Key takeaways

• 401(k)s are for corporate employees; 403(b)s for nonprofit employees

• Both plans can offer pre-tax or Roth deferral options

• The contribution limit is $23,500 in 2025 and $24,500 in 2026

• 403(b)s have a unique 15-year catch-up rule

• 401(k) plans can generally offer more investment option types than 403(b)s

401(k) and 403(b) plans are both employer-sponsored retirement accounts with the same contribution limits, tax advantages, and withdrawal rules, but different catch-up rules. The main difference is who can use them: 401(k)s are typically offered by for-profit companies, while 403(b)s are available to be offered by nonprofit organizations, schools, and churches.

401(k) plans and 403(b) plans are two of the most popular employer-sponsored retirement plans available. The two have many similarities, including their contribution limits and tax advantages. However, they also have some key differences, including who can use them.

What is a 401(k) plan?

A 401(k) plan is an employer-sponsored retirement plan offered by many for-profit companies. The 401(k) that exists today was created in the Revenue Act of 1978 based on an idea created by Ted Benna, a retirement benefit consultant often touted as the “father of the 401(k).”

Read more: What is a 401(k)?

What is a 403(b) plan?

A 403(b) plan is an employer-sponsored retirement plan that’s very similar to a 401(k) plan. The key difference is that 403(b) plans can only be offered by public schools, churches, and 501(c)(3) non-profit organizations. The 403(b) plan was originally created in 1958, but it’s been expanded and adapted since then.

Read more: The average 403(b) balance by age

Similarities between 401(k) and 403(b)s

401(k) plans have a lot in common relating to their tax advantages, contribution limits, and other features. They share important advantages and disadvantages.

Tax advantages

401(k) plans and 403(b) plans are tax-advantaged, meaning workers can preserve more of their investment growth for retirement rather than losing some to taxes each year.

Most contributions to 401(k) and 403(b) plans are made on a pre-tax basis, meaning the money contributed is generally withdrawn from employees’ paychecks before taxes. This helps those workers to pay less in taxes that year. The money then grows tax-deferred in the account, and employees don’t pay income taxes on the money until they withdraw it.

Many 401(k) and 403(b) plans also accept Roth contributions. Rather than being made pre-tax, Roth contributions are made after an employee has already paid taxes on their income. Then, all investment growth in the account and distributions from the account are tax-free if certain conditions are satisfied.*

Employer match

For both 401(k) and 403(b) plans, employers may contribute to their employees’ plans in addition to the employee contributions. These are often done in the form of matching contributions. For example, a company might promise to match each worker’s retirement contributions up to 5% of their wages.

Contribution limits

Both 401(k) and 403(b) plans are subject to the same IRS contribution limits. In 2026, employees can contribute up to $24,500 of their income, up from $23,500 in 2025. Workers age 50 and older may contribute up to an additional $8,000 per year in 2026 in catch-up contributions, an increase from $7,500 in 2025.

In addition, beginning in 2025, employees ages 60 through 63 may qualify for a higher “super catch-up” contribution of up to $11,250 if their plan allows.

The combined employee + employer contribution cap also rises in 2026 to $72,000, from $70,000 in 2025 (not including catch-up contributions).¹

Early withdrawal penalties

Both 401(k) and 403(b) plans are intended to be used for retirement savings. As a result, both plans penalize workers who withdraw from their accounts before age 59 ½. For both accounts, any distributions taken before age 59 ½ that don’t qualify for any exceptions will be subject to a 10% tax penalty. That’s in addition to the ordinary income taxes you’ll pay on the withdrawals.

Required minimum distributions (RMDs)

Pre-tax retirement accounts, such as 401(k) plans, 403(b) plans and IRAs, are subject to Required Minimum Distributions (RMDs). These withdrawals allow the IRS to collect tax on assets that have not yet been taxed.

Retirement account owners must take their first required minimum distribution for the year in which they reach age 73. The withdrawal amount required is based on the account balance at the end of the previous year, along with the average life expectancy for a person of that age. The withdrawals are typically taxed at the individual's ordinary income rate. There are tax penalties for failing to the required minimum distribution within a given year.

Differences between 401(k) and 403(b)s

Just as they have some important similarities, 401(k) and 403(b) plans also have some key differences.

Availability

Perhaps the most important difference between 401(k) plans and 403(b) plans is who is allowed to use them. As mentioned, 401(k) plans are provided by for-profit companies. If you work in a corporate job, you likely have access to a 401(k) plan.

403(b) plans, on the other hand, are only available to public schools, churches, and organizations classified as tax-exempt under IRC 501(c)(3).

How investment options differ

401(k) plans often have a wide variety of investment options. Many plans allow employees to invest in a variety of mutual fund or exchange-traded fund (ETF) options. Many also allow employees to invest in individual stocks and bonds, as well as other investments.

403(b) plans have a far more limited number of investment options. Per federal law, 403(b) accounts can only invest in annuities and mutual funds.

Additional contributions for 403(b) plans

For 403(b) plans, there’s a unique 15-year service catch-up rule.2 If you’re an employee of an employer offering a 403(b) plan and have worked there for at least 15 years, you can make a catch-up contribution each year that’s the lesser of:

• $3,000

• $15,000 minus any additional elective deferrals made in previous years

• $5,000 times your years of service minus your total elective deferrals made in previous years

If an employee of a 403(b) is 50 years or older and has at least 15 years of service, they may take advantage of both catch-up contributions.

Which plan should I choose?

In most cases, you won’t have a choice between a 401(k) plan and a 403(b) plan. After all, they are offered by different types of employers. However, some workers may have multiple employers and, therefore, access to multiple retirement plans. If you have access to both a 401(k) and a 403(b) or are trying to choose between jobs with different retirement plans, here are some things to consider:

• Investment options: First, consider the investment options available in each retirement plan. 403(b) plans typically have relatively limited investment options. If you have access to a 401(k) plan with more robust offerings, you may want to consider that route.

• Employer matching: Both 401(k) and 403(b) plans can offer employer matching, but that doesn’t mean they all do. An employer match is a part of your total compensation package; don’t pass it up.

• Roth availability: If you want to make Roth contributions to your retirement account to get tax-free withdrawals, make sure to check whether your 401(k) and 403(b) offer a Roth option. Both plans can offer Roth options, but not all plans do.

If you have access to both a 401(k) plan and a 403(b), you may contribute to both. However, you may only contribute up to the individual employee contribution limit of $24,500 in 2026 ($23,500 in 2025), plus any eligible catch-up contributions. When you participate in multiple accounts, you are limited to the combined total contribution amount across all plans, not separate limits for each account.

Making the most of your retirement plan options

No matter what type of retirement plan you have through your employer, there are steps you can take to help maximize it. After all, the retirement contributions you make from the start of your career can have a major impact on whether you can retire comfortably.

First, its generally suggested to contribute up to 15% of your income in your retirement account each year. If it’s not possible to contribute 15%, start at a lower percentage and gradually increase it over time. At the very least, you should consider contributing at least enough to take advantage of any employer match you have.

Next, remember to focus on other areas of your financial health. Paying off your debt and building an emergency fund could help provide for a secure retirement. First, being debt-free and having an emergency fund can help reduce your living expenses during retirement. They can also ensure you don’t have to pull money from your retirement account early to cover any financial emergencies that arise.

Choosing the right investments for your retirement plan

Regardless of whether you have a 401(k) or a 403(b), you may have the option to choose your own investments. There’s not necessarily one option that’s best for everyone.

Many employers offer target-date funds in their plan, which are funds that automatically rebalance with a lower risk level as you near the target date (aka your retirement year). The date in the name of the target date fund is the assumed date of retirement. The asset allocation becomes more conservative as the fund nears the target retirement date; however, the principal value of the fund is never guaranteed.

The role of retirement planning

If you’re early in your career, it’s possible you may not yet be prioritizing retirement planning. After all, retirement is decades away, and there are many competing goals for your paychecks. However, taking charge of your financial future now can help you reach your financial goals — not just your retirement goals — and live more comfortably during your later years.

Read more: Seven essential steps for retirement planning

FAQs about 401(k) vs. 403(b) in 2025 and 2026

What are the 2025 and 2026 contribution limits? 

Employees can contribute up to $23,500 in 2025 and $24,500 in 2026. Workers 50+ may add $7,500 in 2025 and $8,000 in 2026 in catch-up contributions, and those ages 60–63 may qualify for an $11,250 super catch-up.

Can I contribute to both a 401(k) and a 403(b)? 

Yes. If an individual contributes to both in the same year, the combined total across accounts cannot exceed $23,500 in 2025 and $24,500 in 2026 (plus catch-up contributions) The IRS applies this limit across all accounts, meaning individuals cannot exceed the total cap by contributing to both.

Do employer contributions count toward the limit? 

Yes. The combined employee + employer contribution cap is $70,000 in 2025 and $72,000 in 2026 (not including catch-up contributions).

What is the difference in investment options? 

401(k)s often include mutual funds, ETFs, stocks, and bonds. 403(b)s are legally restricted to annuities and mutual funds.

Do both plans offer Roth options? 

Yes. Many employers allow Roth contributions, made with after-tax dollars for tax-free withdrawals in retirement.

What makes 403(b) plans unique? 

In addition to the 50+ and super catch-ups, 403(b)s may offer a 15-year service catch-up of up to $3,000 annually for long-tenured employees.