Help with retirement options

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Help with retirement options

Postby LittleFish » Fri Jun 28, 2013 10:36 am

I'm sure I'm going to use all kinds of incorrect terminology, so forgive me in advance.

My husband has no retirement plan options at work, although he is the "breadwinner" of the family. We fully fund a Roth for him, and he rolled over some money from a prior job into a traditional IRA.

I work for a public university. When I started, I was given the choice between a pension or investment plan. I chose investment. My employer contributes 6%, I contribute 3% with pre-tax dollars. I don't have the option of contributing more to that plan. So in addition to that, we fully fund a Roth for me. Which leads to my first question: are we allowed to fully fund a Roth for me given my retirement plan at work (this would be our first year fully funding it)?

We didn't think we were saving enough, and we thought our only other option was a taxable account. So we opened one this year.

But after finding this forum and doing more research, I learned I do have some additional options at work: 403(b) tax sheltered annuity (no idea what that is!) or 457 deferred compensation plan.

Should we invest there instead of the taxable account? I feel like our retirement plans will become very lopsided between my husband and I.

Edited to add more details:

Emergency Fund: 6 months
Sinking Fund: 15K
Debt: 187K mortgage (3.625%)
Tax Filing Status: Married Filing Jointly
Tax Rate: 25% Federal
Age: Me 33, Him 35
Desired Asset Allocation: Not sure
Desired International Allocation: Also not sure. Maybe 25%

Current Retirement Assets:

His Roth: 11K (21% TWCGX, 10% AVEGX, 10% BIAGX, 23% GABSX, 8% HFCSX, 16% OAKIX)

His Traditional: 13K (22% AVEDX, 20% AVEWX, 16% BUFTX, 40% SWDRX)

Her Roth: 10K (23% AVESX, 21% AVEDX, 23% AVEWX, 21% AQEGX, 10% OAKIX)

Her Traditional: 11K in mutual funds (10% AVEFX, 44% AVEGX, 10% AVEDX, 26% AVEWX, 10% BIAGX)

Her Work Retirement Account: 26K - No tickers available on these
FRS Select High Yield Fund 20% (Total Expense Ratio .46%) - this is a bond fund
Fidelity Growth Company 20% (Total Expense Ratio .90%)
Prudential Mid-Cap Quantitative Core Equity Fund 20% (Total Expense Ratio .35%)
T. Rowe Price Small Cap Stock Fund 20% (Total Expense Ratio .92%)
American Funds New Perspective Fund (Total Expense Ratio .80%)
Other Funds Availabe to Choose From: FRS Select Yield Plus Money Market Fund, FRS Select U.S. Treasury Inflation Protected Securities Index Fund, FRS Select U.S. Bond Enhanced Index Fund, PIMCO Total Return, Pyramis Intermediate Duration Pool, FRS Select Foreign Stock Index Fund, American Funds Euro-Pacific Growth Fund, FRS Select U.S. Stock Market Index Fund, FRS Select US Large Value Stock Active Fund, Fidelity Growth Company Fund, Fidelity Low-Price Stock Fund, American Beacon Small Cap Value Fund

Taxable Account: 3K (100% AVEGX)

I'll have to do a little more research on what is available in the 403(b) and 457 plans. Yes, you will notice some of our funds are SRI. Not really looking for a debate on that. I am doing some soul searching to figure out if I am comfortable investing in index funds as well in my IRAs. But I will always do at least some SRI. My husband does not feel as strongly about it as I do.
Last edited by LittleFish on Sat Jun 29, 2013 9:39 am, edited 3 times in total.
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Re: Help with retirement options

Postby 22twain » Fri Jun 28, 2013 11:32 am

LittleFish wrote:are we allowed to fully fund a Roth for me given my retirement plan at work (this would be our first year fully funding it)?


This doesn't depend on whether you have a retirement plan at work or not. It depends on your "modified adjusted gross income" (MAGI). For details, see http://www.rothira.com/2013-Roth-limits-eligibility .

I learned I do have some additional options at work: 403(b) tax sheltered annuity (no idea what that is!) or 457 deferred compensation plan.


Who provides the 403(b)? If it's TIAA-CREF it's probably a pretty decent option, but we need to know exactly what it contains.

I work for a private college whose retirement plan is strictly a TIAA-CREF 403(b), and I've done OK with its "CREF stock" and "TIAA traditional" (stable-value fund) options. You may have more options available to you.

Should we invest there instead of the taxable account?


Unless the 403(b) options are terrible, the tax deferral probably makes it worthwhile. You can contribute up to $17,500 per year if you're less than 50 years old, or $22,500 per year if you're older than that. Keep in mind that you probably won't be able to withdraw the money before you're 59.5 years old, except for certain special provisions.
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Re: Help with retirement options

Postby LittleFish » Fri Jun 28, 2013 11:41 am

We're under the income cap for the Roth. So that is good to be reassured about. Thanks!

Looks like there are 9 insurance company options and 4 mutual fund company options for the annuity thingy :) One of them being TIAA-CREF.

We're early to mid thirties, but getting a somewhat late start with getting serious. Between us, we only have about $70K in our retirement accounts. No debt but our mortgage, fully funded emergency fund, no kids (yet, hopefully soon...) But we've definitely been slackers on the retirement savings. It's only in the last year that we've committed to at least 15%.
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Re: Help with retirement options

Postby Bob's not my name » Fri Jun 28, 2013 11:54 am

The MAGI limit is the same for a Roth IRA and a deductible spousal TIRA, so your husband, because he's uncovered by a plan at work, could instead make a deductible contribution to a TIRA. Which is preferable depends on your marginal rate.
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Re: Help with retirement options

Postby The Wizard » Fri Jun 28, 2013 12:17 pm

LittleFish wrote:Looks like there are 9 insurance company options and 4 mutual fund company options for the annuity thingy :) One of them being TIAA-CREF.

TIAA-CREF would be an excellent choice, even without knowing what the other options are, though if Vanguard was one of the mutual fund companies if would be harder to choose.
With T-C, you have the OPTION to annuitize certain of their accounts down the road, but you can treat them the same as mutual funds for the time being.
Look into this more and ask if you have any questions...
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Re: Help with retirement options

Postby LittleFish » Fri Jun 28, 2013 12:42 pm

Vanguard is one of the options too :) Guess that is good!
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Re: Help with retirement options

Postby Groundhog » Fri Jun 28, 2013 12:56 pm

LittleFish,

No real advice here but just wanted to say "Welcome". I didn't find the Bogleheads until my late 40's and I've learned so much from this site and reading the recommended books. Hopefully you have some time during the summer to read some books. Keep saving and good luck!
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Re: Help with retirement options

Postby synergy » Fri Jun 28, 2013 1:01 pm

Mid thirties is not so late. You will probably find that many of us who read this board started much later. TIAA CREF and Vanguard are excellent options. Don't get involved with insurance companies or annuities unless you are sure you know what you are getting into because they may be difficult to get out of. Establish your level of risk tolerance in your AA and save, save, save. Welcome !!!
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Re: Help with retirement options

Postby The Wizard » Fri Jun 28, 2013 1:31 pm

Also, as regards your husband with no "retirement plan" at work, that's fine, he can still invest and accumulated money after taxes for the same purpose. He'll want to aim for tax efficiency, which means stock index funds (not bonds).
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Re: Help with retirement options

Postby Peter Foley » Fri Jun 28, 2013 2:45 pm

My wife worked for a major University and had much the same options as you describe. She had both optional 403b and 457b plans available and could contribute to both up to their legal maximums..

If you are in the 25% tax bracket or higher, using either the 403b or the 457 can be a good way to save and reduce your taxes at the same time. If you did a little research and posted the offerings in the two plans, I'm sure a few Bogleheads would offer advice as to which funds would best meet your purposes.

In providing such advice, it would be helpful to know your marginal tax rate and you desired asset allocation (stock% vs. bond%).
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Re: Help with retirement options

Postby spencer99 » Fri Jun 28, 2013 3:21 pm

LittleFish,

Welcome.

There are some REALLY capable individuals around here who can help you put this all together. Take a look at the format for posting all your current assets and available options. Post in that format and you'll get good advice.

That said, I also have both 403(b) and 457 plans available and here's what has worked for me:

Use both, if warranted, for several reasons,

1) If you have the funds available, it gives you more tax-deferred space - $17,500 for each.
2) Per your asset allocation, there may be attractive options in both programs. Pick and choose the best from each.
3) 457s are attractive because funds can be withdrawn without penalty before age 59 1/2 (I'm not conversant enough with the details to relate here but they're easily googled)

I recommend that you not start by focusing on any particular company. Rather, set an asset allocation and pick the specific providers and/or funds that best meet that objective. If you stick around here long you'll soon hear the siren song of diversification and low expenses.

In my case my best US and Int'l equity funds are in my 403 (Fidelity Spartans) and my lowest ER Total Bond fund is in my 457. (My 403 also includes TIAA-CREF but that's not the best option for me)

This is your family's retirement fund, it doesn't really matter what pot it sits in. Even when both spouses have available plans it may be better to contribute mostly to one if the investment options are substantially better.

Best,

S
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Re: Help with retirement options

Postby ruralavalon » Sat Jun 29, 2013 8:58 am

Welcome to the forum :) .

LittleFish wrote:My husband has no retirement plan options at work, although he is the "breadwinner" of the family. We fully fund a Roth for him, and he rolled over some money from a prior job into a traditional IRA.

I work for a public university. When I started, I was given the choice between a pension or investment plan. I chose investment. My employer contributes 6%, I contribute 3% with pre-tax dollars. I don't have the option of contributing more to that plan. So in addition to that, we fully fund a Roth for me. . . . . .

But after finding this forum and doing more research, I learned I do have some additional options at work: 403(b) tax sheltered annuity (no idea what that is!) or 457 deferred compensation plan.

Should we invest there instead of the taxable account?


You have a lot of options on priority for where to invest.

To give you any concrete suggestions on where best to put your additional investment money more details are needed, including: your marginal tax brackets (both federal and state); the size and holdings in the IRAs you already have; any debt you may have (amounts and interest rates); the investment options in your investment plan, 403b and 457 (plan providers, funds, tickers and expense ratios); and your desired asset allocation.

Please see -- Investment Planning ; and Asking Portfolio Questions .
"Everything should be as simple as it is, but not simpler." - Albert Einstein
Wiki article link:Getting Started
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Re: Help with retirement options

Postby LittleFish » Sat Jun 29, 2013 9:37 am

Thank you all for the warm welcome and feedback! I've learned a lot already! I've edited my original post with more info.
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