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Rtngolf

Roth 403 B Or Not

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Hi everyone, I am a 25 year veteran teacher working in illinois. My wife is about the same years into it. We are currently both maxing out 403 b and make North of 100k a year each. I was thinking of switching to the roth 403b. I would have aspire available to me and my wife would have Fidelity. What does everybody think. I doubt I will be in a lower tax bracket when I retire unless they mess with my pension!!

 

Rich

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Rich,

 

As you are phased out of the Roth IRA given your household income, a Roth 403(b) is your only option when looking at saving tax-free for retirement. However, you are still locking that money up to only be used after retirement, and it can't be moved from the 403(b) until you leave teaching.

 

As the tax implications are the same, I would consider saving to a taxable investment account. It's only taxable to the extent of the investments you choose, so index, low-turnover funds shouldn't give you too much tax liability. In addition, this money can be used before retirement, and is not subject to any fees that your 403(b) company may impose.

 

However, if the main focus is retirement savings, then the Roth 403(b) is a good choice. It will give you flexiblity when it comes to retirement income, and it can also be a tax-free asset to leave to heirs should you not need the money. Chances are with two teacher pensions, at your current income, there's a chance you might not need it.

 

Note that by switching to the Roth option, your income tax liability will be going up as you lose the tax deferral of the traditional 403(b). I think that it's worth it in the long run though.

 

Best,

Dave

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To All,

 

I think in general its wise to diversify your retirement saving to take advantage of tax situations.You should consider holding both before-tax and after-tax (Roth) savings to benefit in the event of lower taxes in your retirement years, and the Roth to benefit in the event of higher taxes in your retirement years. This is called tax diversification. The Roth 403(b) is an opportunity to have more control over your tax liability in retirement. Personally I have taxable , tax advantaged and Roth accounts. That flexibility is priceless. Each offers a unique advantage. Since I am mostly underrepresented in Roth savings , I am putting as much as possible in it now as I wrap up my working years

 

As far as maxing out a Roth and a tax advantaged account. I am not sure if you can max out the limit to both within a 403b. But I do know you can max out a 457 and a 403B separately since they are separate and distinct retirement products

 

 

 

Tony

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Deb,

 

A Roth IRA and Roth 403(b) are considered two different types of accounts as one is an individual account, and one is offered through an employer. You can max out both to their limits.

 

Dave

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Oh I thought she was asking if she could max out a 403b Roth and a tax sheltered 403b at the same time. Yes you certainly can do a Roth IRA and a 403B Roth at the same time. My bad.

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Thanks to you both. Another question if you can help.....I am in my 20th year teaching and starting to feel an incredible urge to get out of education... for reasons too numerous to get in to here.......I read (and dream) of "retiring" early or at least getting out of this field.....I see advice about "talking to a financial advisor" for help. Since I am trying to do much of this now on my own, who is this person?? I live in a rural community and our only options near us are brokerage dealers. When I try to get them to look at what we have, invariably it just turns into them wanting to sell me something else. I have also tried tax professionals to no avail. I just want someone to look at what we have, and let me know if A) whether it is feasible and B) an approximate timeline. That would also allow me to know what steps I need to take to get there even faster. Any advice or insights? Thanks in advance.

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Deb19, I have no personal experience with this organization, but it looks like a good place to find a true fiduciary advisor (i.e., one who works for a fee and pledges to represent your best interests, not sell you some product). https://www.napfa.org/

 

I would also suggest that you might want to re-post your question as a separate thread, in order to get more responses.

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Hi Deb,

Are you the same poster asking for assistance on Bogleheads? If not, here is the link and discussion that may be helpful: https://www.bogleheads.org/forum/viewtopic.php?f=2&t=173633&p=2620314#p2620314

 

I also wrote a blog piece on my website about a colleague teacher who was turned away because he wanted to pay the hourly fee for the planner to look at his portfolio: http://latebloomerwealth.com/2014/09/12/did-garrett-planning-network-pass-the-smell-test/

 

Agree with whyme, start a new thread. Also read the long thread about finding a competent financial adviser. It is a complicated issue as some advisers still will not accept people who only want their portfolio evaluated. I am beginning to believe that by they time one goes through the process of learning a little about the investment process and then bringing your plan to an adviser, that person may say that they cannot accept any more clients or that they flat out tell people that they do not want to accept people by the hour (Its infuriating and you might as well become a do it yourselfer!). This BTW is totally against the Garrett Network and NAPFA policy. I know as I called both of them to get the low down when I wrote my piece. Garrett spoke person was appalled by this one adviser's behavior. Did Garrett Planning Network Pass the Smell Test? It was my most popular read piece and its been on my blog for a year.

 

If any adviser that belongs to either NAPFA or Garrett says that they will not accept fee only clients, call NAPFA or Garrett and report them immediately. When I called Garrett they were very happy I reported this individual. I did not have to say the adviser's name, they already knew!

 

For the record, there are a lot of competent advisers in these organizations that want to help in any way, fee only or by fee only and AUM (AUM above .50% is too much, IMO, and the total costs over time for the AUM can very high because the client does not think about this over time anyway. Personally, I have a problem with AUM costs and I think you do too). But you Deb are not one of those people who want an adviser to do everything. The NAPFA and Garrett people do not try and sell you a product that gives them a kickback or commission. They are all trained in investments and portfolio management by the CFP designation, Certified Financial Planner. There are more good things here than the few who might tarnish these professional organizations.

 

This is a lot of information and hope it helps,

Best of fortunes,

Steve

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Thank you Steve...for this information. I am not the one on bogleheads btw, but maybe I should be checking this site out too. :). Thanks again....

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Tony and Dave Thanks, It sounds to me that a roth might be a good solution. I do like the idea of having maximum flexibility as Dave suggest by not doing either one and investing after tax. but Tax free with drawl Sounds great since I am looking at working another 9 years.

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