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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75539  
Subject: Re: Should I split between 40? and Roth? Date: 1/16/1999 11:17 AM
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Greetings, MajorChip, and welcome. You asked:

<<At work, I have a 403B where I contribute.
My employer pays into a 401A, matching my contributions 50 cents on the dollar.
The maximum matching is 3% for my contribution of 6%.
Currently, I contrubute 12% and get matched 3%.
Would it be smarter to reduce my contribution to 6% and put the other 6% (or more?) into a Roth IRA?>>


IMHO it makes perfect sense to contribute the 6% to your 403b plan to receive the 50% maximum match your employer provides on that contribution. Beyond that level, you need to compare your alternatives on a tax-equivalent basis. If you are as dedicated in an alternative as you are in the 403b (i.e., you contribute a set amount every time you get paid, and that increases at the same rate as your pay does), then often you can do far better in a Roth and in a taxable alternative. That's because you have greater flexibility in your choice of investments that often out-perform the mutual funds available within your 403b plan. You have to run the numbers to see if that's true in your case. I suggest a way to do that in Step 4 of my 13 Steps to Foolish Retirement Planning. You can read those steps at http://www.fool.com/Retirement/Retirement.htm . Do so, run your numbers, and then decide. My bet is the Roth will be very attractive after you have met the maximum match within your 403b plan.

Regards….Pixy
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