The 401(k) gets most of the attention, but it’s not the only workplace retirement account out there. Depending on where you work, you might have a 403(b), a SIMPLE IRA, or a pension instead. Understanding which account you have — and how to use it — is one of the most important money decisions you’ll make at work.
The 401(k): The Most Common Workplace Account
A 401(k) is offered by most private-sector employers. You contribute pre-tax dollars (or after-tax Roth dollars), which grow tax-deferred until retirement. Many employers also match a portion of your contributions — which is essentially free money.
- 2025 contribution limit: $23,500 ($31,000 if 50 or older)
- Employer match: Common, but varies by company
- Tax treatment: Traditional (pre-tax) or Roth (after-tax)
- Vesting: Your contributions are always yours; employer match may vest over time
If your employer offers a 401(k) match, contribute at least enough to get the full match before doing anything else with that money. It’s an immediate 50–100% return on those dollars.
The 403(b): For Schools and Nonprofits
A 403(b) is the public school, university, hospital, and nonprofit equivalent of a 401(k). The rules are very similar — same contribution limits, same tax treatment options, same basic structure. Key differences:
- Often offered by teachers, nurses, professors, and charity workers
- Some 403(b) plans include annuity products with higher fees — check your investment options carefully
- Some plans offer an additional catch-up provision for employees with 15+ years of service
- Employer matching is less common than in the private sector, but does exist
If you work in education or healthcare and have a 403(b), treat it the same way you would a 401(k) — contribute consistently, choose low-cost index funds if available, and get the employer match if offered.
The SIMPLE IRA: For Small Businesses
A SIMPLE IRA (Savings Incentive Match Plan for Employees) is designed for employers with 100 or fewer employees. It’s easier and cheaper for small businesses to administer than a 401(k).
- 2025 contribution limit: $16,500 ($20,000 if 50 or older)
- Employer match: Required — employers must either match up to 3% of employee salary or contribute 2% for all eligible employees regardless of participation
- Vesting: Immediate — employer contributions are yours right away
- Early withdrawal penalty: 25% in the first two years (vs. 10% for most other retirement accounts) — take this seriously
The required employer match is a significant advantage of SIMPLE IRAs. Even if you work for a small company, you’re likely getting some retirement contribution from your employer.
Pensions: Defined Benefit Plans
A pension (also called a defined benefit plan) is different from the accounts above. Instead of building an account balance, you earn a guaranteed monthly income in retirement based on your years of service and final salary. Pensions are most common in government jobs, military, and some union positions.
- The employer bears the investment risk — you get a guaranteed payment regardless of market performance
- Typically requires a minimum number of years before you’re vested (often 5–10 years)
- The monthly benefit is calculated by a formula: often (years of service × salary × multiplier)
- You may have the option to take a lump sum instead of monthly payments at retirement
If you have a pension, understand your vesting schedule and projected benefit. Leaving before you’re vested forfeits your pension entirely. If you have both a pension and a 403(b) or 401(k), contribute to the savings account as well — pensions alone may not cover all your retirement expenses.
What to Do If You Have Multiple Jobs or Change Jobs
When you leave a job, you have options for your 401(k) or 403(b):
- Leave it where it is — if the plan has good investment options and low fees
- Roll it into your new employer’s plan — keeps everything in one place
- Roll it into an IRA — often gives you more investment choices and lower fees
- Cash it out — almost always a bad idea; you’ll owe income tax plus a 10% early withdrawal penalty
Always do a direct rollover — have the old plan send the money directly to the new account, not to you. If the check comes to you, you have 60 days to deposit it or it’s treated as a taxable withdrawal.
The Bottom Line
Whether you have a 401(k), 403(b), SIMPLE IRA, or pension, the core principle is the same: contribute consistently, get any employer match that’s available, and choose low-cost investments. The specific account matters less than starting early and staying consistent.
For more, see What Is a 401(k) Match?, 401(k) for Beginners, and Jobs & Career.