403(b) vs. IRA: What Every Educator Needs to Know About Retirement Savings

As an educator, you've dedicated your life to helping others grow. But are you giving your own future the same care? Whether you're a new teacher or a seasoned professional, understanding your retirement savings options is essential — and two of the most powerful tools at your disposal are the 403(b) and IRA.

In this article, we’ll break down the differences, benefits, and strategies behind these retirement plans so you can feel confident about your financial future — and take advantage of the tax benefits that come with them.

What Is a 403(b) Plan?

A 403(b) is a retirement savings plan designed for public school employees, nonprofit workers, and certain religious organizations. It’s very similar to a 401(k), but created specifically for educators like you.

Key Features:

• Offered by your school district or employer

• Contributions are made through payroll deduction

• You can invest pre-tax (Traditional) or after-tax (Roth, if available)

• Funds grow tax-deferred until you withdraw them

2024 Contribution Limits:

• Employee limit: $23,000

• Catch-up (age 50+): Additional $7,500

• Special catch-up: If you’ve worked 15+ years with your employer, you may qualify for an extra $3,000 per year

Why it matters: These high contribution limits make the 403(b) an excellent tool for building serious long-term savings.

What Is an IRA?

An IRA (Individual Retirement Account) is a personal retirement savings account you open on your own, outside of your employer.

There are two main types:

• Traditional IRA: Contributions are often tax-deductible, and growth is tax-deferred until withdrawal.

• Roth IRA: Contributions are made with after-tax dollars, but qualified withdrawals are 100% tax-free.

2024 Contribution Limits:

• Annual limit: $7,000

• Catch-up (age 50+): Additional $1,000

Why it matters: Even though the contribution limits are lower than a 403(b), IRAs offer more investment flexibility and can be a great way to diversify your retirement tax strategy.

403(b) vs. IRA: Side-by-Side Comparison

Which One Should You Choose?

If You Can Only Do One:

• Start with your 403(b) if your employer offers matching contributions — that’s free money!

• If there's no match or high fees in your 403(b), consider maxing out a Roth IRA first, especially if you're in a lower tax bracket.

If You Can Do Both:

The best strategy is often to use both:

1. Contribute to your 403(b) to reduce taxable income now

2. Add to a Roth IRA for tax-free income later

   
   

This gives you flexibility in retirement — some income will be taxed, some won’t. That’s a powerful advantage when planning withdrawals.

Don’t Forget About Vesting and Fees

With a 403(b):

• Be aware of vesting schedules for any employer match — you may need to work a certain number of years to keep it.

• Check for administrative or investment fees, which can eat into your growth.

With an IRA:

• You have full control over the provider and investments.

• Look for low-cost index funds and avoid high-fee mutual funds when possible.

When Should You Start?

Now. Always now.

Thanks to the power of compound interest, the earlier you start saving, the less you have to contribute over time to reach the same goal.

Let’s say you save $300/month starting at:

• Age 25: You could have over $500,000 by age 65

• Age 40: You’d need to save almost double to catch up

Educators often put off saving while paying off student loans or focusing on their classroom — but even small contributions now can grow into something life-changing.

Real-Life Example: Sarah the Science Teacher

Sarah, 35, has worked in her district for 10 years. She contributes $400/month to her 403(b), but never considered opening a Roth IRA. After meeting with a TFS advisor, she:

• Increased her 403(b) contribution by $100/month

• Opened a Roth IRA with an initial $1,000 deposit

• Set up auto-contributions of $200/month to the Roth

By retirement, she’ll have both tax-deferred and tax-free income, giving her more options — and peace of mind.

How Teachers Financial Services Can Help

At TFS, we specialize in helping educators like you:

• Understand your 403(b) plan and investment options

• Open and manage an IRA that fits your goals

• Reduce taxes and build a personalized savings strategy

• Track your progress and adjust as life changes

We believe every teacher deserves a secure, fulfilling retirement — and we’re here to help you make it happen.

Ready to Take the Next Step?

Whether you’re just starting out or fine-tuning your retirement strategy, we’re here to guide you.