Low-cost 403b and 457b retirement plans for teachers

Which Plan to Prioritize: 457(b)

If you have access to both a 403(b) and a governmental 457(b) plan, the 457(b) is generally the superior choice when fees and investment options are comparable.

• The Major Advantage: Unlike a 403(b), a governmental 457(b) does not hit you with the IRS 5 9 1 2 early withdrawal penalty if you leave your job. You can access your money penalty-free immediately upon separation from service, no matter your age (though ordinary income taxes still apply).empower.com
• Contribution Flexibility: Both plans have identical employee contribution limits ($24,500 in 2026). If your budget allows and you want to max out both, you can contribute the full amount to both simultaneously, as they have separate contribution limits.missionsquare.com+1
• Note on Employer Matches: If your district offers an employer match exclusively for the 403(b), always contribute enough to the 403(b) to capture the full match first, then direct any additional savings to the 457(b).

Which Vendor Offers the Lowest-Cost Options?

School district vendor lists vary wildly by employer, but teacher retirement advocates (like 403bwise ) generally advise steering clear of high-fee insurance-backed annuity products (often peddled by companies like Equitable, Valic/AIG, or MetLife). Instead, look for low-cost, transparent brokerages:403bwise.org

1. Fidelity and Vanguard: When available on a district’s approved vendor list, these are the gold standards for low-cost index fund investing with minimal administrative or custodial fees.
2. TIAA: Often available in education settings and generally offers low-cost institutional index fund choices.
3. Aspire Financial Services: A non-traditional administrator that acts as a custodial platform allowing teachers to access low-cost providers (like Vanguard or Fidelity mutual funds) inside a 403(b) or 457(b) framework, usually for a very small flat fee.403bwise.org
4. State-run 457(b) Plans: If your public school district participates in a state-level deferred compensation 457(b) plan (such as those offered through state retirement systems), these typically feature ultra-low administrative costs compared to localized K-12 vendor lists.403bwise.org

Tip: Request a complete, current vendor/provider list from your school district's HR or payroll department and check the specific fund expense ratios or run the names through resources like 403bwise.403bwise.org

If you'd like, share:

• Your state or district name
• A few of the vendors available on your HR list

I can help you look closer at which specific options on your list will keep your fees the lowest.

For a teacher who has access to both a 403(b) and a 457(b), the best strategy is usually to prioritize the plan with the lowest total fees, while giving the governmental 457(b) a strong preference if early retirement is a goal. The lowest-cost vendor depends on the school district's approved provider list and the specific investment options available.www.sec.gov+2

1. Which plan should you prioritize?

First choice for early-retirement flexibility: governmental 457(b)

Withdrawals after you leave the employer generally aren't subject to the 10% federal early-distribution penalty that can apply to a 403(b) withdrawal before age 59½. Ordinary income tax may still apply to pretax withdrawals. This is particularly valuable if you plan to retire in your 50s.www.sec.gov+2

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First choice for maximum savings: whichever plan is cheaper

Compare the investment expense ratios, administrative fees, advisor charges, and any contract or surrender fees. If your 403(b) has substantially cheaper index funds than your 457(b), the 403(b) may be the better first contribution destination.www.sec.gov+3

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Best long-term approach: consider using both

If you can afford to save more, the plans have separate employee contribution limits. For 2026, the standard limit is $24,500 for each plan, or $49,000 combined before applicable catch-up contributions. You don't necessarily have to choose only one.www.kiplinger.com+1

One important caveat: this assumes the 457(b) is a governmental plan. Nongovernmental 457(b) plans, typically offered by certain tax-exempt organizations, have different distribution and creditor-risk rules.

2. Which vendor offers the lowest-cost options?

For K–12 teachers, these are the providers I would investigate first, provided they are available through your employer.

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1. Aspire Financial Services

(Strong low-cost candidate)

Its self-directed, non-advisor option can provide access to low-expense index mutual funds. 403(b)wise describes a fee structure of $40 annually plus a 0.15% recordkeeping fee, with fund expenses added separately. Confirm current fees and your district's specific contract.403bwise.org+1

Details:Aspire options and fee guide

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2. Vanguard

A strong candidate when the employer offers its low-cost institutional or index-fund options. Verify the plan's administrative fees and available share classes rather than assuming every Vanguard arrangement is equally inexpensive.403bwise.org+2

Details:Check 403(b) availability

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3. Fidelity Investments

Worth comparing for low-cost index funds and straightforward mutual-fund options. The actual cost depends on the specific contract and any separate plan or advisor fees.www.investor.gov+2

Details:403(b) vendor comparison guide

There is no single vendor I can responsibly declare the cheapest for every teacher. For a governmental 457(b), a state-sponsored deferred-compensation plan may be even more attractive. If you're in New York, for example, 403(b)wise specifically highlights the New York State Deferred Compensation Plan as a low-cost 457(b) option for eligible school employees.403bwise.org+1

3. Let’s identify the best option for your situation

Which school district or state do you teach in?

That is the key detail needed to narrow this down. I can compare your district's approved 403(b) and 457(b) vendors, identify the lowest-cost options supported by available fee information, and recommend which plan to fund first based on those costs and the withdrawal rules.

If you're a teacher choosing between a 403(b) and a 457(b), I'd generally start with whichever plan offers the lowest-cost investments and fees—but if both are similarly priced, a governmental 457(b) is often the more attractive first choice, especially if you might retire early or leave teaching before age 59½.

The catch is that the plan's actual fees and investment choices matter much more than the account label. A low-cost 403(b) can be a better deal than an expensive 457(b).

I'll focus on public-school teachers in the U.S. and the rules for 2026.

1. 403(b) vs. 457(b): which is better?

403(b) — a good choice for long-term retirement savings

• Commonly available to public-school teachers.
• Offers traditional pretax and, if the plan permits, Roth contributions.
• Some plans offer a special catch-up for teachers with 15 years of service.
• Early withdrawals generally face income tax and potentially a 10% additional tax before age 59½.

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Governmental 457(b) — often better for flexibility

• Available through many state and local governments.
• After you leave your employer, distributions generally avoid the 10% early-withdrawal tax that applies to many 403(b) withdrawals, although ordinary income tax still applies to pretax withdrawals.
• Has its own contribution limit, separate from the 403(b) limit.
• May be particularly useful if you want the option of retiring before age 59½.

These distinctions are reflected in IRS guidance on 403(b) plans and governmental 457(b) plans.www.irs.gov+2

Important: Make sure the 457(b) is governmental. A nongovernmental 457(b), which is generally intended for select employees of tax-exempt organizations, has different rules and risks.

2. Where to find the cheapest options

The cheapest plan is usually the one with transparent administrative fees and inexpensive index funds—not necessarily the provider with the most recognizable name.

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1. 403bwise — best place to start for a 403(b)

Independent educational resource

Visit the 403(b) vendor search tool. Search your school district to see which vendors are rated favorably. It also links to Aspire and Vanguard availability searches.403bwise.org

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2. 457bwise — best place to compare 457(b) costs

State-by-state plan directory

Visit the educator 457(b) plan search. It lists teacher eligibility, administrative fees, account fees, and investment options.457bwiser.org

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3. New Hampshire Deferred Compensation — if you're a New Hampshire teacher

The directory lists this governmental 457(b) plan as available to teachers, administered by Empower, with a 0.22% administrative fee and no account fee. Investment expenses are additional. Check the current fee schedule before enrolling.457bwiser.org

Official New Hampshire plan website

One caveat: a 0.22% administrative fee means $22 annually per $10,000 invested, before investment expenses. Compare that with the full cost of your available 403(b), including any advisor charges, annuity expenses, surrender charges, and fund expense ratios.

3. How to identify a genuinely low-cost plan

Ask your benefits office or plan administrator for the current investment menu and fee disclosure. Compare these items:

The SEC's Saving and Investing for Teachers guide explains how to evaluate vendors and ask about their compensation.www.sec.gov

4. How much can you contribute in 2026?

The standard employee contribution limit is $24,500 for each plan in 2026. If your employer offers both plans and you're eligible, you can generally contribute up to $24,500 to the 403(b) and another $24,500 to the governmental 457(b), subject to plan rules. That can mean $49,000 in combined employee contributions before applicable catch-ups.www.irs.gov+2

You don't necessarily need to choose only one. If both plans are inexpensive, contributing to both can be a useful strategy.

Let's narrow this down to the cheapest option for you

The best provider depends heavily on your state and school district. Which state do you teach in, and if you're comfortable sharing it, what's your school district? I'll compare the available plans and their fees to help identify the best starting point.

Having access to both a 403(b) and a 457(b) as a teacher is a fantastic retirement-saving luxury. In most cases, the 457(b) is the superior choice to start with due to one major structural advantage: no early withdrawal penalties.canonicowealthmanagement.com+1

403(b) vs. 457(b): Key Comparison

• Early Withdrawals:
  • 457(b): If you separate from service (retire, quit, or change districts) at any age, you can withdraw your money penalty-free (though it is still subject to regular income tax).
  • 403(b): Subject to the standard IRS 1 0% early withdrawal penalty if taken before age 5 9 1 2 , with very few exceptions.schwab.com+1
• Contribution Limits (2026 2026𝟐𝟎𝟐𝟔):
  • Both share a generous employee limit of$2 4,5 0 0 per year.
  • Bonus: Because they are governed under different sections of the IRS code, you can actually contribute the maximum to both simultaneously if you have the financial capacity, doubling your tax-advantaged space to$4 9,0 0 0 (plus catch-up contributions if age 5 0+).canonicowealthmanagement.com+1
• Catch-up Contributions:
  • 457(b) offers a special double-limit catch-up in the final 3 3 3 years before normal retirement age.
  • 403(b) offers a rare 15 15 1 5 -year service catch-up option, though it is rarely implemented cleanly by school districts.weareteachers.com+2

Where to Find the Cheapest Options

Unlike standard corporate 401(k) plans, school districts often outsource their 403(b) and 457(b) plans to a confusing roster of third-party vendors, some of which are loaded with high-fee insurance products and mutual fund commissions.weareteachers.com

1. Check for a State-Sponsored 457(b): Many public school teachers have access to a state-level deferred compensation 457(b) plan (e.g., California's CalSavers/coordinated plans, or state-run deferred comp plans). These state-run 457(b) plans frequently feature institutional index funds with extremely low administrative and investment management fees.403bwise.org
2. Use 403bWise: This non-profit advocacy group provides a searchable database and a traffic-light rating system (Green, Yellow, Red) for school district vendor lists. They can help you identify low-fee providers (like Aspire, Vanguard, or Fidelity-compatible custodians) on your specific district’s approved list.403bwise.org
3. Contact Your HR / Benefits Department: Ask for the complete Vendor List or Information Sharing Agreement (ISA) list for both plans. You are looking specifically for low-cost providers that offer broad-market index funds (like an S&P 500 index fund) with expense ratios under 0.1 0% to 0.2 0%, and avoiding high-fee variable annuities.

If you'd like to narrow this down further, let me know:

• Are you a public or private school teacher?
• Can you share the names of the approved vendors or providers listed under your district's plan?

I can help you spot which ones are low-cost vs. high-fee traps.