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Playing Catch Up

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  • Playing Catch Up

    Hello Everyone. I've been lurking for a bit and decided to finally post. I am new to the whole "retirement game" and I feel behind compared to many of you. Please forgive my ignorance, I've been trying to learn this as best as I can.

    I recently finished fellowship earlier this year and I am finally an attending. I have a 403b from residency and was told by a friend I should roll this into an IRA. Looking at the requirements for a roth IRA, it seems my AGI is too high and so a traditional IRA is more of what I would need. I had a few questions I hoped someone could shed some light on.

    Are there tax implications involved in transferring my 403b money to a newly opened traditional IRA?

    I haven't even made an account yet, but was thinking about going with Vanguard or Fidelity as those seem to be the most popular choices. Is there a particular fund that I should select? I'm still young so I figured a more aggressive portfolio would be better, possibly 80% stocks 20% bonds.

    My wife is a stay at home mother, but we file jointly. From what I've read I am able to open an IRA for her as well. Is this true and would it also need to be a traditional IRA?

    I'm sure I will come up with more questions. I appreciate everyone's help and look forward to reaching the heights many of you have achieved.

  • #2
    Does your current job have a 401k or other qualified retirement plan? It would generally be preferable to rollover your pretax 403b funds to another qualified plan. Or leave them in the 403b if allowed by the plan. Rather than rollover to a traditional IRA. Reason being, you will want to do backdoor Roth IRAs each year.

    Yes you can and should make IRA contributions for a spouse. This will probably need to be a backdoor Roth IRA based on your income.

    If you have Roth funds in the 403b, you would rollover those to a Roth IRA.

    There is no tax on moving pretax funds into another pretax receptacle. Such as a 401k or rollover IRA.


    • #3
      If you rollover into an IRA, use a Roth IRA.  There are no income restrictions to rollover/convert to Roth IRA.  The income restrictions come into play for direct Roth contributions.  You will owe tax on the conversion if in pre-tax vehicle currently but that's likely advantageous this year when you only have a half-year of attending salary.


      • #4
        ^^^ the pertinent question here is what is your marginal tax rate, federal plus state. Personally I would consider converting if this was 20% or below. I’m gonna guess OP is 24% tax bracket, or above. OP, do you know?

        But depends on how much 403b money we’re talking about.


        • #5
          Yes. First, STOP. Friends are often clueless.

          Read. Learn.

          Are you married? What's your new work plan? Tax bracket? Etc....


          • #6
            Oh, my. Welcome to the forum. Please heed @peds‘ advice. Take your time and follow relevant threads. If you believe you are over your head and/or don’t have time to fully educate yourself until you at least feel comfortable, get specific advice from a CPA and/or a fee-only financial planner. There is much to learn and you do not have to hurry.

            Your are NOT playing catch-up if you’ve just finished fellowship and are following this forum - YOU ARE AHEAD OF THE GAME. Patience and education. Do not rush your decisions and don’t be swayed by emotion and friends when it comes to finances. Save your feelings for personal relationships.
            Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087


            • #7
              1) IRA is out of consideration.
              2) Leaving them in 403b or rolling them to new plan is tax neutral. Purely whether the plans allow and options and fees are agreeable.
              3) Rollover Roth is the one time sensitive and subject to tax. That most likely needs to happen this month for 2018 tax rates.

              If you choose Roth rollover, Fidelity or Vanguard is fine.
              Rollover holdings or liquidate and directly move cash.
              Depends completely upon how comfortable you are with allocation.

              Because of the income jump, Roth rollover might be advantageous this month. That is your time pressure.


              • #8
                I have nothing to add except, this is what I love about WCI. A new member's 1st post and seven (7) straight useful, correct and complementary posts.


                • #9
                  I agree with slowing down, you are in no rush.

                  I would start with the basics, since you are asking the same questions most of us asked before we had a clue (I have asked these same things here and on the Bogleheads forum).

                  To me, you should read one good book. WCI book is good. Bogleheads Guide is good. Read one of them and you will have an outline of everything you need to know.

                  Basic steps:

                  Define your income

                  Define and track your expenses

                  Write an investment policy statement

                  Make a savings plan


                  More advanced is thinking about how/where to rollover previous plans. I agree going to a tIRA doesn't make sense as it would make future backdoor Roth contributions difficult. But to me theres no need to rush into figuring this out yet before you feel like you have a good grasp on your overall plan.


                  Also, you are not playing catchup. You are just finishing fellowship. This is a great time to wrap your head around this. If you were asking this in 15 years, you'd be playing catchup.


                  • #10
                    Thank you all very much! I appreciate all of the help and information. I will look more into all of this and will likely consult my CPA to make sure I am not doing anything I shouldn't be. I will also gather the information that was asked of me and do my best to answer it.