401k v. 403b Retirement Plans
Understanding the differences between 401k and 403b plans shouldn't be too
difficult, as they're quite similar in nature and purpose. While the
of employers offer 401k plans, many state run or otherwise nonprofit
organizations offer 403b plans - at their discretion.
It's worthwhile to note that you do not get to select which type of plan you
want, and that over time should you switch employers that the same plan, if
any, will not be guaranteed.
Regardless of whether you elect to enroll into a 401k or 403b plan, you can
expect to pay some type of fees or costs associated with the retirement plan
in which you've created and are contributing to.
A 403b plan in comparison to a 401k plan however can be seen as a disadvantage
since they stand not to accept funding or any form of 'matching' for your
annual or monthly payments to fund your 403b plan. That is, in doing so, per
the Employee Retirement Income Security Act, (ERISA) they would not be
qualified for their tax-deductible and other fee alleviations or deals in
which they currently have through their 403b options and the federal
The federal act known as the Employee Retirement Income Security Act (ERISA)
is in charge of 403b plans, however not 401k plans - understandably, as 403b
plans can also include private organizations, not only nonprofit.
People choose to invest their money and accept deductions for their paychecks
for the sake of a 401k or 403b plan for the simple-fact that, typically, they
are non-taxed and in turn will accumulate more funds at a more rapid rate.
401k plans are considerably more dynamic than 403b plans in that they allow
the account or investment holder to elect various forms of bonds or stocks
directly through the 'host bank', or funding institution for that specific
employer. That is, as different employers easily have different banking or
credit institutions in which they use to 'host' the 401k plans for their
By principle, it's worth noting that 403b plans are typically administered or
protected by insurance companies, while 401k plans on the other hand are
typically administered or maintained - as mentioned above - through mutual
plans and institutions - such as investments, and even with the ability to
interest rates on a case by case basis, such as the amount, etc. Lastly, keep
in mind that unless you're 50 years or older - in which you can earn and
contribute more annually, a $16,500 dollar cap is in effect for those
otherwise under that age.
While the total cap for 401k and 403b plans might vary each year, they
typically fall within an additional or less than $1000 $3000 dollars - if any
fluctuation at all.