403(b) vs 401(k)
What Is the Difference for Your Retirement?
Same contribution limits. Same tax benefits. But your investment options and fees may differ dramatically.
The hidden difference that matters most
Fees
Many 403(b) plans charge 1.5-3% in annual fees through annuity contracts. A typical 401(k) with index funds charges 0.03-0.10%. Over 30 years, this difference can cost you hundreds of thousands of dollars.
Side-by-Side Comparison
| Feature | 403(b) | 401(k) |
|---|---|---|
| Offered By | Nonprofits, schools, hospitals, religious orgs | For-profit companies |
| 2026 Contribution Limit | $23,500 | $23,500 |
| Catch-Up (50+) | $7,500 | $7,500 |
| Special Catch-Up | 15-year rule (extra $3,000/yr) | None |
| Roth Option | Available | Available |
| Employer Match | Common but lower on average | Common |
| Investment Options | Often limited to annuities + mutual funds | Broad (mutual funds, ETFs, target date) |
| Fees | Often higher (annuity-heavy) | Varies, improving due to litigation |
| Loan Provisions | Yes | Yes |
| Required Minimum Distributions | Yes (age 73) | Yes (age 73) |
Fee Impact Calculator
See how investment fees affect your retirement balance over time.
Assumes 7% annual return before fees. Simplified estimate for illustration.
The 15-Year Rule: A Unique 403(b) Advantage
This is the benefit most 403(b) holders do not know they have. If you have worked for the same eligible employer for 15 or more years, you can contribute an additional $3,000 per year to your 403(b).
Maximum 2026 Contributions With 15-Year Rule
Lifetime cap: $15,000 total in additional 15-year rule contributions. So you can use it for up to 5 years at $3,000 each. This benefit does not exist for 401(k) plans.
The 403(b) Investment Options Problem
The biggest practical difference between 403(b) and 401(k) plans is investment quality and fees.
Many 403(b) Plans
- - Annuity contracts with 1.5-3% annual fees
- - Surrender charges if you leave early
- - Limited fund choices
- - Complex fee structures
Modern 401(k) Plans
- - Index funds at 0.03-0.10% fees
- - No surrender charges
- - Broad fund selection
- - Transparent fee disclosure
Good news: Some 403(b) plans have improved. If your employer offers TIAA-CREF or Vanguard options within the 403(b), the fee difference may be minimal. Check your plan documents for expense ratios.
Employer Match Comparison
- -401(k) matches are often dollar-for-dollar or 50 cents on the dollar up to a percentage of salary
- -403(b) matches exist but are historically less generous (nonprofit budgets are tighter)
- -Always contribute enough to capture the full employer match, regardless of plan type
- -An employer match is a 50-100% immediate return on your contribution. Never leave it on the table.
If You Have Access to Both Plans
Some employers (hospitals, universities) offer both 403(b) and 401(k) options. If so:
- 1.Compare investment options and fees in each plan
- 2.The plan with better options and lower fees is usually the better choice
- 3.You can contribute to both (but the combined employee contribution limit applies)
- 4.Capture the full employer match from whichever plan offers it first
Roth 403(b) vs Roth 401(k)
Structurally identical. Both allow after-tax contributions with tax-free growth and tax-free withdrawals in retirement. The same contribution limits apply.
When to choose Roth: If you expect to be in a higher tax bracket in retirement than you are now. Common for younger workers early in their careers, or those expecting pension income that will push them into higher brackets.
Rolling Over When You Leave
403(b) or 401(k) to Traditional IRA
More investment options, lower fees, full control. Usually the best option when leaving an employer.
403(b) to 401(k) (or vice versa)
Direct rollovers between plan types are permitted. Useful if your new employer has a strong plan.
Roth versions to Roth IRA
Tax-free rollover. Maintains tax-free growth and withdrawal benefits with more investment flexibility.