403(b)

Why Care?

If you work for a school, hospital, non-profit, or religious organization, the 403(b) is your primary employer-sponsored retirement vehicle — functionally equivalent to a 401(k).

Same tax advantages as a 401(k): contributions reduce taxable income (Traditional) or grow tax-free (Roth 403(b) if offered). Employer matches are free compensation — always capture them.

Higher contribution limits for long-term employees. After 15 years of service at certain organizations, additional catch-up contributions may be available.

Non-profits and schools often have lower salaries — which makes tax-advantaged saving even more critical for building retirement security.

Many 403(b) plans have historically had higher fees and fewer investment options than 401(k) plans. Knowing this helps you navigate the plan more effectively.

Watch expense ratios closely. 403(b) plans — especially those from insurance companies — have historically carried high fees and annuity products. Always choose the lowest-cost index funds available.
Capture the full employer match first. Whether it's 3% or 6%, contribute at least enough to get every matching dollar.
Check if your plan offers a Roth 403(b). If you expect to be in a higher tax bracket in retirement, Roth may be more valuable.
Ask about the 15-year catch-up provision. Employees with 15+ years of qualifying service may contribute an extra $3,000/year, up to a $15,000 lifetime cap.
Review your investment options annually. Identify the best low-cost options available and stick to them.
Roll it over when you leave. If you leave your employer, roll the 403(b) into an IRA or new employer's plan to maintain investment flexibility.