How this instrument works
A 403(b) is the tax-sheltered retirement plan built for employees of public schools, universities, hospitals, and other 501(c)(3) nonprofits — a teacher, a professor, a nurse, or a minister is the typical saver, not someone at a for-profit company, who is instead offered a 401(k) under a neighboring section of the same tax code. The name comes straight from Internal Revenue Code Section 403(b), and for decades the plans could only be funded through annuity contracts sold by insurance companies, which is why older paperwork still calls them tax-sheltered annuities, or TSAs, even though a 1974 rule change added custodial accounts holding ordinary mutual funds.
This sheet expresses both Your contribution, % of salary and Employer match, % of salary as plain percentages of Annual salary, $ — the way many 403(b) payroll deductions and matching formulas are actually written on a pay stub. Total annual contribution adds the two rates together and multiplies by salary in a single step. Projected balance at retirement then splits into two separate growth tracks: Current 403(b) balance, $ compounds alone at the assumed rate, while the level annual contribution runs through the future-value-of-an-annuity term, since each year's deposit only earns however many years remain before retirement.
Both rates hold steady for the entire span in Years until retirement, though real pay rises with raises and real markets never sit at one fixed return. The arithmetic also assumes a match exists at all — plenty of 403(b) plans at small nonprofits and churches offer none — and it says nothing about vesting schedules, annuity surrender charges some legacy contracts still carry, or the special catch-up allowance available to employees with fifteen years at the same employer.
- Enter your pay into Annual salary, $.
- Set Your contribution, % of salary to the deferral rate taken from each paycheck.
- Enter Employer match, % of salary as its own percent of pay, not a percent of your contribution.
- Fill in Current 403(b) balance, $ and Years until retirement.
- Set Assumed annual return, %, then read Total annual contribution and Projected balance at retirement.
Worked example — a $60,000 salary, 20 years to go
Take a $60,000 salary with Your contribution, % of salary set to 6 and Employer match, % of salary set to 3. Total annual contribution is $60,000 times nine (six plus three) divided by 100, which is $5,400 a year — a third of that, $1,800, is money the employer adds that the saver never touched directly.
Starting from a $10,000 Current 403(b) balance, growing at an Assumed annual return, % of 7 for 20 Years until retirement, the $10,000 alone compounds to $38,696.84, while the $5,400 deposited every year compounds through the annuity term to $221,375.66. Projected balance at retirement reads $260,072.50 — roughly 85% of that final figure came from two decades of contributions and match, not the balance the account started with.
Questions
Who actually uses a 403(b) instead of a 401(k)?
Employees of public schools, universities, hospitals, and other 501(c)(3) nonprofits — a teacher, a professor, a nurse, or a minister is the classic saver here. For-profit employers offer a 401(k) instead, governed by a different subsection of the same tax code; the compounding arithmetic behind both plans is nearly identical, but who is eligible and how the plan is regulated differ.
Why are Your contribution and Employer match both a percent of salary?
Because that is how many 403(b) payroll deductions and matching formulas are actually printed on a pay stub — a flat percent of pay rather than a percent of the dollar amount you contribute. Total annual contribution multiplies Annual salary, $ by the sum of both rates; treating a match rate that is really a percent of your own contribution as if it were a percent of salary will overstate what lands in the account.
What is the 403(b) 15-years-of-service catch-up?
A rule specific to 403(b) plans, letting an employee with at least 15 years at the same employer defer up to $3,000 more per year than the standard limit, on top of any age-50 catch-up, with a $15,000 lifetime cap. Total annual contribution performs no limit checking — it multiplies salary by whatever combined rate is entered, catch-up eligible or not.
Does every 403(b) plan actually offer an employer match?
No. Many plans at small nonprofits, churches, and legacy annuity-based providers offer none at all. Employer match, % of salary defaults to a nonzero figure here only as an example; enter 0 and Total annual contribution equals salary times Your contribution, % of salary alone, with no match added.
Why were 403(b) plans once called tax-sheltered annuities?
Because Section 403(b) originally allowed funding only through annuity contracts sold by insurance companies, and the older name outlasted the rule. A 1974 change added custodial accounts holding ordinary mutual funds under 403(b)(7), but many legacy annuity contracts still carry surrender charges and higher fees than a typical 401(k) fund lineup — costs this projection does not subtract.
Is the employer match money mine as soon as it's added?
Not necessarily. Church and many small-nonprofit 403(b) plans fall outside ERISA and set their own vesting schedule, which can forfeit unvested match dollars if you leave early. Projected balance at retirement counts every match dollar as fully yours the day it lands — check your plan's summary description before treating that share as guaranteed.
References
- IRS — Retirement topics: 403(b) tax-sheltered annuity plans
- Consumer Financial Protection Bureau — Planning for retirement
Read this first: This instrument shows arithmetic, not advice. Real offers add fees, taxes and terms that vary by lender and place — verify the figures against your actual paperwork before deciding anything.