Expert: Allen - 4/22/2011

Question
I work for a Hospital my wife the Gov. with a vested qualified defined pension benefit plans. My contributions to the plan are made by the hospital, not by me. However there is also a voluntery option for a 403b through Fidelity. If I joined the 403b plan would there be any tax advantages. My wife & I have few deductions and pay taxes through the nose!

Answer
You definitely should contribute as much as you can afford. The amount contributed is subject to Social Security tax. However, you do not pay federal and state income tax now. So if you are in a combined federal and state income tax bracket of say 33%, when you contribute $100, your paycheck is only reduced by $67. You also do not pay current tax on investment earnings.

Taxes are due when you withdraw the money. However, you should be in a lower tax bracket when you withdraw the money.