Two retirement plans contribution limit : 403B and 457

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Topic Author
btakla
Posts: 20
Joined: Mon Dec 18, 2017 2:07 pm

Two retirement plans contribution limit : 403B and 457

Post by btakla » Fri Jun 22, 2018 3:51 pm

Hello,

My new employer offers two retirement plan:
- 403(b) Tax-Sheltered Annuity
- 457 Deferred Compensation
https://www.utsystem.edu/offices/employ ... t-programs

From what I am reading it is seems like I can max out both of them with $18,500 each in pre-tax or Roth contribution. (37k total)

Here are my two questions:
1-Is this correct or am I missing something out about the contribution limit?
2- I think I will go for the pre-tax contribution and then roll it to Roth IRA over once I retire, any advantage to the Roth option now?


Thank you for your time and knowledge :)

ExitStageLeft
Posts: 1642
Joined: Sat Jan 20, 2018 4:02 pm

Re: Two retirement plans contribution limit : 403B and 457

Post by ExitStageLeft » Fri Jun 22, 2018 4:57 pm

You have it right.
https://www.irs.gov/retirement-plans/ho ... ement-plan

As far as whether tradional or Roth is better, that depends on a lot of things. The wiki page delves into some of it.

If you are currently in a low tax bracket and you have high confidence that you will be in a higher bracket at retirement then the Roth is a pretty obvious best choice. For most people though, they will be in a much lower bracket in retirement and the traditional plan is best.

DW and I have nearly all our portfolio in traditional plans. We'll be doing small Roth conversions when we retire, such that Roth and traditional balances will be about equal when we reach age 70. That seems to be the best plan for us, but it's one of those things that has so many individual parameters that there's usually no one answer that fits all the time.

NightFall
Posts: 267
Joined: Wed Mar 12, 2014 4:38 pm

Re: Two retirement plans contribution limit : 403B and 457

Post by NightFall » Fri Jun 22, 2018 8:51 pm

Note that if you're in the ORP plan, you also have a non-voluntary contribution of something like 6.65% of salary plus the employer's contribution, which is somewhere between 6-8%. So your contribution could be something like $37K + 12.65% of salary.

Topic Author
btakla
Posts: 20
Joined: Mon Dec 18, 2017 2:07 pm

Re: Two retirement plans contribution limit : 403B and 457

Post by btakla » Tue Jun 26, 2018 10:39 am

Thank you for the replay and explanation

02nz
Posts: 2577
Joined: Wed Feb 21, 2018 3:17 pm

Re: Two retirement plans contribution limit : 403B and 457

Post by 02nz » Tue Jun 26, 2018 11:15 am

I'm guessing you'll qualify for a pension if you stay a while with this employer. You should figure that into your decision about traditional vs Roth - a pension will push your tax rate in retirement upwards, making Roth potentially a better choice. Also, Texas has no state income tax, again an argument for paying your taxes now (Roth) instead of deferring (traditional).

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