What is a Roth IRA? Is it better than a 403b?

Answer 1

A Roth IRA is a type of individual retirement account. The other type of IRA is the traditional. Both types have a yearly contribution limit of $4,000, unless you are age 50 by Dec. 31. If you are age 50 by Dec 31, your limit is $5,000.

With a traditional IRA, you may be able to get a tax break up front when you make your contributions to the plan. The down side is that 1) withdrawals cannot be made without penalty before you reach age 59 1/2, 2) withdrawals MUST begin the year you turn 70 1/2 or you face a 50% penalty, and 3) ALL the money you withdraw is taxable when you withdraw it. If you die before depleting your IRA, yours heirs must withdraw any remainder within 5 years.

A Roth IRA (named for the senator who came up with the idea) does not give you a tax break when you make contributions. On the other hand, none of the downsides of a traditional IRA happen with a Roth. You can make withdrawals of your contributions before reaching age 59 1/2 without penalty so long as you do not withdraw any earnings that may have accumulated. You do not have to start making withdrawals ever. This makes the Roth a convenient way to pass assets to your heirs tax free. When you do need to make withdrawals, none of the money is taxed, including accumulated earnings, if you are at least 59 1/2.

Now, 403b. This is a retirement plan provided to public school employees, employees of not-for-profit organizations, and ministers. The annual limit for 2006 was $15,000. The limit is supposed to increase for inflation by $500 beginning in 2007. There is also a catch-up provision that allows an extra $4,000 to be contributed to a 403b, provided that you are at least age 50.

Which is better? Some 403b plans provide for employer matching of contrbutions. If this descibes your 403b, then this is better. You are talking about free money in this case.

There are income limits to be able to contribute to a Roth IRA. Contributions to a 403b reduce your taxable income. For reducing taxable income, age restrictions on withdrawals, and taxation of withdrawals, a 403b works much like a traditional IRA. If your earnings are high enough, you may need to have a 403b to reduce your income to where you could also have a Roth.

Yes, you can have both. If you are single and earn less than $95,000 and your employer does not match contributions, you should get a ROTH first. Once you have funded it, then put what you can into a 403b. If you earn more than $95,000, use the 403b to reduce your taxable income enough so that you can make contributions to a Roth.

I know this is a long answer, but I wanted to give you an accurate answer.

Answer 2

A Roth IRA is very similar to a regular IRA with the biggest exception is when the taxes are due and who can contribute to it. The taxes for a traditional IRA are paid at the end when you are withdrawing the money. For the Roth, you are paying the taxes up front and than withdrawing the money tax free. The traditional IRA has a lower income level before it fazes out than the Roth IRA. If I am right, the 403b is similar to the 401k so you should be able to put more money into the 403b. The best position to be in is to maximize the amount that you put into both a 403b and a Roth IRA to maximize your future retirement.

Answer 3

you're able to need a economic representative and an entire economic historic past to get an recommended answer. With the a 403b, the decrease value costs are tax-deferred and you will ultimately would desire to pay taxes on the investment and interest. With the Roth IRA, the investments are after-tax, however the interest is tax unfastened. verify first, how plenty you may desire to speculate. Then locate out the optimal you may placed right into a 403 as against the optimal you may placed right into a Roth IRA. a third complicated decision could be to do the two: make investments some interior the 403 and a few interior the Roth IRA. the two plans have their reward and the two have constrained draw backs, inclusive of no assure on appropriate and interest.

Answer 4

The Roth IRA let's you put post tax $$ into it, and it earns interest.
If you are over the age of 59 1/2 when you take the money out, it is non-taxed.

It is better than the 403b. It has better tax breaks.