Glossary
403(b) Plan
A 403(b) plan is a tax-advantaged retirement savings plan designed for employees of public schools, nonprofits, and certain tax-exempt organizations. It works similarly to a 401(k), allowing pre-tax or Roth contributions with tax-deferred investment growth.
Who can use a 403(b) plan?
403(b) plans are available to employees of public schools, nonprofit organizations (501(c)(3)s), hospitals, churches, and some government agencies.
How does a 403(b) compare to a 401(k)?
They are very similar in structure, contribution limits, and tax benefits. The key difference is who is eligible—403(b)s are for nonprofits and public institutions, while 401(k)s are for private-sector employees.
What is the 403(b) contribution limit?
As of 2025, individuals can contribute up to $23,000 annually, or $30,500 if they’re age 50 or older (including the $7,500 catch-up contribution). Limits may adjust annually.
Can employers match 403(b) contributions?
Yes, some employers offer matching contributions, though it's not required. Matches are subject to vesting schedules and IRS contribution limits.
What types of investments are allowed in a 403(b)?
Most 403(b) plans offer mutual funds and annuity contracts. Investment choices may be more limited than those in 401(k) plans.
When can I withdraw funds from a 403(b)?
Penalty-free withdrawals can start at age 59½. Early withdrawals may incur a 10% penalty unless an exception applies, such as disability or certain hardship circumstances.
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