403(b) vs. IRA: Are They the Same?
A 403(b) is not an IRA. Both retirement accounts have tax benefits but different contribution limits and qualifications.
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There are two main types of retirement accounts: the accounts you can open yourself, and the accounts available through an employer.
What is a 403(b)?
A 403(b) plan is a tax-advantaged retirement savings account offered by nonprofit organizations, public schools, and religious institutions to their employees. It's very similar to a 401(k) plan offered by employers in the private sector.
A 403(b) is not the same as an individual retirement account (IRA).
403(b) vs. IRA
The main differences between a 403(b) and an IRA are where they're offered and who qualifies. Typically, only people who work for nonprofits or in public service, such as a hospital or school, have access to a 403(b) plan. On the other hand, anyone who has income from work — what the IRS calls “taxable compensation” — can open and contribute to an IRA.
IRA vs. 403(b)
Feature | 403(b) plan | IRA |
|---|---|---|
Eligibility | Offered by employers in the nonprofit and public sectors to their employees. | Anyone with earned income can open an IRA. |
Contribution limits | $23,500 for those under age 50 in 2025. Employees over age 50 or have more than 15 years of service can add more into their 403(b). | $7,000 for individuals under age 50 in 2025. Those age 50 and above can add another $1,000 as a catch-up contribution. |
Matching contributions | Often available, but varies by employer. | Typically not available, though some providers may offer a match. |
Investment choices | Limited investment options, typically annuities or mutual funds. | Broad investment options, including stocks, bonds, ETFs and more. |
Tax benefits | Pre-tax or Roth, depending on plan provider. | Traditional or Roth. |
Early withdrawal rules | May incur 10% penalty and income tax for non-qualified withdrawals. | May incur 10% penalty and income tax for non-qualified withdrawals. Roth contributions — not earnings — can come out tax- and penalty-free. |
403(b) contribution limits
The annual maximum contribution to a 403(b) is $23,500 in 2025. People age 50 and older can contribute an extra $7,500 as a catch-up contribution. Due to the Secure 2.0 Act, those ages 60, 61, 62 and 63 get a higher catch-up contribution of $11,250 .
Employees with 15 or more years of service with their employer may also qualify for additional contributions to a 403(b) plan.
The maximum 403(b) contribution is a combined limit: If you also contribute to a 401(k), SIMPLE IRA or some other workplace retirement plan, the annual maximum is for all of those plans combined.
Can you contribute to a 403(b) and an IRA?
You can contribute the maximum to a 403(b) and contribute the maximum to a traditional or Roth IRA in the same year. (Note that Roth IRAs have income limits that restrict who can contribute.)
The IRA annual contribution limit is $7,000 in 2025 ($8,000 if age 50 and older).
You can contribute more money to a 403(b) plan than you can to an IRA.
» MORE: How to retire early
How to set up a 403(b) or an IRA
You enroll in a 403(b) plan at work, through your employer.
You can set up an IRA with a financial advisor, online broker or bank in just a few minutes.
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