Sunday, June 12, 2011

Should I Diversify?

This school year I finally started a 403(b). During my sixth year of teaching. I know, I know. I put $220 per month in there, soon to go up to approximately $400 per month.

Also, since I am a teacher I will get a pension when I retire. So, there's that.

My question: should I open another type of retirement account? Like a Roth IRA or something? Or, should I stick with my pension and 403(b) and use my funds elsewhere?

Would it make sense to keep increasing the amount in my 403(b), or should I start a new kind of account to diversify?

I'd love input on this issue. I'd also like to save for a house (hence the name of the blog), but not at the expense of my retirement. I think a pension and a 403(b) are sufficient, but I also have very little idea of how much I need to save for retirement. Like, no idea, really. Help a blogger out.


  1. Jessica, just FYI - totally loving your blog and still stalking you all the time =)

    OK, ROTH IRA vs. 403b. 403(b)s you get to put the money in without paying taxes on it now - but then you pay taxes later. After your money grows. So if you save well for retirement, you should be in a similar/higher tax bracket - and then you end up paying more taxes. If your work matches 401K/403B, then if usually works out better to do the 403B anyway - because otherwise you're just throwing money away. But if there's no matching (in my district there isn't) - then ROTH IRA is a better deal - though there's a maximum limit of $6000/year (500/month). general strategy has been to first max the ROTH IRA, and then if I have extra, put that in the 403(b). Just my two cents...let me know what you end up finding out/deciding =)

  2. Yes, you should definately diversify. Your pension will be taxable, all distributions from your 403b will be taxable. If you participate in SS, that will most likely be taxable too because of your pension and 403b withdrawals. Start yourself a pot of tax-free money! Instead of bumping up your 403b contributions, open a Roth.

    Choose a low-cost custodian, such as Vanguard or Fidelity.

    If you are under 50, then you may contribute $5000 per year, not $6000. $6000 is for folks 50 and older.

  3. I think you should open a Roth.
    I will also have a pension (hopefully, I don't know if I will keep working after I have kids yet)
    , I currently have a 401K, and beginning in December, I will open a 403b. GBut we also hope to open a Roth Ira next year.

  4. If you get a match on your 403B, you should contribute enough to get the full match. If not, you should contribute to a Roth IRA. I think that the tax advantage during retirement of a Roth make it a no-brainer. Given your age, I would make sure that your Roth is invested in the stock market versus a bank with a cd. The cd rate won't keep up with inflation. Good luck!

  5. ROTH IRA all the way!!! Since you're putting in money that has already been taxed, you won't be taxed on any gains you get when you withdraw.

  6. P.S. She's right - I misspoke. It is 5,000/year.