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Who Has a 403(b)?
If you work in education (public or private K-12, colleges, universities), healthcare (hospitals, health systems, clinics), or the nonprofit sector (foundations, social service organizations, religious organizations), your employer likely offers a 403(b) plan instead of a 401(k). The 403(b) is essentially the education and nonprofit world’s version of the 401(k), with a few important differences.
The Problem with Many 403(b) Plans
Historically, 403(b) plans were dominated by insurance company products — specifically, variable and fixed annuities. Many school districts and hospitals still default employees into annuity products that carry significantly higher fees than comparable mutual funds. These fees can include mortality and expense charges, administrative fees, and surrender charges for early withdrawal.
A teacher with $200,000 in a 403(b) variable annuity with 2% total annual costs, compared to an IRA invested in index funds at 0.10% annual cost, loses approximately $165,000 over 20 years at a 7% gross return. This is why 403(b) rollovers are particularly impactful for many education and healthcare workers.
When Should You Roll Over Your 403(b)?
Consider rolling over when:
- You are leaving your current employer for another job or retirement
- Your plan investments are primarily insurance annuities with high fees
- You want access to low-cost index funds not available in your plan
- You want to consolidate multiple retirement accounts
- You want to simplify RMD calculations in retirement
Stay in your 403(b) when your plan offers excellent low-cost mutual funds, you are close to retirement and appreciate the stability, or you need the 15-year catch-up contribution option (available only to longtime employees).
403(b) Contribution Limits 2026
The 403(b) contribution limits for 2026 are the same as 401(k):
- Standard limit: $23,500
- Age 50+ catch-up: $31,000 total
- Age 60-63 enhanced catch-up (SECURE 2.0): $34,750 total
- 15-year catch-up: Additional $3,000/year for eligible long-service employees (max $15,000 lifetime)
The 15-year catch-up is unique to 403(b) plans — no equivalent exists in 401(k) plans.
How to Roll Over Your 403(b) to an IRA: Step by Step
- Leave your employer (or confirm your plan allows in-service rollovers)
- Open a Traditional IRA at a low-cost provider (Fidelity, Vanguard, Schwab)
- Contact your 403(b) plan administrator and request a direct rollover
- Provide your new IRA account number and custodian details
- Watch for surrender charges on annuity contracts — these may delay your rollover for years if you are still in the surrender period
- Confirm receipt of funds in your new IRA
- Invest the rolled funds in your chosen low-cost index funds
Use the 403(b) Rollover Calculator to estimate your fee savings over your retirement timeline.
457(b) Plans: The Bonus Plan for Educators and Government Workers
Many public school employees and government workers also have access to a 457(b) deferred compensation plan with a completely separate contribution limit. In 2026, you can contribute up to $23,500 to a 457(b) in addition to your 403(b) contributions — potentially doubling your annual retirement savings. Governmental 457(b) plans also have no early withdrawal penalty, which is a significant advantage.
FAQ
Do I have to roll over my 403(b) when I leave my school or hospital?
No. You can leave funds in your former employer’s 403(b) as long as your balance exceeds $7,000. However, reviewing whether to roll over as you transition jobs is wise and often financially beneficial.
Can I roll my 403(b) into my new employer’s 401(k)?
Yes. A 403(b) can be rolled into a 401(k) that accepts incoming rollovers. Contact your new employer’s plan administrator to confirm they accept 403(b) rollovers and get the acceptance paperwork.
What is a 403(b) surrender charge?
A surrender charge is a fee imposed by insurance annuity contracts for early withdrawal within a specified period, often 7 to 10 years. If you are within the surrender charge period, you may face significant fees to roll over. Ask your plan administrator for your specific contract terms before initiating a rollover.
Are 403(b) plans as safe as 401(k) plans?
ERISA-covered 403(b) plans at private employers have the same federal legal protections as 401(k) plans. Governmental 403(b) plans (most school districts) are not subject to ERISA. Your contributions are still held in trust and protected from your employer’s creditors, but ERISA’s specific fiduciary rules do not apply to governmental plans.
Can a retired teacher do a Roth conversion of their 403(b)?
Yes. After leaving employment, you can roll your traditional 403(b) to a Traditional IRA and then convert portions to a Roth IRA over time. This is a powerful strategy for retirees with pensions who expect steady income but want to build a tax-free bucket for legacy or supplemental income.
Written by Alex Porter | Updated April 2026 | For educational purposes only.