403(b) vs. SEP-IRA: Using Both With a Job and a Side Business

01They are different kinds of plan

A 403(b) is an employer-sponsored plan you contribute to through salary deferral from your paycheque, typically at a school, hospital or non-profit. A SEP-IRA is a plan your own business sponsors and funds, with employer contributions only and no salary deferral at all. Because the money enters through different doors, the two are not simply added together.

02What is shared and what is not

The critical distinction: your salary deferrals are limited in aggregate across plans, so deferrals into a 403(b) count against that shared ceiling. A SEP contribution is not a deferral — it is an employer contribution — so it is governed by a different limit. This is why someone already maxing a 403(b) can often still fund a SEP from genuine self-employment income. It is also why the arithmetic confuses people: two limits, two different scopes.

03The self-employment income has to be real

A SEP contribution has to be supported by actual net earnings from self-employment. Consulting, private practice, honoraria and freelance work generally qualify. Your salary from the 403(b) employer does not, no matter how the two feel from your side. If the side income is small, the SEP contribution will be small, because it is a percentage of that income and nothing else.

04Where people get it wrong

Three recurring errors. Treating total household income as the SEP base rather than net self-employment earnings. Assuming a 403(b) at work blocks a SEP entirely — it usually does not. And forgetting that being covered by a workplace plan affects whether a separate traditional IRA contribution is deductible, which is a different question again.

05If there is also a 457(b)

Many public-sector and non-profit employers offer a 457(b) alongside the 403(b), and it has its own limit that generally does not share with the 403(b). For someone with a 403(b), a 457(b) and a side business, there is more room available than almost anyone expects — and more ways to trip over the interaction. That combination is worth mapping once, properly, rather than guessing each December.

06What this is not

This explains how the account types interact. It is not advice about your situation, and I am not a registered investment adviser — nothing here is a recommendation about what to invest in. What I can do is work out how much room you actually have across all of it, which is usually the question underneath the question.

This article is general information, not individualized tax, legal, or financial advice. Every situation is different — reach out and we'll look at yours directly.