403b vs 401k.com

Updated 17 April 2026

403(b) vs 401(k) in 2026

Same tax rules. Often wildly different fees. Here is what nobody tells teachers and nurses about their retirement plan.

If you work for a nonprofit, school, or hospital, you have a 403(b). If your employer offers only annuity-based products, your plan may cost you $100,000 or more over your career. Here is how to tell and what to do about it.

Career cost gap

$267,000

Lost to fees over 30 years
2% fees vs 0.1% fees at 7% return
$50K starting balance + $500/month

$50K invested, 7% annual return, $500/month contribution

$800K$700K$600K$500K$400KYear 0Year 10Year 20Year 30$761K$494K0.1% fees (401k index fund)2% fees (403b annuity)

At a glance: 403(b) vs 401(k)

Full comparison →
Feature403(b)401(k)
Offered byNonprofits, schools, hospitals, religious orgsFor-profit companies
2026 contribution limit$23,500$23,500
Catch-up (age 50+)$7,500$7,500
Enhanced catch-up (ages 60-63)$11,250$11,250
Special catch-up15-year rule: +$3,000/year (lifetime $15K cap)None
Typical fees0.1-3% depending on provider0.03-1% depending on plan
Investment menuAnnuities + mutual funds (often limited)Mutual funds, ETFs, target-date funds
Roth optionAvailable at most employersAvailable at most employers

Watch out for these providers

If your 403(b) provider is AXA Equitable, Voya, Lincoln Financial, VALIC, or Equitable Financial, you are likely in an annuity contract with 1.5-3% all-in annual costs. That is 10 to 30 times more expensive than a low-cost index fund.

See the full fee breakdown →Check what your plan charges →

Fee impact calculator

Enter your own numbers to see your personal cost gap. Default values produce the $267K headline figure.

High-fee plan (2.0%)

$639,517

Low-fee plan (0.1%)

$991,984

You keep

$352,468 more

Assumes 7% annual return before fees. Monthly compounding. For illustration only.

Open full calculator with scenario presets and shareable URL.

The 15-year rule: a 403(b)-only advantage

If you have 15+ years of service at the same qualifying employer, you can contribute an extra $3,000/year to your 403(b), up to a $15,000 lifetime cap. This does not exist in the 401(k).

Full eligibility guide →

2026 max for age 50+, 15+ yrs

$23,500 standard
+$7,500 age catch-up
+$3,000 15-year rule
= $34,000

If your employer offers both plans

Hospitals, universities, and large nonprofits sometimes offer both a 403(b) and a 401(k). The decision rule is simple: compare the investment options and fees. The cheaper plan with index funds usually wins. Get every employer match before making that choice.

Decision framework with worked examples →

Frequently asked questions

What is the difference between a 403(b) and a 401(k)?
403(b) plans are offered by nonprofits, schools, and hospitals; 401(k) plans are for for-profit companies. Contribution limits and tax benefits are identical at $23,500 for 2026. The practical difference is that many 403(b) plans use annuity contracts with 1.5-3% annual fees, while modern 401(k) plans often offer index funds at 0.03-0.1%. Over a career, that fee difference can cost six figures.
Why are 403(b) fees so high?
403(b) plans were legally required to use annuity contracts until 1974. Insurance companies built distribution networks into schools and hospitals that persist today. Teachers are still cold-called by reps from AXA Equitable, Voya, Lincoln Financial, VALIC, and Equitable Financial who sell annuity-wrapped 403(b)s paying the rep commission. These products often carry 1.5-3% all-in annual costs. 401(k) plans have been reformed through litigation and competition toward low-cost index funds.
What is the 403(b) 15-year rule?
Employees with 15 or more years of service at the same eligible employer (schools, hospitals, church-related orgs) can contribute an extra $3,000 per year to their 403(b). The lifetime cap is $15,000. This stacks on top of the $23,500 standard limit and the $7,500 age-50+ catch-up, giving a maximum 2026 403(b) contribution of $34,000 for qualifying employees over age 50.
What is the 2026 403(b) contribution limit?
$23,500 for both 403(b) and 401(k) plans in 2026. The catch-up contribution for those 50 and over is an additional $7,500 (or $11,250 for ages 60-63 under SECURE 2.0). The 403(b)-only 15-year rule allows an extra $3,000/year for eligible long-service employees.
Should I use my 403(b) or 401(k) if my employer offers both?
Compare the investment options and fees in each plan. The plan with lower-fee index funds usually wins. If only one plan has an employer match, contribute enough to capture that match first. If both match, get both matches, then direct additional contributions to the lower-fee plan.
Can I roll a 403(b) into a 401(k) or IRA?
Yes. 403(b) to 401(k) rollovers and 403(b) to Traditional IRA rollovers are both permitted. Use a direct rollover (trustee-to-trustee transfer) to avoid the 20% withholding that applies to indirect rollovers. Rolling to an IRA typically gives you more investment choices and lower fees.