Is a 403(b) an IRA?

A 403(b) is not an IRA. Both are retirement accounts with similar tax benefits, but they have different contribution limits, and 403(b)s are offered only through employers.
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Written by Andrea Coombes
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While 403(b) plans and IRAs are both retirement accounts that offer tax benefits, a 403(b) is not an IRA.

Internal Revenue Service. .

Both types of plans do allow for pretax contributions — that can mean a lower tax bill in the year you contribute — and in both plans your money grows tax-deferred.

But the plans have some major differences, too. For one, only an employer can set up a 403(b) plan, which it then offers to its workers. An IRA is set up by an individual for their own use.

Key term

Definition

Defined contribution plan

These types of retirement plans are employer-sponsored. Employees are responsible for choosing their investment options and contribution amounts. Examples of this type of plan include the 401(k) plan, 403(b) plan and 457(b) plan.

IRA

An IRA, also known as an individual retirement arrangement, is a type of investment account that gives a tax advantage to people when saving for retirement. Anyone earning income can open and contribute to an IRA.

Contribution

This refers to the money added to a retirement account. Every year, the IRS may set a new limit on how much Americans can put into their retirement accounts.

Here are some other differences:

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403(b) vs. IRA

Access

To be able to save money in a 403(b) plan, you must work for an employer that offers one. Generally, 403(b) plans are offered by nonprofit employers such as schools and hospitals. Here’s a helpful IRS page about 403(b) plans.

In contrast to a 403(b), anyone who has income from work — what the IRS calls “taxable compensation” — can open up and contribute to an IRA. (If you're a married couple who files jointly, a nonworking spouse can also contribute, thanks to the spousal IRA.) Here’s more on how and where to open an IRA.

Contribution limits

Another big difference between these two types of retirement accounts is that you can contribute much more money to a 403(b) plan than you can to an IRA.

The annual maximum contribution to a 403(b) is $23,000 in 2024 ($30,500 for those age 50 or older), compared with an IRA annual maximum of $7,000 in 2024 ($8,000 if age 50 or older). Employees with 15 or more years of service with their employer may also qualify for as much as $15,000 in total additional contributions to a 403(b) plan.

Keep in mind that 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.

But the 403(b) contribution limit is separate from the limit for a traditional IRA or Roth IRA. That means you're allowed to contribute the maximum to a 403(b), and contribute the maximum to a traditional or Roth IRA in the same year. (Note that income limits restrict who can contribute to a Roth IRA.)

» Learn more about IRAs

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How to set up an IRA

You can set up an IRA with an online broker, robo-advisor or bank in just a few minutes. You can find providers that charge no fees to open an IRA, and that require no minimum deposit. You can set up transfers from your bank account, and start with as little as $25 or so.

» Ready to get started? See our picks for the best IRA account

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