403(b) and 457(b) plans

Not everyone has a 401(k). Public school teachers, nonprofit employees, and government workers often have 403(b) or 457(b) plans instead. They function similarly to a 401(k) but have important differences — and the 457(b) in particular has one feature that makes it arguably the best retirement account available to public employees.

403(b)

Used by nonprofits, schools, and some religious organizations. Contribution limits match 401(k)s ($23,500 in 2026). The main historical quirk is that 403(b) plans have often been sold through high-fee insurance annuities instead of low-cost mutual funds — you may need to dig through your plan options to find the good choices. Look for the 'vendors' list and pick the one offering actual mutual funds (Vanguard, Fidelity) rather than variable annuity products.

457(b)

Used by state and local government employees and some nonprofits. Contribution limit is the same $23,500. Here's the amazing feature: 457(b) plans have no early withdrawal penalty once you separate from service, regardless of your age. If you leave your government job at 52, you can withdraw from your 457(b) immediately, no penalty, no substantially-equal-periodic-payments complexity. This is unique.