403b vs. Roth IRA (for a teacher)

[ScrimpAndSave]

Can anyone tell me what the benefits of either or are? Thankfully, we have a pension plan...but I am not banking on it.

Thanks!

[disneysteve]

403b - Money goes in pre-tax, grows tax-free, gets taxed when withdrawn in retirement.
Roth - Money goes in post-tax, grows tax-free and is tax-free in retirement.

403b - Investment options limited to whatever the management company offers. Often a hard sell to buy an annuity which nobody should ever do under any circumstances.
Roth - Investment options are unlimited since you decide where to put your money.

403b - Minimum withdrawal requirements apply when you reach a certain age.
Roth - No minimum withdrawal requirements exist.

I'm sure others will add to my list. I'll add if I think of any more.

[MonkeyMama]

To add:

ROTH - $5k max contribution

403B - $16,500 max contribution

403B may have an employer match.

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If you were in a high tax bracket I'd go for the 403B. One of the best tax deductions available - I'd take it! (& at higher incomes you don't qualify for IRAs anyway).

If you were in a low tax bracket, I'd do the 403B up to any match, fund the ROTH, and then back to the 403B if I wanted to save more for retirement. The ROTH would be the best vehicle, but I wouldn't give up any match, and you can only put $5k into it, annually. I'd probably take advantage of both.

Middle tax bracket? (25%)? Flip a coin. I'd probably shoot for the ROTH myself, but depends if you rather have the tax break now. Wouldn't argue with anyone for doing the 403B for a current tax break.

[disneysteve]

I'd probably take advantage of both.

I agree, partly because of the different tax treatment and partly because of the pathetic limit on Roths. $5,000/year isn't nearly enough to save for retirement.

[TBH]

I agree, partly because of the different tax treatment and partly because of the pathetic limit on Roths. $5,000/year isn't nearly enough to save for retirement.

Depends on what your income is, Steve. If I save 15 percent of my income, most years that amount is less than $5000. I'd call that adequate savings, especially since I started saving for retirement in my early 20s.

[disneysteve]

Depends on what your income is, Steve. If I save 15 percent of my income, most years that amount is less than $5000. I'd call that adequate savings, especially since I started saving for retirement in my early 20s.

True, but OP is a teacher and has posted her income in other threads. $5,000 wouldn't represent adequate retirement savings for her or for at least half the country for that matter since median income is about $50,000 currently.

[davecc]

Roth IRAs are the way to go!