Common Questions About 403(b) Plans and How They Work

Can I move money from my 403(b) to an IRA?

Yes. You can roll over funds from a 403(b) into a traditional IRA or a Roth IRA, though the rules differ slightly. A direct rollover—where the 403(b) custodian sends money straight to the IRA custodian—avoids taxes and penalties. If you take the money yourself, you have 60 days to deposit it into an IRA or face income tax on the full amount plus a 10% penalty if you are under 59½.

Rolling to a Roth IRA converts the money to after-tax status, meaning you owe income tax on the amount converted in that tax year. A traditional IRA rollover keeps the money in pre-tax form. Check with your 403(b) plan administrator about their rollover procedures—some require paperwork, and a few restrict rollovers until you leave the employer.

Key Takeaways

• A direct rollover from your 403(b) to an IRA avoids the 60-day deadline and prevents accidental tax withholding on the transfer.
• When you change jobs, your 403(b) balance stays in the account and continues to grow tax-deferred, even though you cannot add new money.
• Early withdrawals before age 59½ trigger a 10% penalty plus income tax unless you meet a narrow exception like disability or separation from service at 55 or older.
• The IRS sets annual contribution limits that change each year; in 2024 the limit is $23,500 for employees under 50, plus catch-up contributions if you are 50 or older.
• Required minimum distributions begin at age 73 and are calculated based on your age and account balance using an IRS life expectancy table.

What happens to my 403(b) if I change jobs?

Your money stays in the account and continues to grow tax-deferred. You cannot make new contributions once you leave the employer, but you keep what you have already saved. You can leave it there, roll it to an IRA, roll it to your new employer's retirement plan if one exists, or—if you are 55 or older and separated from service—begin withdrawals without the usual 10% early withdrawal penalty.

Leaving money in an old 403(b) is often the simplest choice if the plan has low fees and good investment options. Some people consolidate multiple old accounts into one IRA to simplify record-keeping. Ask your new employer whether they offer a 403(b), 401(k), or other plan, since rolling into a new employer plan may give you access to different investment choices or lower costs.

Can I withdraw money from my 403(b) before retirement?

You can withdraw money, but you will owe income tax on the amount withdrawn plus a 10% penalty if you are under 59½, unless a narrow exception applies. The main exceptions are disability, a series of substantially equal payments, or separation from service at age 55 or older. Some plans allow loans instead—you borrow from your own balance and repay yourself with interest, avoiding the tax hit.

A few 403(b) plans offer hardship withdrawals for immediate and heavy financial need, such as medical bills or preventing eviction, but these still trigger income tax and the 10% penalty. Before withdrawing, explore whether your plan allows loans or whether you have other savings you could tap instead, since withdrawals permanently reduce your retirement balance.

How much can I contribute to a 403(b) each year?

The annual contribution limit changes each year and is set by the IRS. In 2024, the limit is $23,500 for employees under 50. If you are 50 or older, you can contribute an additional $7,500 as a catch-up contribution, for a total of $31,000. These limits apply to your own deferrals only and do not include employer contributions.

Some 403(b) plans—particularly those in schools and nonprofits—allow an additional catch-up contribution if you have worked there for 15 years or more. This special rule can add up to $3,000 per year, though it has a lifetime cap. Check your plan documents or ask your benefits administrator whether this applies to you, since not all plans offer it.

Do I have to take withdrawals from my 403(b) at a certain age?

Required minimum distributions (RMDs) begin at age 73 for most people, based on your age and account balance. The IRS calculates the minimum amount you must withdraw each year using a life expectancy table. If you do not take the full RMD, you owe a penalty on the shortfall.

If you are still working and do not own more than 5% of the company, some 403(b) plans allow you to delay RMDs until you actually retire. This is called the "still-working exception." Once you retire or separate from service, RMDs begin the following year. Your plan administrator will calculate your RMD and can help you understand the withdrawal schedule.

What is the difference between a 403(b) and a 401(k)?

Both are employer-sponsored retirement plans with the same contribution limits and tax treatment, but they serve different employers. A 403(b) is for employees of schools, hospitals, nonprofits, and some government agencies. A 401(k) is for private companies and some government employers. The investment options often differ—403(b)s historically offered annuities, while 401(k)s typically offer mutual funds, though this distinction has blurred.

Vesting rules and loan provisions can also differ between plans. A 403(b) may vest your employer contributions immediately, while a 401(k) might use a graded schedule. If you work for an employer that offers a 403(b), that is your only choice through that employer. If you have worked at multiple employers, you may have both types of accounts, and you can roll them into a single IRA to consolidate.

Can my employer change or eliminate my 403(b) plan?

Yes. An employer can freeze contributions, change investment options, or terminate the plan entirely. If the plan is terminated, your money does not disappear—you keep what you have saved, and the employer must give you options to roll it over or take a distribution. The employer cannot take back money they have already contributed on your behalf.

If your employer freezes the plan, you stop making contributions but your existing balance remains invested and continues to grow. Some employers freeze plans temporarily during restructuring or switch to a different plan type. Ask your benefits administrator about any changes to your plan and what options you have if contributions are frozen or the plan is terminated.

Frequently Asked Questions

Can I move money from my 403(b) to an IRA?

Yes. A direct rollover—where the 403(b) custodian sends money straight to the IRA custodian—avoids taxes and penalties. If you take the money yourself, you have 60 days to deposit it into an IRA or face income tax on the full amount plus a 10% penalty if you are under 59½.

What happens to my 403(b) if I change jobs?

Your money stays in the account and continues to grow tax-deferred. You cannot make new contributions once you leave the employer, but you keep what you have already saved. You can leave it there, roll it to an IRA, roll it to your new employer's plan, or begin withdrawals at 55 or older without the 10% penalty.

Can I withdraw money from my 403(b) before retirement?

You can withdraw money, but you will owe income tax plus a 10% penalty if you are under 59½, unless you meet an exception like disability or separation from service at 55 or older. Some plans allow loans instead, where you borrow from your own balance and repay yourself with interest.

Do I have to take withdrawals from my 403(b) at a certain age?

Required minimum distributions begin at age 73. The IRS calculates the minimum amount you must withdraw each year using a life expectancy table. If you are still working and do not own more than 5% of the company, some plans allow you to delay RMDs until you actually retire.

What is the difference between a 403(b) and a 401(k)?

Both have the same contribution limits and tax treatment, but a 403(b) is for schools, hospitals, nonprofits, and some government agencies, while a 401(k) is for private companies. Investment options often differ—403(b)s historically offered annuities, while 401(k)s typically offer mutual funds.