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And if you didn't withdraw the 10K, you could still put in more than you intended to.

If you have the extra money.

5% ... that rate is only in place until 2007

If it goes up, I will reconsider.

If your taxable income is that low ...

Try to run the numbers. In 2005, for married filing jointly, 15% tax bracket applies to taxable income up to $59,400. Considering the deductions, exemptions, 403b contributions and tax-exempt benefits, the gross income must be over something like $85K to go to a higher bracket (disregarding the effect of capital gains at this point). The median household income in the U.S. is below $50K. Compared to that, $85K does not look that low. Take 13.5% yearly of, let's say, $70K and invest it in stocks for 35 years. Should suffice.

403b distributions are taxable as ordinary income, not capital gains

The same is true for the traditional IRA!

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