Balancing 403b vs ROTH

Currently I'm contributing 10% to my work 403b and minimally contributing to my ROTH every month.  My tentative plan has been to finish my car loan and several projects then up my ROTH contribution to the max (probably sometime mid to late next year).

I'm wondering if it would be a better idea to drop my 403b contribution down to 4% (the employer match limit), and redirect the rest to the ROTH now (basically doubling my current contribution).  This would let me raise it to the max quicker when the car is done, and leave more funds left over for shoving into long term goals and non-retirement investments.

Does this seem like a good idea or a horrible idea?  :)

Thanks!

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  • I don't know that it matters much. It's retirement savings either way, right? Do you prefer one account over the other?  I guess with the ROTH, you have the ability to take out some of the principle but do you want to have that ability and take away from your future self?

    TechieM2 said:
    This would let me raise it to the max quicker when the car is done, and leave more funds left over for shoving into long term goals and non-retirement investments.

    Now that's different. You're basically saying you'd fund your retirement less in this scenario. It depends on whether you think you'd be putting enough into retirement. One rule of thumb is to aim to save at least 15% of your pre-tax income each year.

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      • TechieM2
      • IT Professional and General Geek
      • techiem2
      • 3 mths ago
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      Superbone Yeah that's the part that catches me when I consider it.  In the end I'd be funding retirement less overall due to the 403b change unless I increased that back up as well when/after getting the ROTH contribution maxed (but you know how likely that is to happen..).  So maybe it's just better overall to keep it as is and just bump up the ROTH when I can to eventually get that maxed while leaving the 403b alone for that full 14% (10% + 4% employer match).

      Once I'm maxing the ROTH then I'd use extra funds for other investing and goals and such.

      Thanks! 

      I think I'll stick with my current plan for now then.  Sometimes it helps to write this stuff out to really see how the options would play out.

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 3 mths ago
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      TechieM2 "Roth" is a name, not an acronym. :)

      1. What's your marginal tax rate currently?

      2. Do you expect it to be higher or lower in retirement?

      3. Where is your Roth?

      4. What kinds of expenses and fees are in your 403b?

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      • TechieM2
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      • techiem2
      • 3 mths ago
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      nolesrule aaah I never knew that!

      1.  22% (I'll probably be here quite a while unless I get a major raise or a different job)

      2.  I would assume lower?

      3.  Wisebanyan (Axos Invest now)

      4.  Apart from the fund expense ratios, there's a quarterly administrative fee of about $14.75.  That's the only thing I see.

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 3 mths ago
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      TechieM2 The quarterly fee is a sunk cost. But how are the expense ratios in the 403b?

      If you expect to be in a lower tax bracket you should prioritize the 403b unless it's rediculously expensive.

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      • TechieM2
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      • techiem2
      • 3 mths ago
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      nolesrule The 2 funds I'm in now in the 403b are both Vanguard - 0.04% (VINIX) and 0.09% (VITLX).

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      • nolesrule
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      • nolesrule
      • 3 mths ago
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      TechieM2 Those are good choices. I'd stick with the 403b. Don't forget that in the 22% tax bracket you'll be paying an additional 22% taxes on the amount not going into the 403b.

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      • TechieM2
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      • techiem2
      • 3 mths ago
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      nolesrule Yeah that crossed my mind as well.

      I'll just stick to my original plan of upping the Roth as I can to eventually max it while just leaving the 403b alone.

      Thanks!

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