A 403(b) is not a Roth IRA — they are separate retirement account types with different rules

A 403(b) is a workplace retirement plan offered by certain employers, mainly schools, hospitals, and nonprofits. A Roth IRA is an individual retirement account you open on your own. They differ in who can use them, how much you can contribute each year, when you can withdraw money, and how taxes work on the money you save.

You can have both at the same time. Many people do. But they are not the same account, and the contribution limits do not overlap — money you put into one does not count against the limit for the other.

Key Takeaways

  • A 403(b) requires an employer to offer it; a Roth IRA you open yourself through a bank, brokerage, or credit union.
  • You can contribute to both in the same year, and the contribution limits are separate.
  • A 403(b) reduces your taxable income in the year you contribute; a Roth IRA does not, but withdrawals in retirement are tax-free.
  • A 403(b) has required withdrawals starting at age 73; a Roth IRA does not require withdrawals during your lifetime.

Who can use each account

A 403(b) is available only if your employer offers one. Employers that sponsor 403(b) plans include public schools, private schools, hospitals, certain nonprofits, and some religious organizations. You cannot open a 403(b) on your own — your employer must set up the plan and you must be on the payroll.

A Roth IRA is available to anyone with earned income, regardless of employer. You open it yourself at a financial institution — a bank, brokerage firm, credit union, or robo-advisor. Your employer does not need to be involved. The only requirement is that your income in that year is below a certain threshold; those thresholds change each year and depend on your filing status.

How much you can contribute each year

For 2024, the 403(b) contribution limit is $23,500 per year if you are under age 50. If you are 50 or older, you can contribute an additional $7,500 catch-up amount, for a total of $31,000. These limits change each year.

For 2024, the Roth IRA contribution limit is $7,000 per year if you are under age 50, or $8,000 if you are 50 or older. These limits also change each year. The limits are the same whether you have a 403(b) or not — you can contribute the full $7,000 to a Roth IRA even if you also contribute $23,500 to a 403(b).

Some 403(b) plans allow additional catch-up contributions beyond the standard limit if you have worked there for at least 15 years. This is called the 15-year catch-up provision, and it can allow up to $3,000 extra per year (lifetime maximum of $15,000). A Roth IRA does not have this option.

Tax treatment of contributions and withdrawals

Money you contribute to a 403(b) is usually taken from your paycheck before taxes are calculated, which lowers your taxable income for that year. When you withdraw the money in retirement, you pay income tax on it at your tax rate at that time. This is called a traditional 403(b).

Some employers offer a Roth 403(b) option instead. With a Roth 403(b), you contribute after-tax money (it does not lower your taxable income now), but withdrawals in retirement are tax-free. A Roth 403(b) is different from a Roth IRA, but the tax treatment of withdrawals is the same.

With a Roth IRA, you contribute after-tax money, so it does not lower your taxable income. But all withdrawals in retirement are tax-free, including the earnings your money made. You never pay tax on Roth IRA withdrawals if you follow the rules.

When you can withdraw money

With a 403(b), you generally cannot withdraw money before age 59½ without paying a 10 percent penalty, plus income tax on the amount withdrawn. Some plans allow loans or hardship withdrawals, but these have strict rules and your employer decides whether to offer them.

With a Roth IRA, you can withdraw the money you contributed (not the earnings) at any time, tax-free and penalty-free. You can only withdraw the earnings before age 59½ if you meet specific exceptions, such as a first-time home purchase (up to $10,000 lifetime) or a may have access to education expense.

Starting at age 73, you must begin taking required minimum distributions (RMDs) from a 403(b) — a set amount each year based on your age and account balance. If you do not take it, you owe a penalty. A Roth IRA does not require withdrawals during your lifetime, which is one reason some people prefer it for leaving money to heirs.

What happens if you change jobs

If you leave a job where you had a 403(b), you can leave the money there, roll it into an IRA, or roll it into a 403(b) at a new employer if one is offered. Rolling into a traditional IRA keeps the tax-deferred status. Rolling into a Roth IRA is possible but triggers income tax on the amount rolled over in that year.

A Roth IRA is not tied to any employer, so changing jobs does not affect it. Your Roth IRA stays with the financial institution where you opened it.

Frequently Asked Questions

Can I have both a 403(b) and a Roth IRA at the same time?

Yes. The contribution limits are separate, so you can contribute the full amount to each in the same year. For example, you could contribute $23,500 to a 403(b) and $7,000 to a Roth IRA in 2024 if your income allows it.

If I have a Roth 403(b), is it the same as a Roth IRA?

No. A Roth 403(b) is a workplace plan offered by your employer; a Roth IRA is an individual account you open yourself. Both offer tax-free withdrawals in retirement, but they have different contribution limits, withdrawal rules, and required minimum distribution rules.

Can I roll a 403(b) into a Roth IRA?

Yes, but you will owe income tax on the amount you roll over in the year you do it. This is called a Roth conversion. You can only do this if you have left the job or if your plan allows in-service conversions.

Do I have to take withdrawals from a Roth IRA like I do from a 403(b)?

No. A Roth IRA does not require withdrawals during your lifetime. A 403(b) requires withdrawals starting at age 73. This is a major difference if you want to leave money to heirs or do not need the income.

What if my employer offers a Roth 403(b) instead of a traditional one?

You can choose which type to contribute to, or split contributions between both if your plan allows. A Roth 403(b) has higher contribution limits than a Roth IRA but requires withdrawals at age 73, while a Roth IRA does not.