Roth 403(b) vs. Roth IRA: What's the difference?

Thinking through all your retirement planning options can help your money work hard now for your future self. Your employer may offer a plan that you supplement with an account of your own, each with traditional and Roth versions to consider.

Both Roth 403(b)s and Roth IRAs are tax-advantaged accounts that can move you toward your retirement goals. Comparing a Roth 403(b) vs. Roth IRA can help you decide if you want to have one or the other—or even both.

Certain public-sector and tax-exempt employers—such as schools, hospitals, churches, libraries and government agencies—offer traditional 403(b)s and Roth 403(b)s. Similar to private-sector 401(k)s, you—as the employee—can put a portion of your paycheck into the account. In particular, a Roth 403(b) lets you do this after paying income taxes on the contribution, so you don't pay taxes on your withdrawals in retirement.

Your employer selects the investment company to run the account, but you usually can control your investing options from there. You'll likely be able to choose from annuities and mutual funds that invest in stocks and bonds.

A Roth IRA is an individual retirement account that you can establish and contribute to on your own. You don't need an employer to set one up for you. Like other Roth accounts, your contributions are made with after-tax dollars. Additionally, you can access the money in retirement tax-free if you make a qualified distribution.¹

Anyone who earns income from a job or self-employment, and meets IRS income limitations, can contribute to an IRA. Similar to a Roth 403(b), you can invest it in assets like stocks, bonds, mutual funds and exchange-traded funds.

While they overlap in name, a Roth 403(b) isn't the same as a Roth IRA. While the basic tax treatment is the same for both accounts, they differ by availability, maximum contribution amounts, income limitations, your ability to take loans, and withdrawal rules.

You can go to any financial institution that offers Roth IRAs and open an account, as long as your income is under a certain limit. But to have a Roth 403(b), you would first have to be a specific kind of employee—one who works at a public-sector or tax-exempt organization—and then meet eligibility requirements for an employer that offers a Roth 403(b) retirement plan.

Roth 403(b)s have much higher contribution limits than Roth IRAs. Plus, with a Roth 403(b), your employer can match your contributions to grow your account even more.

• 2023: You can contribute up to $22,500 of your own wages or salary per year, plus an additional $7,500 catch-up contribution if you're at least 50 years old.
• 2024: You can contribute up to $23,000 of your own wages or salary per year, plus an additional $7,500 catch-up contribution if you're at least 50 years old.

Additionally, you can contribute an additional $3,000 per year if you've been with your employer for at least 15 years (for a lifetime max of $15,000) provided you have not fully funded a Roth 403b in prior years.

• 2023: You can accept employer contributions up to a combined limit of $66,000 (or $73,500 if you're at least 50 years old).
• 2024: You can accept employer contributions up to a combined limit of $69,000 (or $76,500 if you're at least 50 years old).

• 2023: You can contribute up to $6,500 per year, plus an additional $1,000 per year if you're at least 50 years old.
• 2024: You can contribute up to $7,000 per year, plus an additional $1,000 per year if you're at least 50 years old.

If you have a Roth 403(b) through your employer, you can contribute to it no matter your income. That isn't the case for Roth IRAs, which have income thresholds.

• If you make between the maximum MAGI listed, you can contribute but it will be a reduced amount.
• If you make equal to or more than the maximum limit listed, you can't contribute anything to a Roth IRA.

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The IRS doesn't allow loans from Roth IRA accounts for any reason.

You can take loans from Roth 403(b) plans, but it's up to individual employers to decide if their plans will offer loans. If they do, Roth 403(b) plans generally allow you to borrow up to whatever's less: up to 50% of your balance or $50,000. If your account contains $10,000 or less, you may be able to borrow the entire amount.

Generally, with any Roth account, you can withdraw your own contributions without facing taxes or penalties at any time. But when it comes to accessing the earnings, both Roth 403(b)s and Roth IRAs are set up with rules to encourage waiting until retirement. For both, you can face taxes and penalties if you withdraw money before age 59½ and if you haven't owned the account for at least five years (although certain exceptions are allowed).¹

As long as you meet the qualifications, you can have a Roth 403(b) and a Roth IRA at the same time. Since Roth accounts generally offer a tax-efficient savings approach, it could benefit your retirement strategy to contribute to each account type.

Whether it's something you should do, however, depends on your overall financial strategy and circumstances. For instance, if you have too many Roth accounts that are taxed upfront, you may want to mix in traditional accounts to spread out your tax liability over time. Generally, diversifying your investments across accounts that are taxed now, taxed later or never taxed can help you keep a balanced approach. Take time to consider how your accounts can work together to benefit your overall tax and financial situation.

To make wise choices for your future, survey the options available to you and factor in how each would help you attain your retirement goals. You'll want to map out a financial strategy that lets you afford and enjoy the lifestyle you want for now and later—whether that involves a dream home, sending kids to college, supporting a favorite cause or leaving a lasting legacy. A Thrivent financial advisor can help you determine whether a Roth 403(b), Roth IRA, both or something else entirely is the right fit for you.