The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: GoConfidently on May 01, 2016, 04:20:50 PM
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Newbie question. I realize this has probably been answered before, but I need some specific guidance and I'm having trouble making a decision.
I currently have about $28,000 in a traditional, annuity based 403(b) account. I contribute a small about each pay period, but have reduced contributions due to an aggressive student loan debt repayment schedule. I would like to transfer this account to Vanguard for a few reasons and have already decided that Vanguard is the way to go. I'm stuck on whether or not to go to a traditional or Roth IRA though. In the next few years (3-5) I might enter a higher tax bracket, but in the next 5-10 I anticipate moving into a lower tax bracket. I'm having trouble deciding which one is right for me. If I move out of state (as anticipated in the next 5-10), I will need to move my state based retirement account as well. My gut says go to a traditional and roll over to a Roth later, when I'm closer to FIRE. Does that sound right?
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It sounds like you still have the job connected to the 403b. If so, does your 403b allow in-service withdrawals? If not, then you need to wait until you leave that job before you can move the funds to Vanguard.
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In-service withdrawals are allowed
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Will you be in a lower tax bracket when you retire than you are now?
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More than likely
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Then it would probably be better to go with a traditional IRA and do the conversion to Roth when you're in a lower tax bracket during retirement.
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Then it would probably be better to go with a traditional IRA and do the conversion to Roth when you're in a lower tax bracket during retirement.
^^This.
You could also convert smaller chunks in years when you're in a lower bracket, rather than the full amount in one fell swoop.