IRA Rules & Balancing Various Accounts

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AaronScott
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Joined: Mon May 23, 2016 5:02 pm

IRA Rules & Balancing Various Accounts

Post by AaronScott » Thu Mar 26, 2020 11:41 am

Hi everyone!

My fiance and I are both teachers with 403(b)'s. I also have a Roth IRA (Vanguard target date fund), and she also has a traditional IRA through Teachers Federal Credit Union that she says is a savings account with 4% interest. She makes an annual lump sum deposit each year... and I'm confused about that because I thought IRA contributions would be deducted from paychecks like 403(b)'s. Is anyone familiar with this kind of IRA and could help me to understand what's going on?

Also, I'd like to get her into a Roth IRA as well. My approach has been 10% of gross paycheck into a 3-fund portfolio in the 403(b), and maxing out the target date Roth IRA (yes I'm mirroring but I'm 28 so this isn't a huge pile of money and I can adjust down the road). This equates to about 17% of my gross paycheck being saved for retirement with the AA being 10-15% bonds (side note - that sounds like a good plan, right?).

My fiance's 403(b) with is Voya ING and I'd like to move that to Vanguard as well. Overall, should I try to get her accounts to mirror my own? Is it added diversification for each of our savings to include different approaches and types of accounts? Is her traditional IRA necessary? (Another side note- I thought traditional IRA's weren't available when you have employer-sponsored tax-deferred accounts like a 403(b)?) It might be worth mentioning that we are in NY and we each have a pension, but I also like to plan as if that pension won't exist when I retire (and it'll be a great bonus if it does!).

Any guidance on how to balance these 403(b)'s, IRA's, and Roth IRA's would be greatly appreciated! Thanks all!


Aaron

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ruralavalon
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Location: Illinois

Re: IRA Rules & Balancing Various Accounts

Post by ruralavalon » Thu Mar 26, 2020 12:20 pm

To answer your questions more details are necessary, including the fund names, tickers and expense ratios of the funds offered in the employers' 403b plans. For information needed and format see: "Asking Portfolio Questions". Also see the questions I ask below.

Please simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.

AaronScott wrote:
Thu Mar 26, 2020 11:41 am
Hi everyone!

My fiance and I are both teachers with 403(b)'s. I also have a Roth IRA (Vanguard target date fund), and she also has a traditional IRA through Teachers Federal Credit Union that she says is a savings account with 4% interest. She makes an annual lump sum deposit each year... and I'm confused about that because I thought IRA contributions would be deducted from paychecks like 403(b)'s. Is anyone familiar with this kind of IRA and could help me to understand what's going on?
IRA contributions are not automatically deducted from payroll like 403bs. She could probably set up automatic contributions drawn from her bank checking account to an IRA.


AaronScott wrote:
Thu Mar 26, 2020 11:41 am
Also, I'd like to get her into a Roth IRA as well.
You haven't provided enough information to judge whether a Roth IRA or traditional IRA will be better.

Will she be eligible for a substantial pension in addition to Social Security? What is her tax bracket, both federal and state?

AaronScott wrote:
Thu Mar 26, 2020 11:41 am
My approach has been 10% of gross paycheck into a 3-fund portfolio in the 403(b), and maxing out the target date Roth IRA (yes I'm mirroring but I'm 28 so this isn't a huge pile of money and I can adjust down the road). This equates to about 17% of my gross paycheck being saved for retirement with the AA being 10-15% bonds (side note - that sounds like a good plan, right?).
That sounds like a good plan. A 17% contribution rate is good.

What is your age? Will you be eligible for a substantial pension in addition to Social Security? 10-15% in bonds may be reasonable, depending.

AaronScott wrote:
Thu Mar 26, 2020 11:41 am
My fiance's 403(b) with is Voya ING and I'd like to move that to Vanguard as well.

What other vendors besides Voya ING are available in her employer's 403b plan? I would be surprised if Vanguard is one of the choices, but that would be nice.

What funds are offered by Voya ING in the 403b plan? Please give fund names, tickers, and expense ratios.

AaronScott wrote:
Thu Mar 26, 2020 11:41 am
Overall, should I try to get her accounts to mirror my own? Is it added diversification for each of our savings to include different approaches and types of accounts?

It's often better to coordinate investments among all accounts of a married couple, treating all accounts together as a single unified portfolio, rather than looking at each account separately.

I do not suggest coordinating a couple's investments before they are actually married.

AaronScott wrote:
Thu Mar 26, 2020 11:41 am
Is her traditional IRA necessary? (Another side note- I thought traditional IRA's weren't available when you have employer-sponsored tax-deferred accounts like a 403(b)?)
You haven't provided enough information to judge whether a Roth IRA or traditional IRA will be better.

Will she be eligible for a substantial pension in addition to Social Security? What is her tax bracket, both federal and state?

It is possible to have a traditional IRA in addition to a 403b account. But there are income limits for deductibility of the contributions to a traditional IRA. There are also income limits for contributions to a Roth IRA, but those income limits are higher.

AaronScott wrote:
Thu Mar 26, 2020 11:41 am
It might be worth mentioning that we are in NY and we each have a pension, but I also like to plan as if that pension won't exist when I retire (and it'll be a great bonus if it does!).
I am not familiar with your pension system or its level of funding, so cannot comment on this.

AaronScott wrote:
Thu Mar 26, 2020 11:41 am
Any guidance on how to balance these 403(b)'s, IRA's, and Roth IRA's would be greatly appreciated! Thanks all!
It's often better to coordinate investments among all accounts, treating all accounts together as a single unified portfolio, rather than looking at each account separately.

First decide on a desired asset allocation (the stock/bond mix, and domestic/international stock mix) that you want to aim for.

Start fund selection in the 403b plan where the choices are limited, choosing just one or two of the best funds offered. Then complete the desired asset allocation using the nearly unlimited choices available in an IRA.

This approach helps you avoid using some of the mediocre or high expense funds found in many 403bs.

To give more specific ideas more details are necessary, including the identities of the funds offered in your employer's 403b plan. For information needed and format see: "Asking Portfolio Questions" .
Last edited by ruralavalon on Thu Mar 26, 2020 12:46 pm, edited 2 times in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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FiveK
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Re: IRA Rules & Balancing Various Accounts

Post by FiveK » Thu Mar 26, 2020 12:28 pm


Spirit Rider
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Re: IRA Rules & Balancing Various Accounts

Post by Spirit Rider » Thu Mar 26, 2020 12:36 pm

AaronScott wrote:
Thu Mar 26, 2020 11:41 am
she also has a traditional IRA through Teachers Federal Credit Union that she says is a savings account with 4% interest. She makes an annual lump sum deposit each year... and I'm confused about that because I thought IRA contributions would be deducted from paychecks like 403(b)'s. Is anyone familiar with this kind of IRA and could help me to understand what's going on?
The fact that this is the Teachers Federal Credit Union is not relevant. It is still an IRA account at a financial institution like any other IRA account. If she wanted to she could make payroll direct deposits just like to any other financial account, but direct lump sum or other contributions are perfectly fine.
My fiance's 403(b) with is Voya ING and I'd like to move that to Vanguard as well. Overall, should I try to get her accounts to mirror my own? Is it added diversification for each of our savings to include different approaches and types of accounts?
It is not clear whether you are referring to having access to Vanguard funds in the 403b or trying to rollover the funds. The latter is not possible until separation or age 59 1/2.
Is her traditional IRA necessary? (Another side note- I thought traditional IRA's weren't available when you have employer-sponsored tax-deferred accounts like a 403(b)?) It might be worth mentioning that we are in NY and we each have a pension, but I also like to plan as if that pension won't exist when I retire (and it'll be a great bonus if it does!).
The traditional IRA is additional tax-advantaged retirement space just like your Roth IRA. The choice of traditional or Roth contributions is a personal choice depending circumstances and choice. There is no inherent benefit to 403b contributions > the amount necessary to receive the full amount of any employer match. You have far more flexibility in an IRA than a 403b.

All individuals can make a traditional IRA contribution. There is a deduction income limit for "active participants" in an employer retirement plan. For 2020, individuals with an IRA MAGI <= $65K and MFJ <= $105K can deduct the full contribution. If her IRA MAGI is <= $65K she can make and deduct traditional IRA contributions. If for the year you will be married, your MFJ IRA MAGI will be <= $105 she can still make and deduct traditional IRA contributions. However, if either is not true, she should switch to making Roth IRA contributions

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ruralavalon
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Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: IRA Rules & Balancing Various Accounts

Post by ruralavalon » Thu Mar 26, 2020 1:06 pm

"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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