Max out 403b first?

[Anonymous]

My DD is graduating from college in May. I will finally have money to contribute to my 403b again (I’m a public school teacher, age 52). I’m single. My question is should I max out my 403b from now on and if I have any money left over, contribute that to a Roth IRA? I am vested in the MD state pension system and currently have around $160k in a 403b.

[Anonymous]

Is there a match in the 403b? If no, seems better to max Roth first, as it's under your control and you can draw principal from it without penalty.

[Anonymous]

Anonymous wrote:Is there a match in the 403b? If no, seems better to max Roth first, as it's under your control and you can draw principal from it without penalty.

No match in the 403b. My pension is the only match. I was thinking about taxes. I’d assume my income in retirement will be lower so if I withdraw from the 403b during retirement, I’d be in a lower tax bracket.

[Anonymous]

Given that you have a pension, are you sure you will be in a lower tax bracket in retirement?

[Anonymous]

Anonymous wrote:Given that you have a pension, are you sure you will be in a lower tax bracket in retirement?

Yes. According to the calculations on the state pension website, my income from my pension plus an SS estimate shows my income will be lower in retirement.

[Anonymous]

Also a teacher here. Your pension is taxed more favorably in Maryland than W-2 income. Also no union dues, FICA or Medicare is taken out. So that bumps the value 15% over an equal W-2 amount.

If possible, You may want to look at your taxes from last year and only put enough into the 403b to get into the lower highest marginal tax rate once the standard deduction is included. Once you have your taxable income in that lower rate, then add to the Roth. This way you are maximizing tax savings as well as efficient retirement savings.

I would also recommend a 457b instead of the Roth if available. You have access to those funds immediately once you leave the school system even if before age 59.5.

[Anonymous]

Oops. I meant put into a 457b instead of the 403b.

[Anonymous]

With 13 or fewer years to go, I would try to max out both if you can.

[Anonymous]

Max the Roth first. I'm not sure how you feel about being able to access the money before full retirement, but then would come the 403b. Given you already have a pension you're in good shape.

I might if I were in your position with more liquid assets look at real estate for some diversification and cash flow, as you don't have a lot of time to benefit from compounding.

[Anonymous]

OP, which school district are you in?

Make sure your 403b is with a good, low fee company. I think MCPS gives you little choice in 403b - but the other MD school districts have a lot of terrible, high fee, options only.

If you are in MCPS don't worry about selection of 403b plan but any other district - do some looking around on this website to see how your district's plan is rated:

https://403bwise.org/advocacy/search_district_plans

[Anonymous]

I’m in Baltimore City so my 403b is with Vanguard. Thanks for the responses!