Should I contribute to a Roth 403b

[hospitalistmd]

Hello All,

My wife and I are both physicians (she is part-time urgent care, I am a hospitalist).  We just found out that she has access to an unmatched 403b plan.  We currently max out my 403b (matched at 6%) and both do backdoor Roth IRAs.

My question is whether there may be benefit for her to contribute a portion or all 18.5k to a Roth 403b versus the traditional 403b (I do not have this option).  With the new tax changes, we are squarely in the 24% tax bracket. I was thinking that this may make the Roth 403b more appealing for these years when our tax bracket is lower.

thoughts?

[jfoxcpacfp]

Others will differ, but I would seriously look at using at least part of the Roth 403b space given your bracket. She can always switch to fully deductible when your marginal rate rises, and shift to a higher Roth 403b allocation when your bracket lowers.

[radz]

Do you have access to a 457b as well? I have been thinking about fully contributing to the Roth 403b this coming year and use a non-gov 457b for pre-tax space. Although I think it would be prudent to make sure that the 457b is not negatively impacted by the new tax law.

[hospitalistmd]

Thanks for both of your thoughts!  Johanna, I was thinking the same thing (or even just contributing all of it to the Roth 403b).  Radz, I do have access to non-gov 457b but Physicianonfire made me nervous with the comments regarding tax reform on the distributions thereof.

It seems very appealing to add 18.5k (if I understand right I can contribute 18.5k post tax) to my roth "bucket" to not have to worry about tax implications.

Any other thoughts?

[StarTrekDoc]

With the new tax brackets for those should seriously consider Roth over pretax vehicles since 24% is pretty wide up to 315k and probably won't sunset for that group.

I would rather most of us will fall into this group pre and post retirement. If true, Roth wins with that factor alone.

Those hitting above the 315k mark now, have to watch their anticipated hard income from pensions and rmds. If that bumps you over 315k in retirement or if 315k is too.much anyways, then Roth is a consideration to avoid rmds....and really then becomes a wealth management question on inheritance....a whole other subject

[jz]

Paying 24% marginal tax now, at 5% real growth, it will take her 6 years to get back to whole, and approximately equal her nonRoth- phantom 403b-post 24% value.

[hospitalistmd]

StarTrekDoc, I tend to agree.  jz, forgive my lack of knowledge, could you spell out whether you think that is a good or bad thing ?

[jz]

@hospitalistmd,   could you spell out whether you think that is a good or bad thing ?

If she is <5-10 years from retirement, it's bad.  If she is > 5-10 years from retirement, it's a great strategy.

Paying taxes now to achieve Roth status is much more attractive now, given the lower tax brackets.

[q-school]

StarTrekDoc wrote:

With the new tax brackets for those should seriously consider Roth over pretax vehicles since 24% is pretty wide up to 315k and probably won’t sunset for that group.

I would rather most of us will fall into this group pre and post retirement. If true, Roth wins with that factor alone.

Those hitting above the 315k mark now, have to watch their anticipated hard income from pensions and rmds. If that bumps you over 315k in retirement or if 315k is too.much anyways, then Roth is a consideration to avoid rmds….and really then becomes a wealth management question on inheritance….a whole other subject

Click to expand...

I'm under the impression roth 403 plans have rmd.

I guess you can convert roth 403 to roth ira at some point?

can someone more knowledgeable than me comment?

 

[jfoxcpacfp]

q-school wrote:

StarTrekDoc wrote:

With the new tax brackets for those should seriously consider Roth over pretax vehicles since 24% is pretty wide up to 315k and probably won’t sunset for that group.

I would rather most of us will fall into this group pre and post retirement. If true, Roth wins with that factor alone.

Those hitting above the 315k mark now, have to watch their anticipated hard income from pensions and rmds. If that bumps you over 315k in retirement or if 315k is too.much anyways, then Roth is a consideration to avoid rmds….and really then becomes a wealth management question on inheritance….a whole other subject

Click to expand…

I’m under the impression roth 403 plans have rmd.

I guess you can convert roth 403 to roth ira at some point?

can someone more knowledgeable than me comment?

Click to expand...

Yes, they do, but you just roll out to a personal Roth.

[ScientistPhysician]

Johanna, this is a really stupid question... my current 403(b) contains both Roth and Pre-tax contributions. When I retire, can I separately roll-over the Roth contributions into a Roth IRA, while keeping the pre-tax in the 403(b)? It's many years before I have to do this, but am curious about the logistics.

[jfoxcpacfp]

ScientistPhysician wrote:

Johanna, this is a really stupid question… my current 403(b) contains both Roth and Pre-tax contributions. When I retire, can I separately roll-over the Roth contributions into a Roth IRA, while keeping the pre-tax in the 403(b)? It’s many years before I have to do this, but am curious about the logistics.

Click to expand...

That is absolutely not a stupid question.

• Legally, it should be possible. (I'm theorizing because I've never been asked that question and I'm not sure where I'd find the answer.)


• Administratively, it will depend upon what the plan document says.

 

[Craigy]

jfoxcpacfp wrote:

ScientistPhysician wrote:

Johanna, this is a really stupid question… my current 403(b) contains both Roth and Pre-tax contributions. When I retire, can I separately roll-over the Roth contributions into a Roth IRA, while keeping the pre-tax in the 403(b)? It’s many years before I have to do this, but am curious about the logistics.

Click to expand…

That is absolutely not a stupid question.

• Legally, it should be possible. (I’m theorizing because I’ve never been asked that question and I’m not sure where I’d find the answer.)


• Administratively, it will depend upon what the plan document says.

 

Click to expand...

+1 you need to obtain a copy of the plan.  It's out there somewhere, likely some behemoth of a text.  If you have a good HR department they should be able to walk you through it.

[ScientistPhysician]

Thanks Johanna and Craigy. Good idea to read the fine print, the answer is yes, the roth balance can be separately rolled over to a roth IRA (which clearly seems to have 100% upside vs keeping in the 403).

[cgossage]

ScientistPhysician wrote:

Thanks Johanna and Craigy. Good idea to read the fine print, the answer is yes, the roth balance can be separately rolled over to a roth IRA (which clearly seems to have 100% upside vs keeping in the 403).

Click to expand...

May I ask why you want to roll a portion to a Roth IRA and leave the rest in the 403(b), instead of rolling the Pre-Tax portion into a Traditional IRA?