What Are the Differences Between a 403(b) Plan and an IRA?

While 403(b) plans and IRAs are both retirement accounts that offer tax benefits, a 403(b) is not an IRA.

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.

Here are some other differences:

403(b) vs. IRA

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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 $23,500 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, compared with an IRA annual maximum of $7,000 in 2025 ($8,000 if age 50 and 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 Roth IRAs have income limits that restrict who can contribute.)

» Learn more about IRAs

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.