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Is a 403b with Vanguard worth it?
Old 01-20-2021, 05:34 PM   #1
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Is a 403b with Vanguard worth it?

I'm an educator, 49 (but turn 50 in Dec) about 5-6yrs away from Retirement and a Pension. Just rolled over my money from EJ to Vanguard tIRA.
I am at a point where with the exception of my home, I am debt free. I will be able to max my IRA this year. I still can invest another 20k but want your suggestion what method?
403b? Taxable Account? Or is there something else.

My school district has Vanguard listed under it's 403b. The district pays for the 3rd party fees but does not pay for the Vanguard Fee which is $5 a month. However, it does offer cheaper expense fees ( ex. Wellesley Admiral is .07% less than the Wellesley Investor Fund). It has both 403b Roths and t403b.

Also have the option of rolling over my tIRA into a 403b to get the lower expense fees while I'm still working.

Would this 403b be a smart choice? Or is there something better in stock investments?
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Old 01-20-2021, 06:18 PM   #2
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It appears that you will need access to your savings before age 59.5. It may be that your 403(b) would allow access under the "Rule of 55" (if you retire from that job in the year that you turn 55). You will need to check the details of your plan to see if that is true.

If I were in your shoes, I would contribute to the t403(b), but not the tIRA. I would consider putting some money into a Roth IRA (or the R403(b)).
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Old 01-20-2021, 08:47 PM   #3
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It appears that you will need access to your savings before age 59.5. It may be that your 403(b) would allow access under the "Rule of 55" (if you retire from that job in the year that you turn 55). You will need to check the details of your plan to see if that is true.

If I were in your shoes, I would contribute to the t403(b), but not the tIRA. I would consider putting some money into a Roth IRA (or the R403(b)).
Yes, the Rule of 55 applies so it's there if I need it right away.

As for which plan to contribute to, I have the tIRA that I rolled over and is my largest fund. I also opened a Roth IRA and I'm already half way to maxing it. I was planning to make the 403b a 403bROTH. So by the time I retire, and not including my pension, roughly 25% of my retirement savings is in Traditional and 75% is in Roths.
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Old 01-20-2021, 10:12 PM   #4
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I obviously don't know your situation, but why are you aiming to have most of your savings in Roths? Usually, one's marginal tax rate is lower in retirement than while working, and that situation favors mostly saving in Traditional. May I ask why you have come to a different conclusion?
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Old 01-21-2021, 08:32 AM   #5
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I obviously don't know your situation, but why are you aiming to have most of your savings in Roths? Usually, one's marginal tax rate is lower in retirement than while working, and that situation favors mostly saving in Traditional. May I ask why you have come to a different conclusion?
That's been a tough one to figure out because I think I'm on the border for either one.
I currently make 78k before taxes. I've calculated my retirement pension to be around 53k. Both of those numbers place me currently in the 22% tax bracket.
I may be close to moving into the next tax bracket in my final years of work, but I doubt it.
Currently I file Head of Household, but by the time I retire, I will more than likely transitioning to Filing single.

Based on that info, it seems like it doesn't really matter if I go Traditional or Roth. Since I have 35k in a tIRA, I thought it might be best to go Roth now to keep it balanced since I have no idea what's going to happen to the tax laws 10 years from now.

What do you think?
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Old 01-21-2021, 09:05 AM   #6
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I see. Given your likely tax situation, I agree with funding the Roth options. I personally would diversify, most in Roth, some in traditional, as you originally said!

My crystal ball is hazy, but I am expecting rates to go up, not down, in the future. My best guess is that the current law will not change, i.e., rates will revert in 2026.
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Old 01-21-2021, 09:25 AM   #7
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I see. Given your likely tax situation, I agree with funding the Roth options. I personally would diversify, most in Roth, some in traditional, as you originally said!

My crystal ball is hazy, but I am expecting rates to go up, not down, in the future. My best guess is that the current law will not change, i.e., rates will revert in 2026.
Thanks! Yes, I agree they'll have to go up at some point. After the last year with Covid and with the HUGE payouts to Businesses as well as us, someone is gonna have to pay it back.
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