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kgreen4me

457b Vendors vs 403b Vendors

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My employer offers the 457b and 403b plan options.  In my research of those plans I determined that the 457b was probably the best option, however then I read bad reviews on the two vendor options that I have for that plan.  Does anyone have any feedback regarding these two vendors – should I avoid them and consider a 403b plan instead?  If so, any advide on which 403b vendors would be a good option?

 

457b Vendor Options:

 403b Vendor Options:

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Kgreen4me

Welcome to the site. I can quickly look at your choices in both plans and see that your determination that your 457b plan is a  better choice than your 403b plan might be misguided if you were drawn in that direction by an AXA agent.T he Oregon Saving Growth Plan looks very good and looks much like our state 457b plan in Virginia. It's a decent choice. But stay away from AXA.

BUT WOW!! You also have Vanguard and Fidelity in your 403b so you have three good choices overall. For the most ease do a Vanguard Target Retirement  Fund close to your retirement date. Or set up a 3 fund portfolio of index funds with Vanguard or Fidelity.   Explore the search function on the 403bwise forum and you should find lots of info on this topic from past posts. The Utah life path funds are a good option and are similar to Vanguard Target Funds. They are internally managed for you so you don't need outside help via a sales agent.  You could actually do both plans. I like the fact you have a 403b Roth option with Vanguard that I didn't even know existed.

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OR State 457 plan is certainly worth using. Can you give us a hint of the "bad reviews" of this plan, maybe links? The admin fees are relatively low cost at 0.17%. The Lifepath  Portfolios (all-in-one target date funds) are low-cost at 0.12%. https://www.oregon.gov/pers/OSGP/Documents/Fee-Structure.pdf

Either the Vanguard or Fidelity 403b options would be excellent and slightly lower cost than the OR 457 plan, depending on your balance.

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2 hours ago, tony said:

Kgreen4me

Welcome to the site. I can quickly look at your choices in both plans and see that your determination that your 457b plan is a  better choice than your 403b plan might be misguided if you were drawn in that direction by an AXA agent.T he Oregon Saving Growth Plan looks very good and looks much like our state 457b plan in Virginia. It's a decent choice. But stay away from AXA.

BUT WOW!! You also have Vanguard and Fidelity in your 403b so you have three good choices overall. For the most ease do a Vanguard Target Retirement  Fund close to your retirement date. Or set up a 3 fund portfolio of index funds with Vanguard or Fidelity.   Explore the search function on the 403bwise forum and you should find lots of info on this topic from past posts. The Utah life path funds are a good option and are similar to Vanguard Target Funds. They are internally managed for you so you don't need outside help via a sales agent.  You could actually do both plans. I like the fact you have a 403b Roth option with Vanguard that I didn't even know existed.

I thought the 457b plan was the better option at first because there isn’t an early withdraw penalty.  Thanks for your suggestions!  I will need to read up on them – this is new subject matter for me and I want to make a smart choice. 

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43 minutes ago, kgreen4me said:

I thought the 457b plan was the better option at first because there isn’t an early withdraw penalty.  Thanks for your suggestions!  I will need to read up on them – this is new subject matter for me and I want to make a smart choice. 

Don't let the fact that Voya administers the plan stop you from using it if that's the case. The fees are low. Just don't buy any insurance product. If you have doubts Vanguard stands tall as an alternative in your 403b. Target funds = Lifepath funds. I am not sure where you are getting that there is no withdrawal penalty. You are investing in a retirement fund.  The IRS will get you if you try to pull the money out before 59.5. If you mean being able to transfer the fund to a different vendor than Vanguard or Fidelity have no withdrawal penalties or surrender fees but most insurance companies do. I am hoping I have understood correctly what you mean by withdrawal penalty. Keep asking questions , we will get you to the right choice.

My biggest warning is staying the heck away from insurance company annuity salesman/advisors. They have a conflict of interest as they are on commission. Their advice is compromised.

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I agree with Tony that having Voya as the record keeper and administer is not a problem. Insurance companies usually have this job in state run 457 as well as 401k and 403b plans. The plan is controlled by a state entity that is a fiduciary for the investors. The plans are usually run at cost, not for profit. The admin job is put up for bid and Voya won the bid. Because there's a cost to being a fiduciary, these state plans can be slightly more expensive than the usual K-12 403b plan from Fidelity or Vanguard which are non-ERISA plans lacking the fiduciary relationship. 

Tony, 457 plans have a different distribution rule from 403b and 401k plans. The 457 has no penalty for distributions after leaving the employment of the plan's sponsor. This is different from the 403b and 401k plans where distributions prior to 59.5 will result in a 10% early withdrawal fee. There are some exceptions to the early withdrawal fee that a plan may allow. Because of this no penalty feature, 457 plans are valuable in adding flexibility to funding an early retirement, whether planned or not. Of course, any distribution is taxable income unless it's coming from a Roth 457 plan. 

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1 hour ago, krow36 said:

Tony, 457 plans have a different distribution rule from 403b and 401k plans. The 457 has no penalty for distributions after leaving the employment of the plan's sponsor.

OOPS  Actually I knew that. I guess now I understand why Kgreen was favoring the 457b plan. I thought she was talking about surrender feesTrue there

is no penalty for an early withdrawal, but be prepared as Krow mentions to pay income tax on any money you withdraw from a 457b plan at any age. That's still a bad thing that cuts deep. Also, that advantage is no reason to pay higher fees so stay away from AXA in your 457b.

 If I remember correctly AXA actually was the administrator of the 457b Virginia plan was at one time but no AXA products were in the mix of investments. Thank God. I believe Blackrock might be the administrators now but not the record keepers. I've been out of the loop so can't remember precisely. Hard to go wrong with a good state run 457b plan with very low fees. Still, the direct access to Vanguard is very enticing and I am partial to Vanguard and have all my money there.

What I did not know is that Vanguard now offers a 403b Roth option. Is that correct?  Must vary by plan. Must be plan specific?

 

 

 

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When Vanguard moved from running their "smaller" 403b plans to hiring Newport Group for the job, the Roth 403b was introduced as was Admiral class funds, and a $60/yr admin fee rather than a per fund fee.

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3 minutes ago, krow36 said:

When Vanguard moved from running their "smaller" 403b plans to hiring Newport Group for the job, the Roth 403b was introduced as was Admiral class funds, and a $60/yr adm

good to know. 

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5 hours ago, kgreen4me said:

Krow36 - The 457b Oregon Savings Growth Plan did look good, but from what I’ve read Voya is the vendor that my employer chose for that plan and their consumer reviews didn’t look great to me:  https://www.consumeraffairs.com/finance/ing-direct.html

kgreen4me, I just read consumer affairs reports on Voya. Thanks for the link. They do seem to have a problem with their customer service. And there was 3 complaints dealing with state plans--CO, OR and MI. Very disappointing! I'm not surprised that there was complaints about service with insurance products. I think the state 457 plans are much larger than Voya's generic 403b and 457 plans that they sell to individual school districts and municipalities and it's hard to know what  percentage of customers have complaints. The state plans do change their record keeper and administrator so there's no guarantee that OR will stay with Voya.

Tony can relate a customer service problem he had when helping a friend with Vanguard. So even very highly respected companies like Vanguard sometimes have these types of problems, unfortunately. 

If you value the 457 over the 403b, I think it's unlikely you will have a problem with the OR 457. 

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 I agree that if Voya keeps getting numerous complaints the state can/may eventually change away from them. I wouldn't let a few complaints on record stop you from going the 457b route.  I am sure Vanguard had plenty of complaints with the Newport change. Haven't heard too much lately so maybe things are better there now.  I would like Kgreen 4me to share with us why the no penalty option is important to her/him. If she plans to leave the workforce early. If not I don't see it as an advantage over the 403b in her case. She has got two great choices in Vanguard and Fidelity index funds and target funds. Plus a Roth option. 

Overall,  Kgreen has a good assortment of a few decent choices mixed among the usual suspects of bad choices. TRowe Price has some decent funds and you don't find them often in 403b plans. Their fees are higher and funds active but I have heard good things about them. You could do worse. While I prefer Vanguard and Fidelity, I also don't mind American Funds and TRowe Price as possibilities if the better-mentioned choices are not available.

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Tony - After thinking about a bit longer, I guess the fact that the 457b doesn't have a early withdraw penalty isn't that big of a deal for me.  I'm 55, so it's only 4.5 years until I can withdraw the money anyway.  It's really nice to hear that I have been presented with some good options!  I need to learn about the index funds and target funds that you mentioned.  Once I select a vendor, I'm not sure what to select from that point.  I sure appreciate you two chiming in with all the advise!

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You are closer to retirement than I assumed so you are right that a 457b might not necessarily offer you a better option.

In my opinion, if you are not that knowledgeable about investments or don't like messing with them on your own then you should keep things as easy as possible for yourself. I would do a Vanguard Target fund closest to your date of retirement because it is self-managed by experts at Vanguard and the fees are very low.  Here is some info  https://investor.vanguard.com/mutual-funds/target-retirement/#/   Target funds are a solid choice. for hands-off folks. Your state 457b has a life path option that would work in the same way. That would be O.K too

If you don't like target funds you can do a basic 3 fund portfolio on your own.  This would work well with Fidelity or Vanguard as both offer them and they are very similar

1. Total Stock Market Index

2. Total International Index

3. Total Bond Index.

The difference is you will have to allocate them and rebalance them yourself.   I don't recommend this option unless you feel knowledgeable enough in dealing with them because you will have to allocate them and rebalance them yearly on your own. Target funds, on the other hand, are "set and forget" investment options that make sense for the majority of investors.

 

Do you have any other assets? You might want to combined/ transfer any other tax-sheltered accounts you have as well and put everything in one place. I don't know your situation but if you own insurance products you might have surrendered fees so be careful how you proceed. Ask us before doing anything.

I hope you are not just now starting to save but if you are you will need to save as much as you possibly can until retirement.    The target fund would be a good way to proceed.   Remember though, the stock market goes up and down daily, weekly, monthly, and yearly. So don't panic if you see fluctuation in your funds. Its normal but over time the trend is up!! as proven by history.

My best to you,

Tony

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