What is a 403(b) plan and how is it different from a 401(k)?

A 403(b) plan is a tax-advantaged retirement account for employees of public schools, nonprofits, and some hospitals. It works almost identically to a 401(k) — the 2026 contribution limit is $23,500 ($31,000 with catch-up at 50+). The key difference is that 403(b) plans often have a 15-year catch-up provision allowing long-term employees to contribute an extra $3,000 per year, and historically had fewer investment options (though this has improved).

What is a 457(b) plan?

A 457(b) plan is a deferred compensation plan for state and local government employees and some nonprofits. The 2026 contribution limit is $23,500. The major advantage: there is no 10% early withdrawal penalty — you can withdraw at any age after separating from your employer, making it one of the best early retirement tools available. Government 457(b) plans also have a unique double-limit feature letting you contribute up to $47,000 in the final 3 years before your plan's normal retirement age.

What is a Solo 401(k) and who qualifies?

A Solo 401(k) — also called an Individual 401(k) or Self-Employed 401(k) — is a 401(k) plan for self-employed individuals with no full-time employees other than a spouse. In 2026, you can contribute up to $23,500 as an employee, plus up to 25% of net self-employment income as the employer, for a combined maximum of $70,000. It is the most powerful retirement account available to sole proprietors and freelancers.

What is the Thrift Savings Plan (TSP)?

The Thrift Savings Plan is the retirement savings plan for federal government employees and uniformed service members. It functions like a 401(k) with a 2026 contribution limit of $23,500 ($31,000 with catch-up). The TSP offers some of the lowest expense ratios of any retirement plan in the country — as low as 0.048% — through its core index funds covering US stocks, international stocks, bonds, and government securities.

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

If you work two jobs where one offers a 401(k) and the other offers a 403(b), the IRS limits your combined employee elective deferrals to $23,500 in 2026 — not $23,500 per plan. However, each plan's $70,000 total limit (employee + employer) is calculated separately, meaning employer contributions can effectively allow you to save more than $70,000 combined across both plans.

Workplace Retirement Plans Guide 2026: 403(b), 457(b), TSP, Solo 401(k) & More

Not everyone saves for retirement through a 401(k). Teachers, government workers, nonprofit employees, self-employed individuals, and military service members all have access to specialized retirement plans — many of which offer advantages the standard 401(k) cannot match.

Overview: Workplace Retirement Plan Comparison

Plan	Who It’s For	2026 Employee Limit	Early Withdrawal Penalty
401(k)	Private sector employees	$23,500 / $31,000 (50+)	10% before 59½
403(b)	Schools, nonprofits, hospitals	$23,500 / $31,000 (50+)	10% before 59½
457(b) Government	State/local government	$23,500 / $47,000 (near retirement)	None after separation
457(b) Nongovernmental	Nonprofits	$23,500	10% before 59½
TSP	Federal employees, military	$23,500 / $31,000 (50+)	10% before 59½
Solo 401(k)	Self-employed, no employees	$70,000 combined	10% before 59½
SEP IRA	Self-employed, small business	$70,000	10% before 59½
SIMPLE IRA	Small businesses under 100 employees	$16,500 / $20,000 (50+)	25% if within 2 years
Pension	Government, some private	Defined benefit	Varies by plan

403(b) Plans: Retirement for Education and Nonprofit Workers

A 403(b) plan works nearly identically to a 401(k). Employees of public schools, 501(c)(3) nonprofits, churches, and certain hospitals are eligible.

2026 403(b) contribution limits:

Under 50: $23,500
Age 50+: $31,000 (with $7,500 catch-up)
15-year catch-up: Additional $3,000/year for employees with 15+ years of service and average contributions below $5,000/year (lifetime cap $15,000)

The 403(b) historically offered limited investment options — often annuities — but modern plans at larger institutions now include mutual funds and ETFs comparable to 401(k) plans.

457(b) Plans: The Early Retiree’s Secret Weapon

The 457(b) plan’s defining advantage is the absence of the 10% early withdrawal penalty. After separating from your employer — at any age — you can withdraw from a governmental 457(b) and pay only ordinary income taxes.

Double-limit provision: In the final 3 years before your plan’s normal retirement age, government 457(b) participants can contribute up to $47,000 (double the standard limit). This applies if you did not max contributions in prior years.

Stacking with a 403(b): Many government and nonprofit workers have access to both a 403(b) and a 457(b). The IRS treats these as separate limits — you can max both, contributing up to $47,000 per year ($62,000 with catch-ups), in addition to any employer contributions.

Thrift Savings Plan (TSP): Federal and Military Retirement

The TSP is one of the best retirement plans in the country for its ultra-low expense ratios. The five core funds:

TSP Fund	What It Tracks	Expense Ratio (approx.)
G Fund	Government securities	~0.048%
F Fund	Bloomberg US Aggregate Bond Index	~0.048%
C Fund	S&P 500	~0.048%
S Fund	Dow Jones US Completion Index (small/mid cap)	~0.048%
I Fund	MSCI EAFE (international)	~0.048%
L Funds	Target-date lifecycle funds	~0.048%

FERS employees (hired after 1987) receive a 1% automatic contribution plus matching up to 4% more — a total potential employer match of 5%.

Solo 401(k): Maximum Savings for the Self-Employed

A Solo 401(k) is the most powerful retirement plan available to self-employed individuals with no full-time employees. You act as both employee and employer, allowing contributions in both capacities.

2026 Solo 401(k) limits:

Employee elective deferral: up to $23,500 ($31,000 if 50+)
Employer profit-sharing: up to 25% of net self-employment compensation
Combined maximum: $70,000 ($77,500 if 50+)

Example: A freelancer with $150,000 net self-employment income can contribute $23,500 as employee + $37,500 (25% of $150,000) as employer = $61,000 total.

Solo 401(k)s also allow a Roth option and participant loans, which SEP IRAs do not.

Pension Plans: Defined Benefit in a Defined Contribution World

Traditional pension plans (defined benefit plans) promise a specific monthly payment in retirement based on years of service and final salary — the employer bears the investment risk.

Pensions are now rare in the private sector but remain common for:

Federal employees (FERS basic benefit)
State and local government workers
Military service members (20-year cliff vesting)
Some unionized industries (construction, transportation)

Military retirement (20-year cliff): Service members who serve at least 20 years receive 40–100% of their base pay as a monthly pension for life, depending on years served and the retirement system (Legacy, BRS, or REDUX).

401(k) vs. 403(b) vs. 457(b): Which Is Better?

For educators and nonprofit workers who have access to both a 403(b) and a 457(b), the optimal strategy is to fund both. The 457(b)’s no-penalty early withdrawal feature makes it particularly valuable for anyone considering retiring before 59½. Max the 457(b) first if early retirement is the goal.

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Written by WealthVieu

WealthVieu researches and writes data-driven personal finance guides using primary sources including the IRS, Bureau of Labor Statistics, Federal Reserve, and Census Bureau.

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