability
- Death (distributions to beneficiaries)
- Substantially Equal Periodic Payments (SEPP / Rule 72(t))
- Separation from service at age 55 or older
- Domestic relations orders (divorce/QDRO)
403(b) loans: Many plans allow loans up to 50% of your vested balance or $50,000 (whichever is less). Loan interest is paid back to yourself, but you miss out on investment growth.
Rolling Over a 403(b)
When you leave your employer, you can roll your 403(b) into:
- New employer’s 403(b) or 401(k) — if the plan accepts rollovers
- Traditional IRA — most flexible option; broader investment choices
- Roth IRA — only if converting pre-tax funds (taxable event)
- Keep it in place — allowed but limits flexibility
Rollovers are tax-free if done as a direct trustee-to-trustee transfer or completed within 60 days of distribution.
Related Resources
- Workplace Retirement Plans Guide — 403(b), 457(b), TSP, and more
- 403(b) vs 401(k) — key differences explained
- Roth Conversion Guide — converting 403(b) funds to Roth
- Required Minimum Distributions — RMD rules for 403(b) plans
The content on Wealthvieu is for informational purposes only and should not be considered financial, tax, or investment advice. Consult a qualified professional before making financial decisions. Full disclaimer · Editorial policy