Is there any benefit of a 403b as opposed to Schwab brokerage?

[deek]

Hi all. My wife has not yet taken advantage of the 403b plan offered by her employer (state job) because she is already contributing to our state retirement system. She's already maxing out her external Roth as well (Vanguard). I have a Schwab brokerage that I'm going to make a joint account so we can both add to that collectively. Is there any benefit to using this 403b offering even though there's no match? Should we just be adding whatever extra we have to the brokerage (index funds) for savings?

I guess my main thing here is that I know she can't take the $ out penalty free until age 59.5. But if we were able to be FI by 45, we might want a good chunk of that 4% withdrawal from our brokerage to live on, which would mean needing to contribute more to our brokerage. Maybe I'm just not understanding the situation enough and need to learn more.

[Psychstache]

I mean, yes? A 403(b) will typically include pre or post tax benefits depending on the options available through the employer, which is an immediate return of your top tax rate (or future returns of tax free funds).

[Log]

Yes, a 403(b) offers the same tax benefits as a 401(k).

If you want to retire before 59.5, you can draw on your brokerage and any principal in your Roth(s). It's fine if you're drawing down your brokerage more aggressively than 4%, as long as you have enough in that bucket to last you to 59.5.

[Villanelle]

Hi all. My wife has not yet taken advantage of the 403b plan offered by her employer (state job) because she is already contributing to our state retirement system. She's already maxing out her external Roth as well (Vanguard). I have a Schwab brokerage that I'm going to make a joint account so we can both add to that collectively. Is there any benefit to using this 403b offering even though there's no match? Should we just be adding whatever extra we have to the brokerage (index funds) for savings?

I guess my main thing here is that I know she can't take the $ out penalty-free until age 59.5. But if we were able to be FI by 45, we might want a good chunk of that 4% withdrawal from our brokerage to live on, which would mean needing to contribute more to our brokerage. Maybe I'm just not understanding the situation enough and need to learn more.

You can live off of penalty-free withdraws of the contributions to your Roths to help bridge the 45-59.5 years.  Contributions withdraws (as opposed to withdraws of the growth) are always penalty-free.  So if, over the course of time,  you made contributions totaling $150,000 to a Roth account, you can withdraw up to $150k any time.  If the account balance at that point is $275k, the remaining $125k has to wait until retirement age (or pay a penalty).   

[MDM]

The Investment Order described there will work well for most.  How does it look to you?

[reeshau]

I guess my main thing here is that I know she can't take the $ out penalty free until age 59.5. But if we were able to be FI by 45, we might want a good chunk of that 4% withdrawal from our brokerage to live on, which would mean needing to contribute more to our brokerage. Maybe I'm just not understanding the situation enough and need to learn more.

As a married couple, your tax rate (if you file jointly) is 0% for long-term capital gains up to $94k.  That doesn't mean $94k of withdrawals from your taxable account--it's gains.  So, a couple FIRE-ing in their 40's is unlikely to break it.  This is very close to the experience of a Roth, except that those gains do count toward your MAGI for ACA purposes. (Roth does not)  But a purposeful plan to fill a pre-59 1/2 bucket with a taxable account is very flexible, and can come very close to your retirement account options, in terms of taxes.