Author Topic: Overwhelmed by retirement options - assistance going through them?  (Read 1767 times)

BMEPhDinCO

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So this is one of those "too much of a good thing" situations. I currently work for a university that offers:

401(a) - they put in 11.5% of my salary, I am mandated to put in 10%.
403(b) - I can put in $18,000 here
457 - I can put in $18,000 here
IRA/RothIRA - I can put in $11,000 here (me + DH)

Now, my salary isn't high enough to allow us to do all this (and still live on it, DH doesn't have a job, yet). So right now I'm doing the 401(a) (because, mandatory), the 403(b) (but not able to max it), and the IRA (for this year only, DH had a job the first part of the year and want to stay in 15% tax bracket).

My question is, assuming nothing changes in DH salary for next year (much, he does do some SE things, less than $1k per month), what should I do? We have $11k saved for a Roth/IRA already to be put in immediately. But, should I switch to saving some in a 457 as well as a 403(b)? Or should I max out the 403(b) or 457 and not put anything in the (R)IRA?

Other thoughts... DH might also get a university job, which would then allow him the same options, does that change anything?

Finally, it's insane that if two people are working at the University, they can defer SO much! Together, between the accounts, we could defer around $100,000 (salary dependent), PLUS University match PLUS FSA PLUS medical insurance and parking come out before taxes. If I understand that right, we could make over 6 figures and get a tax refund. Wow.

dandarc

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Re: Overwhelmed by retirement options - assistance going through them?
« Reply #1 on: October 20, 2017, 01:26:34 PM »
http://rootofgood.com/make-six-figure-income-pay-no-tax/

2X University employees is a sweet deal.  If you keep your spending low enough, it is often possible to not pay any federal income tax - ever.  Given this is an ER forum, you may want to consider prioritizing the 457B - no early withdrawal penalties after separation from service.  All things being equal, that's my favorite retirement account.  Things are often not equal (different investments / expense ratios), so do your homework.

Louisville

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Re: Overwhelmed by retirement options - assistance going through them?
« Reply #2 on: October 20, 2017, 01:32:03 PM »
Are you really sure that you're allowed to  contribute to all that? I would think that all of them combined would be capped at 18k.

BMEPhDinCO

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Re: Overwhelmed by retirement options - assistance going through them?
« Reply #3 on: October 20, 2017, 01:49:31 PM »
Are you really sure that you're allowed to  contribute to all that? I would think that all of them combined would be capped at 18k.

@Louisville, the 401(a) is independent... the 403(b) is $18k limit and, because technically the 457 is deferred compensation, it is also a separate $18k. Those are for people less than 50 (which we are) and does not include catch-up contributions. The $100k figure comes from two people doing it. But yeah, it is mind blowing isn't it?!

dandarc

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Re: Overwhelmed by retirement options - assistance going through them?
« Reply #4 on: October 20, 2017, 01:55:07 PM »
Are you really sure that you're allowed to  contribute to all that? I would think that all of them combined would be capped at 18k.
OP has got it exactly right - 457B is an 18K bucket, 403B is another 18K bucket, IRAs are another 5.5K each, then the 401(a) is separate as well.  This "large amount of deferral space" is one of the reasons people take public sector jobs.

dandarc

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Re: Overwhelmed by retirement options - assistance going through them?
« Reply #5 on: October 20, 2017, 01:58:22 PM »
@Louisville, the 401(a) is independent... the 403(b) is $18k limit and, because technically the 457 is deferred compensation, it is also a separate $18k. Those are for people less than 50 (which we are) and does not include catch-up contributions. The $100k figure comes from two people doing it. But yeah, it is mind blowing isn't it?!
That part about being under 50 to use the 457 is not true.  May be true of your specific plan, but the law / IRS allows it, as does at least one state's 457B - see first question https://www.myfloridadeferredcomp.com/SOFWeb/save.aspx - 18K for most, another 6K catch-up for over-50's, plus the special catch up if you've "missed" prior years within 3 years of normal retirement age.

gluskap

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Re: Overwhelmed by retirement options - assistance going through them?
« Reply #6 on: October 27, 2017, 05:19:59 PM »
OMG I need to switch careers and find a university job!  LOL.

BMEPhDinCO

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Re: Overwhelmed by retirement options - assistance going through them?
« Reply #7 on: November 03, 2017, 06:46:20 AM »
@Louisville, the 401(a) is independent... the 403(b) is $18k limit and, because technically the 457 is deferred compensation, it is also a separate $18k. Those are for people less than 50 (which we are) and does not include catch-up contributions. The $100k figure comes from two people doing it. But yeah, it is mind blowing isn't it?!
That part about being under 50 to use the 457 is not true.  May be true of your specific plan, but the law / IRS allows it, as does at least one state's 457B - see first question https://www.myfloridadeferredcomp.com/SOFWeb/save.aspx - 18K for most, another 6K catch-up for over-50's, plus the special catch up if you've "missed" prior years within 3 years of normal retirement age.

Oops, that's what I get for not being clear. I just meant that the $18k amount is for people less than 50! And that over 50 can put in $24k (so two people would be able to put in $96k between them with both having a 403b and a 457!) Thanks for the clarification you gave as well, and it is state dependent, I think my state "strongly encourages" the 403b first, with the 457 "being for higher earners".

dandarc

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Re: Overwhelmed by retirement options - assistance going through them?
« Reply #8 on: November 03, 2017, 09:24:14 AM »
@Louisville, the 401(a) is independent... the 403(b) is $18k limit and, because technically the 457 is deferred compensation, it is also a separate $18k. Those are for people less than 50 (which we are) and does not include catch-up contributions. The $100k figure comes from two people doing it. But yeah, it is mind blowing isn't it?!
That part about being under 50 to use the 457 is not true.  May be true of your specific plan, but the law / IRS allows it, as does at least one state's 457B - see first question https://www.myfloridadeferredcomp.com/SOFWeb/save.aspx - 18K for most, another 6K catch-up for over-50's, plus the special catch up if you've "missed" prior years within 3 years of normal retirement age.

Oops, that's what I get for not being clear. I just meant that the $18k amount is for people less than 50! And that over 50 can put in $24k (so two people would be able to put in $96k between them with both having a 403b and a 457!) Thanks for the clarification you gave as well, and it is state dependent, I think my state "strongly encourages" the 403b first, with the 457 "being for higher earners".
Ah - I misread that.  If your plan is to work until a normal retirement age anyway, I suppose the 403B is about as good as the 457B.  And I think 403Bs sometimes have lower cost investments, so that might be why the advise that.

BMEPhDinCO

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Re: Overwhelmed by retirement options - assistance going through them?
« Reply #9 on: February 14, 2018, 11:21:36 AM »
Hi all,

I didn't want to start a new thread, but I wanted to re-visit this conversation with updated information and again a request for thoughts/assistance...

DH just started a new job with industry - he has access to a 401(k).

I have access to 403(b), 401(a), and 457.

We also have $11k available to put into a tIRA or RothIRA.

We plan on filling up the 401l and a, 403b, and 457 accounts. But my question then is, should we do RothIRA or tIRA? We both have a Roth open now with USAA (5+ years) and a tIRA with Vanguard.

Plan is to be FI around 50 if we can both keep these salaries (or higher).

Other info: no kids, only mortgage left on the house (and only about 7 years left on that, we've been paying it off as part of our "cash" holding - don't want to discuss this, I'm happy with my plan here), we have a fully funded EF, we have cash set aside for travel, our next car, house repairs, medical, etc, etc (yes, we are lucky, yes we apply frugal living)

tl;dr : Roth or tIRA after maxing other retirement accounts?

dandarc

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Re: Overwhelmed by retirement options - assistance going through them?
« Reply #10 on: February 14, 2018, 11:32:42 AM »
The Roth vs. Traditional question for an IRA (assuming your MAGI for this purpose is low enough to deduct a traditional) boils down to - do you think your Marginal Tax Rate will be higher when you're withdrawing vs when you make the deposit, or lower.

If you think your tax rate will be lower at withdrawal than it is now while contributing, you go traditional.

If you think your tax rate will be higher at withdrawal than it is now while contributing, you go Roth.

General advice for folks on this forum is that traditional is usually better, but only you can evaluate this for your own specific situation and plans.

Also keep in mind - you're deciding between better and best here, so don't agonize over the decision to the point you delay investing.

Edit: Had the higher / lower bit reversed.  Fixed now.

BMEPhDinCO

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Re: Overwhelmed by retirement options - assistance going through them?
« Reply #11 on: February 14, 2018, 11:51:13 AM »


If you think your tax rate will be lower at withdrawal than it is now while contributing, you go traditional.

If you think your tax rate will be higher at withdrawal than it is now while contributing, you go Roth.


Thank you dandarc! With either IRA, we would be in the current 12% tax bracket for 2018, so pretty low (effective rate would be 3.5% fed with Roth contribution). So I don't know that we'd be getting much lower rates than that at withdrawal, especially since the bulk of our income will be in pre-tax accounts.

I guess my question is, does it make sense to balance the pre-tax accounts with a post-tax account for our situation? And just pay the $1,750 or so extra taxes now? Especially with the early retirement timeline?