Hello,
My wife will be returning to work as a teacher after taking a year off to stay at home with our daughter when she was born. My wife has the option for a 403b and 457b. The plans are administered by
TSA Consulting Group. From a quick look, the options for her
403b look much better than the options for her
457b. The 403b options include Vanguard and I was thinking of using a low cost index fund, something like the Spartan Total Market Index Fund by Fidelity –FSTVX, expense ratio of 0.07%.
My first question is whether or not we should be contributing to either of her options. We already max my 401k as a Roth 401K, and we also max out a Roth for my wife and I at $5500 each. Our financial information is shown below.
Second, if we should begin contributing to the 403b/457b in addition to our current retirement savings, which would you recommend, and which investment options? Are the 457b options bad enough to avoid it? I know the 457b is typically advantageous due to being to withdraw it penalty free after retirement at any age (from what I understand).
Third, with us being in the 25% federal tax bracket, I am not sure if Roth vs traditional is appropriate. My wife and I will both have pensions in retirement, as well as SS, but that alone will most likely not put us into the six figure income in retirement. Other than the tax rate now vs tax rate in retirement issue, is it also a factor as to how much the investment will grow that plays into the Roth vs Traditional discussion, with the higher growth leading more to the Roth side of the discussion?
Here is our financial information:
Emergency Fund: Yes, six months
Tax rate: 25% Federal, 4.24% State
State of residence: Az
Age: 41 (Him) Early 30s (Her)
Desired asset allocation: 80% stocks, 20% bonds
Desired international allocation: 30% stocks
Total portfolio is mid-six figures.
Current Retirement Assets: Taxable Expense Ratio Percentage
VTI - Vanguard Total Stock Market ETF (0.05%) 2%
His 401K Bond Market Index Fund (0.06%) 6%
S&P 500 Index Fund (0.05%) 42%
International Index Fund (0.13%) 13%
Russell 200 Index Fund (0.07%) 14%
His Roth at Vanguard VBTLX - Vanguard Total Bond Market Index Fund Admiral Shares (0.08%) 3%
VTIAX - Vanguard Total International Stock Index Admiral Fund (0.14%) 4%
VTSAX - Vanguard Total Stock Market Index Fund Admiral Shares (0.05%) 10%
Her Roth at Vanguard VBMFX - Vanguard Total Bond Market Index Fund Investor Shares (0.20%) 0.7%
VGTSX - Vanguard Total International Stock Index Fund Investor Shares (0.22%) 0.8%
VTSAX - Vanguard Total Stock Market Index Fund Investor Shares (0.05%) 2%
Contributions New Annual Contributions
$18000 his 401K +( additional employer match of 6%)
$5500 His Roth IRA
$5500 Her Roth IRA
Available Funds
Funds available in his 401K
Lifecycle Funds:
Fund Expense Ratio
Lifecycle Retirement Fund .32%
Lifecycle 2020 Fund .35%
Lifecycle 2025 Fund .36%
Lifecycle 2030 Fund .37%
Lifecycle 2035 Fund .38%
Lifecycle 2040 Fund .38%
Lifecycle 2045 Fund .38%
Lifecycle 2050 Fund .39%
Lifecycle 2055 Fund .40%
Index Funds:
Fund Expense Ratio
Bond Market Index Fund .06%
Balanced Index Fund .07%
S&P 500 Index Fund .05%
International Index Fund .13%
Russell 2000 Index Fund .07%
Actively Managed Funds:
Fund Expense Ratio
Stable Value Fund .29%
Global Bond Fund .36%
Diversified Real Asset Fund .72%
U.S. Large Companies Fund .31%
Global Equity Fund .68%
International Companies Fund .63%
U.S. Small/Mid Companies Fund .69%
Science and Technology Fund .65%