By Dr. Jim Dahle, WCI Founder
If you work as an independent contractor, meaning you get a Form 1099 each pay period instead of a W-2, you're responsible for your own benefits, including a retirement plan. Your two main choices are a SEP-IRA or a solo 401(k), aka an individual 401(k). This post will help you decide which to use. If you want the TLDR version, the right answer for you is probably a solo 401(k).
But let's explore the issue further.
What Is a SEP-IRA?
Simplified Employee Pension Individual Retirement Arrangements, or SEP-IRAs, are a good fit for a small business owner with few to no employees or the self-employed. A sole proprietor under 50 can shelter 20% of net business profit, up to a total contribution of $66,000 for 2023 and $69,000 for 2024. If you have employees, you'll have to contribute an equal percentage of income into their accounts as you did into your own.
The amount placed into a SEP-IRA is 100% tax-deductible. You take this deduction on line 15 of Form 1040 Schedule 1. Whatever amount you put into the SEP-IRA becomes an “above the line” (the line is line 11 of Form 1040, aka “Adjusted Gross Income” or AGI) deduction.
Advantages of a SEP-IRA
While a SEP-IRA is usually the wrong choice for most independent contractor doctors, it does have some advantages over a solo 401(k).
- A SEP-IRA can easily be set up online with most major brokerage companies, such as Vanguard, and funded with a simple electronic funds transfer from your personal or business account. It took me less than five minutes when I opened one many years ago. (Note that I switched to a solo 401(k) later.) This simplicity is a significant advantage over a solo 401(k).
- Another advantage of a SEP-IRA is that the account can be funded after the end of the year AND it can be opened after the end of the year. However, this advantage was lessened by the Secure Act 2.0 legislation, which basically allows the same thing even for the employee contribution of a solo 401(k). You just have to open and fund the account before your tax date—usually April 15, but it can be as late as October 15 with extensions.
- Starting in 2023 and as a result of the Secure Act 2.0, there is now the possibility (if your SEP-IRA provider allows it) of Roth contributions into a SEP-IRA.
- You can roll over a SEP-IRA into a Roth IRA each year as a Roth conversion, too. There is no two-year waiting period like with a SIMPLE IRA or a SIMPLE 401(k). Most solo 401(k)s don't allow in-service rollovers out of the plan.
- Unlike a solo 401(k), you are not required to file IRS Form 5500-EZ each summer for a SEP-IRA, even once the account has more than $250,000 in it. While this form is not hard to fill out, the penalties for not doing so are massive.
More information here:
Best Retirement Savings Plans for the Self-Employed
How to Open a Solo 401(k) at Fidelity
What Is a Solo 401(k)?
Solo 401(k)s were introduced in 2002, and they are a good fit for the self-employed/business owners—even those who employ their spouses if there are no other employees that would qualify for the 401(k). Both the owner and the employed spouse must receive the same percentage of contribution.
Rather than limiting contributions to the usual amount of an employee 401(k) deferral ($22,500 per year in 2023; $23,000 in 2024), the laws allow you to also put in an employer contribution (really all the same money for a sole proprietor) for a total of up to $66,000 per year in 2023 ($69,000 in 2024), exactly the same total contribution as a SEP-IRA. If 50+, you also get an extra $7,000 as an employee catch-up contribution.
A solo 401(k), however, is a more complex beast than a SEP-IRA. You are required to have a plan document, for instance. This isn't a big deal, and the paperwork at most brokerage options walks you through it quickly, but it will take longer than five minutes. It is not unusual for it to take a few weeks to get it all set up. With that complexity, however, comes a number of options not available in a SEP-IRA.
Once there is more than $250,000 in it, you'll need to file Form 5500-EZ each year too. Do not forget this. It's due July 31 each year starting the year after it finishes the year with $250,000+ in it. Even if you have two solo 401(k)s (for some dumb reason) and the total is more than $250,000, you'll need to file this form.
If you are interested in “self-directed” retirement accounts (used to invest in non-traditional assets like precious metals, cryptocurrencies, real estate, etc.), both SEP-IRAs and solo 401(k)s can be used.
More information here:
7 Advantages of a Solo 401(k) vs SEP-IRA
There are at least seven ways solo 401(k)s are better than SEP-IRAs.
#1 Higher Allowable Contributions for Many Earners
As a sole proprietor, you only needed $217,500 in income to max out a solo 401(k) in 2023, but you needed $330,000 to max out a SEP-IRA. This is because part ($22,500 in 2023) of the total $66,000 [2023] contribution is an employee contribution and doesn't enter into the employer contribution amount calculation. This income ($217,500 or $330,000 in 2023) is net of all business expenses, including the employer half of the payroll taxes.
Here's a SEP-IRA calculator to figure out the annual contributions permitted. Sometimes this 20% number is phrased as 25% of wages, but for a sole proprietor, this is really the same number. It's 20% if you include the retirement plan contribution, and it's 25% if you do not include the contribution itself. Note that if you are an S Corp (or an LLC filing as an S Corp), you are limited to 25% of actual wages paid. Even if the business made $300,000, if you only paid yourself $100,000 as salary, your employer contribution will be limited to $25,000.
#2 Loans
You can potentially borrow money from a solo 401(k) but not a SEP-IRA. You probably shouldn't borrow from either, but at least the option is there in case of catastrophe. You can generally borrow up to $50,000 per year or 50% of the balance, whichever is less.
#3 Backdoor Roth IRAs
SEP-IRAs must be taken into the pro-rata calculation when converting non-deductible IRAs to Roth IRAs, but, thanks to the Secure Act 2.0, that requirement will be dropped in 2024 for the Roth portion of SEP-IRAs. Solo 401(k)s are not subject to that rule. As a result, most SEP-IRA users couldn't do a Backdoor Roth IRA and missed out on this great opportunity. Learn more with our Backdoor Roth IRA Tutorial.
#4 Roth Contributions
Inside a solo 401(k), your “employee contributions” (up to $22,500 for 2023 and $23,000 for 2024) can be designated as Roth contributions. This allows you some tax diversification benefits, and it also allows you to save more money in a tax-protected manner since after-tax money is worth more than pre-tax money. In fact, all $66,000 in 2023 ($69,000 in 2024) can be Roth if you do the Mega Backdoor Roth IRA process (see #5 below). The Secure Act 2.0 lessened this advantage, however, because starting in 2023, Roth contributions are now allowed in SEP-IRAs (although it's still hard for me to find one that actually allows it.)
#5 Mega Backdoor Roth IRA Contributions
Although SEP-IRA contributions can be converted into a Roth IRA each year, only a 401(k) allows a true Mega Backdoor Roth IRA contribution. These are after-tax contributions with either in-plan Roth conversions or in-service withdrawals with a conversion to a Roth IRA. These allow investors to put the entire $66,000 contribution into a Roth account. This can be very beneficial when trying to maximize the 199A deduction.
#6 Asset Protection Benefits
Although many states protect IRAs and solo 401(k)s equally from creditors, at least two (Minnesota and South Carolina) give additional asset protection to solo 401(k)s over IRAs.
#7 Catch-Up Contributions
Starting at age 50, an employee can contribute an extra $7,500 [2023 and 2024] into a 401(k) as an employee contribution. This cannot be done in a SEP-IRA.
That's a lot of advantages. I have used both types of accounts to good advantage at various times in my investing career. However, my general recommendation for an independent contractor is to use a solo 401(k) for the reasons outlined above.
However, if you don't care about any of those advantages, take a careful look at a SEP-IRA. You can always roll it into a solo 401(k) later.
If you have employees, choosing a retirement plan is no longer a do-it-yourself project. You should seek out professional help to study your business, understand what you want out of a retirement plan, and understand what your employees are likely to do if offered a retirement plan. The right plan for your business may be a 401(k), a SEP-IRA, a SIMPLE IRA, or no plan at all.
What do you think? Do you use a SEP-IRA or a solo 401(k) and why?
[This updated post was originally published in 2011.]
Oops again. Scratch that.
I also have questions about the best way to save for retirement if I have both 1099 income, and w-2 income with no benefits. I’ve had a SEP for many years, but three years ago took the W 2 job, from which I now make the majority of income. My tax guy says my SEP maxes out at 8k ( small private practice), and that I should consider a SIMPLE for the W 2 income. Does that sound right?
I am still trying to understand why the W 2 income doesn’t count toward my contribution limit. But this thread is helping. Thanks.
Here’s my post on SIMPLEs. https://www.whitecoatinvestor.com/simple-iras/
I’m not a huge fan. One issue with W-2 income is the retirement plan has to be put in place by your employer. Your employer apparently doesn’t provide one. You can’t just open a SIMPLE, a SEP, or a 401K as an employee. The employer has to do it. You’re limited to a backdoor Roth IRA. I’d spend some time lobbying the employer to start a retirement plan.
Thank you. I have both W 2 and 1099 income, but the max from the 1099 income is small and the W 2 income from the county I’m an independent contractor for, for 16 hours a week says no to retirement options. I do my SEP through USAA ( I was military), and they offer SIMPLE too. Now I’m thinking solo 401k for the higher max, but I’d have to use my Scwaab.Thoughts?
Schwab is fine. I have an account there. I have accounts at TD Ameritrade, Vanguard, USAA, Fidelity, Schwab, PenFed etc. I wouldn’t call any of them bad.
Thank you. I had just consolidated down to two, but this solo 401k sounds like what I’m looking for. So glad I found this thread.
I’m curious, when you open a SEP IRA or solo 401k, is the plan opened in the businesses name or your name? Lets say for example I am an independent contractor, but all compensation is going into my s corp. From there, I am receiving a salary (W2) from my s corp. If I set up a SEP IRA, would the account be opened in the name of my s corp or my personal name? What about the solo 401k? Just curious, as I may be heading down one of these roads fairly soon.
SEP-IRAs are in your name. Solo 401Ks are in the business name. Of course, if you are a sole proprietor, your name is your business name. Since you have an S Corp, your 401K would be opened in the S Corp’s name.
This is a great website! I wish I had come across this earlier in some of my decision processes. I am new to all of this and these posts are of great value. I am currently working for a solo practitioner on a w-2 without a 401k. In a few years I hope to become a partner and I wanted to know what options at that point I would have in terms of possibly starting a solo 401k or other retirement account (I have Roth and HSA at this point)? Could I incorporate myself after becoming partner and open a solo 401k? His set up currently is a PA.
I have navigated this from many perspectives.
In 2010 and 2011, I had W2 income as an Active duty Army “employee” with TSP(401K) and 1099 income for moonlighting. I maxed the TSP and was able to max a SEP as well.
In 2012 all of my income was all 1099 so I opened a solo 401k with Fidelity. I was able to max it with a 17000 “Employee”(salary deferral) contribution and a 33000 “employer”(profit sharing) contribution. It help me save an addional 17000 dollars for retirement that year. I have not done the calculation for this year.
Does anyone know if you have a sole proprietorship side business and you are also a household employer with a nanny, do you need to have two separate EINs to establish a solo 401k, one for your business with solo 401k and one for household employer? or do you use the same EIN for both? Reason I ask is because IRS web site does not allow me to get a new EIN as sole proprietor since I already have one as household employer, both falling under sole proprietor designation. if using the same EIN for both is ok, will the IRS consider the nanny an employee to which nondiscrimination rules apply and for which you need regular 401k?
the irs web site does let me get an EIN for a retirement plan. should that be what I use?
Great question. I think the easiest way out of this dilemma is starting an LLC for one or the other. Then you can get another EIN. LLCs are cheap and easy. My renewal this year is $15.
WCI
Thanks for the suggestion, but from what I have gathered, the LLC EIN in the setting of a sole proprietorship is a legal entity for the state, but for federal tax purposes one is still supposed to use their SSN or sole proprietorship EIN.
I confirmed with the IRS that they will not issue a second EIN to a sole proprietor.
So I called up a business that specializes in nanny tax handling and has legal staff familiar with nanny tax related issues, and their opinion is that since household employee wages are reported on Schedule H rather than deducted on Schedule C, they dont count as business employees for the purposes of a solo 401k. For what it’s worth, the retirement specialists at Ameritrade handling solo 401ks also thought that the household employee under same EIN wont be an issue. So my plan is to use the EIN I was issued as a household employer.
Also I just want to recommend Ameritrade over Vanguard for the purposes of a solo 401k to everyone. Nearly every Vanguard index ETF that WCI uses is available commission free on Ameritrade’s platform. The commission free ETFs at etrade seem to be more oriented to active traders rather than investors. If you use any actively managed funds, the NTF list at Ameritrade includes T Rowe Price funds and some other good actively managed fund families.
Also the person helping me was authorized to give me negotiated lower commissions based on the amount I would be rolling in, and this can be extended to friends and family.
And Ameritrade accepts rollovers from prior 401ks. So if you have a bad 401k from an old employer it can be rolled over which Vanguard does not.
Again agree with WCI, use vanguard for everything else, but I would go with ameritrade for this particular account.
There’s a newer post on this subject where I talk about where to open a Solo 401K, and why Vanguard may not be the top choice.
https://www.whitecoatinvestor.com/where-to-open-your-solo-401k/
G, I’m interested if you have any follow up regarding having a household employee and a solo 401k. Any issues?
Roth Conversion/Back-door Roth IRAs. SEP-IRAs must be taken into the pro-rata calculation when converting non-deductible IRAs to Roth IRAs
A little confused.. I have both w2 and 1099.. can I still do the backdoor roth ira if I contribute to the sep ira?
If you convert the entire SEP-IRA each year, otherwise, no. You could also roll the SEP-IRA into a 401(k).
I have both a W2 from my primary academic appointment and also work as a moonlighter as a schedule C. My moonlighting pays more than my w-2 work. So I try to make just enough at my academic job to cover the FICA taxes and the rest I try to earn as a moonlighter.
I have a 403b from my academic job with a match and I have a SEP for the moonlighting. I max out the 403 as tax deferred and I also max out the SEP and convert to Roth every year.
Do I have to combine my total 403b (17.5 + employer match) plus my SEP to determine my max contributions or are they separate? Could I do 52k in the SEP and still max out the 403b plus employer match?
You’re getting into a pretty gray area now where it would be worth getting professional advice. I do something similar for this website and for my clinical job, but those are very clearly unrelated employers. In your case, the job is pretty similar. Read this post for more info:
https://www.whitecoatinvestor.com/beating-the-51k-limit-friday-qa-series/
You will notice that tax preparation programs will balk at what you’re doing, but it is difficult to find truly definitive statements from the IRS on the subject.
Two questions for you ..
You stated in one of your bullet points that you could designate your employee contribution portion inside your Solo 401K as ROTH. Does this mean that you are paying tax on that 16,500 amount if you choose the ROTH designation? Loosing the tax deferral benefit? Or are you able to deduct this amount in full and then designate this as ROTH with no tax consequence? I assume that once you designate that portion as ROTH then you are paying tax on it and then loose the tax benefit.
Second question …
You ended the article stating that you have not opened a 401k because you haven’t needed the benefit. This surprises me a little with reading other pages on your site encouraging diversification. Are you not taking any advantage of ROTH designation in your portfolio?
My current strategy is 52K into Solo 401k taking the entire tax deferred benefit, then putting 5,500K into TIRA with no deduction but then rolling it into ROTH.
This allows me to have full tax benefits of 401 contribution and large pot of tax deferred monies, small pot of ROTH monies that I have already paid tax on but will not have tax benefit, and then of course I have my regular taxed account.
Thoughts?
Yes, you pay tax on that amount. But you then never pay tax on that money and its earnings again. I am doing what you do now (the article was written years ago) because I now need those advantages listed in the article.
Quick question on this related subject. If you have both tax-deferred and roth contributions to a solo 401k, how do you keep track of which amounts will be taxed and which are tax-free (including the future growth)? Are they kept in separate accounts?
Yes, they are kept in separate accounts.
First of all, thank you very much for authoring and maintaining this blog. It has been a great reference for me.
I am a W-2 employed physician. I am fortunate to take full benefit of 457b/match by my employer (about 35k total in 2014).
I will be receiving 1099 income for work as a consultant unrelated to my primary job. Is this income eligible to be placed in a solo 401k? Also, since it will be an ’employee’ contribution, my understanding is that I can deposit the entire amount (since it will be less than 17k). Do all of the vendors require an EIN to open an account? I do not have one, although my understanding is that it is easy to acquire one.
The income from this side gig is not going to be very much. However, I really want to have somewhere to roll a traditional IRA so that I can start utilizing the backdoor Roth.
Thank you very much in advance for your help.
Yes, you will need a free, easy to obtain EIN. Yes, the income is eligible for an individual 401(k). Since you have no other 401(k) or 403(b), you can put an employee contribution in, so basically almost everything you make consulting can go into the individual 401(k). This is a great solution to your pro-rata issue.
Thank you for your blog! I have a question regarding the SEP IRA. I am currently an independent contractor and plan to contribute my max into a SEP IRA (less than 20k). However, I was wondering if it’s also possible for me to also contribute $5500 into a Roth IRA since I am still under the income limitations. Thank you!
Yes. And if you weren’t then you could do it via the backdoor.
Great! Thanks for the quick reply. The IRS website on this topic was very confusing!
WCI, but I thought that because he has a SEP IRA, that he would be subject to the pro rata issue when converting to a ROTH. Is this not the case?
He’s not converting to a Roth. He’s making a direct Roth IRA contribution. No conversion required so no pro-rata calculation required.
I get to participate in a 401K in my day job. If I start a profitable side business, can I also create an IRA or some form of a retirement plan through my side business? I thought I could only participate in one tax-deferred retirement program at a time (or is it based on the total I contribute across both of them?). Thanks.
https://www.whitecoatinvestor.com/multiple-401k-rules/
Hi, I just discovered your blog and am so glad I did – I’m sure it will continue to be a valuable resource. I apologize in advance for my ignorance.
I’m a new dentist, independent contractor. I do not have S-corp or LLC…that being said, I opened a SEP-IRA with Ally but cannot make a contribution until I submit IRS form 3505-SEP. It looks easy enough, but I was told by Ally that I should seek help by a financial advisor. I refuse to hire an advisor just to fill out a form! I asked my CPA about it and he said I shouldn’t need the form and to talk to a broker; no help there. So my question is:
Do I need to establish an S-corp or LLC to have this IRA, and if not,then when the form asks for my title, what should I put?
First, why Ally? Go to Vanguard unless you have a very good reason not to.
Second, why a SEP-IRA and not an individual 401(k)? https://www.whitecoatinvestor.com/sep-ira-vs-solo-401k/
So the answers to your questions are “No” and “Who cares because Vanguard won’t make you fill it out and that’s where you should be opening the thing anyway?” (Or if you insist on Ally, why not use “Owner”?
Does the company matter all that much? My understanding is that Vanguard doesn’t allow borrowing on a Solo 401K, but E-trade does. But if E-trade goes out of business, does one lose his retirement account and all its funds?
No, it doesn’t belong to eTrade. Not to mention that is a pretty unlikely event.
https://www.whitecoatinvestor.com/where-to-open-your-solo-401k/
I am new at financial planning and so this question might be very basic. My husband an I are both physicians and have both maximized out employer 401K. He however also has a Locum Tenems position with a 1099 form. Does that qualify him as a sole proprietor? Also does he have to open a business or LLC in order to apply for an individual 401K and contribute as an employer. Please advice on how to move forward with getting the individual 401K.
Thank you. I appreciate this website soooo much.
Yes. No. I opened mine at Vanguard but you can get a nice one at etrade or TD Ameritrade too and just buy Vanguard ETFs.
So I just need to fill out the application for individual 401K with vanguard if that is my company of choice? What do I put in as the company name? Is it easier to just open a company? If so what resources would best guide me on how to do so?
Thanks again for your prompt response.
You know what, you do need an employer ID from the IRS to open the individual 401(k), at least with Vanguard. Might be easiest if you establish an LLC in your state, although I don’t think the LLC is required. They have an application packet here:
https://personal.vanguard.com/us/LiteratureRequest?FW_Activity=FindLiteratureActivity&FW_Event=getliterature&vendorID=S571
I just followed the instructions. If it is still unclear you can call Vanguard. It’s not that much more complicated than a SEP-IRA.
I am currently a fellow (W2 income) and have a 403(b), a roth IRA (for which I utilize the backdoor roth option), and an HSA (all maximal contributions). My wife is in private practice and only has a roth IRA (max back door roth). We both have a small amount in a separate brokerage account. I am doing moonlighting work at other institutions and receive a 1099. I’m hoping to reduce our tax burden and maximize putting $ into retirement accounts as well as paying down ~80K in student loans (refinanced at 4%). What do you think would be the best way to use the 1099 $$. Paying down student loans or opening up a SEP-IRA (is that even possible for me? Or are there other options we can do?
Do a solo 401(k) instead of a SEP-IRA. Otherwise, you’ll have pro-rata issues with your backdoor Roths.
Hi WCI,
I have a very similar situation to Sonny. Employed physician (with 403b/457b) and a backdooe roth IRA. I have an S corp and made some extra money this year and was thinking about solo 401K versus SEP IRA. Accountant mentioned SEP IRA since I won’t have to make the contribution until March of 2016. She also said that it is possible to have a backdoor Roth and a SEP IRA as long as the contributions are not in the same years. That is, I have not made a backdoor Roth contribution in 2 years and 2016 will be the first year I will be contributing to a SEP IRA.
Do you think this is incorrect? Thanks and happy holidays.
That’s correct that a SEP-IRA is fine if you’re not doing a backdoor Roth IRA every year. It’s also probably too late this year to open a solo 401(k). You can do a SEP-IRA contribution for 2015 in April, contribute to a traditional IRA for 2015 in April and then later in 2016 open a solo 401(k) and roll the SEP-IRA into it, then convert the IRA.
I am a physician and had a regular job with 401K profit sharing plan till 4/10/2015. I contributed my own $11250 ( 100% vested) in that with my salary of 112,000 ( W2). I started as an independent contractor from 9/14/2015 till 12/31/15 and had a salary of 80,000 ( 1099). I do a non-deductible IRA every year and have put in $6500 for 2015. Should I do SEP-IRA or solo 401K for my independent contractor position. Please advise.
Solo 401(k) so you can convert all your non-deductible stuff to a Roth IRA. Unfortunately, it’s probably too late this year to open one but still time to do a SEP. So you can do the SEP for 2015, a solo 401(k) for 2016, roll the SEP money into the solo 401(k), and then convert the IRA for relatively low tax cost. Then do backdoor Roth IRAs each year going forward.
referring to my previous comment-This is my projected salary $80,000 till 12/31/2015.
Does SEP-IRA for 2015 contributions needs to be opened by 12/31/2015 or 4/15/2016
4/15/2016
I love this blog. Thank you, there is so much useful information. I was a W-2 employee from Jan 1-March 30, made ~$90,000, put 16,500 into 401k. From May to Dec 31,2015 I worked as an independent contractor with S-Corp, with a projected earning of $150,000. I have opened a solo 401k with TD Ameritrade, can I max out to get to $52,000 or only put 25% on 1099 money. When is the deadline to transfer money to solo 401k, December 31, 2015 or April 15,2016? Thanks again
Only 20% of net self employment income plus a $1500 employee contribution. You can put employer contributions into the 401(k) up until April 15th, but I’m a little less clear on the employee contribution deadline. I’d probably do it today just to be safe although I’m pretty sure my Vanguard one will let me do it next year.
I love this blog and website. The amount of information you have is amazing. I wish I knew it much earlier! I have two questions
1. I am university employed but as a side I do moonlighting and get 1099. After talking to my accountant, I opened a SEP IRA and has been contributing. Is this a right approach as I max my 401(a) and 403(b) with the college.
2. If and when I stop the extra work and thus income, what is the best way to handle the already contributed SEP IRA? I do not have IRA currently.
thank you again,
1. No. Use an individual 401(k) so you can do a backdoor Roth IRA too. Just roll your SEP money into it.
2. You can just keep it, but like I said in # 1, I’d put it in the individual 401(k).
The simplicity of SEP is tempting me to stay where I am. I have an option of Roth 403(b) which I am not using currently. The reason is I feel once I stopped the outside work which will probably happen in the next 2-5 years, my income will drop by 30-40% and thus my taxes and felt that I should not pay tax at this time. If you still fill that I need the diversification of Roth contribution, can I contributed to the ROS 403(b) and leave the SEP as it is.
I have ordered your book and that also might help
truly thankful to your time!
Dave
You realize that with a backdoor Roth IRA you aren’t comparing tax-deferred and tax-free, you’re comparing taxable and tax-free, right? But you’re right, a SEP is simpler.
let me clarify. Excuse my ignorance though!!
when I do backdoor Roth IRA basically the traditional non deductible IRA was already taxed at my current tax rate. So if that is the case and I have the ability to contribute to Roth 403(b) which is again post tax at the current rate, are those not the same? if they are rather than moving to 401K and then use back door should I stay in the SEP IRA and instead start Roth 403(b) contribution?
I am sure I am mixing something there!
Thank you
If you’re not maxing out your 403B, then sure, it’s the same (except you probably have better options and lower expenses in the Roth IRA.) I’m suggesting you both max out your 403B and do a backdoor Roth IRA contribution each year. In fact, why not just do tax-deferred contributions in the 403(b) and then do a backdoor Roth IRA contribution with the tax savings? You lost me a little in my 401(k)/403(b) discussion. I’m not really sure what you have available to you and how much you’re saving each year for retirement.