403b on top of 401k, Roth IRA, pension?

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Geneyus
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403b on top of 401k, Roth IRA, pension?

Post by Geneyus »

I feel like I'm getting stretched thin regarding retirement and might miss out on a lot of compounding interest...

I'm about to be offered a job at a non-profit that has a 403b retirement plan. I spent 10+ years at a government (vested pension), I've contributed pre-tax to a 401k with company match the past few years, and I've maxed a Roth IRA for quite some time. Do I really want a 4th revenue stream :-| , and how can I combine it if I leave in 5 years? I read one website that said if it's a "Roth 403b", I can roll it into my existing Roth IRA later without taxes, but if it's a "traditional 403b", I'd have to roll it into a traditional IRA to avoid income taxes?

What would you all do? If the above is true, I think I need to go for the Roth 403b so I can move it to my Roth IRA. Or should I run away and stay private sector? This position would be a big resume builder and growth opportunity for me.
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ResearchMed
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Re: 403b on top of 401k, Roth IRA, pension?

Post by ResearchMed »

Geneyus wrote: Thu May 19, 2022 12:39 pm I feel like I'm getting stretched thin regarding retirement and might miss out on a lot of compounding interest...

I'm about to be offered a job at a non-profit that has a 403b retirement plan. I spent 10+ years at a government (vested pension), I've contributed pre-tax to a 401k with company match the past few years, and I've maxed a Roth IRA for quite some time. Do I really want a 4th revenue stream :-| , and how can I combine it if I leave in 5 years? I read one website that said if it's a "Roth 403b", I can roll it into my existing Roth IRA later without taxes, but if it's a "traditional 403b", I'd have to roll it into a traditional IRA to avoid income taxes?

What would you all do? If the above is true, I think I need to go for the Roth 403b so I can move it to my Roth IRA. Or should I run away and stay private sector? This position would be a big resume builder and growth opportunity for me.
You should do a bit of reading about 401k/403b/TIRA/RothIRA accounts.

You could, for example, take a 403b (assuming you have separated from employer or dealt with any during-employment restrictions) and roll it tax-free into an IRA. You could then, if you wish, pay the taxes and move it into a Roth IRA. Note that there was no need for a step that included a Roth 403b.

You could end up with one big fat Roth IRA if you wanted, or perhaps a TIRA and a Roth IRA.
But then you might lose some of the protections (and perhaps good choices) of the 403b...

I'm not sure why you are phrasing your possible decision as whether you should "run away" from the non-profit, expecially if it may enhance next professional steps.

What is it you fear?

RM
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MrJedi
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Re: 403b on top of 401k, Roth IRA, pension?

Post by MrJedi »

Are you saying you don't want to maintain a bunch of accounts? The pretax 401k can potentially combine into the new pretax 403b if the plan allows. This may or may not be advisable depending on the new 403b options.

And yes, the pretax 401k and pretax 403b can all eventually end up in a single traditional IRA without a taxable event whenever you leave those jobs.
Admiral
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Re: 403b on top of 401k, Roth IRA, pension?

Post by Admiral »

Is the question "Do I need to save more money for retirement" or "is having a 4th option too complicated"? If it's the former, well, we can't answer that for you. If you want to keep saving, you'll need to use the plan, or save in an IRA.

If it's the later, I can tell you that my spose and I have:
A pension
A 403b
A 457
Two Roth IRAs

And I love having all the options (though we don't contribute to the R-IRAs any longer as we're above the phaseout; our workplace plans have Roth options.)

It's really not difficult to roll workplace plans into an IRA. Or you can just leave them be until you retire. There are no tax implications if the process is done properly.
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Geneyus
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Re: 403b on top of 401k, Roth IRA, pension?

Post by Geneyus »

I guess my question is: Should I worry about adding a 4th account with a low total versus trying to keep my retirement accounts consolidated where possible to increase the likelihood of compounding interest? I'm in my upper 30's. The actual maintenance/tracking of 4 accounts isn't a concern...

I guess you could think of it as whether you should have $50k in two accounts or $25k in 4 different types of accounts... you'd lose some of the compounding but gain diversification, I guess.

Being able to lump the 403b into one of my existing accounts (traditional 401k / Roth IRA) years later without a penalty would ease my worries. I guess I can't/wouldn't mess with the pension I can't touch for 30 years.
tashnewbie
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Re: 403b on top of 401k, Roth IRA, pension?

Post by tashnewbie »

Geneyus wrote: Thu May 19, 2022 3:26 pm I guess my question is: Should I worry about adding a 4th account with a low total versus trying to keep my retirement accounts consolidated where possible to increase the likelihood of compounding interest? I'm in my upper 30's. The actual maintenance/tracking of 4 accounts isn't a concern...

I guess you could think of it as whether you should have $50k in two accounts or $25k in 4 different types of accounts... you'd lose some of the compounding but gain diversification, I guess.
I'm no expert, but this is not how math works. $25k in 4 accounts grows the same (assuming invested identically) as $50k in 2 accounts.

If your current 403b has similar or better funds as the 401k with similar or better fees, then I would consolidate the 401k into the 403b, to simplify the number of accounts you have to track.
Being able to lump the 403b into one of my existing accounts (traditional 401k / Roth IRA) years later without a penalty would ease my worries. I guess I can't/wouldn't mess with the pension I can't touch for 30 years.
There wouldn't be a penalty for transferring a 403b into a Traditional IRA. You could consolidate all of your tax-deferred accounts (401k, etc.) into a single Traditional IRA when you retire (or leave those employers). The 401ks of former employers are unlikely to accept incoming rollovers of former employees. You of course have to pay taxes to convert tax-deferred assets into Roth IRA.
MrJedi
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Re: 403b on top of 401k, Roth IRA, pension?

Post by MrJedi »

Check your math. For compounding, 25k each in 4 accounts makes no difference vs 50k each in 2 accounts. Multiplication is commutative and also distributive.

10% x (25k x 4 accounts) = 10k

10% x (50k x 2 accounts) = 10k
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Geneyus
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Re: 403b on top of 401k, Roth IRA, pension?

Post by Geneyus »

Very good, very good. Thank you for the responses. You put my mind at ease.
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ResearchMed
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Re: 403b on top of 401k, Roth IRA, pension?

Post by ResearchMed »

Geneyus wrote: Thu May 19, 2022 4:12 pm Very good, very good. Thank you for the responses. You put my mind at ease.
Good!

What you might want to be doing is to notice if any of those accounts/plans have any choices that are particularly good in your opinion, and that are not available in other accounts.

If there are such things (now, or in the future when time comes to perhaps move money - or even now IF you are able to move any of the money), then you might want to a) adjust your holdings so that you can take advantage of that "nice" holding in one account, and change that same amount in a different account to even things out, OR b) in the future keep that plan/account open so you keep access to that "nice" holding.

Examples could be a stable value fund in the 401k or 403b, or some mutual funds you want, but they have much lower expense ratios there than in an IRA.

Just consider these possibilities in the future before you move money that can't be moved back, or close accounts that can't be re-opened.

RM
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