What is the Difference Between 401k and 403b Retirement Plans

Posted by Grace under Terminology on February 28, 2015

Want to know what is the difference between 401k and 403b retirement plans? Feel free to read this and leave a comment afterwards. What is a 401k and 403b? I just graduated in college. Fortunately, I get a job easily. I want to invest some portions of my salary in stocks or mutual funds. I am just curious what about the difference between 401k and 403b, and please name some of the best companies to allow me to contribute to 401k to invest, awhile ago some of my friends are discussing 401k and some friends are 403b, I want to know both of these plans. Thanks for your response.

The statement above was just an inquiry from Total Investment blog reader. My response was simple; “403b work like 401k, but they are different, 403 are from non-profit organization and 401k plans are from the contributor (you) and your employer”.


What is a 401k Plan?

To know what is 401k plan in USA all about, read the details about what Robert Kiyosaki’s point of views about 401k plan, he answered the question – Is 401k a Good or Worst Retirement Plan? After you have read what Robert T. Kiyosaki’s thought about 401k, it’s time to know the best 401k advice from Suze Orman. I know this advice is worth mentioning in this topic so you can decide whether you will continue contribute to your 401k plan or not.

I found this statement from Suze Orman’s personal finance book entitled “The Money Book for the Young, Fabulous & Broke”, and this is your take home advice regarding 401k plan.

“Always contribute to a 401k so you can get the maximum company match; but if you have limited income, you might then switch to paying off your credit card debt, saving for down payment on a home, or funding a Roth IRA for the rest of the year. A Roth offers a better tax deal than a 401k when you get around to making withdrawals.”

Citations and Reference: Suze Orman, Author, Money Book for the Young, Fabulous & Broke, 2005 Riverhead Books, New York, USA, pp 371

What is the Difference Between 401k and 403b Retirement Plans

To make the answer concise, I found a personal book written by Debby Fowles entitled “The 250 Personal Finance Questions for Your 20s & 30s” here’s the exact answer; “403b plans are defined-contribution plans used by nonprofit organizations. 403b plans work very much like 401k plans. Your contributions are tax-deductible and your earnings are tax-deferred until you take the money out at retirement. Like 401k plans, the amounts that you and your employer can contribute are limited by law.”

Citations and Reference: Debby Fowles, Author, The 250 Personal Finance Questions for Your 20s & 30s, 2009 by Adams Media, Avon Massachusetts, USA, pp 145

Share your opinion on what is the difference between 401k and 403b retirement plans today. Use the comment box and leave a useful and relevant information. Thank you!

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