by TPayne17 » Thu Mar 06, 2014 6:10 pm
My girlfriend, who is 22, just got hired at a local hospital and they give her the choice between a Roth 403b and a traditional 403b. She won't start for a couple weeks but I wanted to ask some early questions. When I figure out the investment options and more information I may create a new thread asking for advice in that area. I'm trying to get her started early on the right track as I wish I had (I just got into investing at 26). For now, these are my questions...
From my research I can't really tell any major differences between a 401k and a 403b other than the fact that a 403b is offered by non-profit organizations and may have more limited investment options than a 401k. Is this correct or am I missing a major difference that has effects on the investor?
When offered the choice between a 403b and a Roth 403b, isn't this choice easily the Roth 403b for a person in their early 20s?
I couldn't find any information on this... are you allowed to have a Roth 403b in addition to contributing the max to a Roth IRA?
The contribution limit for a Roth 403b is $17,500, correct? Can you contribute money to this account from any source or does it have to come directly from your pay checks? For example, can she login to the firm's website and add money to the Roth 403b via ACH whenever she wants or does it have to be done by her check?
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Re: Roth/403b/401k Questions
by ERMD » Thu Mar 06, 2014 7:17 pm
there is effectively no difference between a 401k and 403b, as you noted. my 403b has a dozen excellent vanguard index funds. the difference between a roth 403b and standard 403b is the same as the difference between a traditional IRA and roth IRA - pre-tax vs. after tax dollars. check the wiki for details.
as for the contribution limit, it's 17.5, whether you deduct it pre-tax, or deposit it after tax.
investing should be more like watching paint dry or grass grow. if you want excitement, take $800 and go to vegas. -- paul samuelson
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Re: Roth/403b/401k Questions
by Leeraar » Thu Mar 06, 2014 7:32 pm
As a young 'un, go for the Roth. You are effectively saving more.
L.
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Re: Roth/403b/401k Questions
by TPayne17 » Thu Mar 06, 2014 7:56 pm
I understand, thanks people! I've never had a 401k/403b and only know what I've read about them. This might be a stupid question but can you make contributions to one whenever you want like an IRA? Or is the only way to contribute to set up a % out of each paycheck?
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Re: Roth/403b/401k Questions
by Leeraar » Thu Mar 06, 2014 10:07 pm
TPayne17 wrote:I understand, thanks people! I've never had a 401k/403b and only know what I've read about them. This might be a stupid question but can you make contributions to one whenever you want like an IRA? Or is the only way to contribute to set up a % out of each paycheck?
Usually, you can only make contributions by payroll deduction, and you may have to be careful to do so as to get your employer's matching contributions. The exact rules depend on your employer' plan. Some allow cash contributions outside of payroll deductions, most do not.
L.
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Re: Roth/403b/401k Questions
by retiredjg » Thu Mar 06, 2014 10:18 pm
TPayne17 wrote:From my research I can't really tell any major differences between a 401k and a 403b other than the fact that a 403b is offered by non-profit organizations and may have more limited investment options than a 401k. Is this correct or am I missing a major difference that has effects on the investor?
Effectively no difference.
When offered the choice between a 403b and a Roth 403b, isn't this choice easily the Roth 403b for a person in their early 20s?
This is not related to age. It is related to tax bracket....which might be related to age. Roth 403 b can be a good choice for a person in a very low tax bracket. However, there are exceptions. For example, if contributing to traditional 403b would make her eligible for the saver's credit, then traditional 403b is probably the better choice.
I couldn't find any information on this... are you allowed to have a Roth 403b in addition to contributing the max to a Roth IRA?
Yes.
The contribution limit for a Roth 403b is $17,500, correct? Can you contribute money to this account from any source or does it have to come directly from your pay checks? For example, can she login to the firm's website and add money to the Roth 403b via ACH whenever she wants or does it have to be done by her check?
Usually from the paycheck. If there is an exception, I don't know what it would be.
Link to Asking Portfolio Questions
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Re: Roth/403b/401k Questions
by Calm Man » Thu Mar 06, 2014 10:22 pm
OP, very nice of you to help out the young lady. I have nothing to add investing wise. You will be doing the young lady a far better and more long-lasting service if you would have her fully understand these issues so that she can handle these matters by herself. You may or may not be there for the duration of her life but she will be. Good luck to her.
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Re: Roth/403b/401k Questions
by TPayne17 » Thu Mar 06, 2014 11:04 pm
Leeraar wrote:Usually, you can only make contributions by payroll deduction, and you may have to be careful to do so as to get your employer's matching contributions. The exact rules depend on your employer' plan. Some allow cash contributions outside of payroll deductions, most do not.
L.
Is this also the case for a Roth 403b? Contributions to this plan wouldn't be considered deductions because it is post tax contributions being roth, right? I will wait until I can find more info on the specific plan. Thanks.
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Re: Roth/403b/401k Questions
by TPayne17 » Thu Mar 06, 2014 11:06 pm
Thank you retiredjg, your responses are very helpful.
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Re: Roth/403b/401k Questions
by Leeraar » Thu Mar 06, 2014 11:24 pm
TPayne17 wrote:
Leeraar wrote:Usually, you can only make contributions by payroll deduction, and you may have to be careful to do so as to get your employer's matching contributions. The exact rules depend on your employer' plan. Some allow cash contributions outside of payroll deductions, most do not.
L.
Is this also the case for a Roth 403b? Contributions to this plan wouldn't be considered deductions because it is post tax contributions being roth, right? I will wait until I can find more info on the specific plan. Thanks.
I mean deductions of contributions paid from your payroll check.
Deductible from your income for tax purposes is an entirely different thing.
L.
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Re: Roth/403b/401k Questions
by TPayne17 » Thu Mar 06, 2014 11:39 pm
Leeraar wrote:
Deductible from your income for tax purposes is an entirely different thing.
L.
Ohhh I see now, sorry about that. Thanks.
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