The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Oromont on November 30, 2018, 10:03:32 AM
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Dear Friends,
Sorry I didn’t know how to post an individual question… so here it goes.
My husband and I are artists and came into the retirement planning game a bit late. We have been doing a lot of work this year trying to learn and get our finances organized.
My question is in regard to my 403 from my job. I have a salary of around $35,000 and have been contributing 4% which is what my employer matches. This is through Mutual of America which I have read it is not the best place to invest.
Now that I have more saving room, could I continue to put in Mutual OA the $1,500 I am currently contributing and just add the reminding $16,500 into my Vanguard Trad IRA? Not sure if that is an option.
Additional Info:
I also have self-employment income and contribute to a SEP IRA the amount my accountant tells me I can contribute (ca $6,000).
We leave in MD.
Thanks so much for your help. We have a lot of catch up to do but are determined to get ahead of the game. Thanks for all your postings!
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Absolutely not - you can't put 403b money just anywhere. You can fully fund the traditional IRA ($5500 limit in 2018) and also fully fund the 403b ($18,500), but the 403b money must go into the 403b provided by your employer.
Now, if your plan allows in-service distributions, you might be able to roll over form the 403b to the IRA, but the money must go to the 403b first even if that is allowed.
So - discuss with your employer and review the plan documents to know for sure what your options are.
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$18,500 is the current maximum limit for most people to contribute to certain kinds of retirement plans, but the details make a difference, so you may not get the "right" answer for you until you give more detail and/or get a bit more understanding. I"m not the best person to you answer you, I will guess at what you mean, and hope you will correct me as you go farther. If somebody more authoritative answers, listen to them! No professional advice here...please use you accountant's advice over mine. :) Anyway, learning this stuff is a process, so good for you on jumping in with both feet!!
403(b) plans are among the types of retirement plans that are subject to the $18,500 limit, which rises to $19,000 next year. So you can put in up to 18,500 this year if you want. From what I understand, they are retirement plans available through certain types of employers (link from IRS below). You use whatever options the plan provides. They could have 3 kinds of investments in them - annuities; "custodial" accounts, in which the plan is the custodian, but you choose investments from a menu of options they provide, such as certain mutual funds; and a deal for church employees that I know nothing about.
https://www.irs.gov/publications/p571#en_US_201801_publink1000239614
https://www.irs.gov/newsroom/401k-contribution-limit-increases-to-19000-for-2019-ira-limit-increases-to-6000
@dandarc is right about the current limit on contributing to the Vanguard traditional IRA being $5,500. Next year that rises to $6,000. See link immediately above for more details.
For thoughts on comparing the Mutual of Omaha option to your other options:
1. Is Mutual of Omaha providing an annuity?
2. If so, can you provide some specifications of it, so they can be considered in comparison to your other options?
3. Also, does the 403(b) plan offer custodial accounts (mutual funds), or only the annuity?
The SEP IRA is a separate animal. Here is a link where the IRS discusses how much you can contribute to it (see "SEP Limits" section, not the part about the Simple IRA. Simple IRA is something else, please ignore). By reading, it appears the amount is 25% of your self-employment income.
https://www.irs.gov/retirement-plans/how-much-can-i-contribute-to-my-self-employed-sep-plan-if-i-participate-in-my-employers-simple-ira-plan