403(b) Calculator Explained

The teacher's 401(k), with two quirks that matter

A 403(b) is the retirement plan that public-school teachers, state-university professors, hospital workers, ministers, and nonprofit staff pay into instead of a 401(k). Mechanically the two plans are almost identical — same $23,500 employee deferral cap, same combined $70,000 annual addition limit, same compound-growth maths to project a balance at age 65 — but the menu of investments is narrower, the fee structure is historically worse, and there is one obscure catch-up provision (the 15-year service rule under §402(g)(7)) that 401(k) savers do not get. The 403(b) calculator handles the projection in one step; this article is the long version of how the plan actually works, what the calculator is doing under the hood, and where the real-world decisions sit.

We walk the §402(g), §414(v), §415(c) and §401(a)(17) limits, the future value of an ordinary annuity (which is what the projection is), the Traditional vs Roth decision, the fee-trap that most 403(b) participants do not realise they are in, and the withdrawal rules that decide when you can actually touch the money. Worked example with the calculator embedded. All figures are 2025 IRS values from Notice 2024-80.

What a 403(b) is, in one paragraph

Section 403(b) of the Internal Revenue Code authorises a tax-sheltered annuity plan (sometimes still called a TSA) for employees of public schools, churches, and §501(c)(3) tax-exempt organisations. It is the public-sector and nonprofit cousin of the 401(k), and it predates it — 403(b) plans were created in 1958, twenty years before the 401(k) provision was added in 1978. Eligible employers are K-12 districts, state universities, community colleges, hospitals, religious bodies, and most charitable nonprofits. Eligible employees are everyone the employer pays under that umbrella — teachers, administrators, support staff, ministers, nurses, hospital technicians, and nonprofit office workers. Private-sector for-profit employees do not qualify for a 403(b); they get a 401(k) or a SEP-IRA instead. The 403(b) calculator applies all the 2025 contribution limits automatically, so the projection is what the IRS would actually let you contribute — not just what your input percentages multiply out to.

The four limits the calculator enforces

Four IRS limits shape every 403(b) projection. The calculator caps each input so you cannot accidentally project a balance that the law would not let you accumulate.

§402(g): employee elective deferral — $23,500 (2025)

The amount you can defer out of salary into the 403(b) on a pre-tax or Roth basis. For 2025 the limit is $23,500. If you are 50 or older, the §414(v) standard catch-up adds $7,500, taking your limit to $31,000. SECURE 2.0 added a "super catch-up" of $11,250 for anyone aged 60, 61, 62, or 63 in 2025, bringing their cap to $34,750 — this snaps back to the standard $7,500 catch-up at age 64. The calculator caps your employee percentage at whichever limit applies for your current age and flags the cap in the results if your input would exceed it.

§401(a)(17): compensation limit — $350,000 (2025)

Only the first $350,000 of salary counts for employer contributions. If your salary is above $350,000, the calculator caps the salary used for the employer match at $350,000 (your own elective deferral is independent of this — the §402(g) dollar cap above always wins on the employee side). Most 403(b) participants never approach this, but a tenured medical-school professor or a hospital CFO can.

§415(c): total annual addition — $70,000 (2025)

The combined cap on employee plus employer contributions in a single year: $70,000, or $77,500 with the 50+ catch-up. The cap binds for high earners with generous employer contributions — for example, a $350,000 salary with a 15% employer non-elective contribution would put employer alone at $52,500, leaving only $17,500 of employee deferral room before the §415(c) cap binds (well below the $23,500 §402(g) cap). The calculator applies §415(c) after both individual limits and warns when it has reduced your total addition.

§402(g)(7): 15-year service catch-up — up to $3,000/year, $15,000 lifetime

The 403(b)-only catch-up that 401(k) savers do not get. Employees with at least 15 years of service at the same eligible 403(b) employer may be allowed an extra $3,000/year of elective deferral, capped at $15,000 in cumulative lifetime use, on top of the standard §402(g) limit. The plan document must permit it (many do not). The calculator does not model this directly because it is plan-specific and lifetime-capped; if you qualify and your plan allows it, raise your employee percentage to reflect the extra dollars and the calculator will warn if you exceed the §415(c) ceiling.

How the projection maths works

The headline figure — your 403(b) balance at retirement — is the future value of an ordinary annuity. You contribute a fixed amount each year, that amount earns an assumed return, and the balance compounds until you stop contributing. The formula is:

FV = C × ((1 + r)ⁿ − 1) / r

where C is the total annual addition (employee plus employer, after all the caps above), r is the expected annual return as a decimal, and n is years until retirement. When r is zero the formula collapses to C × n. The calculator holds salary constant for the projection horizon — it does not model salary inflation or step-ups, partly because they are largely cancelled by consumer-price inflation in real terms, and partly because piling more assumptions onto a 30-year projection compounds estimation error rather than removing it. If you want a real-terms answer, subtract long-run inflation (roughly 2–3 % per year) from your expected return input.

Note the formula assumes contributions are made at year-end (ordinary annuity). Real 403(b) contributions land monthly via payroll, which is closer to an annuity-due. The practical difference over 30 years at 7 % is roughly 3.5 % — the annuity-due figure is about 1.07× the ordinary-annuity figure. The calculator uses the ordinary-annuity form because it is the conservative figure and the more commonly published convention; if you want the annuity-due answer, multiply the headline by 1.07.

Worked example: a 35-year-old teacher on $55,000

Plug the calculator's default inputs into the formulas above.

• Current age 35, retirement age 65 → n = 30 years
• Salary $55,000, employee 8 % → employee = $4,400/year (well under the $23,500 cap)
• Employer 5 % non-elective → employer = $2,750/year
• Total annual addition C = $7,150 (well under the $70,000 §415(c) cap)
• Expected return 7 % nominal → r = 0.07
• FV = 7,150 × ((1.07³⁰ − 1) / 0.07) = 7,150 × 94.461 = $675,394
• Total contributed = $7,150 × 30 = $214,500 ($132,000 employee + $82,500 employer)
• Investment growth = $675,394 − $214,500 = $460,894 (68 % of the final balance)

Two takeaways. First, two-thirds of the final balance comes from compound growth — not from the dollars contributed. That ratio is structural to long-horizon retirement accounts: starting earlier (longer n) is worth more than contributing more (larger C), because n sits in the exponent and C only multiplies. Second, a 35-year-old who pushes the employee deferral from 8 % to 15 % adds only $3,850/year of contributions — still nowhere near the $23,500 cap — but lifts the projected balance to roughly $1.04 million on the same return assumption. The same teacher who delays the increase until age 50 captures roughly half of that improvement, because the extra dollars only get 15 years of compounding instead of 30. Open the 403(b) calculator and slide the employee percentage to see the curve.

Traditional 403(b) vs Roth 403(b)

Most 403(b) plans now offer both flavours, and a single $23,500 cap applies across both — they are not separate buckets. The right choice comes down to one question: do you expect your marginal tax rate at retirement to be higher or lower than today?

Traditional 403(b) contributions are pre-tax — they reduce your current taxable income. You pay ordinary income tax on withdrawal. Best if you expect your retirement marginal rate to be lower than your current rate. The 24 % bracket today becoming the 12 % bracket in retirement is a 12-point arbitrage you keep, on every dollar deferred, for every year you hold the position.

Roth 403(b) contributions are after-tax. Qualified withdrawals after age 59½ and a 5-year holding period come out tax-free — contributions and growth both. Best if you expect your retirement marginal rate to be higher than today (young savers, anyone in a low bracket now, or anyone who wants the tax diversification of having both buckets to draw from). The calculator's headline figure is the pre-tax balance for both — for the Traditional case, mentally subtract your expected retirement marginal rate to get the spendable amount; for the Roth case, the headline is already the spendable amount. Employer contributions are almost always pre-tax even when your own contributions are Roth, so they go into a Traditional sub-account regardless. SECURE 2.0 allowed employer Roth matching in 2024 but plan uptake is still patchy.

The 403(b) fee trap

403(b) plans have a deserved reputation for higher fees than 401(k) plans. The historical reason is that 403(b)s were originally annuity contracts — Section 403(b) is literally titled "Tax-Sheltered Annuity Plans" — sold by insurance company salespeople in school staff rooms with surrender charges, mortality and expense fees, and sub-account expense ratios that could clear 2 % per year. Modern 403(b)(7) custodial accounts use mutual funds and are usually cheaper, but old annuity-based plans persist, particularly in K-12 districts that did not consolidate their vendor list.

A 1 %/year fee differential compounded over 30 years removes roughly 26 % of the final balance — on the $675,394 worked example above, that is $175,000 of foregone retirement spending. Two checks worth running before committing further contributions:

• Read the plan summary and the fund expense ratios. If your plan's only options are variable annuities with expense ratios above 1 %, you are in an old-format 403(b). Ask the HR office which 403(b)(7) custodial providers are on the vendor list — most districts now offer Vanguard, Fidelity, or TIAA alongside the legacy annuity vendors.
• Check for surrender charges. Older 403(b) annuity contracts charge 5–8 % surrender fees to move money out for the first 5–10 years of the contract. If you are stuck, switch your future contributions to a low-cost vendor (you can usually have more than one vendor at the same time), let the old contract age out, then transfer when the surrender window closes.

The calculator assumes a clean expected return net of investment fees. For a 1 % annual fee, drop the return input by 1 percentage point (7 % becomes 6 %) and re-run. The difference is what fees cost you in dollar terms over the projection horizon.

Withdrawal rules and the Rule of 55

Penalty-free withdrawals from a 403(b) begin at age 59½. Earlier withdrawals face a 10 % early-distribution penalty under §72(t) on top of ordinary income tax. The §72(t) exceptions are:

• Rule of 55: separate from the employer in the year you turn 55 or later, and you can take penalty-free withdrawals from that employer's 403(b) (not from other accounts) immediately. Public-safety employees get this from age 50.
• SEPP / 72(t)(2)(A)(iv): substantially equal periodic payments over your life expectancy, for at least 5 years or until age 59½, whichever is later. Useful for early retirees who want to bridge the gap to 59½.
• Hardship distributions: for immediate and heavy financial need as defined in Treasury Regulation §1.401(k)-1(d)(3) — medical bills, primary-home down payment, tuition, eviction prevention, funeral costs, casualty losses.
• Birth or adoption: up to $5,000 per child, penalty-free, under SECURE Act §113.
• Qualified disaster: up to $22,000 from a federally declared disaster area, under SECURE 2.0.
• Terminal illness: certified by a physician under SECURE 2.0 §326.

Required minimum distributions (RMDs) from a Traditional 403(b) start at age 73 for anyone born 1951–1959, and age 75 for anyone born 1960 or later, under SECURE 2.0. Roth 403(b) lifetime RMDs were eliminated for plan years starting after 2023. See the RMD calculator for the Uniform Lifetime Table factor that applies in any given year.

Common mistakes

Stopping at the employer match. The employer match is the floor, not the ceiling. A 5 % employer contribution on a $55,000 salary is $2,750/year. The §402(g) limit is $23,500. The gap between those numbers is the retirement balance most 403(b) participants leave on the table.

Choosing the annuity vendor by default. If the school district's payroll office hands you a single form with one vendor on it, ask for the full approved vendor list. Most districts have 4–10 approved 403(b) providers; the default is rarely the cheapest.

Ignoring the Roth option in a low-tax-bracket year. Years with low income (early career, year of a sabbatical, year of a salary cut) are the highest-value years to make Roth contributions. The marginal tax cost is lowest exactly when the future tax-free growth runway is longest.

Rolling old 403(b)s into a new employer plan without checking fees. If your old 403(b) is in a low-fee custodial account and the new plan is a high-fee annuity, the right move is to leave the old balance where it is (or roll to an IRA), not to consolidate into the new plan for tidiness. IRA fees and fund choice almost always beat 403(b) annuity options.

When to seek professional advice

The 403(b) calculator is enough for the question "how much will I have at 65?" For the questions that decide what to actually do — whether to switch vendors, whether to roll an old balance to an IRA, whether the Traditional vs Roth allocation should change in a given tax year, whether the §72(t) SEPP rules let you retire early without penalty — talk to a fee-only fiduciary financial planner (CFP designation, NAPFA membership) or a CPA. Avoid the "free" 403(b) consultation offered by the annuity vendor whose product is on the district's vendor list; that is a sales meeting, not advice. This article and the 403(b) calculator are informational only and do not constitute personalised financial advice.

Frequently asked questions

See the FAQ section on the 403(b) calculator page for eligibility, 2025 contribution limits, the 15-year service catch-up, the 401(k) vs 403(b) comparison, Traditional vs Roth selection, and withdrawal timing rules.

Related calculators

• 403(b) Calculator — Retirement balance projection with 2025 IRS limits
• 401(k) Calculator — Private-sector retirement projection with the same §402(g)/§415(c) limits
• Roth IRA Calculator — Tax-free retirement balance with MAGI phase-out check
• IRA Calculator — Traditional vs Roth IRA growth projection
• RMD Calculator — Required minimum distributions using the IRS Uniform Lifetime Table
• Retirement Calculator — Full retirement income projection across all accounts
• Compound Interest Calculator — Future value of a lump sum plus contributions at any frequency