Given two accounts:
- Traditional IRA - Current balance $30,000
- 403(b) - Current balance $0
And contributions of:
$400/month * 12 months = $4,800 / year
Which account would you apply contributions to?
I realize there are a ton of variables to this question. So let me try to narrow it down.
- Approximately 38 years until retirement
- Assume both accounts have exactly the same investment options and fees. The 'performance' of both will be identical
- There are no matching contributions for either account
- The yearly limit for IRA is $5,500 (under 60). The yearly limit for 403(b) is $18,000. Since contributions will not hit either limit, the limit is irrelevant.
My gut tells me that in order to really utilize the current balance, the contributions should go into the account with the larger balance. Because an account starting at $30,000 will grow at a faster rate than an account starting at $0, right?