A 401(k), a 403(b), and a 457 plan all let you defer up to $24,500 of your paycheck in 2026, but the comparison of these three retirement plans turns on who can use them, how the money is taxed if you touch it early, whether it’s safe from your employer’s creditors, and how easily you can move it when you change jobs.1Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500 The plan you get is determined by your employer, not by preference, so most of this comes down to understanding the rules of the plan you already have or are about to be enrolled in.
Who Offers Each Plan
Private, for-profit companies sponsor 401(k) plans, and they run the range from small businesses to large corporations. Some nonprofits also offer 401(k) plans, though many opt for a 403(b) instead.
The 403(b) is reserved for employees of public schools and organizations that are tax-exempt under section 501(c)(3), which covers nonprofit hospitals, charitable foundations, and religious organizations. Ministers can participate under a separate provision.
State and local government employers offer 457(b) plans. Certain tax-exempt organizations that are not 501(c)(3) entities can also sponsor a 457(b), but only for a select group of management or highly compensated employees. These restricted arrangements are sometimes called “top-hat” plans, and they carry drawbacks that matter later in this article.2Internal Revenue Service. IRC 457(b) Deferred Compensation Plans
2026 Contribution Limits
The baseline elective deferral limit for 2026 is $24,500 for all three plan types. That’s the maximum you can redirect from your paycheck before taxes, or after taxes if you use a Roth option.3Internal Revenue Service. Retirement Topics – Contributions
Age-Based Catch-Ups
If you’re 50 or older by year-end, you can add $8,000 on top of the base, for $32,500 total. SECURE 2.0 introduced a higher tier at ages 60, 61, 62, and 63: an $11,250 catch-up in place of the $8,000, pushing the ceiling to $35,750. Once you turn 64, you revert to the standard $8,000.1Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
457(b) Three-Year Catch-Up
If you’re in a governmental or tax-exempt 457(b) and within three years of the plan’s stated normal retirement age, you may be able to contribute up to double the base limit. For 2026 that’s as much as $49,000 in a single year, capped at the lesser of twice the annual limit or the base plus unused room from earlier years.4Internal Revenue Service. Retirement Topics 457b Contribution Limits You cannot combine this special catch-up with an age-based catch-up in the same year; the plan uses whichever produces the larger number.5Internal Revenue Service. Issue Snapshot – Section 457(b) Plan of Governmental and Tax-Exempt Employers – Catch-Up Contributions
403(b) Fifteen-Year Service Catch-Up
Employees who have worked at least 15 years for the same qualifying 403(b) employer, such as a public school system, hospital, church, or certain health and welfare agency, can contribute an extra $3,000 per year up to a $15,000 lifetime cap. The exact amount comes out of a formula based on years of service and prior contributions.6Internal Revenue Service. Retirement Topics 403b Contribution Limits Unlike the 457(b) special catch-up, this one can stack with the age-based catch-up. When both apply, contributions above $24,500 count against the fifteen-year catch-up first, then against the age-based catch-up.7Internal Revenue Service. 403(b) Plans – Catch-Up Contributions
Roth Options and the New Higher-Earner Rule
All three plan types can offer a Roth option alongside the traditional pre-tax option, though not every employer includes one. Pre-tax lowers your taxable income now and taxes withdrawals later; Roth taxes contributions now and produces tax-free qualified withdrawals. The dollar limit is the same either way.
Starting January 1, 2026, SECURE 2.0 changes this for higher earners. If you earned more than $150,000 in FICA wages during the prior year, every dollar of catch-up contribution to a 401(k), 403(b), or governmental 457(b) must go in as Roth. Your base $24,500 can still be pre-tax. This applies to the age-50 catch-up, the age-60-to-63 enhanced catch-up, and the 403(b) fifteen-year catch-up. Earners at or below $150,000 keep the choice.
Vesting
Your own contributions are always 100% vested from day one. The question is what happens to employer matching or profit-sharing dollars.8Internal Revenue Service. Retirement Topics – Vesting
401(k) and 403(b) plans use one of two federal-limit schedules:
- Cliff vesting: 0% ownership of employer contributions until three years of service, then 100% at once.
- Graded vesting: starts at 20% after two years and reaches 100% after six years.
A “year of service” generally means at least 1,000 hours worked over a 12-month period. Leave before you’re fully vested and you forfeit the unvested employer money.
Governmental 457(b) plans rarely include employer matching, so vesting is usually not a live concern. Non-governmental 457(b) plans work on a different structure entirely, covered under creditor risk below.
Early Withdrawals Before Age 59½
Pulling money out of a retirement plan before 59½ generally triggers a 10% additional tax on top of ordinary income tax. That applies to 401(k) and 403(b) distributions.
Governmental 457(b) plans are the exception, and it’s one of their biggest advantages. When you separate from your government employer, you can withdraw from your 457(b) at any age without the 10% penalty. Regular income tax still applies.9Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions One caveat: if you rolled money into your 457(b) from a 401(k) or IRA, that portion keeps its 10% penalty exposure if you pull it out before 59½.
SECURE 2.0 Penalty Exceptions
SECURE 2.0 added new situations in which 401(k) and 403(b) participants can access money before 59½ without the 10% penalty:
- Terminal illness certified by a physician, no dollar cap.
- Domestic abuse: the lesser of $10,000 (inflation adjusted) or 50% of the account, repayable within three years.
- Emergency personal expenses: one withdrawal of up to $1,000 per year, with a three-year gap before another unless the prior one is repaid.
- Federally declared disasters: up to $22,000 within 180 days of the qualifying event, repayable over three years.
These are available only if your plan adopts them. Not every employer will, so check with your plan administrator before counting on any of them.
Hardship Withdrawals and Loans While Still Working
401(k) and 403(b) plans can allow hardship distributions for an “immediate and heavy financial need.” IRS safe harbor categories include medical bills, costs to prevent eviction or foreclosure, funeral expenses, tuition, and certain home repairs.10Internal Revenue Service. Retirement Topics – Hardship Distributions The 403(b) rules track the 401(k) rules closely.11Internal Revenue Service. Retirement Plans FAQs Regarding Hardship Distributions
The 457(b) uses a tighter standard called “unforeseeable emergency”: severe financial hardship from illness, accident, casualty loss, or similar circumstances beyond your control. You must show that insurance, liquidating other assets, or stopping contributions wouldn’t fix the problem.12Internal Revenue Service. Employee Plans News – Unforeseeable Emergency Distributions from 457b Plans Buying a home or paying tuition typically won’t qualify under a 457(b) the way they can under a 401(k) hardship.
Loans are another option if the plan permits them. Federal law allows loans from 401(k), 403(b), and governmental 457(b) plans up to the lesser of $50,000 or 50% of your vested balance, with a floor of $10,000 if your balance is between $10,000 and $20,000. Repayment runs five years with substantially equal, at-least-quarterly payments.13Internal Revenue Service. Retirement Plans FAQs Regarding Loans Miss a payment and the outstanding balance becomes a taxable distribution, potentially with the 10% penalty.
Non-governmental 457(b) plans do not allow loans, because the money legally belongs to the employer until it’s distributed.14Internal Revenue Service. Non-Governmental 457(b) Deferred Compensation Plans
Rollovers When You Change Jobs
A direct rollover, in which the plan sends funds straight to the new account, avoids the mandatory 20% federal withholding that kicks in when the check is paid to you.15Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions If you take receipt of the money, you have 60 days to deposit the full amount into an eligible plan or the whole distribution becomes taxable, with a possible 10% penalty on top.16Internal Revenue Service. Topic No. 413, Rollovers from Retirement Plans
What you can roll into where depends sharply on plan type:
- 401(k): can go into another 401(k), a 403(b), a governmental 457(b), or a traditional IRA.
- 403(b): same broad compatibility as a 401(k).
- Governmental 457(b): can roll into a 401(k), 403(b), traditional IRA, or another governmental 457(b).17Internal Revenue Service. Rollover Chart
- Non-governmental 457(b): cannot be rolled into an IRA, 401(k), or 403(b). Transfers are limited to another non-governmental 457(b).18Internal Revenue Service. Comparison of Tax-Exempt 457(b) Plans and Governmental 457(b) Plans
That last bullet is one of the biggest practical disadvantages of the non-governmental 457(b). If your next employer doesn’t offer a compatible plan to receive the transfer, income tax comes due on the entire balance when it becomes available at separation.
Required Minimum Distributions
You must begin required minimum distributions (RMDs) at age 73 under current law. The first RMD is due by April 1 of the year after you turn 73; each subsequent one is due by December 31.19Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs)
All three plan types offer a still-working exception: if you’re still employed by the plan sponsor and don’t own more than 5% of the business, you can delay RMDs until April 1 of the year after you actually retire. IRAs don’t have this exception, which is a reason some participants keep money in the employer plan past 73.
Miss an RMD and the excise tax is 25% of the shortfall, dropping to 10% if you correct it within the allowed window. SECURE 2.0 also eliminated RMDs for designated Roth accounts inside employer plans starting in 2024, so Roth 401(k), Roth 403(b), and Roth 457(b) balances no longer force distributions during the account holder’s lifetime.
Creditor Protection and Employer Bankruptcy
This is where the three plans diverge most severely, and where the governmental-versus-non-governmental split inside the 457(b) matters most.
401(k) plans fall under ERISA, which provides strong federal protection against creditors. In bankruptcy, ERISA-qualified plan assets are generally exempt from the debtor’s estate, with exceptions for federal tax liens and certain domestic relations orders.
Most 403(b) plans at private nonprofits are also ERISA-covered and get similar protection. However, 403(b) plans sponsored by government employers and churches are exempt from ERISA, which may reduce creditor protection depending on state law.
Governmental 457(b) plans hold assets in trust for participants and are generally protected in ways similar to other qualified plans.
Non-governmental 457(b) plans are a different situation entirely. The assets are not held in trust. They remain the employer’s property and are available to the employer’s general creditors if the organization is sued or goes bankrupt. Even when contributions sit in a “rabbi trust,” a common arrangement, employees rank below general creditors.14Internal Revenue Service. Non-Governmental 457(b) Deferred Compensation Plans With this plan type, your retirement savings are only as safe as your employer’s finances.
Doubling Up: 403(b) Plus Governmental 457(b)
The 457(b) has its own separate contribution limit. Deferrals to a 457(b) don’t count against a 401(k) or 403(b) limit, and vice versa.20Internal Revenue Service. 3Internal Revenue Service. Retirement Topics – Contributions