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Author: puterlady Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75812  
Subject: 403(b), Roth, or both?? Date: 4/8/2000 12:59 PM
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I'm employed at a state institution, and have been paying into our Retirement Plan (a 401(a)) for almost 20 years now. My contibutions are payroll deducted, making them "non-taxable gross", and are matched by the university (free money). (The 20 year participation is important, in that I have now been in long enough to get 100% medical insurance coverage (no cost) through the plan.) We do not pay into Social Security, so I cannot expect any SS distributions when I'm old and gray.

That's the bulk of my current retirement planning, and I know it's not enough. I know I've got to get going on more retirement investments. I'm 42 yrs. old. I really don't wish to continue working at the university for another 23 years, but expect to be there for another 6 months to a year, and then I'd like to begin working as a Realtor full-time. I've been licensed for almost 2 years, but my real estate income has been less than satisfactory.

We have a 403(b) plan at work, that I am debating participation in. If I start now, I'll only have 6months to a year participation if I do leave there. BUT, I can make non-taxable contributions into the plan while I'm there. Does it make sense to start it, with such a short participation timeframe?

I'd like to open a Roth IRA, too. I've already filed my 1040, and expect a check any day now. I'd like to open a Roth with $1k of that return and then begin direct deposit to it to bring me up to $2k contribution for the year 2000. (Is it really worth my while to try to do this prior to April 17, and file an amended return for 1999??? or should I just start fresh for 2000??? If I really pinch pennies, I could have a $1k contribution for 1999, and push hard to get a full $2k in for 2000.)

How might you advise this Fool?








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Author: saml72933 Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 21039 of 75812
Subject: Re: 403(b), Roth, or both?? Date: 4/8/2000 9:20 PM
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puterlady------- I see by your post that you are considering quiting your university job to become a full time realtor. I could not help but respond, for what it's worth. I would hope you would think long and hard about this decision. It seems that you have a very good position with many benefits you would not have as a realtor, not to mention less reliable income. I would advise you to maybe stay with your current employment and do the real estate thing part time, at least for a few years more. You can thus take advantage of the retirement investments available to you and gain a little more insight into the real estate business. Remember, in real estate, you will be self employed and any benefits you get, you will have to provide, and it's not easy. Believe me, I was self employed my entire working life and I was very lucky to have come out of it with a small nets egg for my retirement years. You are about the same age as my youngest daughter who is an eighth grade math teacher in Florida. She is currently considering a 403b7 plan that is managed by Janus. It is probably the same one you mention. I believe it is a good plan with Janus managing it. They are a very good company. Sorry about getting on my soap box, just my 2 cents.

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Author: saml72933 Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 21040 of 75812
Subject: Re: 403(b), Roth, or both?? Date: 4/8/2000 9:24 PM
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P.S.---- I'm surprised no one, other than myself, has taken you to task over this post! LOL

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Author: puterlady Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 21041 of 75812
Subject: Re: 403(b), Roth, or both?? Date: 4/8/2000 9:56 PM
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After I posted originally, I realized that it isn't really clear to me what, if anything, the IRS needs to know about a Roth IRA, if the contributions are not tax deductible.

would I have to file an amended return if I opened a Roth for 1999, though I've already submitted my return?

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Author: puterlady Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 21042 of 75812
Subject: Re: 403(b), Roth, or both?? Date: 4/8/2000 10:05 PM
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Sam,
I know that switching over to fulltime real estate will be incredibly difficult. Doing it part-time has shown me how hard it is. But working another job while trying to also work real estate is just as hard... I really believe if I could spend all my time on RE, I could make a go of it. I've thought long and hard about the loss of benefits that I have now. Even though I am not paid what I'm worth at the University, the benefits are hard to beat...

What can I say? I'm burned out in my current position. I've considered moving to another department within the University to make things more tolerable. The thought of working there one more year is really depressing. Should I stay at a job that I abhor just for the benefits? It's not good for my mental health, nor my spirit!



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Author: saml72933 Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 21043 of 75812
Subject: Re: 403(b), Roth, or both?? Date: 4/8/2000 10:29 PM
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You are correct, in that, there is nothing worse than a job you hate to go to. There, also, is nothing better than a job you can't wait to get up in the morning and go to. I think you might check around and, maybe, find another department to possibly transfer to that would make better use of your time and talents. Who knows, you may find an area you really, really like. You might then, even wonder why you ever thought about leaving. Have a great day, Saml.

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Author: grubaugh One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 21051 of 75812
Subject: Re: 403(b), Roth, or both?? Date: 4/9/2000 4:35 PM
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You do not have to file an ammended return because you open a Roth. The money you put in has already been taxed.

The reason to open a Roth before April 17th is that your 5 year waiting period will start January, 1999. However, since you also have to be 59 before you can take out the tax free money and you are only 43, one more year won't really make any difference.

I would suggest speaking to realtors currently working in your area. Ask them how it was for them starting out and how long you can expect to work in the field full-time before earning enough to live on. You might find useful information at your local Board of Realtors. Residential realtors work mostly evenings and weekends. Does that fit with your lifestyle. Commercial realty is hard to break into and you would be swimming with the sharks.

Checking out your alternatives may help you keep upbeat while you are at your current job.

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Author: lectic One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 21055 of 75812
Subject: Re: 403(b), Roth, or both?? Date: 4/9/2000 7:36 PM
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Not true. Waiting one more year can make a big difference. Take $2,000 and allow it to compound at only 11% (the historical market average) for 20 years. You would be 63 then and by making your contribution now and not missing the 1999 year you would have over $16,000 more in you Roth account. Making the full contribution in the early years makes an enormous difference since those years are the ones with the biggest compounding effect in the later years.

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