Author Topic: Roth IRA  (Read 803 times)

Lindsay517

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Roth IRA
« on: June 14, 2018, 10:05:17 AM »
Hi all. I hope this is the right place to post because I'm fairly new here. I apologize in advance if there's a better place! I looked at the Investment Order page and think that my next step in retirement savings is an IRA. Background, I'm 27 years old at work at a university in the US. Currently make 38k. My job contributes 11% to a 403b (even if I contribute nothing and I'm fully vested right from the start). My account is with TIAA. I currently contribute 8% to a 403b with TIAA as well. Only debt is mortgage and current interest rate is 2.875%. I've been paying extra on the mortgage but I think it makes more sense to invest more instead. I'm on my husband's health insurance through his company (it's actually cheaper than me being on my own) so we don't have an HSA. I'm stuck on where to open a Roth IRA. I don't think TIAA has the best options out there so I'm looking for opinions. MMM talks a lot about Vanguard and Betterment so I guess I'm leaning towards one of those? Any suggestions, opinions, or reading assignments would be welcomed/appreciated!

erutio

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Re: Roth IRA
« Reply #1 on: June 14, 2018, 10:12:02 AM »
Go with vanguard or fidelity.  There's nothing that says you have to use the same brokerage as your workplace 403b or 401k.

Since you work at a university, do you have access to a 457 as well?

RWD

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Re: Roth IRA
« Reply #2 on: June 14, 2018, 10:12:45 AM »
I have my Roth IRA with Vanguard and have been quite happy with it. Easy to set up, easy to manage, extremely low expense ratios.

Lindsay517

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Re: Roth IRA
« Reply #3 on: June 14, 2018, 10:15:43 AM »
Go with vanguard or fidelity.  There's nothing that says you have to use the same brokerage as your workplace 403b or 401k.

Since you work at a university, do you have access to a 457 as well?

Hi Erutio. Yes, I do. My job will only contribute to the 403 but I can contribute to 403 or 457. Would I be better off using the 457?

erutio

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Re: Roth IRA
« Reply #4 on: June 14, 2018, 10:25:18 AM »
You can contribute $18.5k to both a 403b and to a 457, if your income allows of course.  A total of 37k tax advantaged space. 

If you investment options are the exact same in the 403b and 457, and you will get the 403b match regardless of contributing to it, then it is smarter to max out the 457 first.  The reason is that 457 allows you to withdraw from it, without penalty, the moment you separate from the university (retirement, find a new job, quit, or otherwise).  There is no age minimum for penalty free withdrawals.

The reason someone may want to contribute to a 403b first are: 1) investment options in the 457 are bad or have higher fees, 2) need to make contribution to 403b to get a match. 


Dicey

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Re: Roth IRA
« Reply #5 on: June 14, 2018, 10:29:50 AM »
Slightly off topic, but you mentioned it, so you might also find this thread helpful:

https://forum.mrmoneymustache.com/throw-down-the-gauntlet/dont-payoff-your-mortgage-club/

Lindsay517

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Re: Roth IRA
« Reply #6 on: June 14, 2018, 10:33:04 AM »
That is extremely helpful Erutio! I honestly had no idea what the difference was between 403 and 457. I am meeting with our rep next month to look at my account and will see if I have access to the same investments with a 457. If I do, I will switch (I can't currently max). I don't have to use the 403 to get the contributions from my job. Those come with no strings other than a 1 year waiting period (pretty much the best perk of my job).

Lindsay517

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Re: Roth IRA
« Reply #7 on: June 14, 2018, 10:43:41 AM »
Slightly off topic, but you mentioned it, so you might also find this thread helpful:

https://forum.mrmoneymustache.com/throw-down-the-gauntlet/dont-payoff-your-mortgage-club/

This is really interesting! I have "always" been told by family to pay off the house. We took out a 15 year mortgage and as I mentioned, dirt cheap interest rate. We only owe 85k now. And while I haven't been paying a lot extra per month (maybe $125-$150?), that still adds up if it can be put to better use.

MDM

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Re: Roth IRA
« Reply #8 on: June 14, 2018, 10:46:09 AM »
Lindsay517, welcome to the forum.

You might benefit from having you and your husband go through How To: Write a "Case Study" Topic, including the entry of your combined income/investing/expenses in the spreadsheet referenced there.

If you then post a full case study, you could get even more feedback, but the self-analysis alone should be worthwhile.  Good luck!

Brother Esau

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Re: Roth IRA
« Reply #9 on: June 14, 2018, 11:01:20 AM »
At 2.875%, I would not pay off the mortgage and max out 403b and IRA savings.

Dicey

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Re: Roth IRA
« Reply #10 on: June 14, 2018, 11:31:43 AM »
Slightly off topic, but you mentioned it, so you might also find this thread helpful:

https://forum.mrmoneymustache.com/throw-down-the-gauntlet/dont-payoff-your-mortgage-club/

This is really interesting! I have "always" been told by family to pay off the house. We took out a 15 year mortgage and as I mentioned, dirt cheap interest rate. We only owe 85k now. And while I haven't been paying a lot extra per month (maybe $125-$150?), that still adds up if it can be put to better use.
There are a lot of reasons for that, and many of them are good. The difference on this site is that the stated goal is to learn how to build sufficient wealth to achieve FIRE, a term I'd wager your family isn't overly familiar with. (Not derogatory; most people/families aren't.) IF one is here to learn about achieving FIRE, one should learn why prepaying a cheap, affordable, fixed rate mortgage at the expense of other investment saving isn't always the best course. You will get more long term bang for your buck by stuffing your retirement accounts full to bursting before you prepay a mortgage. It's counter-intuitive, but so is nearly everything about achieving FIRE for most people.

Here's a little more link love:
https://forum.mrmoneymustache.com/investor-alley/investment-order/

Best wishes for your success!

boarder42

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Re: Roth IRA
« Reply #11 on: June 15, 2018, 07:30:04 PM »
Max the 457 first assuming decent investment options.