SavingsTalk.com

alien

I've done some research online and everyone says to contribute enough to max out the employer match to a 401k or 403b. My employer already contributes 12% to my 403b. I currently don't contribute anything but I'd like to start soon.<br /><br />My last thought was to open a Roth IRA, try to max that out (isn't it 4,000) and then put anything I can into the 403b (there's no way I'll ever max out that yearly limit).<br />

chicago_bull

I fyour employer contribute 12% of total compensation by default (without you having to contribute at all) and that % will not rise if you make contributions then your have to ask yourself one question: DO you want to pay taxes now or when you retire.

If you want to contribute tax free to a retirement account, but be taxed on the distribution when you retire (taxed as ordinary income), then you should contribute to your 403b. If you would rather pay the taxes now and take distributions at retirment tax free, then a Roth IRA is your best bet (and any extra income after your Roth contribution could then be contributed to your 403b).

I always ask &quot;do you think taxes will be more or less for you in the future (based on tax laws, your income ect.)?&quot; to help people make this decision.

Hope this helps!

invest01

1) Make sure you are contributing enough to your 403(b) to receive all your employer's co-contributions. If not, contribute at least that much.

2) Then, take a look at the costs of the funds in your 403(b). If they are no-load funds with expenses around 0.5% or lower, then I would recommend maxing out the 403(b). It is much easier to contribute through automatic paycheck withdraws than to fund an IRA yourself.

3) If the expenses are higher than what I listed, then consider opening a Roth IRA with one of the low-cost firms such as Vanguard or Fidelity. They both contain low-cost, target-date retirement funds which simplify your investing. I use Vanguard for my own Roth IRA.

Let costs be your deciding factor. In chapter 19 of my free book, I show an example of costs. For every 0.5% increase in expenses, an investor can fall short by $100,000 or more after 30 or 40 years of investing. Small differences in expenses compound to very large differences in end wealth.

If you are interested in downloading my book, click on my profile and read my info, or email me. I am not a financial rep and am not selling anything.

Question: Is your 403(b) a Variable Annuity? If so, please be advised that these have additional &quot;mortality expenses&quot; associated with them, as well as &quot;surrender charges&quot;. I describe those in chapter 19 of my book. If your 403(b) is a variable annuity, I would strongly suggest you look into a Roth IRA to put your own money. After maxed out with your Roth, if you still want to contribute more, then you can put your own contributions into your 403(b).