If you are a public employee, you probably have the opportunity to contribute to a 403(b) retirement plan. But just because you can, does that mean you should?

If you are a public employee, you probably have the opportunity to contribute to a 403(b) retirement plan. But just because you can, does that mean you should? Would an IRA contribution make more sense? Are 403(b) plans complicated? Are IRA restrictions too cumbersome? Let’s take a look.

First, what is a 403(b)?

If you work for a school, government or non-profit organization, you might have a 403(b) plan. They are just like 401(k) plans in that you make pre-tax contributions. The money grows tax free, too. You only pay tax as you make withdrawals.

The rules for taking money out of the plan are similar to IRA rules, but there are a few notable exceptions. First, if you retire from service at the age of 55 or older, you can make withdrawals without incurring a penalty. But there are other advantages to the 403(b) plan as well.

You can defer up to $17,000 per year. And those older than 50 can throw in another $5,500 as a catch-up provision. That allows you to sock away far more than the $5,000 IRA contribution limit ($6,000 for those older than 50). And remember, nobody is going to match your IRA contributions. Also, you may be able to borrow from your 403(b), and that isn’t so easy to do with your IRA.

With all these benefits, why wouldn’t everyone who has a 403(b) contribute to the plan as much as possible?

There are several reasons. First, your investment choices are very limited and they are typically very expensive. To add insult to injury, many plans offer fixed or variable annuities, which adds even greater expense to the mix. It makes absolutely no sense to buy an annuity inside a retirement account, and I can’t understand why any plan would have such provisions, but they often do.

With an IRA, besides having almost unlimited investment options (and lower costs), you can change your investments whenever you like. Often 403(b) plans restrict how frequently you can change your investment choices.

Finally, if your heirs are important to you, the IRA offers much greater IRA beneficiary planning flexibility. This is especially important if you want to leave your retirement to someone other than your spouse and you want to allow them to take advantage of the Inherited IRA rules.

While people ask which is better all the time, the reality is, it may not make a difference to you. That’s because your 403(b) might be the only plan you can make deductible contributions into. That’s right. If your income exceeds $89,000 (joint return) and you have a 403(b) plan at work, the deductibility of your IRA contributions is phased out.

And it doesn’t matter if you use the plan or not. If you simply have a plan through work and your income exceeds the limit, the deductibility of your IRA contributions starts to phase out.

So here is the bottom line:

A. If you have a 403(b) plan and your employer matches your contributions, take advantage of that plan first.

B. If your joint income is below $89,000, take advantage of the IRA after you get the maximum matching dollars from your employer.

C. If you joint income exceeds $89,000, stick with the 403(b).

Do you have a 403(b) at work? Are you taking advantage of it? Why or why not?

Neal Frankle , CFP, is the owner of WealthPilgrim.com, a seasoned and authority personal finance blog. His most recent post was his Scottrade Review .