A Roth 403(b) is available to employees of public school systems, tax-exempt 501(c)(3) organizations (like non-profit hospitals, charities, and universities), and certain ministers. Unlike a Roth IRA, there are no income restrictions on who can contribute; eligibility is determined solely by employment.
Both employees and employers can make contributions to a Roth 403(b) plan. For 2026, employees can make elective salary deferrals of up to $24,500. That's up from $23,500 in 2025. An additional catch-up contribution of $8,000 is allowed for employees aged 50 or older.
Unlike some other retirement accounts, you can't open a 403(b) plan on your own, it must be offered through your employer. You can contribute a portion of your salary to the plan directly from your paycheck. Depending on the plan, these contributions can be made either before or after taxes have been withheld.
Through the Roth 403(b) option you can make contributions that are taxed based on your current tax rates, so you can make tax-free withdrawals later in retirement after meeting certain criteria. This option may benefit you if you expect your tax rate to be the same or higher in retirement.
A Roth IRA has much lower contribution limits, but because you're saving after-tax money, it grows tax free — and you don't pay taxes on the withdrawals. In some cases, you may not need to choose between a Roth IRA vs. a 403(b) — the best choice may be to contribute to both types of accounts.
If you are maximizing your 403(b) contributions, or you are concerned about the ability to access your contributions before retirement, you may want to contribute to the Roth IRA. However, not everyone is eligible to contribute to a Roth IRA. Your income must not exceed the stated Internal Revenue Service limits.
Choose a 403(b) plan
The deferred salary is generally not subject to federal or state income tax until it's distributed. However, a 403(b) plan may also offer designated Roth accounts. Salary contributed to a Roth account is taxed currently but is tax-free (including earnings) when distributed.
Beginning in 2006, 403(b) and 401(k) plans may also include designated Roth contributions, i.e., after-tax contributions, which will allow tax-free withdrawals if certain requirements are met.
Roth 403(b) contribution limits
$23,500 for employees younger than 50. $31,000 for workers ages 50-59 and 64 and older, who are eligible for a catch-up contribution of up to $7,500. $34,750 for workers ages 60-63 under new Secure Act 2.0 rules.
Contributions can always be taken tax- and penalty-free. Roth IRAs must meet the 5-year aging rule before withdrawals from earnings can be taken tax- and penalty-free. Failing to meet the 5-year rule can result in taxes and penalties.
Workers and their spouses do not need to rely on their employers to save in tax-favored retirement accounts. They may open individual retirement accounts, which mostly come in two forms: traditional IRAs and Roth IRAs.
As long as you don't exceed the income provisions you can contribute to both plans. If you are stuck with unsatisfactory investment choices in your 403(b), or prefer a particular financial institution, funding a Roth IRA may make more sense.
You may need between 60% and 100% of your final working years' salary. Retirement income may be made up of pension benefits, Social Security benefits, personal savings and investments, and income from part-time work.
The Roth 403(b) option is advantageous if you are a high-income individual who cannot contribute to a Roth IRA because of the income restrictions. With a Roth IRA, eligibility phases out between $153,000 – $168,000 for single filers and between $242,000 – $252,000 for married couples filing jointly.
If you are financially well-prepared for retirement, Roth contributions may make sense. Strong savers and those with generous retirement benefits may have a sizable retirement income—and be subject to sizable taxes. Having Roth savings exempt from taxation could be a benefit.
You can avoid paying taxes on a 403(b) by using a Roth 403(b), where contributions are after-tax but qualified withdrawals are tax-free, or by using a Traditional 403(b) and deferring withdrawals until retirement, then taking them strategically (or not at all, if you don't need the income), but you'll pay ordinary income tax on those distributions; however, you can't avoid all taxes, as Roth earnings are tax-free only if qualified (age 59.5 & 5 years), and traditional withdrawals are always taxed.
The "240,000 rule" (or $1,000-a-month rule) is a retirement guideline suggesting you need $240,000 saved for every $1,000 of monthly income you want in retirement, based on a 5% annual withdrawal rate ($240,000 x 0.05 = $12,000/year or $1,000/month). It's a simple way to estimate savings needs, but it doesn't account for inflation, taxes, market volatility, or other income sources like Social Security, making it a starting point, not a complete plan.
Withdrawals from your 403(b) plan can impact the taxation of your Social Security benefits. If your total income, including 403(b) distributions, exceeds certain thresholds, a portion of your Social Security benefits may be taxable.