So Wife Ninja had a meeting with the San Diego District guy that is in charge of setting up teachers 403b plans. He sat down with her and explained all of the benefits, investing strategies, and insights in regards to the plan. She came home with a page of notes and I could tell she was excited to explain what they talked about. After talking through the logistics, we decided the 403b is not for us.
For the last three years, I’ve consistently invested 15% of my gross income between my TSP (Government version of a 401K) and my Roth IRA. If I continued investing the same dollar amounts, but added Wife Ninja’s income, we’d only be contributing about 9%. That means, either I or she, needs to be contributing an additional 6% to reach the 15% goal.
Yes, the 403b could be used to help us towards that goal, but three things are holding me back…
1) There is no match. If the school was offering a 5% match on contributions, then you better believe we’d be all over that thing. I would never pass up free money. But there isn’t one. So the attractiveness of a 403b becomes exponentially less sexy.
2) She doesn’t plan to teach for more than a few years. If she opened up a 403b and we move to Seattle (which is the current plan), than we will have to go through the process of rolling the 403b in to an IRA. Sure it’s not the most miserble process out there, but it’s one I’d prefer to avoid if possible. Especially seeing that she will probably work for a few different school districts during her working years. The less accounts out there, the better.
3) The Roth IRA is most likely a better option for us anyway. We anticipate our income only increasing from this point forward. A larger income, means more taxes. It would be smart for us to open up a Roth IRA in her name while we are in a relatively low tax bracket. The Roth IRA is a freakin’ HOT investment for a 23 year old woman. Wife Ninja is hot, Roth IRAs are hot, so it makes sense the two should begin a relationship.
Let’s assume our combined gross income over the next year will be $90,000. This means we would need to put $13,500 towards retirement each year to meet that 15% goal. If I max out my Roth ($5,000), she maxes out her Roth (another $5,000), then we are only $3,500 short of our $13,500 goal. I’m also currently contributing 5% to my TSP, which works out to $3,100/yr. I get that 5% matched by my employer for an additional $3,100 contribution. All said and done, we’ll be contributing $16,200 over the next year, which works out to 18% of our gross income. Sounds like a pretty good deal to me.
I honestly can’t think of one reason why we should sign up for the 403b. Anyone have an argument FOR the 403b? Would you handle our situation differently? Were you totally bored out of your mind today, since this post actually talked about finances?!