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Subject:  Re: 403b, Roth: home improvement? Date:  4/25/1998  11:44 AM
Author:  TMFPixy Number:  3023 of 88513

Greetings, PAS, and welcome.

<<I contribute to the UC 403b pretax equity (indexed) fund. The university does not match any of my contributions (There is a separate Pension plan). I am at least 20 years from retirement age.

1- Under what circumstances does it make better sense to do a Roth IRA?

2- We have some home improvement projects we'd like to do in the next 1-5 years. We can borrow from the 403b, paying ~7-8% interest (most of this back to our account). The payments are with after-tax dollars, so this money would ultimately get taxed twice once it is finally distributed. Does this have any advantages compared to
a) Building up a war chest with after tax dollars? (unfortunately, the chest doesn't have much in it right now so we may be forced to the 403b-loan route, or b, c below for some of our more pressing projects)
b) getting a home equity loan?
c) getting a regular bank loan?

3- We have young children we would like to put thru college starting in ~14 years. What's a good way to start saving? Roth? 403B loan? other?>>

CodyZen provided you some worthy thoughts to consider. If you haven't read that reply, you should. My druthers would be to NOT mix these goals, but keep them separate in your planning. You're trying to use your retirement plans as a central pot to do all. That may work for home mprovements and education to some extent, but it will devastate the compounding you need in your retirement vehicles to meet your retirement needs. Use the funds you're devoting to retirement for that goal alone, and don't view it as a honey pot you can dip into as other needs arise. When you do that, the compounding is lost while the money is outside the plans. In the 403b, the interest you pay to yourself gets taxed twice and almost certainly the shares you cashed in must be repurchased at a higher price. That result doesn't bode well for success in retirement.


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