Question for the group:
DW asked me yesterday if she should contribute to her 403b as pre-tax or Roth. I said probably pre-tax since I expect to be making less money in retirement but bring home the plan information; she brought home the glossy 2-page propaganda sheet. Long story slightly truncated: I went through the Mutual of America's prospectuses and her 403b is a variable annuity contract. They offer a variety of funds of medium to poor quality. Total fees, as far as I can tell, are 1.36% to 2.2%, depending on funds selected, plus $24/annum! DW wants to contribute 10% of her salary, ~$4k/yr, because that's what the adviser said was the ideal amount. There is no company matching incentive, and I already fully fund her IRA.
My question is, is it better to pay these exorbitant rate for the 403b tax shelter or pay ~0.16% ER for superior Vanguard funds in a taxable account? We file jointly, so the tax shelter would be in the 25% bracket. I'm guessing it's a close call, since I'm not sure if the tax rate at which we will withdraw in 22yrs will be significantly lower. But the only math I was ever good at was algebra, this accounting stuff trips me up. I trust the wisdom of this group more than anywhere, so I'm eager to see what you all say.
Thank you much.
DW asked me yesterday if she should contribute to her 403b as pre-tax or Roth. I said probably pre-tax since I expect to be making less money in retirement but bring home the plan information; she brought home the glossy 2-page propaganda sheet. Long story slightly truncated: I went through the Mutual of America's prospectuses and her 403b is a variable annuity contract. They offer a variety of funds of medium to poor quality. Total fees, as far as I can tell, are 1.36% to 2.2%, depending on funds selected, plus $24/annum! DW wants to contribute 10% of her salary, ~$4k/yr, because that's what the adviser said was the ideal amount. There is no company matching incentive, and I already fully fund her IRA.
My question is, is it better to pay these exorbitant rate for the 403b tax shelter or pay ~0.16% ER for superior Vanguard funds in a taxable account? We file jointly, so the tax shelter would be in the 25% bracket. I'm guessing it's a close call, since I'm not sure if the tax rate at which we will withdraw in 22yrs will be significantly lower. But the only math I was ever good at was algebra, this accounting stuff trips me up. I trust the wisdom of this group more than anywhere, so I'm eager to see what you all say.
Thank you much.