A 403(b) is a retirement plan for tax-exempt organizations. Similar to a 401(k), they offer unique tax advantages. They can be a powerful tool to help people reach retirement goals, especially with the 15-Year Rule.
If you work for a school, a hospital, or a 501(c)(3) nonprofit, you’ve likely been offered a 403(b) plan. This type of plan was specifically designed with these organizations in mind. While it looks similar to the more familiar 401(k)s, it comes with a few unique advantages.
Here’s the breakdown of what a 403(b) is and how to make the most of it.
What Exactly Is a 403(b)?
Think of it as the 401(k)’s sibling. They share the same DNA: you put money in directly from your paycheck, it grows tax-advantaged, and your employer can include a match as well.
The big difference? Only certain organizations can offer them, such as public schools and universities, tax-exempt nonprofits, and religious organizations.
It’s worth noting that organizations that can offer a 403(b) often have less flexibility when choosing their plan administrator. That decision is often held by a board of directors or on a government level. That’s why 401GO works hard to be the better, easier choice. Through our vertical integration, we provide a simpler experience no matter where you sit in the organizational chart.
The 403(b) 15-Year Rule You Won’t Find in a 401(k)
This is one of the most underutilized features in retirement planning. If you’ve worked for the same eligible employer for 15 or more years, you may be able to contribute an extra $3,000 per year for up to five years. That’s up to $15,000 in additional lifetime contributions. And unlike the age 50 catch-up, this isn’t age-dependent. A 35-year-old teacher who’s been at the same school district since college could qualify.
If you’re a long-term employee who got a slower start on saving, this rule was made for you.
Traditional vs. Roth: Which One Wins?
Most modern 403(b) plans give you two buckets to put your money in:
- Traditional: You save on taxes now. Your contributions come out of your check before taxes are taken, lowering your taxable income today. You’ll pay taxes when you take the money out later.
- Roth: You save on taxes later. You pay taxes on the money now, but everything you withdraw in retirement, including all that investment growth, is 100% tax-free.
Neither option is universally better than the other. It depends on where you expect your tax rate to compare in retirement versus today.
What to Look For in Your 403(b) Plan
Whether you’re managing a 403(b) or participating in one, there are a few things that should be non-negotiable. Firstly, the plan should have low fees. Every dollar spent on admin fees is a dollar not growing for your future. It should also have a straightforward portfolio. Finally, it needs to be easily accessible. You should be able to check your balance and change your contributions from your phone in seconds.
2026 Contribution Limits
For 2026, the IRS increased the elective deferral limit for 403(b) plans to $24,500. Participants aged 50–59 or 64 and older can contribute an additional $8,000 catch-up on top of that. If you qualify for the 15-year rule, you may be able to add another $3,000 on top of that.
Your 403(b) is your future’s engine. Taking full advantage of your employer match and the updated 2026 limits is one of the best things you can do for your retirement.
Ready to see how simple retirement can be? Check out our other blogs or talk to your HR team about bringing 401GO’s simple-first approach to your organization.
