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|Subject: Re: 403 v 457||Date: 3/21/2011 2:31 PM|
|Author: BruceCM||Number: 68671 of 77407|
Okay, I'm not sure I understand everything, but this is what I think you're saying: Since we both have IRAs at Vanguard, we can contribute to those and not worry about the 403 or 457. However, since our IRAs are Roths, eventhough we have full control over them, we're not getting the tax benefit (yearly deductions for investment) that we would get with traditional IRAs.
With a Roth, you're betting that your marginal tax rate in retirement will be at least what it is now. Also, with a Roth you are NOT required to begin minimum distributions at age 70.5. This would be an important factor to someone who has a lot saved for retirement and/or a generous pension + Social Security and feels they may not need to make withdrawals and would rather use their Roth as a savings plan for an inheritance to their children/grandchildren. But if you need the tax break now, the deductible traditional IRA would likely be a better choice.
My understanding, also, is that the 401a as I see it on the website, is the only thing with money in it right now, and until I talk to his HR person, I can assume that his employer is investing into that account right now, and that since it's at Fidelity, we should be able to move it from 'short term funds' to some sort of index fund or whatever, but it really doesn't matter which plan it is in at this point. However, we would want to move it into a better fund.
Sounds like a plan.
As the previous poster pointed out, allocating between a Fido low cost bond fund and equity fund...or even to chose a target date fund (the 'Freedom' funds) corresponding with your reirement date, might be a good choice. And hopefully this employer provided "401(a)" plan is not within a "tax sheltered annuity' wrapper...which if it is, will typically add another 1% in expenses each year, which would essentially rob you of about 15% or so of your future investment earnings (1% out of an average of 7% investment return). But since your husband is not paying into this, what it is is what it is.
So, I'm guessing that I just need to figure out,
1. Does the university invest in any of these available plans?
2. Do they match more or less for one plan or the other?
3. Are all of these funds available to all the plans?
4. (Anything I'm missing?)
I assume you're speaking of contributing to a 403(b)? If so, and if there is not employer matching, I think I'd stick with maxing out contributions to deductible TIRAs. If there is a matech, I think I'd only contribute to the 403(b) to the extent of the match.
And then I pretty much have to decide which plan to 'enroll' in, so I can change the fund, but it may not make that much of a difference because anything we have we invest in our Roths, *unless* I find out that the university matches, and then we should be investing in there first. (Have I got that all right?)
Thanks so much for your input. (And for your good wishes about my FIL. We're not out of the woods, but very relieved.) :)
Glad to offer assistance :-)
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