Freddie780
New Member
Cash: $ 1.25
Posts: 4
Joined: 30 Jul 2006
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| Retirement Question |
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I am asking this question on behalf of my sister hoping to get third party unsolicited responses.
Given the choice of investing in either a 403b/401K or an IRA which do you choose? I have told her to always do the tax deferred approach of 403B and 401k first (at least to the company match) and even if there is no match the tax deferred will ultimately deliver more than the IRA (which is after tax contributions) - I beleive they are eligible for a Roth IRA but ut us still after tax contributions.
Once they have maxed out or received the company match, then go for the IRA. Her husbad says 403b's have fees - I am at a loss as most funds have some maintenance fees in the long run. Please advice.
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Wed Aug 08, 2007 1:54 am |
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coaster
Senior Advisor
Cash: $ 1356.20
Posts: 6678
Joined: 11 Oct 2005
Location: Wisconsin
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The traditional IRA is before tax contributions so in that sense they're equal with employer plans - both being tax-deferred. It's the Roth IRA that's after tax contributions. The advantages of the employer plans are the employer match and the automatic payroll deduction. The advantages of the IRA are self-directed management and (usually) a larger selection of investments.
I'm sure there's more pros and cons I just can't think of them right now. 
~Tim~
Eye Candy : Why Whimsy
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Wed Aug 08, 2007 2:54 am |
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BlankenshipFP
Money Talk Advisor
Cash: $ 79.56
Posts: 390
Joined: 05 Oct 2004
Location: Illinois
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Very often the 403(b) will be more costly (in terms of overhead) than your own IRA. This is in part due to the way that the plan is implemented - many times with annuity-based investment choices as your only option.
On the other hand, a 403(b) has the benefit of higher annual contributions and potential matching.
I always recommend taking advantage of the 401(k) or 403(b) up to the match, then fully funding the Roth IRA (as eligible), then completing the funding of the 401(k) (or other deferral instrument).
Jim Blankenship, CFP®, EA
Blankenship Financial Planning, Ltd.
www.BlankenshipFinancial.com
Standard IRS Circular 230 Notice Applies
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Wed Aug 08, 2007 1:22 pm |
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more freedom
Full Member
Cash: $ 16.20
Posts: 80
Joined: 12 Jul 2006
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Hey Have you heard the famous author Robert Kiyosaki?
He is really agaisting 401k for the retirement plan.
You might want to go to the library and read his book first
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Sat Aug 11, 2007 2:18 pm |
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efflandt
Senior Member
Cash: $ 80.45
Posts: 401
Joined: 25 Apr 2005
Location: Elgin, IL USA
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The best suggestion is usually a mix of both. Contribute at least enough to your 401k/403b to get company match, and if you will have more than enough to also max out a Roth, bump up the 401k/403b contributions.
I am contributing roughly 2/3rds contributions to my 401k and 1/3rd to Roth IRA, but my goal is to learn enough about investing that the 1/3rd in my IRA's grows to equal the 2/3rds in my 401k. I am converting from IRA to Roth IRA at a rate that remains under my next tax bracket (about $10k/yr covered by W-4 withholding adjustment).
Upon retirement, having less in 401k/IRA will hopefully keep me in a lower tax bracket, while the Roth IRA will allow more flexible lump sum distributions (for enjoyment or essentials) with no tax implications.
In a 401k/403b contributions are not taxed, but all distributions are eventually taxed, and there is required minimum distribution at age 70.5. Roth IRA contributions are taxed, but qualified gains are never taxed, and distributions are never required during your lifetime.
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Sun Aug 12, 2007 6:49 pm |
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