The best choice depends on your employment status and income level. Roth IRAs are ideal for those who anticipate being in a higher tax bracket in retirement, while SEP IRAs are suitable for self-employed individuals. 403(b) plans are specifically for employees of certain organizations.
| Metric | Roth IRA | SEP IRA | 403(b) Plans |
|---|---|---|---|
| Contribution Limit | Under 50: $7,000; 50 or Older: $8,000 (includes $1,000 catch-up contribution) | Up to 25% of an employee's total compensation, with a maximum of $70,000 for 2025. For self-employed individuals, contributions are generally limited to 20% of their net income. Contributions must be based only on the first $350,000 of an employee's (or owner's) compensation for 2025. | $23,500 for employee contributions; $70,000 for combined employee and employer contributions (2025) |
| Eligibility Requirements | Not available | Designed for self-employed individuals and small business owners. If you have employees, you must contribute to their SEP IRA accounts at the same rate as your own. Employees must have reached age 21, worked a minimum of three of the previous five years, and earned at least $750 in the year for which the contribution is made. | Employees of public schools, certain tax-exempt organizations, and ministers |
| Tax Advantages | Contributions are made on an after-tax basis; Earnings grow tax-free; Distributions in retirement are tax-free, provided certain conditions are met. | Contributions are tax-deductible, and earnings are tax-deferred. | Both traditional and Roth 403(b) options may be available; contributions may be tax-deductible depending on the plan type; earnings are tax-deferred |
| Early Withdrawal Penalty | Not available | 10% federal penalty tax if withdrawn before age 59½ (with some exceptions) | 10% federal penalty tax may apply for withdrawals before age 59½ (check specific plan rules) |
| Catch-Up Contributions | $1,000 additional for those age 50 or older. | No catch-up contributions for those age 50 and older. | $7,500 additional for those age 50 or older, raising the employee contribution limit to $31,000; For those between ages 60 and 63, a higher catch-up contribution of up to $11,250 may be allowed, if the plan permits, allowing a total contribution of $34,750 |
| Price | Not available | Not available | Not available |
| Rating | Not available | Not available | Not available |