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403(b)s & 457(b)s: A comparison

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Westend61/Getty Images/Westend61

When it comes to saving for retirement, taking advantage of the retirement plan offered by your employer is a great way to get started. If you have the choice between 403(b) vs. 457(b) plans, it may help to understand the differences between them. Employers typically provide only one or the other, but your employer may offer you the choice to contribute to both.

In this article, we'll break down the differences so you can make the best choice for you.

What is a 403(b)?

A 403(b) is an employer-sponsored retirement savings plan for public sector employees. Your employer may offer a 403(b) if you're employed full-time by a educational institution, hospital, church or other 503(c)(3) organization. You make pre-tax contributions directly from your paycheck into the account, and experience tax-deferred growth until you begin to make withdrawals in retirement.

Your employer may offer a Roth 403(b) as an option. It works similarly to a traditional 403(b), but the tax-advantage changes. With a Roth 403(b), you make after-tax contributions. But by paying taxes now, you can withdraw money from the account without any additional tax liability in retirement, given you meet certain requirements.1 Another benefit of Roth 403(b)s is that the earnings grow tax-free.

What is a 457(b)?

457(b) plans are employer-sponsored retirement plans that come from state and local government employers and pubic schools. However some non-profit organizations offer them as well. You contribute pre-tax money, and their account balance grows tax-deferred. That means you don't have to pay taxes on this money until you withdraw it from the plan, which generally happens in retirement.

Employers may offer a Roth 457(b) that provides a back-loaded tax benefit. Similar to a Roth 403(b), they are funded with dollars that have already been taxed so when it comes time to withdraw funds, you don't have to pay taxes on the contributions. Additionally, earnings may be withdrawn tax-free.1

A comparison of 403(b) & 457(b) plans

While these employer-sponsored retirement plans have several similarities, they are decidedly different. Here are the key details to understand for each.

Contributions limits are the same for 403(b)s & 457(b)s

In 2024, you can contribute up to $23,000 through payroll deductions as well as an additional $7,500 in catch-up contributions if you are 50 or over. This is true of both plans—the distinction lies in how your employer's matching contributions (if any) affect this limit:

  • Employer contributions into a 403(b) plan do not count toward the $23,000 employee contribution limit. Employer matching contributions, paired with employee contributions, can be made up to an annual combined limit of $69,000 ($76,500 if you are 50 or older).
  • Matching contributions to a 457(b) plan are rare. However, they do count toward the $23,000 contribution limit.

Catch-up contribution rules for 403(b)s & 457(b)s have different features

In addition to the standard $7,500 catch-up contribution for people 50 or over, each plan has a unique catch-up feature as well:

  • 457(b) plans allow you to double your maximum contribution in the three years preceding retirement. However, there are two main points to keep in mind regarding this rule:
    • You cannot make a double contribution in the same year as the $7,500 catch-up.
    • Double contributions are limited to any previously unmet maximum contribution limit. If you've contributed the maximum amount each year you've had the plan, then you can't exceed a single limit.
  • 403(b) plan participants who have been with their employer for at least 15 years may contribute an additional $3,000 per year up to a lifetime limit of $15,000 if they haven't fully funded their contribution limits in prior years.

Some withdrawal rules differ between the plans

Withdrawals from employer-sponsored retirement plans taken before you reach age 59½ are generally subject to an early withdrawal penalty equal to 10% of the amount withdrawn. 403(b) and 457(b) plans may provide an exception to this rule:

  • You may be able to take penalty-free withdrawals from your 403(b) if you separated from your employer in the year you turn 55 or older.
  • If you no longer work for the employer sponsoring your 457(b) plan, you can take penalty-free withdrawals regardless of your age.

Withdrawals from traditional 403(b)s and 457(b)s made after age 59½ will be taxed at your ordinary income rate.

Roth 403(b) & 457(b) withdrawals

In Roth versions of 403(b)s and 457(b)s, qualified withdrawals are completely tax-free in retirement. To make a qualified withdrawal, you'll need to have had the account for at least five years and be at least 59½. However, if you withdraw earnings from your Roth 403(b) without meeting the requirements of a qualified withdrawal, then income taxes and a 10% penalty may apply.

A unique advantage of Roth accounts is that earnings grow and can be withdrawn tax-free, which makes them a tax-efficient way to reduce your tax liability in retirement.1

RMDs depend on if you have a traditional or Roth version of your plan

Required minimum distributions (RMDs), the minimum amount of money you must withdraw from a tax-deferred retirement plan after you reach a certain age, will be required for traditional versions of 403(b)s and 457(b)s. At that point, your RMDs will be taxed at your ordinary income rate.

Roth 403(b)s and Roth 457(b)s are not subject to RMDs. That means that you can leave the money in those accounts as long as you'd like so it can continue to experience tax-deferred growth.

403(b) vs 457(b) comparison chart

The differences are summarized below in this 403(b) vs. 457(b) comparison chart:


Offered by educational institutions, hospitals and churches; may allow Roth version.

Common with state and local governments; may allow Roth version.

Employee contribution limit

Annual limit of $23,000.
Annual limit of $23,000. 
Employer contributions

Employers often provide matching contributions. Combined employee and employer contribution limit is $69,000 ($76,500 if 50 or older).

Employer matching contributions are rare. If they are made, they count toward $23,000 limit.
Catch-up contributions

An additional $7,500 if age 50 or over; Additional $3,000 per year if with an employer for at least 15 years. Capped to $15,000 lifetime total.

An additional $7,500 if age 50 or over; Annual limit doubled in each of 3 years prior to retirement.
Early withdrawal penalties

10% if under 59½. Possible exception if 55+ and separated from employer.

No penalty regardless of age if you've separated from your employer.

Required for traditional 403(b)s; no RMDs for Roth 403(b)s.

Required for traditional 457(b)s; no RMDs for Roth 457(b)s.

Can you contribute to both a 403(b) & 457(b)?

The employer decides which plans are available to which groups of employees. So, you may be able to contribute up to the maximum amount to both plans if they are available to you. Unlike contributions to other employer plans like 403(b)s, 401(k)s and SIMPLE IRAs—which you must combine to determine if you've met the maximum salary deferral limit—contributions to 457(b) plans are separate.

Which is better, a 403(b) or 457(b)?

Neither plan is universally better than the other for all retirement savers. If you have to choose between them, consider their unique features and differences to choose the one that will best fit your needs. For example, if you plan to retire early, then a 457(b) may be the better option due to the opportunity for penalty-free withdrawals.

Additionally, when choosing between a traditional or Roth version of the plan offered to you, take the following considerations into account:

  • If you think you're currently at peak earnings potential and expect to be in a lower tax bracket in retirement, a traditional version may be appropriate since you'll be paying those taxes in retirement.
  • If you think your peak earnings point is farther off and you expect to be in a higher tax bracket in retirement, then a Roth version may be more beneficial since you'll be paying those taxes in a lower tax bracket now.

Work with an expert on retirement planning

When you're saving for retirement, a financial advisor can help you spot opportunities and make tax-efficient choices. Reach out to a financial advisor for personalized insights and trusted guidance.

1Distributions of earnings are tax-free as long as your Roth 403(b) or Roth 457(b) is at least five years old and one of the following requirements is met: (1) you are at least age 59½; (2) you are disabled; (3) you are purchasing your first home ($10,000 lifetime maximum); or (4) the money is being paid to a beneficiary.

Thrivent and its financial advisors and professionals do not provide legal, accounting or tax advice. Consult your attorney or tax professional.