No 403(b) match, max roth first?

[atomicrc11]

Hi Guys, I started a new job and have a 403(b) and a 401(a). My employer puts in 5% of my salary into the 401(a) regardless of my contributions to the 403(b). Should I max out Roth's of DW and I, then put into the 403(b)?

Or should I split the money between them? Thanks for any advice.

[mrpaseo]

Step 1: If your employer will MATCH your 401k/403b contribution, invest up to what they will match.
401k: If you put in 6% and your employer matches, you automatically double your money. Otherwise you pay taxes on this money when you withdraw any interest earned (Growth), though you already paid takes on your initial investment you will not have to pay taxes on the principle when you withdraw.
403b: This is when you chose to not receive your full pay, basically you tell them to take a percentage and invest it for you. So if you net 1000 (And pay taxes on the 1000) and you tell them to divert 10%, then you will net 900 and 100 will be sent over to the 403b investment. You will then pay taxes on the 900 that you take home. You will not pay taxes on the 100 until you withdraw it.
These make sense if your employer will match any of your contribution.

Step 2: Maximize your ROTH IRA
The ROTH IRA is not tax deferred, however, anything it makes over the years is tax FREE. Over a 30 year period you could invest up to 150,000 (If the 5000 per year does not go higher), but the fund should be worth at least a million if properly diversified and earns an average of between 10-12 percent. (Not hard to do over a 30 year period). When you are in retirement, and you start drawing on this fund, you will not have to pay taxes on any of it. For this reason I feel it is your best option.
Step 3: Maximize your 401k, 403b
Once you max your ROTH IRAs you might have more money to invest, then you should max these accounts because Uncle Sam allows you to hold onto the tax part of the money (The 100 noted above) and allows you to earn as much money on that money until you withdraw, then you pay the tax money back.

If I got any of this wrong someone please correct me. Thanks.
My advice, follow these steps until you reach your 15% (Or whatever percent you decide to invest for retirements).

Ray

[jIM_Ohio]

It depends on your tax rate and the investment choices.

if choices are bad in 403, use Roth
if you are in 25% tax brackect, the 403 benefits on the tax side are better than the roth tax benefits. These tax benefits may outweigh bad investment choices.