403(b) decision, advice?

[Mr.GrowingMustache]

Hi,
So my wife makes about 55k (teacher) and I make $103k.

She has a terrible AXA 403(b) Annuity with 1%, management fee, 1% fee funding options and a ton of other crappy fees. Effectively making the account +2% in fees. No employer match!

There are about 6 other 403b providers on her list but only one called us back after multiple attempts.

The one that called us back has a 1% fee (0.25% quarterly), Vanguard Admiral shares, and not other fees. Effectively making the account fees about %1.05-%1.15 which is a whole 1% less than AXA but still very expensive :/

Should we bite the smaller bullet and switch to the lower cost provider?
Does she stop contributing in the 403(b)?
She can only put 5k in an IRA, but I would like her to contribute about 10k a year in a tax advantages account.



What do you guys think?


P.s. I am really pissed with the chooses she is given! These are horrid 403(b) options! Can I do anything about it?

[DavidAnnArbor]

Those are awful fees, and you're probably in the 25% tax bracket, so at least you get significant tax savings.
I would complain to the 403B plan administrator.
you can still do an IRA, in addition to the 403B - check for income rules.

[Mr.GrowingMustache]

Yeah, pretty terrible. We are in the end of the 25% bracket and getting into 28%.

You think having the tax benefits outweighs the crappy fees?

[Another Reader]

Can you list all the company choices?  Are the choices all annuities or are there non-annuity accounts available?

What you describe sounds like a better choice, but all the options need to be considered.

[MDM]

See To 401k or not to 401k? That is the question. - and links therein - for answers to a very similar question.

[Mr.GrowingMustache]

Can you list all the company choices?  Are the choices all annuities or are there non-annuity accounts available?

What you describe sounds like a better choice, but all the options need to be considered.

I agree but they are not returning our calls. I feel like the list might be outdated even though it's the one on the website. From my personal research (403b compare) looks like the recognizable name ones are bad, while I found little info on the others.

AIG VALIC
AXA EQUITABLE OPPENHEIMER ASPIRE
LEGEND GROUP
LINCOLN INVESTMENT PLANNING
MET LIFE METLIFE/TRAVELERS/CITISTREET
PERSHING, LLC
PRUDENTIAL ANNUITIES (DISCOVERY FINANCIAL)
PRUDENTIAL DIRECT SIRACUSA
PenServ

Thanks!
See To 401k or not to 401k? That is the question. - and links therein - for answers to a very similar question.

[Another Reader]

I would probably start with the District's benefits office to find out which of these is a current contractor.  The ones with which I am familiar are awful.  Sort through the contenders to see who offers fund investing without the annuity.  Then compare funds and costs.  And yes, letters to the person in charge of benefits and the school board would be on my "to do" list.

[redcedar]

Max tIRA and put rest in 403b but into whatever cash type account avoids the fee. Many 403b plans have a low fee cash option that pay very well.

I know it's not going to make a ton for you but it avoids fee certainty - term borrower from millionaireeducator.com where he also used the cash account in his 457 which was similarly full of expensive options.

Depending on retirement age, you will have many options to invest the money soon.

[DavidAnnArbor]

See To 401k or not to 401k? That is the question. - and links therein - for answers to a very similar question.

+1

[Mr.GrowingMustache]

I have an update!

So we called the current financial advisor (AXA) to see if he has a "cheaper" alternative to the annuity, just in case.

Long story short, he said that they do have a Mutual Fund type account trough Aspire, for the low fee of 1.5% and a very large selection of Mutual funds, and he mentioned American funds as the ones he uses. So I asked about Vanguard funds, and he said that those wouldn't be available unless I did a self directed account........ as soon as he said that I was like "say what again?". So hesitantly he said that we can open our own account, and we'll have to do that ourselves and we won't have an advisor, etc.

So yea, Aspire offers Vangaurd Funds, and their fees are 0.15% a year and a $40 yearly fee! You can register and transfer your account online! They have our state, NJ, and my wife's school district listed!

https://www.aspireonline.com/plan-types/403(b)-plan/plan-search

[DavidAnnArbor]

I'm very happy for you!!!  That's great news!! I wonder if there are other employees with the same questions/concerns you have.

[NESailor]

I have an update!

So we called the current financial advisor (AXA) to see if he has a "cheaper" alternative to the annuity, just in case.

Long story short, he said that they do have a Mutual Fund type account trough Aspire, for the low fee of 1.5% and a very large selection of Mutual funds, and he mentioned American funds as the ones he uses. So I asked about Vanguard funds, and he said that those wouldn't be available unless I did a self directed account........ as soon as he said that I was like "say what again?". So hesitantly he said that we can open our own account, and we'll have to do that ourselves and we won't have an advisor, etc.

So yea, Aspire offers Vangaurd Funds, and their fees are 0.15% a year and a $40 yearly fee! You can register and transfer your account online! They have our state, NJ, and my wife's school district listed!

https://www.aspireonline.com/plan-types/403(b)-plan/plan-search

Looking at your list of providers I almost thought that you were in NY.  My wife is also a teacher and she's just getting into a public district nearby.  I haven't fully researched all the options but it seemed to me that they were very similar to yours (AXA, Legend, American...etc...all administered through the PenServ interface).  I knew even without looking at details that the fees would be INSANE.  The problem with the recommendations to call the benefits office are that the 403b plans offered are for the ENTIRE NY teachers union membership which is run centrally by the Union.  1 savvy investor who sees through their BS is not going to sway them.  Especially since...

...the union administrators/staffers have a 401(k) that's actually very highly rated by BrightScope.  Not shady at all...

At any rate - I'll be looking to avoid the worst fee-laden options too but I'm already a bit stressed about the signup process.  My wife goes along with my financial decisions but doesn't understand or really care about the details.  She won't want to make all these calls and even if she did, she won't understand what they're saying.  Not so sure they'll want to talk to the husband of the potential participant when I start asking real questions...

[Sean Og]

Great news! I was actually going to mention Aspire but didn't see them on your list. I did a lot of digging into my wifes 403b options and Aspire came out tops.

Another option in some districts is through Security Benefit, they run the NEA DirectInvest plan which offers Vanguard fund access at similar fees to Aspire.

http://www.nearetirementprogram.com/#!nea-directinvest/c24dk

Now if only the 457 plan had more options than MassMutual!