403(b) Savings Calculator

How it works

A 403(b) is a workplace retirement plan that nonprofit organizations run. Public school teachers, hospital and charity staff, and some clergy get one. Those employers are tax-exempt organizations, and most register with the IRS as a 501c(3).

A corporation runs the same kind of plan under a different name, the 401(k). Federal staff get the Thrift Savings Plan instead. What changes across the three is the investment menu and the fees, not the idea.

Whatever the name, payroll takes part of your income out of each paycheck before tax. Your employer may add a match on top, and the whole amount is invested for retirement. That money buys fund shares, so it is an investment from the first payday.

Both parts are set as a percentage of pay, so the monthly amount is easy to work out:

• S, your annual salary
• c, your contribution percent of salary
• e, the employer match percent
• M, total invested each month
• B, the balance at retirement
• i, monthly rate of return, annual rate ÷ 12
• n, months to retirement

With the defaults, a $62,000 salary at 8% sends $413 a month into the plan. The 3% match adds $155, so $568 is invested each month.

Over 25 years at a 7% annual return, that $568 grows to roughly $460,391. You put in $124,000, your employer adds $46,500, and growth supplies $289,891. Almost all of that growth is compound interest, which means returns paid on returns you never withdrew.

Fund the match and $568 goes in every month, projecting $460,391. Skip it and only your $413 goes in, projecting $334,830. Which balance would you rather retire on?

✓ Every result is checked against independent reference math. See how we test the calculators →

How to use this calculator

1. Enter your annual salary before tax, the gross figure on your payslip rather than take-home pay.
2. Set the contribution percent to what payroll already deducts from each paycheck.
3. Add the employer match percent from your plan documents, or 0 if there is no match.
4. Enter the years until you retire, then the annual return you expect from the investments you hold.
5. Read the projected balance, then raise the contribution percent one point at a time to see what each rise buys.

A worked example: a teacher on $62,000 with a 3% match

Say you teach on a salary of $62,000 and you defer 8% of it into your district’s 403(b). That is $413 a month out of your pay. The district adds a 3% match worth another $155 a month, so $568 lands in the plan every month while you get on with your job.

Over 25 years at 7% it grows to $460,391.

Now set the match to 0%, the reality in plenty of nonprofit roles, and change nothing else. Your own 8% still goes in, untouched, for the same 25 years at the same return. The projection falls to $334,830.

So the 3% you never noticed leaving a payslip is worth $125,561 by the time you retire, because the district’s $46,500 spent 25 years compounding exactly as hard as your own $124,000 did.

That is the entire case for filling the match before you optimize anything else. Enter your salary, the percent you defer, and whatever your employer actually promises in writing, and see what the free part of your plan is worth to you.

Why fund the employer match before anything else?

Your contributions total $124,000 over 25 years, out of income you would have spent. The match totals $46,500, and it costs you nothing.

Left invested at the same return, that $46,500 grows into $125,561. No savings accounts pay that much interest, and no investment guarantees it either.

That growth is compound interest paid on money you never earned. A bank pays interest on what you deposit. An investment pays a return on returns already credited to you.

So fund the match first. Then split what is left between the plan and an Individual Retirement Account (IRA) you open yourself. Check the total against your retirement savings goal, and see what you need each month to reach it.

An IRA carries no match. It does let you buy every fund, ETF and stock the broker sells, which a 403(b) menu rarely covers.

What the plan's fees and sales pitches cost you

Unlike a corporate 401(k), many plans hand you a list of approved vendors. Plenty of those vendors sell insurance annuity products rather than plain investment funds. Annuities carry an insurance charge, plus a surrender fee if you leave early.

Reps pay for advertising in staff rooms at tax-exempt organizations. Treat that advertising as a sales pitch. Ask whether the rep is one of the licensed financial advisors, and ask how they are paid.

A fee on assets under management is one conflict of interest. Commission on an annuity is a bigger one. The default 7% return projects $460,391 at retirement, while a fee-heavy 5.5% reaches only $364,891.

That 1.5 point gap is not a rounding error in your expenses. It comes out of the investment every year, in good markets and bad. Index funds at a large broker such as J.P.

Morgan Securities LLC usually cost a small fraction of what an annuity charges.

Will $460,391 still buy what it does today?

No. That is a future figure, and inflation makes each dollar buy less by the time you draw it.

The default 7% is only an assumption about investment returns. Pick a lower rate and the answer lands nearer today's money.

The $460,391 is also a figure before tax. Your 8% comes out of income before income tax, so take-home pay falls by less than $413. Every dollar you withdraw counts as ordinary income later.

Life expectancy matters too. A longer life means more years of withdrawals in retirement, and more years of inflation cutting what the same balance buys.

Social Security benefits and a pension cover part of your retirement income. A pension pays a fixed amount for life, based on service and final pay, though not every employer still runs one. Some offer a lump sum instead, which leaves the investment risk with you.

Your own estimate for those benefits is at ssa.gov. Whatever they leave uncovered is your retirement income gap. A retirement budget tests that gap against real expenses like rent, car insurance and medical bills.

Where the rest of your retirement savings sits

This plan is one part of your retirement assets, and the rest usually sits in a few places:

• a traditional IRA or a Roth IRA you open yourself holds the stocks, ETFs and index funds your plan menu leaves out
• a bank or credit union holds your checking account, savings accounts and a certificate of deposit for money you will not need soon
• a 529 plan covers education, funded from income you have already taken home

What separates traditional IRAs from a Roth IRA is the timing of the tax. The traditional version gives you a tax deduction now. A Roth IRA gives you withdrawals free of tax later.

Your 403(b) already gives you the deduction now, so a Roth IRA alongside it covers both timings. Nobody knows what tax rates look like in 25 years.

Cash at a bank that is Member FDIC insured is covered up to the limit. Investments at a broker get SIPC cover instead. That cover protects the account if the broker fails, not against stock market losses.

A money market fund is the low-risk option, and cash waits in that fund before you buy stocks. Money market accounts at a bank work much the same way, at a different interest rate.

Beyond stocks, some investors hold real estate or commodities. Real estate investing can mean a rental property you run yourself, or shares in a fund that owns buildings and collects the rent. A rental pays passive income only after the loan, repairs and empty months come out.

Commodities trading covers gold, oil and crops. Supply and demand set those prices, and the assets themselves pay no interest.

Spreading money across all of them is diversification, and the split you settle on is your asset allocation. A portfolio holding one stock carries far more financial risk than a fund tracking the S&P 500. Headlines quoting the Dow Jones industrial average follow only 30 companies.

Should you clear debt before you raise your percentage?

A credit card charges more interest than any investment reliably earns, so clear that debt first. Paying the credit card off lifts your credit score, and better credit makes later loans cheaper.

Other loans can wait, because a mortgage and home equity loans rarely charge more interest than the match earns. A HELOC is a line of credit secured on your home equity, and the rate on a HELOC can move.

So before you cut contributions to repay home equity loans, run our mortgage calculator and ask your lender. You can also look the mortgage loan originator up on NMLS Consumer Access.

Some plans lend you your own balance. There the plan is the lender, so missed repayments turn the loan into taxable income.

Can a Health Savings Account beat your 403(b) on tax?

Retire before 65 and you buy your own health insurance until Medicare starts. Those premiums are a budget item, and a healthcare reserve can cover them instead of your plan.

A Health Savings Account (HSA) is the account built to pay those bills with untaxed money. You can only open an HSA while a high-deductible health plan covers you.

The HSA carries three tax advantages: a tax break going in, no tax on the growth, and no tax coming out for medical costs. No retirement account offers all three.

So money left in an HSA and invested, rather than spent each year, works as a second retirement plan. Most providers let you move the cash into stock funds once the balance passes a minimum.

After 65 you can spend HSA money on anything and pay only income tax, exactly as a 403(b) withdrawal works. Fund the match first. Then fund an HSA if a high-deductible health plan covers you, and raise your percentage after that.