Written by 
Edited by 
Edited by 
When Roth IRAs were introduced in 1998, they provided the opportunity to create tax-free income in retirement. A few years later, Roth 401(k) and Roth 403(b) accounts were created to allow employers to offer retirement accounts that can provide tax-free income. When you’re saving for retirement, how do you choose between these accounts? These are the key differences between Roth 403(b) plans vs. Roth IRAs, so you can decide which is best for you.
Consider working with a financial advisor as you decide which kind of tax-advantaged retirement account is best for you.
What Is a Roth IRA?
Roth IRAs were created in 1997 as a way for investors to create tax-free income in retirement. Instead of an upfront tax break in the year that you contribute, you receive tax-free withdrawals in the future.
In 2026, you may contribute up to $7,500 in a Roth IRA. If you are age 50 or older, you can contribute an extra $1,100, for a total of $8,600 for the year.
Because these tax-free benefits are so attractive, the ability to fully contribute to a Roth IRA is subject to specific income limits.
| Type of Filer | MAGI Phaseout |
|---|---|
| Single taxpayer | $153,000 – $168,000 |
| Married taxpayers | $242,000 – $252,000 |
The option to contribute to a Roth IRA is phased out for high-income earners and is eliminated for those making $168,000 (single) or $252,000 (married filing jointly) or more.
Roth IRAs can invest in many types of investments, just like a traditional IRA. Most investors use these Roth IRA investments:
You can open your Roth IRA with any brokerage that you choose, including those that offer self-directed IRAs. Consider one of the best Roth IRAs, such as these.
Once your Roth IRA account has been open for at least five years, you can withdraw your contributions without penalty. However, if you withdraw any investment gains early before age 59 ½, you will be subject to a 10% penalty, as well as your usual income taxes.
What Is a Roth 403(b)?
A 403(b) plan is an employer-sponsored retirement account for teachers, nonprofits and eligible employees of churches and hospitals. They are a rough equivalent to the 401(k) accounts offered by many businesses.
Similar to a 401(k), employees make payroll contributions to their 403(b) accounts. While some employers choose to make matching contributions, they are not required to.
Roth 403(b) accounts are the tax-free version of the traditional 403(b). Contributions are made with after-tax money so that all withdrawals in retirement are free from income taxes. Unlike Roth IRAs, your ability to contribute to a Roth 403(b) is not limited by your income.
The annual contribution limits for 403(b) accounts are $24,500 in 2026. Savers aged 50 and over can contribute an additional $7,500, for a total of $32,500. These contribution limits are the total combined amount that you can contribute to traditional or Roth 403(b) accounts.
New in 2026, 403(b) participants between 60 and 63 years old can contribute an extra $11,250 to their accounts instead of the standard $8,000 permitted at age 50.
When you leave your job, you may leave the money in the 403(b) or roll it over into a Roth IRA. Many investors choose a rollover for greater control over their accounts and access to a wider array of investment options.
Key Differences Between the Roth 403(b) and Roth IRA
When comparing Roth 403(b) vs. Roth IRAs, both accounts provide tax-free income in retirement. However, there are several key differences to consider when choosing between the two.
- Ability to contribute: Not all employers offer a Roth option in their company-sponsored retirement plan. However, all investors can contribute to a Roth IRA, as long as they meet the income requirements.
- Contribution limits: You may contribute up to $7,500 per year in a Roth IRA compared with up to $24,500 in a 403(b) account. Investors age 50 and older may use catch-up contributions to contribute up to $8,000 in a Roth IRA and $32,500 in a 403(b). Roth 403(b) catch-up contributions are worth even more – up to $11,250 – for participants between 60 and 63 years old.
- Income limitations. The ability to contribute to a Roth IRA is based on your taxable income. To contribute fully, your modified adjusted gross income (MAGI) must be under $168,000 as a single filer in 2026 ($252,000 for married couples filing jointly). No income limitations apply when contributing to a Roth 403(b).
- Investment choices: Your investment choices for Roth 403(b) contributions are limited to the available plan options of mutual funds and annuities. With a Roth IRA, the investment options are far greater. You can invest in almost anything – ranging from the usual investments like stocks and bonds to more exotic alternative investments through a self-directed IRA.
- Employer contributions: A Roth IRA is an individual account and does not receive a matching contribution from your employer. Matching contributions are not required for a Roth 403(b), but many employers offer them as part of an employee benefits package.
- Early retirement. A 403(b) investor can avoid 10% early withdrawal penalties if they separate from service on or after the year they turn 55. Roth IRAs do not have this benefit.
Whether you’re contributing to a 403(b) or a Roth IRA, it helps to see how it all adds up. Try SmartAsset’s retirement calculator to project your savings and potential income.
Retirement Calculator
Calculate whether or not you’re on track to meet your retirement savings goals.
About This Calculator
To estimate how much you may need to save for retirement, we begin by calculating how much you're expected to spend over the course of your retirement. This includes estimating the income you'll need based on your lifestyle preferences, then factoring in how many years you may spend in retirement. We assume a lifespan of 95 by default, though you can adjust it after your calculation is complete.
Once we have a clearer view of your total retirement needs, we use our models to evaluate your existing and future resources. This includes estimating retirement income from Social Security and the impact of current retirement plans, pensions and other accounts. For additional inputs and a comprehensive retirement plan, please see our full Retirement Calculator.
Assumptions
Lifespan: We assume you will live to 95. We stop the analysis there, regardless of your spouse's age.
Retirement accounts: We automatically distribute your future savings optimally among different retirement accounts. We assume that the IRS contribution limits for your retirement accounts increase with inflation.
Social Security: We estimate your Social Security income using your stated annual income and assuming you have worked and paid Social Security taxes for 35 years prior to retirement. Our estimate is sensitive to penalties for early retirement and credits for delaying claiming Social Security benefits.
Return on savings: We assume the percentage return on your savings differs by whether you're pre- or post-retirement and by account type, with a distinction between investment accounts and savings accounts. This assumption does not account for market volatility or investment losses and assumes positive growth over time. All investing involves risk, including the possible loss of principal.
SmartAsset.com is not intended to provide legal advice, tax advice, accounting advice or financial advice (Other than referring users to third party advisers registered or chartered as fiduciaries ("Adviser(s)") with a regulatory body in the United States). Articles, opinions, and tools are for general information only and are not intended to provide specific advice or recommendations for any individual. The retirement calculator is meant to demonstrate different potential scenarios to consider, and is not intended to provide definitive answers to anyone's financial situation. We always suggest that you consult your accountant, tax, legal or financial advisor concerning your individual situation.
This is not an offer to buy or sell any security or interest. All investing involves risk, including loss of principal. Working with an adviser may come with potential downsides such as payment of fees (which will reduce returns). Past performance is not a guarantee of future results. There are no guarantees that working with an adviser will yield positive returns. The existence of a fiduciary duty does not prevent the rise of potential conflicts of interest.
Can You Use Both Accounts in a Retirement Strategy?
You don’t have to pick just one account for retirement. Using both a Roth 403(b) and a Roth IRA can give you more ways to save and grow your money tax-free.
A Roth 403(b) comes with higher contribution limits and may include employer matches, which can boost your savings faster. Meanwhile, a Roth IRA adds flexibility, giving you more investment choices with the option to withdraw contributions at any time without penalty. This makes it a useful tool for both long-term growth and emergency access.
By contributing to both accounts, you can diversify your retirement portfolio by combining the structured savings of a Roth 403(b) with the flexibility and broad investment options of a Roth IRA.
RMDs and Long-Term Account Control
Roth IRAs and Roth 403(b)s differ in how distribution rules apply over time. Although both accounts allow tax-free withdrawals in retirement, their regulatory treatment affects how long assets can remain invested and how withdrawals are managed later in life.
Roth IRAs are not subject to required minimum distributions (RMDs) during the lifetime of the original account owner. This allows balances to remain untouched for as long as the owner chooses, affecting both withdrawal timing and the ability to preserve assets for later years or beneficiaries.
Roth 403(b) accounts were historically subject to required minimum distributions, even though contributions were made with after-tax dollars. Legislative changes have aligned Roth 403(b) distribution rules more closely with Roth IRAs, but these accounts remain employer-sponsored plans and are still governed by plan-specific rules.
Over the long term, control over the account differs between the two options. Roth IRAs provide direct ownership and ongoing flexibility, while Roth 403(b)s may require rollovers to gain the same level of control. These differences influence account management after retirement, including consolidation, beneficiary planning and withdrawal sequencing.
Bottom Line
Investors seeking tax-free income in retirement may be able to contribute to a Roth IRA or Roth 403(b) account. Contributions are made with after-tax money today, but all withdrawals are tax-free in retirement. Roth 403(b) and Roth IRAs each offer benefits suited to different types of investors. To find the best retirement account for your later years, carefully weigh your current financial needs, as well as those in retirement, to determine which account works best for you.
Retirement Planning Tips
- One of the ways to have more money for retirement is by taking advantage of tax laws to reduce how much you owe. Our retirement taxes calculator helps you understand how your income is affected based upon which state you live in.
- Tax-free income from Roth 403(b) and Roth IRAs are just two possible types of income streams for retirement. Working with a financial advisor can help you maximize the benefits of tax-advantaged accounts. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Photo credit: ©iStock.com/Lana2011, ©iStock.com/Vadzim Kushniarou, ©iStock.com/kupicoo