XDRoX
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I am a teacher and have decided to start a 403b. I picked my stocks which I'm going to use and allocated the places for my money go, and decided how much I am going to invest.
The only thing that I don't know:
Should I pick the standard 403b or the new Roth 403b?
I currently max out my $4000 amount with Janus on my own, but from what I understand this is a separate thing and allows for $15,500 a year.
What do you guys think I should do?
BTW, I'm 31 years old.
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Wed Feb 14, 2007 8:49 pm |
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No-Brainer
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The decision factors that need to be applied to answer this are way to complex for a quick answer in a forum. If you are serious about making the right choice it will take in depth analysis of your individual situation and projected position.
Do the research or hire a consultant, unless you want a snap answer that has 70% chance in being right and that would be use the Roth.
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Wed Feb 14, 2007 10:13 pm |
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coaster
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I don't know much about 403(b)s but if the Roth version is the same as a Roth IRA, the generic recommendation is to go with a Roth because you won't be taxed on the distributions, and who knows what your taxes will be in 30 years.
~Tim~
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Thu Feb 15, 2007 12:27 am |
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XDRoX
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I have reseached it and it is exactly the same as a regular Roth IRA, except the amount is not $4000, it's $15,500.
I can't see any reason to go with the traditional 403b when I could get this one. Do you know of any reasons why someone 31 years old should choose a regular IRA over a Roth? To me it seems like an easy choice. Am I missing something?
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Thu Feb 15, 2007 1:39 am |
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oldguy
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quote:
I can't see any reason to go with the traditional 403b when I could get this one. Do you know of any reasons why someone 31 years old should choose a regular IRA over a Roth? To me it seems like an easy choice. Am I missing something?
You're missing the key variable that will be the basis for your decision - it is 'tax rate'.
If you are currently in a high bracket and will be able to remove the money at a lower rate in retirement, the Traditional is best. And if you are in a low bracket and will pay a higher tax to remove the money, then the Roth is better. So for folks making $100k and paying 35% taxes, the Tradional is best, later they will take that money out at 15%. Of course the wild card is that tax rates can't be predicted 40 years out (you take money out at age 70.5). So you diversify your tax status (just like you diversify your investments) - ie, you buy some of both - that way you won't kick yourself at age 70 for being 100% wrong.
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Thu Feb 15, 2007 3:29 pm |
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BlankenshipFP
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One other difference with the Roth 403(b) (or 401(k)) versus the Roth IRA is that these new Roth designated CODA accounts still have a RMD requirement at age 70.5, whereas the Roth IRA does not. This can, of course, be rectified by rolling over your Roth 403(b) to a Roth IRA at some stage in the future, before age 70.5.
Jim Blankenship, CFP®, EA
Blankenship Financial Planning, Ltd.
www.BlankenshipFinancial.com
Standard IRS Circular 230 Notice Applies
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Thu Feb 15, 2007 3:51 pm |
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