Investments While in Grad School

[TwoJays]

I will be going back to school next fall and am trying to figure out what to do with the 403b account I have with my current employer. By the time I leave my employer (assuming 0% growth/loss) I'll have just over 10k in the 403b and another 6.5k in an ETF I inherited. Rather than staying in my current plan (with fees north of 1%) I figure it makes the most sense to rollover the 403b to a Vanguard account.

I'll also be getting married in the next year and (hopefully) the 2017 and 2018 tax years will be the only years in which we fall in the 15% tax bracket. What I'm trying to figure out is if it makes the most sense to rollover my accounts into a Roth account during our "low" income years or if we should keep them in pre-tax accounts for growth on what currently exists. Based on my calculations, we would pay roughly 1.5k in taxes to rollover to a Roth account.

Not sure what else I should be considering. If more info would be helpful prior to giving advice please let me know what else I should be taking into account and I'll be happy to add it. Still new to mustachianism and investing, in particular. Thanks in advance for the advice!

[seattlecyclone]

Rolling the 403(b) over to a Vanguard IRA sounds like a good idea regardless. Converting it to Roth in the process can make sense if you expect your tax bracket while you're in school to as low as it ever will be, including after you retire.

What will your income situation look like during grad school? If you're even thinking about taking out loans for school, it doesn't make much sense to voluntarily pay $1,500 in extra taxes. Put that money toward school instead.

[TwoJays]

Thanks, seattlecyclone. I was hoping I was on the right track with rolling it over to Vanguard. Unless tax brackets are shifted in the future I'd expect we'd be in the same (15%) tax bracket. Seems like a wash if taxes are the same now and later so would it make sense to go ahead and bite the bullet to avoid any uncertainty on the back end?

Things will be tight during grad school but our plan is to live entirely off DW's income with whatever I earn through side jobs, etc. as a buffer. No loans for tuition or fees but we may need to take out a small loan depending on what life throws at us during those 2-3 years as we've been throwing 1k or more at undergrad loans every month (DW had some with interest rates near 7%!!) up to this point instead of saving all the extra. (FWIW, we started with a combined total near 100k and we're down to 38k, most of which we'll be subsidized when I'm back in school, as of this months payments. :) Wish I could go back give my 18 year old self a good old knock to the head.)

I figured it made more sense to take out a small loan if we need it instead of pulling the money out of the market. Am I wrong there? And if I am, please let me know. Still lots to learn!

[seattlecyclone]

I figured it made more sense to take out a small loan if we need it instead of pulling the money out of the market. Am I wrong there? And if I am, please let me know. Still lots to learn!

Depends on the interest rate and your risk tolerance. The "general wisdom" around here is to aggressively pay off loans higher than about 5% because you're unlikely to do much better in the market, and it seems like that wisdom would apply equally well to taking out a new loan. However some people are more debt averse and just want the loans gone even if they know the math favors investing. Debt payoff/avoidance is never a bad thing, sometimes it just isn't the best thing!