What is the 403b catch-up contribution?

If you are employed in the non-profit sector or a public school, you may have access to a 403(b) retirement plan. It is a tax-sheltered plan that allows eligible employees to save for retirement through elective deferrals, similar to a 401(k) plan for private-sector employees.

Eligible employees who are age 50 and over can make catch-up contributions of up to $7,500 in 2024 and 2025, above the annual limit on elective deferrals. Beginning in 2025, employees aged 60 to 63 will be eligible to contribute up to $11,250 in catch-up contributions. The annual contribution limit for 403(b) in 2024 is $23,000, and it increases to $23,500 in 2025.

What is a 403(b) plan?

A 403(b) plan is a tax-sheltered plan for people working for tax-exempt organizations including public schools, charities, and qualified religious organizations. This retirement plan is comparable to a 401(k) plan for private-sector employees, and it allows participants to contribute pre-tax income to the retirement plan.

403(b) contributions are tax deductible on your federal tax return, and it can help you reduce your taxable income. So, if your employer offers a traditional 403(b), you won’t pay taxes on contributions until you start making withdrawals in retirement.

How do catch-up contributions work?

Catch-up contributions allow participants approaching retirement to accelerate their retirement savings by making additional contributions above the standard IRS contribution limits.

For 2024, eligible employees can contribute up to $23,000 to a 403(b) plan, and an additional $7,500 in catch-up contribution if they are age 50 or older, bringing the total contribution to $30,500. The IRS adjusts the contribution limits annually to keep pace with rising inflation.

403b contribution limit 2025

For 2025, 403(b) plan participants can contribute a maximum of $23,500, up from $23,000 in 2024. If you are at least age 50 to 59, or above 64, you will be eligible to contribute an additional $7,500 per year as a catch-up contribution, for a total of $31,000.

Additionally, effective 2025, participants aged 60 to 63 can be eligible to contribute up to $11,250 in catch-up contributions; eligible participants can contribute a total of $34,750.   

Employers may offer matching contributions to eligible employees’ 403(b) plans. The employer match can be as much as 50 cents to $1 of every dollar contributed to the retirement plan. However, the employer 403(b) match cannot exceed 25% of an employee’s salary.

The combined employee and employer contribution cannot exceed $70,000 in 2025, up from $69,000 in 2024. This limit rises to $77,500 for participants age 50 or older.

Each organization has its own rules on whether to match employee contributions, and you can check the specific details about the employer’s matching program with the benefits department.

403(b) catch-up contributions for employees with long tenures

If you have worked for at least 15 years with the same employer, and your annual contribution amount does not exceed $5,000 per year, you may qualify for an additional catch-up contribution. You will be allowed to defer an additional $3,000 per year above the standard deferral limit, up to a lifetime limit of $15,000. However, not all employers offer the 15-year catch-up contribution.

The 15-year rule is designed to help employees who have been slow in saving enough for their retirement to boost their retirement savings when they are able to. However, if you are not able to make the additional contribution, you won’t be required to make the full contribution; you can set your own savings rate, and adjust it when needed.

Furthermore, the amount you can contribute may be affected by your previous contributions to your 403(b) plans. For example, if you have worked for the same employer for at least 15 years, and you have contributed $75,000 or more during that period, you won’t be eligible for the additional catch-up contribution.

Roth 403(b) contribution limits

Some employers may offer both traditional and Roth 403(b) plans. If your employer offers a Roth 403(b), you can choose to make after-tax contributions to the plan, meaning that you will pay upfront income taxes on the money you contribute to the plan.

The annual contribution limit for a Roth 403(b) is the same as for a traditional 403(b) plan. For 2025, you can contribute up to $23,500 to a Roth 403(b), and the combined employer and employee contribution limit is $70,000.

Can you have a 403(b) and 401(k)?

You may be able to contribute to a 403(b) and 401(k) at the same time. If your employer offers both retirement plans, you can contribute to both retirement plans to maximize your retirement contributions. However, the annual IRS limit applies to the combined total of the contributions you make to both plans.

For 2025, the combined employee contributions to both plans should not exceed $23,500 in 2025. If you are age 50 or older, you can contribute an additional catch-up contribution of $7,500.

How to maximize your 403(b) contributions

If you are eligible to contribute to a 403(b) plan, you should make the most out of your 403(b) plan. Here are some tips to consider:

Max out your plan contributions

Contributing up to the IRS annual contribution limit can boost your retirement savings while taking advantage of the tax benefits offered by the 403(b) plan. If your employer offers a traditional 403(b) plan, you can contribute pre-tax income, and claim a tax deduction during the tax year.

Get the full employer match

If your employer offers a match, you should contribute enough to get the full employer contributions. Generally, many employers match plan contributions as a percentage of your salary contributions up to a certain limit. For example, if your employer offers a 50% match on the first 6% of your salary, you should contribute at least 6% to get the full employer match.

Take advantage of the 15-year special catch-up contribution

If you have been with the same employer for 15 years, and your average annual contribution is below $5,000, you should take advantage of the special catch-up contribution if your employer allows it. This contribution allows you to contribute an extra $3,000 per year, with a lifetime maximum of $15,000, in addition to the standard contribution limit.

Avoid over contributing

Exceeding the annual 403(b) contribution limit can result in double taxation, where the excess contribution is taxed in the year of contribution, and a second time when the funds are withdrawn. You must withdraw the excess contributions by April 15 of the following year, including any earnings on contributions.