457(b) vs 403(b) Public Sector Retirement
**403(b)** plans serve schools and nonprofits—often with annuity vendors. **457(b)** plans serve state and local government—unique penalty-free withdrawals after separation from service, still taxable.
Step by step
1. Check both plans
Some employers offer 403(b) and 457(b)—you may contribute to each.
2. Compare fees
403(b) annuities can carry high insurance wraps—prefer low-cost funds.
3. Model separation withdrawal
457(b) no 10% penalty after leave—still income tax.
457(b) vs 403(b)
Eligibility is employer-type driven—not employee choice.
- 403(b): Nonprofit/education; vendor menus vary widely.
- 457(b): Government; early access after job end without 10% penalty.
Use our calculators
Common mistakes
- High-fee 403(b) annuity
- Confusing 457(b) penalty-free with tax-free
FAQ
Are limits stacked?
If eligible for both, separate elective deferral limits may apply—verify IRS year rules.