Quick preamble–you can contribute to a Roth or Traditional IRA until April 15th 2008 and have it count for 2007. Up to $4000 if you’re under 50 and $5000 if you’re over 50. Just a reminder.
I’ve been musing and mulling over options for retirement savings. We just got a package for the 403(b) (the educational institution version of the 401(k), but I’ll be calling it a 401(k) from now on to avoid confusion) that I’m apparently eligible for even though I’m only part-time. But I don’t get any contribution match.
I also have the options of Roth and Traditional IRAs because of our income level.
Without the match, I think going an IRA route would be the best idea for now. We can better control which funds we invest in. I’m not sure what funds are available in the hospital’s plan. Except for the tax advantage there’s no reason to do it. And I can get tax advantages with IRAs as well.
There are various reasons why I’m going with the Roth instead of the Traditional. I think Ciaran at Chance Favors gives a lot of good explanations for why the Roth is a good option.
Now, if by some miracle we pay off the debt and pass the $5000 contribution limit each for 2008, then we might consider the 401(k) option.
Why? It’s tax-advantaged and it doesn’t fall under the IRA limits.
Now if there was a match, we might look more into this (though we couldn’t yet set up any kind of regular contribution). Free money is free money and an automatic return on investment. Plus the pre-tax nature means I could put more in it than in a. As long as there was a decent index-type fund available it’d be a go.
Of course, there’s a limit on that too…but I highly doubt we’d make it that far and pay off a lot of debt this year. The time value of money means that we’re planning to do some investing now even though we haven’t paid off all our debt, though we’re putting more in to debt repayment. Our loan rates make this even more possible.
So for now, Roth IRA with the 403(b) option as a backup in case things start going fantastically. Ironically, a fantastic year might mean we can’t contribute to a Roth. But then again, fantastic for us would be $40,000/year.
Again, these are my thoughts and I’m not a finance, investing, or retirement professional. Just a library professional. And as such, I can tell you that 666 is not an exciting Dewey Decimal number. Something about glass-working. Very much a let-down. (see, you’re going to learn the whole Dewey on this blog!)