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cantecleer

?'s Re: 403b Vs 457 + 403b Choices

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Hi. Young, new teacher doing my best to figure some of this stuff out.

 

My first question concerns the line of thought that one should *always* contribute to 457 plan first before contributing to a 403b plan (as there is no 10% penalty for early withdrawals from the 457). I can see the logic for doing so if your 403b offerings are awful. But, is this still true if your 403b choices are good/better than what is offered for your 457 plan?

 

Specifically, my district offers 403b's with the following companies (from what I can tell, most of the "normal"/general investment options are available w/ each of these companies. . . e.g., we aren't limited to 20-something vanguard funds, but can choose from all of the typical offerings from the "investor share" family):

 

Aim Funds

American Express

American Fund Groups

Aviva Life Ins Co of America

Cambridge Investment Research

CitiStreet (formerly Copeland Assoc)

Equitable Life Assurance Co

Fidelity Group

First Investors Corp

Franklin Templeton World Retirement Plan

Great American Life (GALIC)

Horace Mann Life Insurance

Ing Life Ins.

Ing Retirement Plans

Janus Group of Mutual Funds

Kaufmann Fund Inc

Legend Service Group

Life Insurance of the Southwest

Merill Lynch

Metropolitan Life Insurance Co.

Nationwide Life Insurance

Oppenheimer Fund Group

Pioneer Investments

Primerica

Putnam Mutual Fund

Security Benefit Life

T Rowe Price Trust

TIAA Cref

USAA Life Insurance Co

Vanguard Group

Van Kampen American Capital

Variable Annuity Life (VALIC)

 

In contrast, my district's 457 is offered through Nationwide and Nationwide only, but the provided "brochure" gives no information (outside of some indication that you can invest in stocks, bonds, cash equivalents). Furthermore, my gut feeling is that the 457 plan will be riddled with fees, whereas I know that a 403b plan w/ a company like Vanguard or Fidelity would be much less costly.

 

So, again, first question = should I contribute to the 457 instead of the 403b (despite my doubts about the 457 plan's administrative costs)?

 

Likewise, second question (sorry this is so long), but I have read that investing in a 403b with certain companies can yield access to funds without many of the costs and fees that public investors incur (if they choose to invest in that fund). For instance, I've read that if one of your choices for a 403b company = TIAA-Cref, then you should go w/ them if only for access to their real estate fund (if real estate was a priority for one's portfolio). Then, if you so desired, you could invest in whatever Vanguard or Fidelity fund you wanted via your IRA (because those general funds would be open to you no matter what).

 

What I mean is, if you have the choice between a 403b w/ tiaa-cref, or vanguard, I've read that you might consider tiaa-cref because having a 403b w/ them affords (low-cost?) access to their real estate fund. Then, just invest IRA contributions w/ vanguard. I obviously don't really get what I'm talking about, or this would be easier to write. . . >_<

 

This is convoluted, but I am hoping that somebody understand enough to, at least, point me in some kinda direction. I do plan on speaking with a financial advisor (a real one, not a salesperson), but I'm hoping to learn a little more before I do, so that I don't sound as clueless as I probably do now.

Edited by cantecleer

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You have some great 403b choices, esp. Fidelity, T. Rowe Price, and Vanguard. Here is how I would view your first question:

 

You can opt for a 457 that is Nationwide, which is almost certainly riddled with high fees, and where you may want to withdraw money early.

 

Or:

 

You can go with one of the above groups, which definitely has low costs.

 

The certainty of the latter option would tilt it in my favor, but that is only my opinion.

 

By the way, each of the above fund groups has a real estate fund.

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Guest Sierra

I suggest you get some more specificity on your 457 plan investment options and let us know what they are?

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I suggest you get some more specificity on your 457 plan investment options and let us know what they are?

 

 

Well, the brochure we received + nationwide's website leads me to believe that if I want to know more details, I will have to talk with a salesperson. The end of their 457 section on their website says the following (kid you not):

 

Don’t know where to start?

 

Take advantage of us – please!* We're focused on helping consumers like you learn about:

 

* Investment options

* Setting investment goals

* Developing strategies to achieve long-term financial objectives

 

~ http://nationwide.com/nw/investments-and-r...plans/index.htm

 

*emphasis added

 

. . . .

 

I have a strong feeling that they won't be the one who's being tooken advantage of (should I even try to contact them about plan options). I will consider looking into it, though. . . but, would hate to fend off an insurance salesmen just because I wanted to know what crappy options, exactly, they offered (instead of just looking at this ridiculous brochure and their "informative" website).

 

Regardless, thank you for the suggestion. I wasn't even considering checking prior to this.

 

And, APteacher, thank you too. I just wanted to make sure that out of those companies, I wasn't missing out on investing in a particularly good fund that a specific company only offers through investment in their 403b/401k plan. It's relieving to know that, out of choosing one of those three companies, I will be better off than many educators who are stuck teaching for districts where it's insurance companies or nada. . .

 

Thank you both. I'm sure the help this forum, as well as its mothersite, provides = a godsend for most of us who have questions that our districts can't/won't answer, and that you wouldn't want a salesperson who works for comissions to answer.

 

Thanks again!

Edited by cantecleer

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