Difference Between Roth IRA and 403b
When saving for retirement, using tax-advantaged retirement plans such as Roth IRAs or 403b plans can provide significant benefits over just putting money in a non-qualified brokerage account or money market account.
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Eligibility
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Only people who work for schools and other non-profits can contribute to a 403b--if it is offered by their employer. Anyone whose taxable income does not exceed the annual limits, which vary by filing status and adjust each year, can contribute to a Roth IRA.
Tax Breaks
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When you contribute money to a 403b plan, the contribution is made with pretax dollars meaning you do not have to pay taxes on the money. Roth IRA contributions are made with after-tax dollars but you are allowed to withdraw the money tax-free.
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Contribution Limits
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The contribution limits for both 403b and Roth IRA accounts adjust each year for inflation. For 2010, you can contribute up to $5,000 ($6,000 if you are 50 or older) to a Roth IRA and $16,500 ($22,000 if you are 50 or older) to a 403b.
Investment Control
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You have complete control over where the money in your Roth IRA is invested. Money contributed to a 403b must be invested in a plan offered by your employer.
Time Frame
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You can withdraw contributions from a Roth IRA penalty-free at any time. Earnings come out penalty-free and tax free when the account has been open for five years and you are at least 59 1/2 years old. You can withdraw money from your 403b account when you are 59 1/2 or if you leave your job after turning 55.
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