Author Topic: Max out 403b or Roth IRA first?  (Read 1312 times)

Swamp Chomp

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Max out 403b or Roth IRA first?
« on: December 21, 2019, 12:25:16 PM »
Hello,

My wife work's 1 day a week as a nurse, which equates to about $10,000 on any given year.  Her employer has setup a 403b for her but she's under the required hours/week to get any employer matching. 

Should we be maxing out that account first or a Roth IRA first? 

RWD

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Re: Max out 403b or Roth IRA first?
« Reply #1 on: December 21, 2019, 01:48:13 PM »
Investment order

How's the fund selection in the 403b? Are there any management fees? Is your income low enough to allow contributions to a traditional IRA? What is your marginal tax bracket?

seattlecyclone

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Re: Max out 403b or Roth IRA first?
« Reply #2 on: December 21, 2019, 02:26:24 PM »
Also what's your work situation? How much are you able to save each year as a couple? If you're also earning some work income and you're able to max out most of your tax shelters as a couple, the best thing would probably be to put as much of her pay into the 403(b) as they'll allow, and then use the spousal IRA provisions to also fill up her IRA. If you have to pick one or the other, an IRA often (but not always!) has better fees and more choices.

Swamp Chomp

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Re: Max out 403b or Roth IRA first?
« Reply #3 on: December 23, 2019, 06:20:29 PM »
Investment order

How's the fund selection in the 403b? Are there any management fees? Is your income low enough to allow contributions to a traditional IRA? What is your marginal tax bracket?

I'm still learning about the 403b... do you have any tips for what I should be looking for to gauge the viability of the plan?  I'll also look into the management fees.

Regarding your other question, I am the primary breadwinner and am self employed. I don't know whether we'll be in the 12% or 22% tax bracket this year.  If I had to guess, I'd say 12% because we have some good write-offs this year.

Swamp Chomp

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Re: Max out 403b or Roth IRA first?
« Reply #4 on: December 23, 2019, 06:22:54 PM »
Also what's your work situation? How much are you able to save each year as a couple? If you're also earning some work income and you're able to max out most of your tax shelters as a couple, the best thing would probably be to put as much of her pay into the 403(b) as they'll allow, and then use the spousal IRA provisions to also fill up her IRA. If you have to pick one or the other, an IRA often (but not always!) has better fees and more choices.

As I replied to the other fellow, I am the primary breadwinner and am self employed.  We had a  pretty good year this year but I would guess after writeoffs, we'll be in the 12% tax bracket... could be in the 22% bracket.

What is the spousal IRA provision?

My IRAs (simple from previous employer and a Roth) are both with Vanguard.

seattlecyclone

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Re: Max out 403b or Roth IRA first?
« Reply #5 on: December 23, 2019, 09:00:45 PM »
What is the spousal IRA provision?

If you have sufficient work income of your own, you can max out an IRA in your spouse's name even if they have no work income of their own (or none left after putting all their earnings into their job's retirement plan).

RWD

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Re: Max out 403b or Roth IRA first?
« Reply #6 on: December 24, 2019, 10:55:16 AM »
I'm still learning about the 403b... do you have any tips for what I should be looking for to gauge the viability of the plan?  I'll also look into the management fees.

Look for index funds with low expense ratios. Ideally you would have something like Vanguard total market index funds (e.g. VTSAX) with expense ratios around 0.05% +/- and no management fees.