401(k) vs 403(b) vs 457
The twenty-first episode of our 401(k) season compares the three workplace retirement plan cousins side by side: the 401(k) of the private sector, the 403(b) of public schools and tax-exempt employers, and the 457(b) of government workers. John, Maria, Melissa and Steve explain who offers which plan and why, how the three plans share a family resemblance in salary deferrals, pre-tax and Roth treatment, and sheltered growth, and where they decisively differ. The episode covers the shared personal deferral ceiling between the 401(k) and 403(b) (twenty four thousand five hundred dollars for twenty twenty six, plus catch-ups) and the completely separate 457(b) limit that lets a dual-eligible teacher, professor, nurse or public employee shelter forty nine thousand dollars of salary in one year across two plans, sixty five thousand dollars at age fifty or older with both catch-ups; the 403(b) fifteen-year service catch-up and the 457(b) three-year special catch-up; employer matches and pension context; loans, hardship rules and the stricter unforeseeable emergency standard; rollover roads; required minimum distributions and Roth options; and the fee and vendor traps of the school 403(b) market. Three clearly labelled invented case studies carry the arithmetic: Rosa, a fictional teacher who discovers she may enroll in both plans at once; Marcus, a fictional nurse whose mid-year move from a nonprofit hospital to a for-profit hospital over-contributes because the 401(k) and 403(b) share one ceiling, contrasted with Denise, a fictional city administrator whose 457(b) limit is untouched by her other plan and whose penalty-free withdrawals after separating at fifty two save two thousand dollars a year across a three-year bridge; and Thomas, a fictional nonprofit executive whose non-governmental 457(b) balance turns out to be an unsecured promise exposed to his employer's creditors. The episode closes with a seven-step checklist, six common mistakes, and a container-first decision framework. Education only — no recommendations, no predictions.
Sources referenced (public, dated): Internal Revenue Service — elective deferral and defined contribution limits for 2026 (Notice 2025-67) and 2025 (Notice 2024-80), guidance on 401(k), 403(b) and 457(b) plans, the fifteen-year service catch-up, the 457(b) special catch-up, excess deferral correction, rollovers, and required minimum distributions in Publications 560, 571 and 575 and the 403(b) and 457(b) pages on irs.gov; U.S. Department of Labor, Employee Benefits Security Administration — ERISA coverage and plan information guidance, on dol.gov. Plan rules on eligibility, investment menus, loans, distributions and normal retirement age vary by plan document and are described in general educational terms; listeners should read their own plan documents, which govern their own accounts, and confirm any decision with a qualified tax professional. The case studies and worked examples are invented and illustrative; the arithmetic examples are teaching calculations using stated assumptions, not forecasts or tax advice.
Audio format: MP3, 128 kbps CBR, 44.1 kHz, mono, -16 LUFS.
This episode is for financial education only and is not investment advice. Narration is AI-generated.
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