Roth 403b and Roth IRA

Ulquiorra said:

My hospital is going to start offering a Roth 403b (yay!). However, I have a few questions.

1) What are the limits I am allowed to contribute to each? From my understanding, I am allowed to contribute $15,000 to the Roth 403b and I can contribute $4000 to a Roth IRA. I am a resident and make 41k by the way.

2) I've already contributed about $100 to the traditional 403b plan. Is there anyway to get it out of there and into the Roth 403b?

Thanks in advance!

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1) $15.5K into the Roth 403b +any match the hospital gives you.
$4K into the Roth IRA for you and $4K for a spouse (increases to 5K for 2008)

2) I think you can recharacterize the donation (but would then have to pay taxes on it.) If you want to be sure, ask your question here: http://fairmark.com/forum/list.php?2

In general, you should use the Roth 403b up to the match, then max out Roth IRAs, then contribute as much as you can to the Roth 403b. This is because the 403b will have higher expenses and less flexibility than the IRA, but a match is free money.

ActiveDutyMD said:

This is because the 403b will have higher expenses and less flexibility than the IRA

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from my experience, the first part isn't true for some people and the second part isn't necessarily true. at ucsf, the 403(b)/457 gives you access to vanguard mutual funds - the institutional class. same with fidelity and DFA. you get access to some of the best funds, index included, for sometimes 0.03% expense ratios - it's crazy. and in terms of flexibility, fidelity lets you add a "brokerage link" feature, where your 403(b)/457 acts like an IRA - meaning that you can do everything from buying individual bonds and ipos to writing covered calls. but i guess it's all employer dependent - not everyone has the clout of the university of california.

etf said:

from my experience, the first part isn't true for some people and the second part isn't necessarily true.

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I was speaking in generalities and I think this is true for MOST 403Bs. I'm also lucky with my "401K" the TSP program with ERs of 0.02. But I have seen a lot of 403Bs, 457s, and 401Ks where the cheapest fund was 1.5% with a 3.5% load! There are also a lot of plans out there that neglect certain asset classes you may want to include in your investment plan, such as REITs, TIPS, small-value stocks, emerging market stocks etc.

Obviously, if you're a special case and have a particularly good Roth 403B, you may want to max that out before moving onto the Roth IRA. Either way, make sure you get the entire match.

I'm not sure if you can withdraw Roth 401K contributions quite as easily and painlessly as you can Roth IRA contributions either and wasn't able to find that out with a few minutes at irs.gov. So the IRA option may be more flexible in that aspect as well.