Jump to content
Sign in to follow this  
40pirate

What Are Our Options With This 403(b) Situation?

Recommended Posts

Hello, I am new here and read a few things. So forgive me if this is basic stuff.

 

Our scenario…My wife currently has a 403b through First Investors who where she was contributing every paycheck. In March of 2006 she made her last contribution. At the time we stopped it to pay of credit cards, which are gone as of March 2009. At this time we opened a Roth IRA in her name, and did not start the 403 contributions back up. We have about $40,000 sitting with First Investors. Her district is re-vamping the 403b vendors and told her to wait until the end of the year enrollment and she will be giving a new list.

 

If Vanguard, T Rowe Price or Fidelity is on the list, can her balance be transferred to them without a fee? If there are no suitable vendors, what can we do with this money? What are her options? I believe there was a 5 year surrender period after the last contribution to First Investors, what exactly does that mean to us?(looking to move it to some type of retirement account, not cash it in) Should we just stick to the Roth? Her teacher’s retirement in Missouri is currently deducting 12.6% of her salary, so we are not looking to put more than 5% additional money away to retirement accounts. Which leads to another question, do you count your pension contribution towards your retirement savings?

 

After reading the Bogleheads (which pointed me to this site) and several posts, I looked at our fees and load. Both funds have a 5.75% front load, then about 1.40% in additional expenses. So needles to say, I don’t think any more funds will be going to First Investors.

 

Thanks

 

Share this post


Link to post
Share on other sites

40pirate --

Unless your wife gets a "match" from her employer on her 403b contributions, it would seem most adviseable to go for the Roth. There's nothing wrong with after-tax savings, really, except that you pay some taxes on the gains (make sure you don't put bonds in these at this time of your life).

 

Given that things change and no one here has been successfully able to predict the future, I have often thought that while it makes sense to distribute your investments among asset classes, it ALSO can make sense to diversify the types of accounts -- 403bs, 401ks, 429s, Roths, taxable accounts and so on... it seems like sooner or later each class has it's advantages.

 

And I BELIEVE that if she leaves her job she can roll her 403b into an IRA.... that could happen.......

 

The new laws have made 403bs worse than ever in most cases. Sorry.

 

JudyS

Share this post


Link to post
Share on other sites

Thanks,

 

The funny thing is my wife said Valic was in today and that is their only choice. But she left all the paperwork and details at school and is off to Monday. Is that common to only have one choice? She said it sounded like they were in a co-op with a few other districts that made this choice together. From reading this forum it seems that many districts have several choices. What does a company do to win the business of a school district?

Share this post


Link to post
Share on other sites

There are some districts that have made the decision to only have one provider- this is the 401(k) model -one provider offering various investment options.

In the 401(k) world, an employer sends out an RFP (request for proposal) for the plan to many providers to evaluate them on pricing, investment lineup, education materials, website, etc. The list is then narrowed to 2-3, and these are brought in for a finals presentation. Afterwards, the decisionmakers make their choice.

Hopefully, the district your wife is part of did their due diligence before making the selection.

Share this post


Link to post
Share on other sites

One last time...

 

I spoke with the representative who presented Valic to my wife's school and have a sheet of investment choices. I don't recall all of the choices, but most any Vanguard fund I would choose is on there. My wife still needs to contact First Investors to see if there would be any fee to transfer to Valic. But this is what the guy told me.... They charge .5 fee on contributions, + the Fund fee. They would also cover up to 3% any surrender fees that we may have to pay.

 

What I am thinking is if surrender fees are 0-3%, transfer through Valic and pay the .5%. This allows us to get the money away from First Investors and into a fund that we really want. If she did put 5% of her salary in per year, the .5% would come out to roughly $150. I know the money would be taxed down the road, but maybe we just do this for a year or so then go back to her Roth at that time after this is established. Any thoughts on this idea?

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

×
×
  • Create New...