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Duncan

New NY state teacher 457b vs 403b

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Hi,

I was wondering if anyone could give some insight on 457b vs 403b. I'm a new teacher, 33 years old, my new york state retirement age is 60.

My new school allows for contributions to a 403b and 457b.  I made a post yesterday asking for advice on what 403b provider to choose.  I got some great information in return.  The response said my best options are : Vanguard or Fidelity.

My 457 b option for new york state just says : New York State Deferred Compensation Plan.

Do I go 457b or 403b?

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Hi Duncan,

The same people will respond to you here as you have already asked your great questions in the 403b forum. 

The primary difference: 457b plan you can roll over or take your money out without penalty when you retire. 403b you cannot touch your money until 59.5. But after 59.5 you can withdrawal your money and still be working in the 403b. In the 457b as long as you are working with the same employer that has your 457b plan, you cannot touch the money.

There are hardship exceptions but in those cases, you will have to pay taxes. 

Here is more information, A LOT MORE! https://www.investopedia.com/articles/personal-finance/111615/457-plans-and-403b-plans-comparison.asp 

Steve

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Duncan,

The ny 457 aka deferred compensation plan is amazing.  I only wish I knew about it earlier.  Amazingly low fees and transparency.   I moved my crappy 403b to security benefit direct invest and make all my new contributions to the ny 457.   You can easily create a three fund portfolio.   The names are kind of funky so ask if you need help making a three fund portfolio.

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On 8/13/2018 at 6:26 PM, Bashdash said:

Duncan,

The ny 457 aka deferred compensation plan is amazing.  I only wish I knew about it earlier.  Amazingly low fees and transparency.   I moved my crappy 403b to security benefit direct invest and make all my new contributions to the ny 457.   You can easily create a three fund portfolio.   The names are kind of funky so ask if you need help making a three fund portfolio.

Which funds are you using for your three fund portfolio?  I've got 100% in NYSDCB Equity Index Unitized Account and then balance the over all portfolio with my VAnguard 403 funds.  

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12 hours ago, arich said:

Which funds are you using for your three fund portfolio?  I've got 100% in NYSDCB Equity Index Unitized Account and then balance the over all portfolio with my VAnguard 403 funds.  

I’m not Bashdash but I think I recall that he is using the following funds. You can’t go far wrong with these 3 low-cost funds:

NYSDCB Equity Index Unitized Account, ER 0.01% (an S&P 500 fund)

International Equity Fund - Index Portfolio, ER 0.20%
NYSDCB U.S. Debt Index Unitized Account, ER 0.02%

The NY State 457 (Deferred Contribution Plan) is probably the lowest cost of all the state-run 457 plans.

There’s certainly nothing wrong with how you are using your 457 account. It’s a good idea to view your retirement asset allocation on a portfolio basis, rather than trying to have each account keep to your asset allocation.

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Great answers here. I was going to add to Steve 's answer who succinctly pointed out the primary difference. But that is exactly what Krow36 did when summing up the NY 457 plan. 

arich, be aware that unless you are investing directly into Vanguard, you might be paying a fee to the vendor on top of the low ER Vanguard cost. If that is the case, you can avoid that by choosing what Bashdash does, direct invest with Security Benefit or with Aspire.

It's nice to see new teachers posting new questions. I'd like to know how they are finding out 403bwise.

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MOEmoney,

We're very lucky to have awesome options in my district.  Other districts are not as lucky. The TPA OMNI403 has grown in this area and can limit the choices teachers have to mostly insurance products IF the district signs up for their OMNI P3 product.  It saves the district $$ because the providers agree to pay the admin fees instead of the district.  Obviously Vanguard and Fidelity would never do this.  I'm in the process now of setting up my sister in law with Security Benefit/ NEA Direct and I can tell you the process is not easy!!  Dozens of phone calls.

I'm a 25 year NY teacher and so is my wife.

We  max out our 403s with Vanguard,

We max out our 457s with the NYSDCP

We max out our backdoor Roths

We max out the kids NY saves 529 plans.

and we send any extra money from our side hustles to an after tax Vanguard Investment account.   I still have a little $$ from an old business account in UBS but I'm in the process of that to Vanguard.

 

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4 hours ago, arich said:

I'm in the process now of setting up my sister in law with Security Benefit/ NEA Direct and I can tell you the process is not easy!!  Dozens of phone calls.

 

 

Can you give us some details of the difficulty with the process? Was it with the TPA? The district? Security Benefit? All 3?

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On ‎2‎/‎6‎/‎2019 at 4:54 PM, krow36 said:

Can you give us some details of the difficulty with the process? Was it with the TPA? The district? Security Benefit? All 3?

I don't want to hijack the thread so this will be brief.  The problem is with Security Benefit.  I had to speak with at least 6 reps on different days to get someone that knew about NEA Direct with NO ADVISOR.  Every rep told me that an advisor had to set up the account.  I haven't seen my sister in law in a few weeks, she filled out some paperwork and was to submit it.  Onces that is done then we'll direct the TPA OMNI403 to start sending $$$ to Security Benefits.  OMNI really had muddied the waters around here as they have tangled a carrot in front of the districts to save a few dollars ($50 per member max) and then given teachers the worst possible choices.  Before Omni was adopted Vanguard and Fidelity were widely available.  Now just a small handful of districts out of 50 in the area make those available.   457 accessibility also varies district to district.  You'd think it would be easy BUT the school districts just say NO and don't give a reason why.

Ant 

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6 hours ago, arich said:

I don't want to hijack the thread so this will be brief.  The problem is with Security Benefit.  I had to speak with at least 6 reps on different days to get someone that knew about NEA Direct with NO ADVISOR.  Every rep told me that an advisor had to set up the account. 

 

OMNI really had muddied the waters around here as they have tangled a carrot in front of the districts to save a few dollars ($50 per member max) and then given teachers the worst possible choices.  Before Omni was adopted Vanguard and Fidelity were widely available.  Now just a small handful of districts out of 50 in the area make those available.   457 accessibility also varies district to district.  You'd think it would be easy BUT the school districts just say NO and don't give a reason why.

Ant 

Perseverance is mandatory, unfortunately. It is difficult by design with Security Benefit. I experienced something similar when trying to transfer my AXA account to Aspire.

I lack the language (confidence) to address the district. The carrot you reference is the what? No cost and no administration by the district to be compliant? And the savings to the district is what, $50/participant or employee?

Is the consequence that the participants are left with all the OMNI403b P3 expensive vendors?

it is such a hurdle because of the confluence of ignorance, arrogance and less-work-for-me attitude, not to mention, less cost to the district. 

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On ‎2‎/‎8‎/‎2019 at 7:09 PM, MoeMoney said:

Perseverance is mandatory, unfortunately. It is difficult by design with Security Benefit. I experienced something similar when trying to transfer my AXA account to Aspire.

I lack the language (confidence) to address the district. The carrot you reference is the what? No cost and no administration by the district to be compliant? And the savings to the district is what, $50/participant or employee?

Is the consequence that the participants are left with all the OMNI403b P3 expensive vendors?

it is such a hurdle because of the confluence of ignorance, arrogance and less-work-for-me attitude, not to mention, less cost to the district. 

Yes, The carrot is an elimination of administrative fees.  As far as I can see teachers who had Vanguard or Fidelity are grandfathered  BUT when OMNI comes in with their P3 Offer the financial company (insurance company) cover the admin expenses that would normally be covered by the district and ONLY the expensive options are offered to the teachers.  https://www.omni403b.com/p3.aspx 

The info below on how P3 Came to be is fascinating.  They essentially created an RFI Application that they knew would all but eliminate Vanguard and Fidelity from teachers options.  School districts save about $40-50 per member and teachers get screwed.  The reason I know so much about this is because my sister in law got screwed.  She had Fidelity for about 12 years and was contributing.  OMNI came to her district and they adopted Omni P3.  She was told that she'd not longer be able to contribute to "Fidelity" while her colleagues were grandfathered with Fidelity.  Turns out she had "Fidelity Advisors" which was being eliminated all together and they would NOT get her continue with Fidelity.  So she did the worst thing she could have done, she stopped contributing.  That was around 2010 and she's missed out on the ride we've been on for 8 years. 

I have written to her Asst. Supt for Finance,  Her Union Officers, etc but no one would help her.  They won't even add a 457 option.  So that's why I'm here trying to find the best of the worst for my sister in law.

Anthony

---------------------------------------------------------

Since its initial unveiling in 2011, interest in OMNI’s Preferred Provider Program (P3) has been truly exceptional. The P3 Advisory Committee organized key aspects of this exciting new service model that is revolutionizing the relationship between employers and their 403(b) providers.

Here are the steps taken to develop the program:
 

  • Advisory Committee made up of School Business Officials hire National Consultant to Develop Request for Information (RFI).
  • Committee identifies over 80 criteria to evaluate Service Providers on.
  • RFI Application sent to over 200 Service Providers.
  • Advisory Committee evaluates and scores responses from Service Providers.
  • Most major Service Providers meet or exceed criteria in RFI.
  • Service Providers awarded P3 status enter into an agreement with Omni to pay for Plan Administration expenses associated with their active accounts in Districts.
  • Approximately 90% of all major Providers participate in P3.

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Good summary, and kudos for exerting that amount of effort for your s-in-law. 

I requested to get on OMNI’s advisory committee. Could you imagine how much they laughed at the thought of a teacher on that committee? It was a one-time committee, they did the damage and don’t meet. And the School Business Officials have meetings that are hosted by OMNI and the P3 vendors. No wonder some districts do not allow 457 plans as that would potentially hurt their commissions. It’s an unspoken mess. 

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On ‎2‎/‎11‎/‎2019 at 9:17 PM, MoeMoney said:

Good summary, and kudos for exerting that amount of effort for your s-in-law. 

I requested to get on OMNI’s advisory committee. Could you imagine how much they laughed at the thought of a teacher on that committee? It was a one-time committee, they did the damage and don’t meet. And the School Business Officials have meetings that are hosted by OMNI and the P3 vendors. No wonder some districts do not allow 457 plans as that would potentially hurt their commissions. It’s an unspoken mess. 

WOW, can we start another thread on this?  This verges on criminal!  Talk about a conflict of interest.

 

Anthony

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Verges on criminal??? You're catching on. Remember, it's unspoken and I'm not an authority:)

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