403(b) plans let eligible public school, nonprofit, and certain religious employees save for retirement with pretax (or Roth) contributions, tax-deferred growth, and possible employer contributions. Investment choices usually include annuities, mutual funds, and sometimes brokerage windows; direct stock ownership is uncommon unless permitted by the plan. The IRS sets annual contribution limits that change periodically - verify the current year's limit and catch-up rules with your plan administrator. Recent law raised the age for required minimum distributions; confirm the RMD rules that apply to your situation.

What a 403(b) is

A 403(b) is an employer-sponsored retirement plan that lets eligible employees set aside pretax dollars to grow tax-deferred until withdrawal. It serves public school employees, employees of certain 501(c)(3) nonprofits, and some church organizations. Employers can also make contributions, subject to plan rules.

Who can participate

If you work for a public K-12 school, a college or university, a hospital, a nonprofit with 501(c)(3) status, or certain religious organizations, you may be eligible. Your employer determines plan participation details and whether the plan allows Roth (after-tax) contributions.

Investment options

Traditional 403(b) investments historically centered on annuity contracts and mutual fund custodial accounts. Today many plans also offer:
  • Variable and fixed annuities
  • Mutual funds and collective investment trusts
  • Brokerage windows that can expand available investments
Most plans do not allow direct ownership of individual stocks unless the plan's brokerage window specifically permits it. Check your plan's investment lineup before choosing funds.

Contributions and catch-up rules

The IRS sets an annual elective deferral limit for pretax (and Roth) contributions. Recent years saw limits in the low-to-mid $20,000s (2023: $22,500; 2024: $23,000). Check the IRS limit for the current year (2025) before calculating your maximum contributions.

If you are age 50 or older you may be able to make additional catch-up contributions; the dollar limit for catch-up contributions has changed in recent years, so confirm the current amount with the IRS or your plan administrator. 1

403(b) plans also include a separate "15-year rule" that can allow additional catch-up contributions for long-service employees with certain employers. The specifics and lifetime caps vary, so confirm whether you qualify with your plan administrator. 2

Taxes, withdrawals, and required distributions

Contributions made on a pretax basis reduce taxable income today and grow tax-deferred. Withdrawals are taxed as ordinary income. Roth 403(b) contributions grow tax-free if distributions meet qualified distribution rules.

Early withdrawals before age 59½ generally face income tax plus a 10% penalty, unless an exception applies. Required minimum distribution (RMD) rules have changed recently: the RMD starting age was raised to 73 for many participants under recent legislation, with further increases scheduled in future years. Check current RMD rules that apply to your birth year. 3

Next steps

Contact your plan administrator to confirm eligibility, current contribution limits, available investment options, employer match rules, and any plan-specific catch-up provisions. If you need help, consider a fee-only financial planner or your HR benefits office.

Invest intentionally: understand your plan's investments, use catch-up opportunities if available, and keep an eye on IRS limit updates.

  1. Confirm the IRS elective deferral limit for 2025 and update the article with the exact number.
  2. Confirm the current catch-up contribution dollar limit for age-50+ for 2025.
  3. Verify the detailed rules and lifetime caps for the 15-year special catch-up provision for 403(b) plans.
  4. Confirm the precise RMD ages and transition rules that apply to different birth years as of 2025.

FAQs about 403b Retirement Plan

Who is eligible to participate in a 403(b)?
Employees of public K-12 schools, many colleges and universities, hospitals, nonprofit organizations with 501(c)(3) status, and certain church organizations typically qualify. Check your employer's plan documents for specifics.
What can I invest in inside a 403(b)?
Most plans offer annuity contracts and mutual fund custodial accounts. Some also provide collective investment trusts and brokerage windows that expand options. Direct ownership of individual stocks is uncommon unless your plan's brokerage option allows it.
How much can I contribute each year?
The IRS sets an annual elective deferral limit that changes periodically (2023: $22,500; 2024: $23,000). Check the IRS limit for the current year (2025) and your plan's rules. Catch-up contributions may be available if you are age 50 or older.
What are the tax and withdrawal rules?
Pretax contributions reduce taxable income and grow tax-deferred; withdrawals are taxed as ordinary income. Roth 403(b) contributions are after-tax and may be withdrawn tax-free if rules are met. Withdrawals before age 59½ generally face taxes and a 10% penalty unless an exception applies. Required minimum distribution rules have changed recently - confirm the RMD age that applies to you.

News about 403b Retirement Plan

Schroders Study Finds Nearly Half of Retirement Plan Participants Would Invest in Private Markets - Schroders [Visit Site | Read More]

Broader Investment Options on the Horizon for Section 403(b) Retirement Plans - Mayer Brown [Visit Site | Read More]

New 403(b) Contribution Limits for 2026 - Kiplinger [Visit Site | Read More]

2025 Contribution Limits: 401(k), Traditional, & Roth IRA - Britannica [Visit Site | Read More]

IRS Reveals Higher Retirement Plan Limits for 2026 - HRMorning [Visit Site | Read More]

Roth Catch-up Rule Changes Take Effect January 1, 2026 - CBIZ [Visit Site | Read More]

Benefits Insight webinar: All About 403(b) Retirement Savings - Johns Hopkins University [Visit Site | Read More]

To Level the Retirement Playing Field, Expand CIT Access to 403(b) Plans - plansponsor [Visit Site | Read More]