403(b) vs 401(k): Complete Side-by-Side Comparison for 2026
22 rows covering every meaningful difference. Contribution limits, tax treatment, fees, investment menu, ERISA coverage, and SECURE 2.0 changes. Updated 17 April 2026.
| Feature | 403(b) | 401(k) |
|---|---|---|
| Eligible employers | Nonprofits (501(c)(3)), public schools, hospitals, religious organizations | For-profit companies; some government entities |
| Tax treatment on contributions (traditional) | Pre-tax; reduces current taxable income | Pre-tax; reduces current taxable income |
| Tax treatment on growth | Tax-deferred until withdrawal | Tax-deferred until withdrawal |
| Tax on withdrawals | Ordinary income tax at applicable rate | Ordinary income tax at applicable rate |
| 2026 employee contribution limit | $23,500 | $23,500 |
| Age 50+ catch-up (2026) | $7,500 additional | $7,500 additional |
| Enhanced catch-up ages 60-63 (SECURE 2.0) | $11,250 additional | $11,250 additional |
| Special catch-up | 15-year service rule: +$3,000/year, $15K lifetime cap | None |
| Combined 415(c) limit (2026) | $70,000 (employee + employer) | $70,000 (employee + employer) |
| Compensation cap (2026) | $345,000 (affects match calculations) | $345,000 (affects match calculations) |
| Employer match commonality | Common but typically smaller (~3.5% avg) | Common (~4.5% avg per PSCA data) |
| Vesting rules | ERISA: 3-yr cliff or 6-yr graded; govt plans set own | ERISA: 3-yr cliff or 6-yr graded |
| Typical investment menu | Annuity contracts + mutual funds; often limited selection | Mutual funds, ETFs, target-date funds; generally broader |
| Annuity availability | Common; often the only option in K-12 district plans | Available but not dominant |
| Typical expense ratios | 0.1% to 3% depending on provider and product type | 0.03% to 1% depending on plan; improving via litigation |
| Loan provisions | Yes (ERISA plans); up to 50% vested balance or $50K | Yes; up to 50% vested balance or $50K |
| Hardship withdrawal | Yes; SECURE 2.0 simplified self-certification | Yes; SECURE 2.0 simplified self-certification |
| Early withdrawal penalty | 10% plus ordinary income tax (before age 59.5) | 10% plus ordinary income tax (before age 59.5) |
| Rule of 55 | Yes; separating from service year you turn 55 | Yes; separating from service year you turn 55 |
| RMD starting age | Age 73 (SECURE 2.0); Roth variant exempt from 2024 | Age 73 (SECURE 2.0); Roth variant exempt from 2024 |
| Rollover to IRA | Yes; direct rollover preserves tax status | Yes; direct rollover preserves tax status |
| ERISA coverage | Governmental and church plans exempt; private nonprofits covered | Covered by ERISA (federal plan governance rules) |
When the 403(b) wins
1. You qualify for the 15-year rule AND your plan has a mutual-fund window
At age 50+ with 15 years of service, you can contribute $34,000 per year to a 403(b) with low-cost index funds. That exceeds the 401(k) maximum by $3,000. This scenario applies to many long-tenured teachers and nurses in plans that offer a Vanguard or Fidelity mutual fund window.
2. Government employer with liberal withdrawal rules
Governmental 403(b) plans are exempt from ERISA withdrawal restrictions. Some allow in-service withdrawals after age 59.5 without the restrictions that private plans face. Check your plan document for specifics.
3. You plan heavy catch-up contributions late in a long career
The 15-year rule plus the 60-63 enhanced catch-up can give a qualifying 403(b) holder a $37,750 annual limit in 2026. No 401(k) holder can match this.
When the 401(k) wins
1. Your 403(b) is annuity-only and the 401(k) has index funds
This is the most common situation. If your 403(b) is through AXA Equitable, Voya, Lincoln Financial, VALIC, or Equitable Financial, and your 401(k) alternative has Vanguard or Fidelity index funds, the 401(k) wins by a wide margin. The fee gap can cost $150,000 or more over a career.
2. You need broader investment options
401(k) plans were opened to ETFs earlier and more widely than 403(b) plans (ETF access in 403(b) only became possible after SECURE 2.0, and implementation is still rolling out). If you want individual stock ETFs or a wide fund selection, the 401(k) is ahead.
3. You value ERISA fiduciary protections
Private 401(k) plans are fully ERISA-covered. The employer has a fiduciary duty to select prudent investments and monitor fees. Governmental and church 403(b) plans lack this oversight. Several major class-action suits have forced 401(k) fee reductions. Fewer such mechanisms exist for exempt 403(b) plans.
SECURE 2.0 changes that narrowed the gap
The SECURE 2.0 Act of 2022 made several changes that bring 403(b) plans closer to 401(k) parity:
- ETF access in 403(b) plans (effective 2024): for the first time, 403(b) plans can offer ETFs directly, not just mutual funds and annuities.
- Collective investment trust (CIT) eligibility: 403(b) plans can now use CITs, which are institutional pooled funds with lower costs than retail mutual funds.
- Long-term part-time employee access: employees working at least 500 hours per year for two consecutive years must be allowed to participate (down from three years).
- Enhanced catch-up for ages 60-63: $11,250 additional contribution available to all plans, not just 403(b).
- Roth employer match option: employers can now offer Roth matching contributions (after-tax) in both plan types.