Are 403B Plans Good?

Question

school teacher for 10 years. I have a 403B plan putting about 300 in it a month. Recently I was watching a program, and overheard the commentator state a ROTH IRA would be a better choice. We want (hubbie and I) would like to retire at 50 or before, so I want to make sure we are making the right moves to do that. He has 401K but his company matches it a couple percent. What is the advice from you business-minded folks?

Answer 1

If the 403b is invested in B share mutual funds or variable annuities then it is probably a good idea to contribute up to whatever your employer matches and then put the rest in a Roth IRA.  Otherwise its probably best to have both and  to maximize contributions to a 403b and then maximize a Roth.

Answer 2

Unless that commentator can see into the future, I would tend to ignore what he said (and anything else he says, too!)....

The honest answer to whether a 403(b) or a Roth is better, is "it depends". And in reality, you should probably be doing both, since they both have pluses & minuses.

The great benefit to a Roth (especially if you are younger), is that it grows without you ever owing more in income taxes on it.

But the 403(b), even though you'll owe taxes when you withdraw it, will grow faster, because you deferred the taxes initially, so in effect you invested more of each earned dollar than you could with a Roth.

A very general "rule of thumb" is that the Roth is the best bet if you are under 35.  The only danger is that 35 years from now, Congress might just decide that your Roth income is a "windfall", and that they can tax it!

Answer 3

It would depend on the 403b plan.  I have heard that some teachers plans are pretty lame with high expenses & mediocre funds.  

You'll have to do a little research here.  If you have good funds, then I would use it - 403b.