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Edd

403Byes-Or-No?

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Hello. Forgive me if this topic has been discussed previously.

 

I am a teacher in California, will have the state pension for teachers, and currently save some in the 403b that is available to me.

 

Does anyone think that saving in a taxable account in a low turnover fund such as an index fund or some other low turnover fund is a better idea than the tax deferred saving in the 403b?

 

I have long thought about this in my planning/saving phase. Now it is tax deferred but I will pay full income tax rate upon taking it out, or save now after tax and then pull as a capital gains which is taxed at a much lower rate than what I expect to pay in retirement with my pension and pulling from the 403b. Our AGI is currently too high for a RothIRA.

 

The tax savings when I am retired seems like a good idea given that we will live on what we have and want to keep expenses, taxes etc., at that time as low as possible. I see being able to afford it now as better than when I am old living on less.

 

Any thoughts would be appreciated.

 

Thanks, Edd

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I am not sure what our options are. If they are good, then that would be a possibility. If the options stink, however, I am back to the same question as my original.

 

Edd

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Guest Joel L Frank

"I am not sure what our options are. If they are good, then that would be a possibility. If the options stink, however, I am back to the same question as my original."

 

Edd

====================================================================================================

 

Edd:

 

I'm confused. In your opening post you told us that..."and currently save some in the 403b that is available to me." So you have to have at least a working knowledge of what "our options are", no? Does your 403(b) offer a Roth feature? Is it load or no load? If it's no-load it's what it's suppose to be! If it has a Roth feature it is that much better.

 

Joel

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Hi. I contribute to the 403b that we have available. I do not know which of the options also offer the Roth. I had not thought of that, but will now call them and ask. I spoke with the TPA yesterday and he was not sure, so I will have to call myself.

 

Edd

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Guest Joel L Frank

Edd,

 

Before we begin talking about bonds (your new topic, posted today) please take the time to bring us up to date based on this topic which you began on November 11.

 

 

Hello. Forgive me if this topic has been discussed previously.

 

I am a teacher in California, will have the state pension for teachers, and currently save some in the 403b that is available to me.

 

Does anyone think that saving in a taxable account in a low turnover fund such as an index fund or some other low turnover fund is a better idea than the tax deferred saving in the 403b?

 

I have long thought about this in my planning/saving phase. Now it is tax deferred but I will pay full income tax rate upon taking it out, or save now after tax and then pull as a capital gains which is taxed at a much lower rate than what I expect to pay in retirement with my pension and pulling from the 403b. Our AGI is currently too high for a RothIRA.

 

The tax savings when I am retired seems like a good idea given that we will live on what we have and want to keep expenses, taxes etc., at that time as low as possible. I see being able to afford it now as better than when I am old living on less.

 

Any thoughts would be appreciated.

 

Thanks, Edd

 

What about a Roth 403(b)?

 

I am not sure what our options are. If they are good, then that would be a possibility. If the options stink, however, I am back to the same question as my original.

 

Edd

 

"I am not sure what our options are. If they are good, then that would be a possibility. If the options stink, however, I am back to the same question as my original."

 

Edd

====================================================================================================

 

Edd:

 

I'm confused. In your opening post you told us that..."and currently save some in the 403b that is available to me." So you have to have at least a working knowledge of what "our options are", no? Does your 403(b) offer a Roth feature? Is it load or no load? If it's no-load it's what it's suppose to be! If it has a Roth feature it is that much better.

 

Joel

 

Hi. I contribute to the 403b that we have available. I do not know which of the options also offer the Roth. I had not thought of that, but will now call them and ask. I spoke with the TPA yesterday and he was not sure, so I will have to call myself.

 

Edd

 

Edd,

 

What California district do you work in? You can research options at 403bcompare and here http://yourplan.calstrs.com/select/Login

 

Dan Otter

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Hello. I am looking at the Roth option. I had a Roth 403b previously, but as has happened so many times, that option was dropped off our list some years back. When I posted the question, I was only thinking on the taxable account question and not the Roth. When you mentioned the Roth 403b, I will look at that. Of course, we are limited to the options available to us, while the taxable account can hold any stock or mutual fund.

 

My question was regarding the most tax efficient route to living out the retirement years. In looking at 403bcompare, I do not see which can be Roth and which cannot, or perhaps they all can. I called the TPA and he did not know, he just told me to call the mutual fund company.

 

So, at this point, I am considering both and will continue to look into the Roth 403b options.

 

I am getting closer to retirement, 5-8 years, and am studying the issues more closely, and am still trying to accumulate as much as I can before I go out.

 

Edd

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Edd

 

I am not sure what you are asking exactly. Unless your 403b options are very high expense I think you should do the tax deferred to the max plus catch-up. That would lower your AGI by that amount and that may allow you to then contribute to the Roth IRA because your AGI gets lowered. Of course I don't know your income details.

 

I am a believer in having a Roth, 403B accounts and taxable accounts. This gives you more options in retirement. Your goal should be to pay the least amount of possible taxes in retirement. Currently I am 45 % Deferred, 40% Taxable and 15% Roth.

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Interesting, Tony. I will ponder your strategy. I am simply asking what others are thinking/doing with regards to saving in tax deferred vehicle or in something else. The tax impact in retirement is the issue, and would like to not be overburdened by taxes when retired. I have long been a believer in the idea that now I can work more now or longer if necessary, but when I am 72, for example, I do not want to have to fret over needing more income (from work) if taxes eat up more than I have planned for. Of course, in that case, living more frugally will be top priority as well.

 

Thanks,

Edd

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Guest Joel L Frank

Edd

 

I am not sure what you are asking exactly. Unless your 403b options are very high expense I think you should do the tax deferred to the max plus catch-up. That would lower your AGI by that amount and that may allow you to then contribute to the Roth IRA because your AGI gets lowered. Of course I don't know your income details.

 

I am a believer in having a Roth, 403B accounts and taxable accounts. This gives you more options in retirement. Your goal should be to pay the least amount of possible taxes in retirement. Currently I am 45 % Deferred, 40% Taxable and 15% Roth.

Hi Tony,

 

I would like to understand, fully, your breakdown. Are you saying that for each $100,000 of long-term savings/investments $40,000 is in taxable accounts?

 

Joel

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And that means I am in fact paying dividend and captital gains taxes as I go to a degree . It gives me flexibility because the 403 deferral cushions the tax hit on my taxable. The taxable also allows for some advantage when selling as you can deduct losses. I aways seem to get good income tax refunds each year so it must be working.

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Guest Joel L Frank

And that means I am in fact paying dividend and captital gains taxes as I go to a degree . It gives me flexibility because the 403 deferral cushions the tax hit on my taxable. The taxable also allows for some advantage when selling as you can deduct losses. I aways seem to get good income tax refunds each year so it must be working.

 

Tony;

 

As you know one can contribute much more to a Roth 403(b)/457(b) than a Roth IRA. But a Roth IRA is not subject to RMD while Roth 403b/457(b) are. Thus, upon retirement many individuals simply roll their Roth 403b/457(b) into a Roth IRA.

 

That said, would you not be much better off with much more than 15 percent of your holdings in a Roth where qualified distributions are exempt from all taxation (income, dividend, capital gains)?

 

Joel

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Joel,

Perhaps. I am adding to my Roth IRA all I can each year. I was late to the Roth game. I was late to the bond game too. WE don't really know were taxes are going. WE assume up so Roth may make sense now but we may get a Republican Administration which may mean taxes will stay low. I think I may soon stop my deferred plan and supercharge my Roth 403b option which was only introduced a few years ago in our district. The RMD is an issue no question.

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