If you work for the state of Washington or a school district, you have probably heard people talk about “going Roth.” But there is more than one kind of Roth account. The two you will run into most are the Roth IRA and the Roth 403(b).
They sound almost the same, and they share the same tax perks. But they work very differently in practice. In this post we’ll cover what a Roth is, the main differences between these two accounts, which one I usually start people with, and whether you can have both. (Short answer: yes.)
One note before we start. The video was recorded in 2022, and a few rules and limits have changed since then. Where that’s the case, I’ve added the newer numbers below so you aren’t working from old information.
What does “Roth” mean?
Roth just means after-tax. Any account with the word Roth in its name works the same basic way. You pay the taxes on your money now. Then it grows without being taxed, and it comes out tax-free later. You never pay taxes on it again.
Think of it like buying a seed versus buying the harvest. With a Roth, you pay tax on the seed. Whatever grows from it, no matter how big, is yours to keep. With a regular pre-tax account, you skip the tax on the seed but pay tax on the whole harvest when you pick it.
Both the Roth IRA and the Roth 403(b) get this same tax treatment. The differences come from the fact that they fall under different parts of the tax code. That changes who can use them, how much you can put in, and how you get money in and out.
Difference 1: Who can open one
IRA stands for individual retirement account. Almost anyone can open one, as long as your income is under the IRS limits. You set it up yourself at a bank or brokerage. Your job has nothing to do with it.
A Roth 403(b) is different. It’s an employer-sponsored account. You can only use one if your employer offers it. Many Washington school districts offer a 403(b), and many of those plans include a Roth option. If yours doesn’t, you can’t open one on your own.
Difference 2: How much you can save
This is the biggest difference. Because the Roth 403(b) is an employer plan, it lets you save about three times as much as a Roth IRA.
In the video, I used the 2022 limits. Back then you could put $20,500 a year into a Roth 403(b), or $27,000 if you were 50 or older. The Roth IRA limit was $6,000, or $7,000 if you were over 50. These limits go up most years with inflation. Here’s how they compare for 2026:
| Limit | Roth IRA | Roth 403(b) |
|---|---|---|
| Under age 50 | $7,500 | $24,500 |
| Age 50 and older | $8,600 | $32,500 |
| Ages 60 to 63 (extra catch-up) | $8,600 | $35,750 |
| Income limit to contribute? | Yes | No |
Always double-check the current year’s numbers with the IRS or your plan before you set your contribution. They change often.
Difference 3: Income limits
The Roth 403(b) has no income limit. It doesn’t matter how much you or your spouse earn. You can always use it and get the full Roth benefit.
The Roth IRA does have income limits. Once your income passes a certain level, the amount you’re allowed to put in starts to shrink. Past a second, higher level, you can’t contribute at all. Those levels depend on whether you file single or married filing jointly, and they rise each year with inflation.
For 2026, the phase-out range is $153,000 to $168,000 of modified adjusted gross income for single filers. For married couples filing jointly, it’s $242,000 to $252,000. A two-income household of a teacher and a state engineer can hit that range sooner than you might think.
Difference 4: How you put money in
A Roth 403(b) has to be funded through payroll. You can’t write a check from your bank account and send it in. Even if you had the full amount sitting in savings and wanted to put it all in at once, you couldn’t. The most you can add in a given month is whatever is left of your paycheck after your other deductions.
A Roth IRA works the other way. The only way to fund it is from your own savings. You can put in the whole year’s limit in one lump sum. You can set up a monthly transfer. Or you can add money here and there when you have extra. There’s no right or wrong way to do it.
Difference 5: Investment choices and fees
Your investment options in both accounts depend on which company holds the account. Some 403(b) providers have very limited choices. So do some Roth IRA providers. It comes down to where you set it up.
With a good provider, the menus can look pretty similar, with one exception: individual stocks. Some 403(b) providers have plenty of index funds and mutual funds, but as far as I know, they don’t let you buy individual stocks. You can’t buy Amazon or Microsoft shares in a Roth 403(b). You can in a Roth IRA. So the Roth IRA gives you a bit more flexibility.
Fees also depend on the provider and on whether you work with an advisor. Roth 403(b) fees are often higher than Roth IRA fees, but not always. They can be equal, or lower, depending on how the account is set up.
Fees matter, but they shouldn’t be the only thing you look at. A cheap do-it-yourself account means you’re the one picking the funds, keeping track of the rules, and catching mistakes. A higher fee often pays for someone doing that work with you. The goal is to know what you’re paying and what you get for it.
Difference 6: When you can get your money out
Because this is Roth money, you already paid the tax on what you put in. Those contributions are yours. The deal with a Roth is that your growth stays tax-free as long as you leave it alone until a certain point.
For a Roth IRA, that point is age 59 and a half. The account also needs to have been open for at least five years. With a Roth 403(b), there’s an extra door: if you leave your job in or after the year you turn 55, you can take money from that employer’s plan without the 10% early withdrawal penalty.
You can touch your money earlier than that. If you take back only what you put in from a Roth IRA, you owe no tax. If you dip into the growth, you pay income tax on that growth plus a 10% penalty. Here’s a simple example of a Roth IRA withdrawal before age 59 and a half:
| Roth IRA example | Amount |
|---|---|
| Total contributions over the years | $40,000 |
| Growth | $15,000 |
| Account balance | $55,000 |
| Withdraw $40,000: tax and penalty owed | $0 |
| Withdraw $45,000: growth taken out | $5,000 |
| 10% penalty on that $5,000 | $500, plus income tax on the $5,000 |
The Roth 403(b) has similar rules, with two catches. First, an early withdrawal from a 403(b) comes out as a mix of contributions and growth, so part of it may be taxed. Second, if your 403(b) money is in an annuity, you may also owe a surrender charge on top of everything else. Check your contract before you pull anything out.
Difference 7: Required minimum distributions
A required minimum distribution, or RMD, is the IRS telling you, “Time to take money out so we can collect our taxes.” It normally applies to pre-tax accounts.
When the video was made, Roth 403(b) accounts were also subject to RMDs, which was strange since the money was already taxed. You’d be forced to take a tax-free check out each year, and forgetting meant a penalty. My advice back then was to roll a Roth 403(b) into a Roth IRA once you retired, so you’d avoid the RMD trap completely.
That rule has since changed. Starting in 2024, Roth 403(b) accounts no longer have RMDs while the owner is alive. Rolling to a Roth IRA in retirement can still make sense for the wider investment choices, but RMDs are no longer the main reason. Also, the RMD age for pre-tax accounts is now 73, not the 72 mentioned in the video.
Can you have both a Roth IRA and a Roth 403(b)?
Yes. They’re under different tax codes, so you can have both at the same time. Each one has its own separate limit. Filling up one doesn’t use up any room in the other.
Say a 45-year-old teacher wants to put $20,000 a year into Roth accounts. She could put $7,500 into a Roth IRA from savings and have $12,500 come out of her paychecks into a Roth 403(b). That’s about $1,042 a month through payroll, which is easier on a monthly budget than trying to fit it all into one account.
Which one should you choose first?
I usually look at how much someone plans to save. Most often, I start people with the Roth IRA. It’s easier to set up, you can fund it straight from your savings account, and opening it starts the five-year clock.
Why the five-year rule matters
To take out Roth IRA growth tax-free, you need to be 59 and a half and have had the account open for at least five years. A lot of clients come to me at 58 or 59 without a Roth IRA. A couple of years later they meet the age rule, but they still can’t touch the growth tax-free because the five-year clock hasn’t run out.
That’s one of the main reasons I open Roth IRAs for clients early. Even a small first deposit gets the clock started.
When the Roth 403(b) comes first
If you’re already maxing out your Roth IRA, or you earn too much to use one, that’s when I look at the Roth 403(b). It lets you save a lot more, and your income doesn’t matter. For higher earners, the Roth 403(b) is usually the first place I look.
The Roth 403(b) can also make sense if you need more room to save, or if you might want to take a loan from the account, which some 403(b) plans allow and IRAs don’t.
What about the Roth DCP?
When this video was recorded, Washington’s Deferred Compensation Program (DCP) only had a pre-tax option, and a Roth DCP was expected by the end of 2023. A Roth DCP works much like a Roth 403(b), and it’s open to every state employee. That means fewer people need a Roth IRA just to get Roth savings. Check with DRS for the current details of the Roth DCP and how to sign up.
You can even have all three: a Roth IRA, a Roth 403(b), and a Roth DCP. Each has its own separate limit, so if you have the means, you could put the full amount into each one.
If no Roth option is open to you
Maybe you earn too much for a Roth IRA and your employer has no Roth plan. Keep saving anyway. Don’t put off retirement savings just because a Roth isn’t available. You can always convert money into a Roth account later.
If you want help deciding which account fits your situation, you can schedule a personal meeting with us here.
Quick comparison: Roth IRA vs Roth 403(b)
| Feature | Roth IRA | Roth 403(b) |
|---|---|---|
| Who can open it | Anyone under the income limits | Only if your employer offers it |
| Income limits | Yes | No |
| How you fund it | From your savings, any time | Payroll deduction only |
| Individual stocks | Usually yes | Usually no |
| Penalty-free access | Age 59 and a half | Age 55 if you leave that job |
| RMDs while you’re alive | No | No (since 2024) |
| Loans | No | Sometimes, if the plan allows |
Frequently Asked Questions
Is a Roth IRA or a Roth 403(b) better?
Neither is better for everyone. Both get the same tax treatment. For most people I start with a Roth IRA because it’s easy to fund and starts the five-year clock. Higher earners, or people who want to save more than the IRA limit, usually lean on the Roth 403(b).
Can I contribute to a Roth IRA and a Roth 403(b) in the same year?
Yes. They have separate limits. You can max out both in the same year if your budget allows, as long as your income is under the Roth IRA limits.
Do Roth 403(b) accounts still have required minimum distributions?
No. Starting in 2024, Roth 403(b) accounts are no longer subject to RMDs during the owner’s lifetime. They were when the video was recorded.
Can I write a check into my Roth 403(b)?
No. Roth 403(b) contributions have to come through payroll. If you want to put money in from your bank account, a Roth IRA is the account for that.
What if I earn too much for a Roth IRA?
Look at a Roth 403(b) or the Roth DCP, since neither has an income limit. If neither is available, keep saving pre-tax. You can convert money to a Roth later.
To sum it up: unless you need the extra room to save, or you want the option to take a loan, the Roth IRA is usually a good place to start until you reach its income limits. After that, look to the Roth 403(b) or the Roth DCP. And remember that you can have all of them at once.
If you need help choosing investments inside your DCP or Plan 3 account, check out our Plan 3 advice service. Your future depends on what you do today.
P.S. It’s free to join. Over 150 members are already in it, plus you’ll get free courses and resources to help you plan your retirement with confidence.
