Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Roth 403b??
Old 05-02-2014, 08:24 AM   #1
Dryer sheet wannabe
 
Join Date: May 2014
Posts: 15
Roth 403b??

I am taking the liberty of posting a second question soon after posting my first. I have been blown away by the generosity and good sense of people here. I'm hoping I can eventually contribute the same to others.

I asked my TIAA advisor about these and he instead steered me to the Universal Life Insurance. My husband and I are superfrugal and have been maxing out our 403bs (in TIAA) and also contributing to Roth IRAs (in Vanguard).

My employer has recently started to offer Roth 403bs. Our contributions to the above have kept us in the 15% tax bracket, where I would like to remain.

Contributing to the Roth 403b would probably edge us into the next bracket. However, we also have (unusual situation) access to a 457 plan. Because we have accumulated a rather too large cash reserve (via aforementioned frugality), I was wondering if it would be a good idea to do the Roth403b and OFFSET that with an equal contribution to the 457.

I don't see any downside to this plan. We will remain in the 15% bracket and amass more Roth money which can be accessed pretty soon. The 457 even has a fixed GIC (about 2.5, so less than TIAA traditional) if I want to use this as my "cash bucket."

We are 60 and 62. Thoughts? The TIAA advisor suggested the Universal Life for our cash reserve, but comments here suggest that is a poor idea. What about the Roth403b and 457 idea that I proposed above?

Thanks again. I hope this is clear.
__________________

__________________
frugalscholar is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 05-02-2014, 08:59 AM   #2
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,836
What do you want to achieve here? Are you looking for somewhere to stash cash? do you need easy access. What are your investment requirements? and current portfolio? Do you have a pension?
__________________

__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”

Current AA: 65% Equity Funds / 20% Bonds / 7% Stable Value /3% Cash / 5% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 05-02-2014, 09:11 AM   #3
Dryer sheet wannabe
 
Join Date: May 2014
Posts: 15
Thanks for all the questions. I have been reluctant to post many specifics--but I suppose I should. We will not get SS (well, each of us will get @$200/month). Nor do we have a pension. We opted instead for TIAA. Therefore, we have no safety net of any sort. That situation has probably motivated my supersaving.

At the moment, we have enough to retire with a 4% drawdown, though we want to work a few more years (a few years ago, tenured faculty were let go in a budget crisis, so no guarantees anywhere). Our money is in a mix of stocks/bonds/guaranteed. We follow the monte carlo simulator-generated recommendations to rebalance in TIAA. In other accounts, mostly retirement, we have mainly stocks.

So that is all probably TMI--but yes, I suppose we just need to do something with extra cash at the moment. If interest rates go up in the future, we may annuitize part of the TIAA to provide the safety net we are lacking.

Thanks so much for your comments.
__________________
frugalscholar is offline   Reply With Quote
Old 05-02-2014, 09:21 AM   #4
Thinks s/he gets paid by the post
steelyman's Avatar
 
Join Date: Feb 2011
Location: Triangle
Posts: 3,218
I didn't try to be too clever. As soon as my employer opened Roth 403 plans, I ran right down, stopped traditional, and switched to Roth. I kept on contributing the maximum.

I maxed the 457 so I'd have a source available to me after leaving if needed (I still can't access the 403 penalty-free).

These two moves made me sell from taxable accounts to cover what I needed for regular income. But hey, the tax is now paid!
__________________

steelyman is offline   Reply With Quote
Old 05-02-2014, 09:33 AM   #5
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,836
You sound in a similar situation to me. I'm using the stable value fund in my 457 to fund my ER, but as you are over 59.5 the early withdrawal advantage of the 457 isn't relevant. The proportion you put into 457 vs ROTH403b depends on your tax situation. Your problem really sounds like one of asset allocation, but if you can get access to a stable value fund in the 457 I'd want to get that into my portfolio.
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”

Current AA: 65% Equity Funds / 20% Bonds / 7% Stable Value /3% Cash / 5% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 05-02-2014, 01:31 PM   #6
Thinks s/he gets paid by the post
 
Join Date: Feb 2011
Posts: 1,629
Quote:
Originally Posted by frugalscholar View Post
Thanks for all the questions. I have been reluctant to post many specifics--but I suppose I should. We will not get SS (well, each of us will get @$200/month). Nor do we have a pension. We opted instead for TIAA. Therefore, we have no safety net of any sort. That situation has probably motivated my supersaving.

At the moment, we have enough to retire with a 4% drawdown, though we want to work a few more years (a few years ago, tenured faculty were let go in a budget crisis, so no guarantees anywhere). Our money is in a mix of stocks/bonds/guaranteed. We follow the monte carlo simulator-generated recommendations to rebalance in TIAA. In other accounts, mostly retirement, we have mainly stocks.

So that is all probably TMI--but yes, I suppose we just need to do something with extra cash at the moment. If interest rates go up in the future, we may annuitize part of the TIAA to provide the safety net we are lacking.

Thanks so much for your comments.
Since you raised the "no guarantees" issue, many folks don't realize that non-gov't 457's are not as "safe" as most other retirement plan types. They are not separate funds set aside like 401ks/403b's, but are considered part of employer assets until employee actually retires. If your employer go bankrupt, your 457 could potentially be lost in those proceedings.

Section 457 deferred-compensation plans are risky in this economy - Chicago Tribune

Non-Governmental 457(b) Deferred Compensation Plans
__________________
ERhoosier is offline   Reply With Quote
Old 05-02-2014, 03:33 PM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,450
Is this cash you want to redeploy in a taxable account? If so, then I think it would depend on your target AA and what attractive alternative are available to you in your tax-deferred accounts.

How would the Roth 403b put you in a higher tax bracket? isn't that the same money that would be in your take-home pay today? If so, then diverting some take-home pay to the roth 403b shouldn't affect your taxable income at all.

In any event, I'm not sure if I would jump through too many hoops to defer income in the 15% bracket unless you are sure you will be in a lower bracket when you retire.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is online now   Reply With Quote
Old 05-02-2014, 05:35 PM   #8
Dryer sheet wannabe
 
Join Date: May 2014
Posts: 15
ER Hoosier: Thanks for the heads-up. I was aware of the 457 issue and was planning on drawing those down first in retirement.

pb4uski: The Roth 403b is post-tax (like a Roth IRA) and would replace my regular pre-tax 403b contribution. That is why my tax bracket would go up. And that is why I was thinking of offsetting the Roth 403b contribution with a 457 contribution, which is pretax.

nun: Your earlier posts about your strategies have been very influential. Thanks.
__________________
frugalscholar is offline   Reply With Quote
Old 05-02-2014, 07:41 PM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,450
Quote:
Originally Posted by frugalscholar View Post
....pb4uski: The Roth 403b is post-tax (like a Roth IRA) and would replace my regular pre-tax 403b contribution. That is why my tax bracket would go up. And that is why I was thinking of offsetting the Roth 403b contribution with a 457 contribution, which is pretax.
...
I see. I thought that the Roth contributions would be in addition to maxing out the 403b.

If the 403b contributions are keeping you out of the 25% bracket then I would stick with the tax-deferred contributions and forego the Roth. You can do Roth conversions once you have retired and are no longer flirting with the 25% tax bracket so you'll save 25% now and pay 15% or less later. Right?
__________________

__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is online now   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Contribute to Roth IRA, 403b or both if possible? dooo42 FIRE and Money 6 02-25-2011 12:12 AM
Should i contribute to both a roth ira and unmatched employee 403b or just use one? dooo42 FIRE and Money 1 12-23-2010 09:15 AM
Need Advice: Roth 403b vs. traditional 403b SingleMomDreamer Young Dreamers 0 01-10-2008 08:57 AM
403B Roth or Traditional drboston FIRE and Money 1 12-29-2006 10:32 AM
Roth 403b AND Roth IRA? macdaddy FIRE and Money 3 07-05-2006 07:25 PM

 

 
All times are GMT -6. The time now is 02:50 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.