Aside from the main differences as listed out in the previous answer, there are other differences among an IRA, 401k and 403B:
- You can set up an IRA for yourself without going through an employer like a 401k and 403B. Many people choose to have an IRA in addition to their employer-sponsored plan for the ability to choose better investment options, lower fees, etc.
- Many (not all) 401k and 403b offer loan options which allow you to borrow from the plan. With an IRA, the loan option is not permitted.
- You may be able to withdraw money early from your IRA without paying any penalty if the money is put toward the purchase of your first primary residence or to pay for qualified education expenses. With a 401k or 403b, such withdrawals may be possible but not without a 10% penalty, until you reach the age of 59 1/2.
An IRA is a personally-owned retirement account. A 401(k) or 403(b) are retirement plans offered through an employer...you're entitled only to the "vested" portion of your account. 401(k) plans are typically offered through for-profit businesses. 403(b) plans are typically offered only through not-for-profit and charitable organizations. Depending on how the plan is set-up, both 401(k) and 403(b) plans can have employee contributions and employer contributions (matching, Safe Harbor, discretionary, so on). When employer contributions are involved, plans may have vesting requirements where the employer funds become yours over a certain period of service with the employer. In 2015, you can contribute up to $5,500 ($6,500 if age 50+) of taxable compensation to an IRA. The deductibility of the contribution depends on your modified adjusted gross income, filing status, and whether you participate in a retirement plan through work (see this link). In 2015, you can contribute up to $18,000 ($24,000 if age 50+) of compensation through your employer. In addition to tax-deductible vehicles, there is a non-deductible Roth IRA, also 401(k) and 403(b) plans may be set-up with Designated Roth Account options.
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