403b? Vanguard? Retirement account help?

**sweeps** · 10-16-2007, 12:30 PM

The advantage of your 403b (even without a match) is it's convenient. Your savings come right out of your paycheck and you never think about it.

However, a Roth IRA is typically the better option because (a) you're young and presumably earning a relatively low income -- it's better to pay taxes now and then never pay taxes on those savings again, and (b) you have a practically unlimited selection of funds to choose from. I am partial to Vanguard because I like index funds, and Vanguard charges ridiculously low fees to invest in their index funds.

At 22 you should be investing fairly aggressively, i.e. you should be at least 90% invested in stocks. The Vanguard Target Retirement 2045 might be a good set-it-and-forget-it choice. You can always switch to another fund later if and when you choose to.

**disneysteve** · 10-16-2007, 12:33 PM

There is an advantage to the 403b, but it doesn't apply in your case. The advantage is that the annual contribution limit is much higher than with an IRA/Roth. The IRA limit is currently $4,000/year. The 403b limit is $15,500/year.

If you only have $2,000/year to invest at this point, I'd tend to lean toward the Roth IRA since you'd retain full control of the money. The one limitation you will face is that Vanguard funds have a $3,000 minimum investment. Within the 403b, that wouldn't apply. I seem to think I've read here that T. Rowe Price offers funds with lower minimums if you sign up for an automatic monthy investment plan. Perhaps someone else will post about that.

**sweeps** · 10-16-2007, 12:38 PM

Good point about the minimum investment, Steve. Actually STAR fund (VGSTX) has a $1,000 minimum. So, OP, you could open up your account and put your money in this fund, and then you could transfer your balance to 1 or more other funds if you chose to once you built it up to $3,000.

**kv968** · 10-17-2007, 03:59 PM

Originally posted by disneysteve View Post

I seem to think I've read here that T. Rowe Price offers funds with lower minimums if you sign up for an automatic monthy investment plan. Perhaps someone else will post about that.

T Rowe Price allows you to invest in their funds for as little as $50/month if you use their automatic asset builder program.

**Scanner** · 10-17-2007, 05:20 PM

The advantage of a Roth IRA:

Taxed going in.
Grows tax-free.
Not taxed as income going out.

(theorectically can't double tax income)

The advantage of a 403(b)

Not taxed going in (your declared income will lower - it's a deduction)
Grows tax-free
Taxed going out (it appears as income then)

So extrapolating out here, you make $40,000/year if $2000 is 5%. If you do the 403, you will declare $38,000 in taxes.

I would say go for the Roth. At that level of income, you probably benefit more from control and tax-free going out then needing a deduction right now.

With that little amount, I'd just split it between an agressive domestic and an aggressive international fund.

(anybody correct me if I am wrong on the taxes)

**Duck12** · 10-19-2007, 07:33 AM

Thanks for the advice everyone!...I'm leaning toward the Vanguard Star Fund account since I'm new to this retirement account stuff.

I've also read about Fidelity and T. Rowe Price IRAs. Any input/differences between those companies versus Vanguard?

How much would I have to put into the 403b to benefit from it?

Any other advice is greatly appreciated. Thanks again!

**disneysteve** · 10-19-2007, 08:56 AM

Originally posted by Duck12 View Post

How much would I have to put into the 403b to benefit from it?

Not sure what you mean by this. Any money you put in would grow to be spent in retirement. The more you put in, the more you have to spend down the line.

403b? Vanguard? Retirement account help?