403b/No 401k Retirement Options - Questions

[preppy]

I am considering accepting a new role with a local non profit. I have only ever worked for large corporations and have a 401k and an IRA that I currently contribute to. This new role offers a 403b, which I have no experience with. DH and I are meeting with a financial planner in a few weeks since he is also starting a new job and we want to review/increase retirement contributions for him, but I won't be able to meet with the planner prior to me needing to give this job my answer. My questions are if a 403b offers the same tax benefits? I believe it is also pre-tax dollars with the same limits as a 401k? Is that a correct understanding? Would I be able to do this and max out my IRA? We are not eligible for Roth IRAs.

Overall this role would be no travel and shorter hours (10-4 vs 9-5) which would be a big benefit for our family since DHs new job will have him away from home often and the increased flexibility would be great for me with the kids. I just want to make sure our retirement planning doesn't suffer and want to stay a few steps ahead with this. 

Thanks!

[minionkevin]

Yes, a 403b is the non-profit/school/etc equivalent of a 401k

[vtdiamond]

I've only ever had 403b retirement plans at jobs where I have worked (Hospitals and Universities). My understanding is that it is the same as a 401k.

Congrats on the job offer!

[preppy]

Okay that makes sense about the 403b, thanks!

So my thought was to do the 403b as well as a Roth as nondeductible. @juno, I will talk to the financial planner about this but you think a taxable account would be a better place to save? We both have IRAs that are roll over from previous 401ks at old jobs and we both have Roth IRAs that we can no longer contribute to. We are trying to figure out more vehicles for saving since we are maxed out on accounts that are deductible as far as I know. We are both 32 and have 1.2x our new income level saved since DH took a large jump, but now I feel behind since we were closer to 2x before his increase. We want to use a portion of his increased income towards our retirement savings to catch up. I am not overly savvy with this which is why we are going to talk to someone to help us.

[minionkevin]

Sept 20, 2017 11:53:06 GMT -5 preppy said:

Okay that makes sense about the 403b, thanks!

So my thought was to do the 403b as well as a Roth as nondeductible. @juno , I will talk to the financial planner about this but you think a taxable account would be a better place to save? We both have IRAs that are roll over from previous 401ks at old jobs and we both have Roth IRAs that we can no longer contribute to. We are trying to figure out more vehicles for saving since we are maxed out on accounts that are deductible as far as I know. We are both 32 and have 1.2x our new income level saved since DH took a large jump, but now I feel behind since we were closer to 2x before his increase. We want to use a portion of his increased income towards our retirement savings to catch up. I am not overly savvy with this which is why we are going to talk to someone to help us.

You are ahead of where you need to be, but throwing additional into taxable accounts isn't a bad thing. The most conservative recommendations for retirement are 1x salary at 30 and 1.6x at 35. Between account growth and additional contributions in the next 3 years, you'll get to 1.6x easily.
You wouldn't be doing the non-deductible as a Roth, but a traditional IRA, since you have so much in rollover IRAs that, at least the way I read your post, haven't been converted to Roth. If you were to convert to Roth, you'd have had a large tax bill over however many years you converted, since the 401k-to-rollover-IRA is pre-tax and Roth is post-tax.

[preppy]

Sept 20, 2017 12:03:58 GMT -5 minionkevin said:

Sept 20, 2017 11:53:06 GMT -5 preppy said:

Okay that makes sense about the 403b, thanks!

So my thought was to do the 403b as well as a Roth as nondeductible. @juno , I will talk to the financial planner about this but you think a taxable account would be a better place to save? We both have IRAs that are roll over from previous 401ks at old jobs and we both have Roth IRAs that we can no longer contribute to. We are trying to figure out more vehicles for saving since we are maxed out on accounts that are deductible as far as I know. We are both 32 and have 1.2x our new income level saved since DH took a large jump, but now I feel behind since we were closer to 2x before his increase. We want to use a portion of his increased income towards our retirement savings to catch up. I am not overly savvy with this which is why we are going to talk to someone to help us.

You are ahead of where you need to be, but throwing additional into taxable accounts isn't a bad thing. The most conservative recommendations for retirement are 1x salary at 30 and 1.6x at 35. Between account growth and additional contributions in the next 3 years, you'll get to 1.6x easily.
You wouldn't be doing the non-deductible as a Roth, but a traditional IRA, since you have so much in rollover IRAs that, at least the way I read your post, haven't been converted to Roth. If you were to convert to Roth, you'd have had a large tax bill over however many years you converted, since the 401k-to-rollover-IRA is pre-tax and Roth is post-tax.

Yea none of the IRA was converted to Roth IRA, I don't think we can do that at our income level since we aren't roth eligible? I will prob leave the IRA we have as is. Good to know about the 1.6x, my 401k is through Fidelity and their site tells me 3x your income at 35 which is not going to happen with 2 kids in daycare. We decreased our 401k contributions a little when P started daycare but should be able to max them out again I think with the 403b and with DHs new job. My income will go down slightly but it won't make a big impact with DHs new job. I was thinking we could do nondeductible Roth contributions as well on top of that, the budget I put together of our estimated new income I was earmarking for some money for some sort of retirement vehicle outside our employer programs and outside our regular savings. 

[minionkevin]

You can convert at any income level, but you can't contribute actively to a Roth at any income.

What you would do is contribute to a traditional non-deductible IRA, then convert immediately and there is little/minimal/no tax implication, just the benefit of no tax at withdrawal. However, you can only do it if your traditional IRA (really, your rollover IRA) is already mostly/all Roth already.

Also, that's the first I'm hearing of 3x at 35 from Fidelity. They changed their recommendation awhile ago to be one of the less conservative ones, 1x at 35.
For example, by age 35, Fidelity suggests that you should have saved 1X your current salary, then 3X by 45, and 5X by 55. "Setting up clear goals linked to your salary can help simplify your planning, and help you determine if you are on track throughout your working life," says Fidelity Executive Vice President John Sweeney. "Having such guideposts is particularly important in today's workplace, where layoffs, job switching, longer life expectancy, and escalating health care costs can complicate your efforts to save for retirement."

[minionkevin]

I think you're conflating 2 things. Roths are already non-deductible because of the tax benefit @ withdrawal/retirement age. A traditional IRA is also non-deductible at your income level, but someone at a lower income could deduct contributions.
Your ability to convert a large rollover IRA balance to Roth is limited by your ability/want to pay the tax bill on the contributions + earnings. It's like first dollar in, first out, sort of. You can't pick and choose to only have 2017 and beyond's IRA contributions converted to Roth.

[puppylove64]

Sometimes 403b have lower costs associated with the same investments. I rolled my 401k into my 403b rather than an ira for the lower costs. Worth looking into.

[hbomdiggity]

preppy,I have no input re 403b, but does this mean your H took the job with the significant travel you posted about a few weeks ago?

[noodleoo]

preppy, no advice but congrats on the job offer! That schedule sounds pretty ideal, especially with your H's new job! Congrats!

[preppy]

@juno, minionkevin, that detail was very helpful. I am not well versed in this so this is helpful. We are meeting with the planner, who is fee based (I think this is the best route) and will bring up some of these options.

THank you!!!

[preppy]

Sept 20, 2017 13:33:51 GMT -5 hbomdiggity said:

preppy ,I have no input re 403b, but does this mean your H took the job with the significant travel you posted about a few weeks ago?

He did! He negotiated some additional benefits and he end up taking it. He put in his notice last week so he is off until he starts Oct 2. I think added flexibility will be key for me. Even though I currently WFH this new role would be in office, but the office in literally one block from my house, I could almost see if from my home office, so the shorter hours and zero travel would be very nice. They also offer paid for health insurance with no employer contributions which will actually make up for a lot of my reduced income. I am still negotiating some things but I am pretty sure I will take the job. 

Nothing like totally switching gears all at once in the preppy household!