403(b).

In plain English

A 403(b) is an employer retirement plan offered to teachers, public school staff, hospital and nonprofit workers, and some clergy. You contribute from each paycheck, and contributions can be pre-tax (lowering this year's taxable income) or Roth (taxed now, tax-free in retirement) if the plan allows. The money grows tax-deferred until you withdraw it, usually after age 59 and a half. Historically many 403(b) plans were dominated by high-fee annuity products, so checking the investment menu and its costs matters more here than in a typical 401(k).

01Why it matters

It is often the main retirement vehicle for public servants, and choosing low-cost index options over a high-fee annuity inside the plan can mean tens of thousands of dollars more at retirement.

02The math, step by step

In 2026 a teacher can contribute up to the 403(b) elective deferral limit of $24,500, with an extra age-50 catch-up of $8,000 on top (and a larger catch-up of $11,250 in the year they turn 60 through 63 under SECURE 2.0). If two low-cost index funds are on the menu next to several expensive annuities, picking the index funds keeps more of every dollar working for the teacher. These limits are set each year by the IRS, so check the current figure before maxing out.

03What this is NOT

04Receipts

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