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What is a 403(b)?

A 403(b) is an employer sponsored retirement savings plan that allows you to save pre-tax dollars for your retirement.

A Roth 403(b) permits only after-tax contributions but allows you to diversify your tax risk by letting eligible participants make tax-free withdrawals after retirement.

The IRS limits the amount you can contribute each year

In 2021:  

  • You can contribute up to $19,500.  This limit is applicable if you're under age 50 as of December 31st (referred to as the "elective deferral amount").  
  • If you are 50 or older any time during the calendar year you can contribute an additional $6,500.  That means you can contribute up to $26,000 if you're age 50 or older (referred to as "catch-up contributions")

  • Up to 100% of your includable compensation (if less than the elective deferral limit). Includable compensation is your gross compensation less any pre-tax deductions.


Employer contribution limit:  

In 2021, for those with employer matches or other employer contributions, the limit is $58,000 or 100% of compensation (whichever is less). That means that you can contribute up to $19,500 ($26,000 if you're over 50) and an employer can add up to another $37,500.  

15-Year Rule

Employees with 15 years of service with their current employer and an annual average contribution of less than $5,000 per year are eligible for an additional $3,000 contribution per year up to a lifetime maximum catch up of $15,000. This is known as the 15-year rule.

For participants eligible for both the age 50 catch-up and the 15-year rule, the IRS will apply contributions above the regular limit first to the 15-year rule. Employers are not required to make this provision available.