403(b) and 457(b)
Both 403(b) and 457(b) plans are workplace retirement accounts that often get described as “401(k)-like,” but that shorthand can be misleading. These plans exist because large parts of the workforce—teachers, healthcare workers, nonprofit employees, and government workers—live in a different retirement system than the private sector.
If you work in education, healthcare, state or local government, or for a nonprofit, these plans are usually the main way retirement saving happens through your job.
What these plans are
A 403(b) plan is offered primarily by public schools, colleges and universities, hospitals, and certain nonprofit organizations.
A 457(b) plan is most commonly offered by state and local governments, and sometimes by nonprofit employers as well.
Both are employer-sponsored retirement plans. Enrollment happens through your workplace, contributions are taken directly from your paycheck, and money grows inside the account under tax-advantaged rules set by law.
While they resemble a 401(k) in broad structure, they exist because these employers operate under different legal and compensation frameworks than private companies.
How contributions work
With both plans, you elect a portion of your pay to contribute each pay period. That contribution rate can usually be changed over time as your circumstances shift.
Most contributions are made on a pre-tax basis, which lowers your taxable income today. Many employers now also offer Roth options, where contributions are made after tax and withdrawals later follow different tax rules.
Annual contribution limits are set by federal law and are separate from IRA limits. In some workplaces, employees may have access to both a 403(b) and a 457(b), which can allow higher total payroll-based retirement saving than a single plan alone.
Employer matching and plan design
403(b) plans may include employer matching contributions, but this varies widely. Some employers match generously, some modestly, and some not at all.
457(b) plans—particularly in government settings—often do not include matching contributions, though there are exceptions. When matches do exist, they follow plan-specific rules rather than a universal standard.
Investment options and structure
Both 403(b) and 457(b) plans offer a menu of investments chosen by the plan sponsor. These commonly include mutual funds, target-date funds, and sometimes annuity-based options.
The quality and cost of these options can vary significantly by employer. Some plans are simple and low-cost; others are complex and fee-heavy. Knowing where to find the plan’s investment lineup and fee disclosures is often more important than picking individual funds immediately.
Leaving a job or changing employers
While many people in government, education, and nonprofit roles stay with the same employer for long periods, job changes do happen. When they do, what happens to a 403(b) or 457(b) becomes an important practical question.
In general, the account does not disappear when you leave a job. The money you contributed, along with any vested employer contributions, remains yours. What changes is how actively you can interact with the plan going forward.
With a 403(b), leaving an employer often presents similar choices to leaving a 401(k): the account may stay where it is, or it may become eligible to be rolled into another employer plan or an individual retirement account, depending on the rules of both plans involved.
A 457(b) can feel different, particularly in government settings. These plans are commonly used as long-term savings vehicles for employees who expect to stay for a career, but they can still follow you if you leave. The available options depend heavily on whether the plan is sponsored by a government entity or a nonprofit organization, and on the specific plan rules.
Because the rules around access, rollovers, and withdrawals can differ by plan and employer, leaving a job is one of the moments when reviewing the plan documents or speaking with the plan administrator becomes especially important.
Getting oriented without overcomplicating things
When first encountering a 403(b) or 457(b), it helps to focus on a few grounding questions:
- Which plan does my employer offer, and why?
- Are my contributions pre-tax, Roth, or a mix?
- Does my employer contribute anything, and under what conditions?
- Where are the investment options and fee information documented?
- What happens to this account if I change jobs or leave this employer?
403(b) and 457(b) plans are the primary path to building retirement savings through work.
Retirement planning works best when goals come first, even if they are imperfect.
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