Here’s a conversation I have at least once a week with healthcare professionals who work for hospital systems:

“I’m maxing out my 403(b). I’m doing everything I’m supposed to do for retirement, right?”

And then I ask: “Do you also have access to a 457(b) plan?”

The response is usually a pause, followed by: “I think so? There was something about that during orientation, but I never really understood what it was.”

That pause represents roughly $23,500 in missed tax-deferred savings opportunities. Every single year.

If you work for a hospital system in Northwest Ohio or Southeast Michigan -whether it’s a nonprofit hospital, a university medical center, or a government healthcare facility -there’s a very good chance you have access to both a 403(b) and a 457(b) plan.

And there’s an equally good chance you’re only using one of them.

The Thing Nobody Explained During Orientation

When you started your job, you probably sat through benefits orientation where someone walked you through retirement plans at lightning speed. They mentioned the 403(b), talked about the employer match, and maybe briefly referenced something called a 457(b).

Most people walked out of that meeting thinking: “Okay, I’ll put enough in the 403(b) to get the match, and I’m good.”

But here’s what they probably didn’t emphasize: the contribution limits for 403(b) and 457(b) plans are completely separate.

You can contribute up to $23,500 to your 403(b) in 2026 (plus $7,500 catch-up if you’re 50 or older).

AND you can contribute up to $23,500 to your 457(b) in the same year (plus $7,500 catch-up if you’re 50 or older).

That’s $47,000 in total tax-deferred contributions annually. For married couples where both work in healthcare, that’s potentially $94,000 in combined retirement deferrals.

For high-earning healthcare professionals this isn’t a nice-to-have. It’s one of the few remaining ways to meaningfully reduce taxable income while building retirement wealth.

Understanding the Difference

Let’s break down what these accounts actually are, because the numbers and letters make them sound more complicated than they need to be.

The 403(b) is your primary retirement account. It works almost identically to a 401(k) in the private sector. You contribute pre-tax dollars, your employer typically provides some kind of match, your money grows tax-deferred, and you pay taxes when you withdraw in retirement. Most hospital systems offer Roth 403(b) options as well, where you contribute after-tax dollars but withdraw tax-free in retirement.

The 457(b) is a supplemental deferred compensation plan. It’s only available to employees of government entities and certain tax-exempt organizations like nonprofit hospitals and universities. It has the same contribution limits as a 403(b), but the rules around withdrawals are different—and in many cases, more favorable.

The critical piece most people miss: these are separate buckets with separate limits.

Contributing $23,500 to your 403(b) doesn’t reduce how much you can put in your 457(b). They stack.

Why the 457(b) Matters

Beyond the additional contribution room, 457(b) plans have a feature that makes them particularly valuable for certain situations: no early withdrawal penalty.

With a 403(b) or 401(k), if you withdraw money before age 59½, you typically face a 10% penalty plus ordinary income taxes. There are some exceptions, but the penalty is the rule.

With a 457(b), if you separate from your employer—retire, change jobs, whatever—you can access your money penalty-free regardless of age. You still pay ordinary income taxes on the withdrawal, but no 10% penalty.

For healthcare professionals considering early retirement, career changes, or simply wanting more flexibility, this is significant.

The Catch: Not All 457(b) Plans Are Created Equal

Here’s where it gets important to understand what type of 457(b) you have access to.

Governmental 457(b) plans, offered by state and local government hospitals, county health systems, university medical centers are generally excellent. The assets are held in trust, separate from the employer. If the employer has financial problems, your 457(b) assets are protected. These plans often have the same penalty-free early access rules and can typically be rolled into an IRA when you leave.

Non-governmental 457(b) plans, offered by private nonprofit hospitals, have a different structure. The assets remain the property of the employer until distributed to you. This creates what’s called “creditor risk.” If your hospital system faces severe financial difficulties or bankruptcy, your 457(b) assets could theoretically become part of the bankruptcy estate.

This doesn’t mean you shouldn’t use a non-governmental 457(b). It means you need to understand the risk and factor it into your decision about how much to contribute.

For established, financially stable hospital systems, the risk is low. For smaller or financially struggling hospitals, it’s a consideration worth weighing.

The Strategic Question: Which One First?

If you can’t max out both plans, which should you prioritize?

Here’s the framework I use with healthcare professionals:

Always get your employer match first. This is typically in your 403(b). If your employer matches the first 5% of your salary, contribute at least 5% to your 403(b) before doing anything else. This is free money.

After the match, the decision depends on your specific situation:

If you work for a governmental employer (state university hospital, county health system), max out your 457(b) next. These plans are excellent, the assets are protected, and you get penalty-free access if you leave your job. It’s almost impossible to beat this combination.

If you work for a nonprofit hospital with a non-governmental 457(b), the calculation is more nuanced. Consider:

• How financially stable is your employer?
• How long do you plan to stay?
• Do you value the penalty-free early access feature?
• What are the investment options and fees in each plan?

After you’ve gotten your match and decided on 403(b) vs. 457(b) priority, then fill up whichever bucket you chose first. If you still have money to save after maxing that out, circle back to the other account.

Common Scenarios We See

The mid-career physician earning $350,000 who wants to retire at 55. This person should absolutely be using both the 403(b) and 457(b). The 457(b) provides penalty-free access to bridge the gap between retirement at 55 and penalty-free 403(b) access at 59½.

The hospitalist working at a financially stable university medical center. Governmental 457(b). After getting the match, prioritize maxing the 457(b), then circle back to max the 403(b) if possible.

The nurse practitioner at a smaller community hospital that’s had recent financial struggles. Get the 403(b) match, then probably prioritize maxing the 403(b) before contributing heavily to the non-governmental 457(b) given the creditor risk.

The dual-income household where both spouses work in healthcare. If you can max out all four accounts (two 403(b)s and two 457(b)s), you’re deferring $94,000 annually. This is one of the most powerful wealth-building strategies available to healthcare professionals.

What You Should Do Now

First, confirm what you actually have access to. Log into your benefits portal or contact HR. Do you have a 457(b) available? Is it governmental or non-governmental? What are the investment options and fees?

Second, run the numbers. How much are you currently contributing to your 403(b)? Are you getting the full employer match? Could you afford to contribute more, and if so, should that money go to maxing the 403(b) or starting 457(b) contributions?

Third, understand the trade-offs. More retirement contributions means less take-home pay today. Is that sustainable for your budget? Does it make sense given your other financial goals and obligations?

The Bottom Line

The 403(b) and 457(b) combination is one of the unique advantages available to healthcare professionals who work for hospitals, universities, and government healthcare facilities. It’s a benefit that private practice physicians don’t have access to, and it represents significant tax-deferred savings potential.

But only if you use it.

If you’re currently contributing to your 403(b) but ignoring your 457(b), you’re leaving money on the table. How much money depends on your income, your tax bracket, and how aggressively you could afford to save.

If you’d like to discuss whether maximizing both accounts makes sense for your specific situation or if you’re not sure what you have access to and need help figuring it out…that’s exactly the kind of conversation I have with healthcare professionals in Northwest Ohio and Southeast Michigan regularly.

Feel free to reach out via phone, email, or schedule a time to talk. Let’s make sure you’re taking full advantage of every benefit available to you.