Erin Bendig
In 2025, 403(b) contribution limits exceeded 2024 limits by a welcome $500. That's helpful (and a big boost) for certain employees of schools and other tax-exempt organizations who can participate in a 403(b) retirement plan, including teachers, professors, school administrators and hospital workers.
For those planning retirement, here's what you need to know about the IRS 2025 403(b) contribution limits.
2025 403(b) contribution limits
The maximum amount an employee can contribute to a 403(b) retirement plan for 2025 is $23,500, up from $23,000 in 2024.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
If you're 50 or older, you can contribute an additional $7,500 as a "catch-up" contribution, bringing your contribution total to $31,000. Plus, under a change made in SECURE 2.0, a higher catch-up contribution limit applies for employees aged 60, 61, 62 and 63 who participate in these plans. For 2025, this higher catch-up contribution limit is $11,250 (instead of $7,500).
As with a traditional 401(k) account, money going into a 403(b) through payroll deductions hasn't yet been taxed. The contributions and earnings grow tax-free until you withdraw them — usually in retirement. You can pull money out of the account without a 10% penalty if you're at least 59-1/2. Withdrawals are subject to regular income tax.
15-year catch-up contributions and employer contributions to 403(b)s
For 2025, the single taxpayer contribution limit for a 403(b) plan is $23,500, and $70,000 for the combined employee and employer contributions.
Starting this year, those between the ages of 60 and 63 are eligible to contribute up to $11,250 as a super catch-up contribution. This means if you are 50 to 59 or 64 and older you can contribute up to $31,000 in 2025. Those 60 to 63 can contribute up to $34,750 in 2025.
Some employers also permit both younger and older workers to make catch-up contributions under the so-called 15-year service rule. Under this provision, if you have 15 or more years of service at the same employer, you can contribute an additional $3,000 a year if you have not maxed out your 403(b) contributions in previous years. The 15-year service catch-up contribution, however, has a $15,000 lifetime limit. But then, most K-12 school districts don't offer this 15-year service rule.
What are the best investments in 403(b)s?
403(b) plans are filled with high-cost annuities and other insurance products. Often, 403(b) participants pay high fees. According to the U.S. Government Accountability Office, even small fees can "significantly erode the amount of savings people have to fund their retirement." Certain administrative fees can be more than 2% each year, on top of individual investment option fees that can sometimes also be more than 2% each year.
Review your investment options to find the best insurance company or mutual fund provider within your plan to meet your needs. The website 403bcompare.com, which provides information on California 403(b) plans, lists fees, investment options and performance information for plans offered in the state's local school districts.
Even if you don't work in California, the site is a valuable comparison tool because many of the investment companies listed offer similar 403(b) plans in other states.
You can also switch investments and financial firms within your plan. First, stop making contributions. Why? Because each contribution potentially has its own surrender charge, which is a fee you'll pay if you sell the investment within several years. By stopping contributions, you reduce the amount you'll pay in surrender charges. Next, take time to figure out the costs and benefits of switching investments.
If you notice any of the big names, such as Fidelity or Vanguard, look into what they have to offer, and keep in mind any surrender charges you may have to pay. It may make more sense to place any new contributions with a new provider and wait to switch the older investment once the surrender charges are less.
Finally, talk to your plan administrator to find out when you can switch. Some plans are liberal and allow employees to switch anytime, whereas others permit changes only once or twice a year.
403(b) alternatives
As an alternative to a 403(b), consider opening a Roth IRA with automatic contributions. In 2025, you can contribute up to $7,000 a year to a Roth IRA, plus another $1,000 if you're 50 or older. This is unchanged from 2024. You can withdraw your contributions at any time without penalty or taxes but you must be at least 59-1/2 and have owned the Roth for at least five years.
Pros and Cons of a 403(b)
No one plan works best for everyone. And while there are many benefits to 403(b) plans, there are also a few key disadvantages.
Pros of a 403(b) plan
- Pre-tax contributions: Contributions to a 403(b) plan are made before income tax is deducted.
- Employer matching: Some employers match employee's contributions up to a certain percentage.
- High contribution limits: In 2025, employees can contribute $23,500 (up from $23,000 in 2024), with a catch-up contribution of $7,500 for people age 50 or older. If you are between the ages of 60 and 63 you can contribute up to $11,250 as a super catch-up contribution.
- Tax-deferred growth: With a 403(b) plan, not only are your contributions made pre-tax, but the growth of your investments is also tax-deferred.
- Long-term employee benefits: If you've worked for a qualifying organization for at least 15 years, and your average annual contribution was less than $5,000, you may qualify for an additional catch-up contribution of up to $3,000 a year, above the standard limit.
Cons of a 403(b) plan
- Limited investment options: Many (but not all) 403(b) plans are annuity-based, meaning they may be limited to the products offered by insurance companies.
- Potential for high fees: 403(b) plans, especially those that are annuity-based, can incur high fees, including investment management fees, administrative fees and surrender charges.
- Early withdrawal penalties: If you withdraw funds before age 59½, you'll may have to pay a 10% early withdrawal penalty on top of regular income taxes.
- Employer matching: Employer matching of employee contributions is not mandatory.
- Complex rules: 403(b) plans can be complex, with different rules and restrictions depending on your employer and plan provider.
What is the Difference Between a 401(k) and a 403(b)?
While both a 401(k) and 403(b) have similarities, they are also very different.
| Row 0 - Cell 0 | 401(k) | 403(b) |
Cost | Higher employer administrative costs | Lower administrative costs |
Eligibility | Employees of private companies | Employees of non-profit and tax-exempt companies |
Additional Contributions | Catch-up contributions for employees 50 and older | Additional $3,000 after 15-years of employment, plus catch-up contributions for employees 50 and older |
Employer Match | Yes | Yes, but not common |
Investment Options | Mutual Funds, annuities, stocks and bonds | Mutual funds and annuities |
Bottom line
Like a 401(k), a 403(b) lets you save a portion of each paycheck for your retirement. Plus, your employer may match some or all of your contributions. A 403(b) offers high contribution limits, employer matching, shorter vesting schedules and extra catch-up contributions. But, some 403(b) accounts charge high fees, there may be penalties on early withdrawals and they are not always subject to the Employment Retirement Income Security Act (ERISA).
Related Content
-
Amazon Surge Sends S&P 500, Nasdaq Higher to Start November: Stock Market TodayAmazon inked a $38 billion cloud deal with OpenAI, which sent the stock to the top of the Dow Jones on Monday.
-
If You'd Put $1,000 Into Home Depot Stock 20 Years Ago, Here's What You'd Have TodayHome Depot stock has been a buy-and-hold banger for truly long-term investors.
-
I Need to Free Up $1,000 in My Monthly Budget, and I've Already Given Up Starbucks and Dining Out. What Else Can I Do?Here are some creative ways to save up to $1,000 a month, even if you feel like you've already made all of the obvious cuts.
-
Eight Steps to Help Get You Through the Open Enrollment Jungle at WorkWondering how to survive open enrollment this year? Arm yourself with these tools to cut through the process and get the best workplace benefits for you.
-
What You Learn Becoming Your Mother's Financial CaregiverWriter and certified financial planner Beth Pinsker talks to Kiplinger about caring for her mother and her new book.
-
I Want to Help Pay for My Grandkids' College. Should I Make a Lump-Sum 529 Plan Contribution or Spread Funds out Through the Years?We asked a college savings professional and a financial planning expert for their advice.
-
Seven Moves for High-Net-Worth People to Make Before End of 2025, From a Financial PlannerIt's time to focus on how they can potentially reduce their taxes, align their finances with family goals and build their financial confidence for the new year.
-
I'm a Financial Planner: These Are the Seven Tiers of Retirement Well-BeingLet's apply Maslow's hierarchy of needs to financial planning to create a guide for ranking financial priorities.
-
Four Spa Retreats for Well-Heeled RetireesWe hand-picked these U.S. spa retreats for their serenity, amenities and dedication to the comfort of older travelers. All are located in the Continental U.S.
-
Four Military Benefits That Have Helped My FamilyMilitary life can be challenging for servicemembers and their families, but they're offered some significant financial benefits to help cushion the blow.
