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403(b)

A 403(b) is a retirement plan for employees of public schools, universities, hospitals, churches, and certain nonprofits. Functionally similar to a 401(k) with slightly different rules and, often, worse investment options.

By the TRRP Editorial TeamUpdated 2026SSA · IRS · CMS data

Definition

A 403(b) is a retirement plan for employees of public schools, universities, hospitals, churches, and certain nonprofits. Functionally similar to a 401(k) with slightly different rules and, often, worse investment options.

Why it matters in retirement

403(b) plans historically featured high-fee annuity products instead of low-cost mutual funds. If you work for a school district or nonprofit, your plan menu may be hiding 2%+ fees — costing you six figures over a career.

Key numbers · 2026
Contribution limit (2026)
$24,500
Age 50+ catch-up
$8,000
15-year service catch-up
$3,000/yr
Typical fee in legacy 403(b)
1.5–2.5%
Pros
  • High contribution limits
  • Pre-tax or Roth options
  • Potential 15-year catch-up
  • Employer contributions in some plans
Cons
  • Often annuity-based with high fees
  • Limited low-cost investment options
  • Less ERISA protection
  • Surrender charges on legacy products

Common mistakes

  • Not shopping vendors — many districts offer multiple with vastly different fees
  • Locking up contributions in a variable annuity inside a 403(b)
  • Ignoring the 15-year catch-up for long-tenured employees
  • Paying surrender charges to escape a bad product
The part most people miss

Most 403(b) plans offer a choice of vendors — and often one of those vendors is a low-cost provider (Fidelity, Vanguard, TIAA-CREF traditional). The worst defaults are sold door-to-door; the best have to be requested.

When you’re ready

Want help applying 403(b) to your situation?

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