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Clueless About 403B

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Whyme: Are you not aware that many many teachers who have have a mandatory pretax retirment plan (i.e. state retirement system) are not allowed to deduct a tradtional IRA? I could post a link to the IRS rule but it may be fun for you to go look it up. Good advice on the Roth IRA though. Sometimes it's nice to have a broker to steer you right on things like that so you dont loose your savings to tax penalties due to something as basic as the wrong tax qualification on your money.

 

J. Blink

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Right, Mark corrected me on that earlier; it was something I knew (it applies to me!), but overlooked for a moment when writing the initial post. I'm quick to admit, I'm not a financial pro. But that bit of mis-information was quickly corrected here. There is certainly a place for financial advisors, but I can't see a good argument for introducing a broker into the situation of a new teacher setting up her first 403b; if Brand New followed the advice here (self-direct though Aspire and use a Vanguard Target Date fund), she'll do better than pretty much anyone who uses a full-service broker. Starting at 23, if she puts a reasonably large chunk of her paycheck into the 403b, she'll do very well indeed. If the time comes that she wants advice about setting retirement goals and planning to meet them, tax planning, dealing with an inheritance or estate plan, she will want to hire a fee-based financial advisor, accountant or attorney, but that wasn't the problem at hand.

 

I am curious as to what she wound up doing, but we may never know.

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Sometimes it's nice to have a broker to steer you right on things like that so you dont loose your savings to tax penalties due to something as basic as the wrong tax qualification on your money.

 

J. Blink

 

Hey J,

Your point about seeking help is so true, although I would NEVER recommend a "broker" who has no fiduciary responsibility but himself or herself self interests. That's why around here, we encourage our colleagues to seek out a fee-only adviser WITH fiduciary responsibility IN WRITING and to read Dan's Book to make sure the adviser is doing what they are supposed to do. The conflicts of interest are eliminated with knowledge and fee-only payment, just like all other professions such as a CPA and attorneys. Besides, I believe that an ethical adviser would love to work with clients that know the basics.

 

Said teacher has no further to look than right here: http://www.403bwise.com/advisordirectory/directory.htmlClick here. Are you going to apply? Or are you already on the list? I think Dan is always looking for more advisers.

Have a great weekend,

Steve

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Whyme: Are you not aware that many many teachers who have have a mandatory pretax retirment plan (i.e. state retirement system) are not allowed to deduct a tradtional IRA? I could post a link to the IRS rule but it may be fun for you to go look it up. Good advice on the Roth IRA though. Sometimes it's nice to have a broker to steer you right on things like that so you dont loose your savings to tax penalties due to something as basic as the wrong tax qualification on your money.

 

J. Blink

 

J.

If you read back to page 2 of this thread you'll see that I posted that teachers with a 403b option can also deduct a Traditional IRA if their AGI is $56,000 or less. Trust me, most new teachers are definitely in that range unless they have another source of income. If I'm wrong on that tax issue, please respond, but that is how I read the IRS code.

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