At the heart of each is access to mutual funds. Usually a 403b will have a line up of mutual funds among other options which may include variable annuities. Be very careful because how good a 403b performs is very dependent on how strong the oversight and monitoring of performance. Fees can also be a concern. A fund family like Vanguard can help you set up a Roth IRA, but you need to perform your own oversight and performance monitoring. With Vanguard, you will have access to low cost index funds with probably the lowest fees of any.
ETF's at the moment are more suitable as outside savings. Since ETF's are not required to declare their capital gains annually, this will allow you to accumulate these gains until you are ready to sell and be taxed at the more favorable capital gains rate. However, the choices are more limited than mutual funds.
You may want to consider Warren Buffett's advice, unless you have time to study, evaluate, and monitor performance, you should be investing in the lowest cost index fund that you can find.
To maintain flexibility on how to manage your taxes in retirement, you may want to consider a combination of all three.
You are young. Because there is no match in your 403(b), you should open a ROTH IRA for your retirement savings. You should open and fund the account today, and make regular (like direct periodic withdrawals) contributions.
You are too young to be thinking of your investments as being able to "provide some extra income". Your income needs to come from your work, not from your investments. For one thing, you will find that until your account is very large, it is not going to provide you with "income". For another, you need to be fully funding your retirement before you start thinking about "branching out". Why would you risk your money by short term trading when you haven't fully accounted for your retirement plan?
You don't need a "portfolio that will grow to help with retirement". You need a portfolio that will COMPLETELY enable your retirement (not "help" it). If you don't do it, it simply won't happen.
It depends how much you want to save every year. The limits on IRA's are much smaller than your 403(b), but depending on the servicer of your company's 403(b) plan, the fund choices at a Vanguard or another company might be better. Choosing a roth over traditional IRA depends on how you want the money taxed, before or after, or perhaps two IRAs with both can offer tax diversification upon retirement. IRAs and 403(b) investments would obviously not give you capacity for extra income, since any distributions are faced with tax penalties, so a taxable brokerage account in addition to and IRA might be an option.
Well
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I was wondering what option made the most sense. I want to start investing but I'm not sure the best way to go about it. I was interested in buying some mutual funds or ETFs through Vanguard directly instead of contributing to a 403(b) plan (my employer doesn't match anything). Would it make more sense to open a Roth IRA and buy mutual funds through that? I was also interested in opening an account at an online broker like TD Ameritrade or Scottrade to buy stocks, bonds, REITs, etc. I would like to have a portfolio that will grow to help with retirement and also provide me with some extra income. I'm just a little confused as to where to begin and any help will be much appreciated. Thanks!
