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I have two jobs, one is in the private sector (access to 401k) and one is in the public sector academia (access to 401b/453b) and my wife has a private sector job (access to 401k) and both of us of course have access to IRAs, investments and cash/bonds.

Currently, I am dividing my max contribution limit per year in two, putting it in each of the 401k/403b and within the 401k they are split nearly down the middle between traditional/roth. My wife is putting her max (she is a year older, so higher limit) into the 401k, again within split almost evenly between traditional/roth. She has an IRA with max contribution each year split between traditional/roth. I have the same thing but at a different brokerage along with regular investments.

So am I doing this right or do you see anything glaring that I should be adjusting with it? A few additional pieces of information, my 401k (Vanguard/Ascensus), my 403b (American Fidelity), my IRAs (Robinhood), wife's 401k (Alight/Fidelity), her IRAs (Fidelity). My 403b is an annuity, no real choice there. Everything is "maxed" each year. I just found out I can have a 457b and was thinking about adding that, but feel the field is already pretty crowded, wanted to get a second (or .. n) assessments on whether this is on a sound footing or not? Should I add the 457? Should I be distributing my and the wife's max contributions in a different way? Any issues you can or suggestions on how I can do it better. Is there something I should be doing that I am not?

I tried to be detailed but if there is anything unclear, let me know and I will add it. Thanks in advance.

FYI: I have read these (and THEN SOME) but doesn't make me feel I am on the right path and also not, so hoping to get perspective on it since almost any evaluation comes with a lot of double talk.

https://www.investopedia.com/terms/1/401kplan.asp
https://www.investopedia.com/terms/1/403bplan.asp
https://www.investopedia.com/terms/1/457plan.asp

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    what's the point in splitting between traditional and roth? why split between 401k and 403b? You described what you're doing, but why are you doing that? If we don't know your motivation, it's hard to say if this is the right way to go.
    – littleadv
    Aug 14, 2023 at 22:38
  • I was splitting between traditional and Roth hot a while because I hadn't yet figured out which was more to my advantage, if either... In my experience an employee can only put income into one flavor, 401k or 403b, depending on what category their employer falls into, without having any opportunity to choose between them, but I suppose if you have two incomes, one in each category, you could tune this by deciding how much of each to salt away.
    – keshlam
    Aug 15, 2023 at 2:08
  • @littleadv Good point, I suppose that's why I am asking. In my mind it was to not put everything in the basket of a particular employer/broker if you will. The split between Roth/Traditional is that half is taxed now and half later on distribution, trying to average out the potential that tax now is lower, versus tax then is lower. The motivation is simple, use whatever method is available to me at each employer to spread my risk and by proxy my "return" if you will. Aug 15, 2023 at 4:21

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Balancing 401k and 403b

This comes down to choices and costs. Check which funds your 401k has access to, which the 403b, and figure out which ones you like. You may end up liking some in one and some others in the other, or you may end up concluding that one of them have much better options across the board than the other. Compare fees charged by the plan, expense ratios of the funds, and their performance. The brokerage customer service is also important.

Balancing Traditional vs Roth

You're trying to average the tax benefit, but I'm not sure if it makes sense to me. If you're in a high tax bracket now - Roth makes little sense, because you're unlikely to remain in the same bracket at retirement. If you're in a low bracket now - traditional makes little sense because you'll be in the same/similar bracket, so why pay tax on gains?

Given that you mentioned you're both contributing to the IRA, and you didn't mention backdoor (you said you're splitting IRA between traditional and Roth too), it makes me think that you're in a low tax bracket now. I would probably go Roth all the way.

What about 457(b)?

This is similar to the 401(k) and 403(b) discussion above. But these plans have slightly different terms when it comes to early withdrawal. Not sure how important that may be to you.

Disclaimer

I'm in no way a tax adviser or a financial adviser, or anything other than a random anonymous Internet s#!+poster. Take everything with a grain of salt and double-check. I made some assumptions based on my understanding of your question that may not be correct. You'd probably want to talk to an actual financial adviser (CFA or CFP) or at least a proper tax adviser (CPA or EA).

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  • You may be what you claim in your disclaimer, but this is a damn good answer. It is much better than what one gets from a run-of-the-mill financial adviser that people pay good money for.
    – Pete B.
    Aug 15, 2023 at 10:31
  • As always I appreciate your input and thank you for taking the time. One question about the Roth/Traditional section, since Roth is taxed later and Traditional is taxed now, would I want to be taxed when likely I am in a lower tax bracket, so am I mixing this up? By the way, not a brag, just clarifying what you said, we are UNFORTUNATLEY in a high tax bracket, have been now for about 4 years mostly due to my two jobs, With regards to the balancing of which has lowest fees and better offering I a with you, I have done some work on it but have not had the time to dig too deep as it overwhelms. Aug 16, 2023 at 6:09
  • @GµårÐïåñ "Roth is taxed later and Traditional is taxed now" - the other way around. Roth is taxed now, your contributions are after tax. However, your distributions (including earnings) are not taxed. Traditional is deductible from your income now, but your distributions (and earnings) will be included in income when taken. If you're in a high tax bracket, how are you contributing to IRA?
    – littleadv
    Aug 16, 2023 at 7:06
  • You are right, I said that backwards, thanks for correcting me. The IRA I wasn't aware has an income requirement, since you are putting after pay already taxed income in it to save for retirement. I must have missed that somewhere why would higher incomes not be allowed to save for retirement, they have to retire too and won't always make what they are now. Right? I'll have to look into that. Aug 17, 2023 at 15:10
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Here are my additions to littleadv's excellent answer.

  1. Split your contributions between your two plans to maximize matching. After that put the remainder in the one you like better.

  2. Can you estimate your retirement tax bracket? Doing some projections lets say you estimate you will be in the 22% tax bracket. Then it makes no sense to pay 24% now on money you are putting into Roth (for married filling jointly 190,750 in 2023). So adjust your Roth down in favor of your tax deferred accounts to keep it under that threshold.

  3. Why Robinhood? I would move that to Fidelity that offer excellent benefits plus they don't have the whole fraud thing going on. Also you benefit from having more of your accounts in one place. My recommendations is to stick with the big three: Vanguard, Fidelity or Schwab.

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  • Ah, I like #1, my wife's company used to match a bit but no longer, they stopped a few years back. My 401k job does match slightly, but the 403b doesn't do any. So in that regard, I might end up still mostly doing what littleadv said and picking what has least fees/benefit. As for #2 I wouldn't even know how to do that, can you give me a suggestion, it is going to be significantly less than what it is now that much I know but I also know that's not a good answer or helpful. Robinhood was a carry over, I am not a big fan either but moving the money out will cost me. Thank you for the input. Aug 16, 2023 at 6:14
  • @GµårÐïåñ why would moving money out of robinhood cost you? Just do a transfer in kind to Fidelity. No taxes owed or IRS fees owed. Even if robinhood charges you it is better to pay that fee and get your money into something like Fidelity.
    – Pete B.
    Aug 16, 2023 at 10:47
  • Pete - to point #2 - Income (taxable retirement withdrawals) impacts medicare premiums. In effect, creating phantom brackets that overlap with the ones we are familiar with. Too much to explain in a comment, but you may want to look up the numbers. Wife on medicare and I have 4 years till then, but will probably convert to Roth to top off the 24% bracket for these 4 years. Aug 16, 2023 at 20:51
  • @PeteB. I wanted to transfer to Fidelity and they state in their disclaimer all kinds of fees you would be charged when they sell your assets to transfer the value and that they will clearly not wait to do it when it benefits you, and they charge a fee to transfer your stuff elsewhere, almost all of them do, some higher than others. Aug 17, 2023 at 15:11
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    @GµårÐïåñ - of course. I added a full answer to your comment. Pls take a look. Aug 20, 2023 at 18:04
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Note: This focuses on just my comment and request for clarification, it's not a complete answer.

For the joint filer, $190,750 - $364,200 is the 24% bracket. But, you can see that if you go over $194,000, your premiums go up $65/mo. $1,560. It's a step function, not phased, so if in December, you were exactly at 193,999, but took out $1 more, you are paying $1560. $10,000 more and the $1560 'feels' like a 15% hit. Still within the 24% bracket, hitting $246,000 is another $100/mo jump or $2400 per couple. The effective rate depends on how much over you go.

You may think that even retiring with $4M in retirement savings would mean just withdrawing $160,000/year. And then in year 3, a new roof, and 2 new cars later, you can blow through the next brackets with little effort.

Choosing the line between traditional IRA and Roth is worth studying, and I'm just adding this one overlooked issue to address.

By the time Roth was available, we were already at 28% or higher bracket. And I ignored the very advice I'm sharing here. Link to Medicare chart full article.

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    You are most awesome, thank you for the additional information, I am grateful for the added understanding. Aug 20, 2023 at 21:32

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