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#3134362 - 09/24/13 11:28 AM 401k vs 403b
supton Offline


Registered: 11/09/08
Posts: 4951
Loc: NH
I know 401k is for private, 403b is what places of education use for retirement. Beyond that I'm a bit clueless. My question, which is better to put money into? I have a 401k, wife has a 403b that is just sitting. I don't know what her future job prospects are, but, it's possible that she might keep at either teaching at a university, or perhaps go into a research position at a university. At which time I'm guessing (?) that we could start putting money into her 403b. Or put all the more into my 401k. [I'm guessing 403b plans would allow you to roll prior plans together? Like you can on 401k's.]

?
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#3134391 - 09/24/13 11:47 AM Re: 401k vs 403b [Re: supton]
satinsilver Offline


Registered: 01/24/08
Posts: 2913
Loc: Ohio
I'm not sure about 403b's. But let's deal with your 401k. Do you receive a company match? If so how much do they contribute for every dollar you invest? Many times their contribution is in the form of company stock. Is this the case with yours? What company manages your account, ie Fidelity, Vanguard etc?

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#3134398 - 09/24/13 11:50 AM Re: 401k vs 403b [Re: supton]
bepperb Offline


Registered: 01/10/08
Posts: 4781
Loc: Milwaukee, WI
The most important aspect would be to put money into whatever has a company match. From there I'd be interested in the investment options of both, and who is managing it, to make the decision.
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#3134417 - 09/24/13 12:01 PM Re: 401k vs 403b [Re: supton]
supton Offline


Registered: 11/09/08
Posts: 4951
Loc: NH
I finally revisited my 401k, and realized that I ought to be doing more, at least what I can in order to get the full company match. So I'll do that. I've got mine set to "moderate risk" IIRC, and I'm about to hit 37 with > 90% of one year's salary, mostly in a 401k, for retirement. Paltry, and behind, but not horrible (I started at 23, but it seemed that, whenever I thought about putting more in, the market would flucuate, I'd lose some pay, and I'd wind up too nervous to throw more money at it--a bit smarter now). In the future I'll see about raising it up each year, and hopefully some big jumps when I can (get rid of a car payment, wife gets job, that sort of thing).

The company has some sort of retirement plan too, but from what I can see, they put in a very small amount. I don't understand it yet. All through Schwab, so I'm guessing it all acrues money at about the same rate.

Long ways away from maxing out my 401k contribution; simply have too many other things at the moment. Even w/o car loans I couldn't do the max, as it'll be the house that needs the money. Then it'll be the kids college, or wedding, or some other excuse.


Edited by supton (09/24/13 12:02 PM)
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#3134429 - 09/24/13 12:08 PM Re: 401k vs 403b [Re: supton]
JHZR2 Offline



Registered: 12/14/02
Posts: 33792
Loc: New Jersey
my wife has a 403b and I have a different system similar to a 401k. My undeerstanding is as you describe - 403b is for nonprofit, 401k is for for profit.

Im sure some nonprofits match dollars put in, but my wife's is a hybrid with a pension, so she gets no match. The intent is solely to decrease taxable income.

Id guess that 403 and 401 are different so that for profit comapnies can have some tax advantage for their employees' match payouts.

Is one better or worse? My wife actualy had multiple options of 403b companies to go with. We picked vanguard to park money with low index fund type cost structures.

So the big questions are:

-which offers a company you like with lowest investing costs?
-which account would get a match and are you already maximizing the match?
-does one of you come close to hitting the IRS limits for how much being put in?
-Is your income level appropriate to allow you to qualify for a Roth IRA?

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#3134447 - 09/24/13 12:19 PM Re: 401k vs 403b [Re: supton]
dparm Offline


Registered: 04/19/10
Posts: 12541
Loc: Chicago, IL
Yes, 401k and 403b are the same basic idea. Typically a 401k gives a bit more flexibility to the benefactor -- you have some degree of choice on how that money is invested, though the account maintenance & admin fees cost more. 403b has lower costs, but less choice.

Again, your mileage may vary. Do your research on the funds, management, fees, etc.
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#3134460 - 09/24/13 12:24 PM Re: 401k vs 403b [Re: supton]
eljefino Offline


Registered: 06/15/03
Posts: 24223
Loc: ME
If you're skipping out on company match I'd actually consider debt for other things you list, particularly student loans for tuition. Naturally cutting living expenses is an evergreen nag. But that's free money!!!

The best match I've ever heard of is only around 15%, right? There must be a place to shave to get there.

I'd even consider the 401k as part of your rainy day fund, though if the match is in company stock you want the rainy day to consider them going bankrupt.

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#3134484 - 09/24/13 12:35 PM Re: 401k vs 403b [Re: supton]
supton Offline


Registered: 11/09/08
Posts: 4951
Loc: NH
Yeah, I chose poorly: I should have have put more in years ago, and I shouldn't have taken on my truck loan. Live and learn. Company match maxes out at 6% though, so I'm going to put my contribution at 7% for now, and figure out how to make it balance in the budget (upped our tithing this year, health insurance rises each year, just realized we've been spending a lot on groceries and dining out recently, etc).

Managed to get rid of school loans, but bought too many cars over the years, and have two payments at the moment. Those should be paid off in 3 years; it'd be 2 if I wasn't saving for retirement. Mortgage was refi'd last year, so it's at a decent rate too (3%?), with most of the payment going to principle; and isn't much more than rent.
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#3134486 - 09/24/13 12:36 PM Re: 401k vs 403b [Re: supton]
99Saturn Offline


Registered: 02/25/13
Posts: 1024
Loc: NY
I'm not that familiar with a 403b.

I would add to the comments that once you contribute enough to max out the company match in both accounts (if available), consider an IRA (go through some research for ROTH vs. Traditional and what's right for you). You'll have a bit more freedom in the IRA versus the 401K.

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#3134491 - 09/24/13 12:38 PM Re: 401k vs 403b [Re: eljefino]
supton Offline


Registered: 11/09/08
Posts: 4951
Loc: NH
Originally Posted By: eljefino
I'd even consider the 401k as part of your rainy day fund, though if the match is in company stock you want the rainy day to consider them going bankrupt.


Match is not in the company stock. Having the 401k as a rainy day fund is not something I've ever thought of... Heavy penalties for early withdrawal, but I guess I never thought of it as some sort of emergency fund either. I *think* I'm around 6 months in savings, so that front is good too. But maybe I don't need to increase it, if said 401k is my emergency fund? Never thought of that...
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2011 Toyota Camry, base, 6spd manual, 82k, hers
2010 Toyota Tundra double cab, 4.6L, auto, 90k

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#3134499 - 09/24/13 12:41 PM Re: 401k vs 403b [Re: supton]
bullwinkle Offline


Registered: 10/09/04
Posts: 4109
Loc: Cincinnati, OH, USA
I put in the maximum that the company matches (6%) & $5K per year each for myself & spouse in a self managed IRA (both all stocks), and any other surplus goes in money market or CDs. That way, when interest rates rise again, I should have some protection when the market corrects.
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#3134508 - 09/24/13 12:45 PM Re: 401k vs 403b [Re: supton]
satinsilver Offline


Registered: 01/24/08
Posts: 2913
Loc: Ohio
If you withdraw funds from a 401k after you've separated from the company there's a 10% penalty if you're under the age of 59.5. Then you'll be taxed on the withdraws as income. So not a good idea for a rainy day fund but I see what was being alluded to.

Does the company match 1:1 up to the 6%? Or .5 for every dollar you put in?

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#3134511 - 09/24/13 12:47 PM Re: 401k vs 403b [Re: supton]
Mark_Walk Offline


Registered: 09/19/11
Posts: 326
Loc: Danville, KY
Look at both plans to see if there is a match and maximize that. Beyond that I would look at which plan offers the most diverse group of investment options to pick from.
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#3134526 - 09/24/13 12:54 PM Re: 401k vs 403b [Re: supton]
99Saturn Offline


Registered: 02/25/13
Posts: 1024
Loc: NY
Just FYI, IRA contribution limits were increased this year to $5,500.

Also, once past the company match a ROTH would be a good rainy day fund as to avoid penalties if a need arises to withdraw.


Edited by 99Saturn (09/24/13 01:00 PM)
Edit Reason: added ROTH info

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#3134536 - 09/24/13 01:01 PM Re: 401k vs 403b [Re: supton]
supton Offline


Registered: 11/09/08
Posts: 4951
Loc: NH
Company does $0.25 per dollar, up to 6%. I haven't seen any fees listed on statements, but I haven't made any changes to the plan in 13 years either.

403b is sitting, not even sure how to add to it--wife was adding to it through her job, when she was employed. She just had another offer at the college she teaches at, but we've never inquired about benefits, as it's a part time job (and this offer is again just one course). So, the thinking is, if/when she can add to her plan, if it was worthwhile. Sounds like, based upon zero research, that it's probably similar to my 401k; probably worthwhile if only for the diversification.

Now, the idea of just going to the 6% that my company matches, and rolling the rest into an IRA/Roth... Hadn't thought about that yet. I know squat about stocks, so I'd probably just find some index fund (Vanguard?) to put the money into.
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