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13 hours ago, krow36 said:

Luisa, the vendors of non-annuity custodial 403b accounts to consider are:

Aspire, Security Benefits and PlanMember Services. I would prefer Aspire to PlanMember Services due the admin fees of 0.15% and 0.34%, respectively. I think they are both honest, non-deceptive companies without hidden fees.

There have been no complaints about Aspire's phone service. They have a very useful FAQ website for routine questions. Aspire’s admin fee is $40 and 0.15% per year. Both SB DI and Aspire have very low-cost Vanguard Admiral class index funds. The websites of both Aspire and SB DI have been reported to be very adequate. 

Hi Krow! 

I am planning to go to Aspire. I guess, SB DirectInvest has lower fees but it's not offering 457 as I read in the previous posts here. Yes, I am satisfied with phone service of Aspire and it's offering limits to mutual funds only.  Aspire is easier to recommend to my teacher friends who wish to get new 403b/457b or get out of the high fees from other vendors. As I read in other posts, some may get confused and avail the annuities from SB instead of the low cost mutual funds under DI. 

I prefer to get 457 for following reasons:  1) I may retire early and no need to wait for 59.5 age to get distributions without penalty or  2) I may contribute more  3 years prior to my normal retirement age to catch up with missed contributions in my younger years.  Am I right in my understanding of 457?

Yes, I am getting the Vanguard funds under Aspire.  I am already familiar with Vanguard funds because I have them for my Roth IRA.  More than 10 years ago,  I found out from this website that we could contribute to both 403b/457b and Roth IRA using low cost funds, like Vanguard and Fidelity. Again, thank you for the advices... 

As per advice, I would leave my previous contributions to 403b to Fidelity. Another thank you!!!  

P.S.

To add to my story,  my friend suggested a book about finances but it was not suited to me, so I looked for one for teachers. I got "Teach and Retire Rich" by Daniel Otter. Then, I found this 403b website while reading it.  I made my 1st inquiry and got lots of responses...  After more than a decade, I am posting again to ask for help! 

Thanks a million, Krow!!!  We appreciate you, together with good hearted people here, for taking time to answer our confusions. I wish we will be able pay it forward.  

 

 

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3 hours ago, Luisa said:

I prefer to get 457 for following reasons:  1) I may retire early and no need to wait for 59.5 age to get distributions without penalty or  2) I may contribute more  3 years prior to my normal retirement age to catch up with missed contributions in my younger years.  Am I right in my understanding of 457?

 

I think Aspire is a good choice for you and your colleagues. If you work at it a bit, you may be able in the future to get your district to add Vanguard or Fidelity to the vendor lists. 403bwise has a Facebook Group with over 600 teachers focused on adding low cost vendors to their district's lists. Just a thought.

You will be able to contribute (in 2020) 19.5k + 6.5k (age-50 catchup) for both the 403b plan and the 457 plan. Beyond that total of 52k, the additional catchups depend on your employer’s 403b and 457 plans. I’ve read that these Additional Catch-up features require good past records and that many employers do not include them in their plans because of headaches with past records. So you should check the district’s plans.

https://www.irs.gov/retirement-plans/how-much-salary-can-you-defer-if-youre-eligible-for-more-than-one-retirement-plan

If you’ve maxed your 403b and 457 account, I think it’s a good idea to then contribute to a taxable account for retirement. Taxable accounts have some advantages over traditional 403b, 457 and IRA accounts. Any distribution from those traditional accounts adds that amount to your taxable income for the year. Distribution from a taxable account only adds the amount of capital gain to your taxable income for the year. You are not taxed again on what you have bought with after-tax money.   

The amazing Dan Otter invented and owns 20 Year Old 403bwise and deserves appreciation from all of us! And he's going stronger than ever! I'm a retired teacher and enjoy spreading the word on low-cost investing. Teachers have been victims of the annuity-sellers due to their trusting nature and their lack of information.  

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2 hours ago, krow36 said:

If you’ve maxed your 403b and 457 account, I think it’s a good idea to then contribute to a taxable account for retirement. Taxable accounts have some advantages over traditional 403b, 457 and IRA accounts. Any distribution from those traditional accounts adds that amount to your taxable income for the year. Distribution from a taxable account only adds the amount of capital gain to your taxable income for the year. You are not taxed again on what you have bought with after-tax money.   

 

After maxing 403 and 457, I would suggest next contributing to a Roth IRA before a taxable brokerage account as it allows for tax free growth and withdraws after 59.5. years old if established for at least 5 years prior. My last bucket is the taxable account. 

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Luisa mentioned that she was contributing to her Roth IRA, and I assumed that she would be maxing it. If not, then you make a good point that I agree with.

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10 hours ago, krow36 said:

If you work at it a bit, you may be able in the future to get your district to add Vanguard or Fidelity to the vendor lists. 403bwise has a Facebook Group with over 600 teachers focused on adding low cost vendors to their district's lists. Just a thought.

You will be able to contribute (in 2020) 19.5k + 6.5k (age-50 catchup) for both the 403b plan and the 457 plan. Beyond that total of 52k, the additional catchups depend on your employer’s 403b and 457 plans. I’ve read that these Additional Catch-up features require good past records and that many employers do not include them in their plans because of headaches with past records. So you should check the district’s plans.

https://www.irs.gov/retirement-plans/how-much-salary-can-you-defer-if-youre-eligible-for-more-than-one-retirement-plan

 

Yes, I recently joined the 403bwise FB group. Though I am not frequent FB user, it's easier to share the information with my teacher friends. 

Good to know that I can contribute up to a total of 52k at the age 50  (I know I could contribute to both 403b and 547 plans but not sure if the maximum amount is split up). Obviously, I am not maxing out my contributions to both plans.  The link is so much useful.  Thanks once again!!!

 

 

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On 2/4/2020 at 9:19 AM, techteacher said:

I also teach in Maryland and my district does offer a 457 as well as 403. Been maxing both for several years now. 

Hi Techteacher!  Glad to see Maryland teacher here...  After Krow mentioned the 52k maximum (starting at age 50), it's clear now in my head when you said "maxing both" 😉    Well, I am far away from doing that 😞   but willing to make plans and adjust to reach that goal... 

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20 hours ago, Luisa said:

I am planning to go to Aspire. I guess, SB DirectInvest has lower fees but it's not offering 457

It sounds like you've researched the particular differences between 457b and 403b plans and it is worth the extra expense to you. I'm glad you put in that leg work. My personal preference is the lower fees, but as long as you understand everything, it just comes down to preference.

20 hours ago, Luisa said:

Aspire is easier to recommend to my teacher friends who wish to get new 403b/457b or get out of the high fees from other vendors. As I read in other posts, some may get confused and avail the annuities from SB instead of the low cost mutual funds under DI. 

Just a warning to you (and something for you to let your teacher friends know about), Aspire also has an "advisor" option that isn't low cost. I've never worked directly with Aspire so I can't comment on how hard they push people towards those more expensive plans, but I'm guessing if somebody calls in then the advisor is pushing in that direction because it makes them money to do so.

20 hours ago, Luisa said:

I prefer to get 457 for following reasons:  1) I may retire early and no need to wait for 59.5 age to get distributions without penalty or  2) I may contribute more  3 years prior to my normal retirement age to catch up with missed contributions in my younger years.  Am I right in my understanding of 457?

Number one isn't a problem. There are well defined ways to pull money out of a Traditional 403b/401k/IRA/etc without penalty if you retire early. Some approaches are highly specific like withdrawals for medical debt, but the general approach used for early retirement is known as Rule 72t and can be read about here.

Number two was news to me and is a pro in the 457b column. However, I suspect only a small number of people would find it advantageous. According to the IRS page, IF your plan allows you to (you'll need to verify that) then the IRS is okay with you contributing the lesser of:

  • Twice the annual limit $39,000 in 2020 and $38,000 in 2019, or
  • The basic annual limit plus the amount of the basic limit not used in prior years (only allowed if not using age 50 or over catch-up contributions)

So if you have lots of previously unused 457b space and enough spare money from your salary to take advantage then this is a good way to go. However, be aware of the fact that 403b and 457b plans have a more well known catch up rule that allows people over 50 to contribute an extra $6,500 (so $13,000 total). Therefore, if you don't have enough expendable money to contribute more than $58,000/year (6k IRA, 19.5k 403b, 6.5k 403b catch up, 19.5k 457b, 6.5k 457b catch up) then this 457b perk is actually meaningless.

 

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10 hours ago, EdLaFave said:

It sounds like you've researched the particular differences between 457b and 403b plans and it is worth the extra expense to you. I'm glad you put in that leg work. My personal preference is the lower fees, but as long as you understand everything, it just comes down to preference.

 

In as much as I want lower fees, I am unsuccessful with SB DI  when I tried to do the paperwork 😞   

 

10 hours ago, EdLaFave said:

Just a warning to you (and something for you to let your teacher friends know about), Aspire also has an "advisor" option that isn't low cost. I've never worked directly with Aspire so I can't comment on how hard they push people towards those more expensive plans, but I'm guessing if somebody calls in then the advisor is pushing in that direction because it makes them money to do so.

 

In my experience, Aspire is clear and straight forward on telling me what I asked for.  The application and agreement form is clear enough of the choices if self-directed or with financial advisor and the fees are well stated. Even the our district website, a note from Aspire states that participants can self-select or work directly with their financial advisor.  

 

11 hours ago, EdLaFave said:

Number one isn't a problem. There are well defined ways to pull money out of a Traditional 403b/401k/IRA/etc without penalty if you retire early. Some approaches are highly specific like withdrawals for medical debt, but the general approach used for early retirement is known as Rule 72t and can be read about here.

Thanks, Ed for sharing Rule 72t.  Good to know that I have this option in case of early retirement.  

 

11 hours ago, EdLaFave said:

So if you have lots of previously unused 457b space and enough spare money from your salary to take advantage then this is a good way to go. However, be aware of the fact that 403b and 457b plans have a more well known catch up rule that allows people over 50 to contribute an extra $6,500 (so $13,000 total). Therefore, if you don't have enough expendable money to contribute more than $58,000/year (6k IRA, 19.5k 403b, 6.5k 403b catch up, 19.5k 457b, 6.5k 457b catch up) then this 457b perk is actually meaningless.

 

Thanks again, Ed.  I appreciate you for writing the specific contribution limits for each plan. I am far away from maxing out due to other financial responsibilities.

Now, I am undecided which one to get 😞 

 

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