I have an IRA and a 403(b); which should I put more money in? Which is better?
One is not necessarily better than the other. What’s best for you depends on your specific situation. One significant difference between an IRA and a 403(b) is that an IRA offers virtually unlimited investment options, but a 403(b) limits you to the vendors and products available in your district. If you are satisfied with the vendors and products offered by your 403(b) plan, you can enjoy the convenience of payroll deductions with a 403(b). There is also a possibility, though it’s unlikely in California at this time, that an employer would offer matching contributions for a 403(b). That’s never the case with an IRA. Those arguments might support favoring the 403(b).
On the other hand, if you think you could find investments that better suit your goals, timeline and risk tolerance – or do that with lower fees – you might want to invest more in an IRA.
Another major difference is the maximum annual contribution limit. You can contribute $5,000, ($6,000 if you’re age 50 or older) to an IRA in 2011. You can contribute much more than that to a 403(b) – $16,500 in 2011, or $22,000 if you’re age 50 or older.
You can learn more about IRAs by reading Two Types of IRAs, and more about 403(b)s at Saving with a 403(b) or 457 Plan, both at CTAinvest.org.
Important Note: CTA does not give tax, legal or investment advice. You should meet with your tax, legal, and/or investment advisor to determine the best fit for your situation.