403(b) vs. 401(k): What's the Difference?

Here's how 403(b) and 401(k) plans compare across eligibility, taxes, catch-up contributions, withdrawals, and rollover rules.

Eligibility requirements are one of the biggest differences between 403(b) and 401(k) plans. 

Because eligibility is based on where you work, many employees won't have to choose between a 403(b) and a 401(k). Instead, they'll participate in the retirement plan offered by their employer. 

A 403(b) is typically available to employees of public schools, colleges, universities, health care organizations, churches, and certain nonprofit organizations. A 401(k), on the other hand, is commonly offered to employees of private companies.

403(b)s and 401(k)s generally share the same employee contribution limit ($24,500 in 2026). That means contributions to one plan may reduce how much you can contribute to the other. 

For example, if you're eligible for both plans and contribute $10,000 to a 401(k), you generally would only be able to contribute $14,500 to a 403(b) during the same year (plus, catch-up contributions, if you're 50 or older).

Both plans may allow age-based catch-up contributions for eligible employees on top of the standard contribution limit. However, some 403(b) participants may also qualify for a special 15-year rule catch-up contribution. 

The 15-year rule catch-up contribution is a special provision available to some 403(b) participants who have at least 15 years of service with certain eligible employers, such as schools, hospitals, churches, and nonprofit organizations. 

If you qualify, you may be able to contribute up to an additional $3,000 per year beyond the standard employee contribution limit, subject to a lifetime maximum of $15,000 and other IRS rules.

Because eligibility depends on factors such as years of service and prior contribution history, consult your plan administrator or tax advisor to determine whether you qualify.

Some employers may contribute to employees' 403(b) or 401(k) accounts through employer matching contributions. For example, an employer may match 50% of employee contributions up to a certain percentage of pay. Because matching formulas vary by employer, review your plan documents to understand how employer contributions work under your plan. 

In general, employer contributions to a 401(k) or 403(b) will not reduce the amount you can contribute on your own.

Withdrawal and rollover rules are generally similar for 403(b) and 401(k) plans. The main difference for most participants is whether their contributions are traditional or Roth.

Traditional 403(b) and 401(k) contributions are generally made with pre-tax dollars, which may lower taxable income in the year you contribute. When you withdraw money later, those distributions are generally taxed as ordinary income. 

If you withdraw money from a traditional 403(b) or 401(k) before age 59½, you'll generally owe ordinary income tax plus a 10% early withdrawal penalty unless an IRS exception applies. After age 59½, withdrawals are generally penalty-free, but income taxes still apply.

Roth 403(b) and Roth 401(k) contributions are made with after-tax dollars, so they don't lower taxable income in the year you contribute. However, withdrawals are generally tax-free if you're at least age 59½ and you've held assets in the Roth account for at least five years.

If you leave your job, you may be able to roll your 403(b) or 401(k) assets into another eligible retirement account, such as an individual retirement account (IRA) or another employer-sponsored retirement plan, provided the receiving account accepts the rollover.

The right choice depends largely on which plan your employer offers. 

Many employees won't have a choice between a 403(b) and a 401(k) because eligibility is based on where they work. However, if you're eligible for both plans, consider factors such as employer contributions, investment options, fees, and available catch-up contributions. 

Some employees may find that a 403(b)'s 15-year rule catch-up contribution provides additional savings opportunities. Others may prefer a 401(k)'s investment lineup if it offers a broader selection of investments or a larger matching contribution. 

Before making a decision, review each plan's features and consider talking to a financial advisor to see how each option fits into your overall retirement savings strategy.