The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: cdgreg on March 28, 2017, 05:31:55 PM
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When I was a brand new teacher I foolishly and opened a 403b account with a company (AXA) that has a Series 200 Contract/12 Year Surrender Schedule. I no longer work at the school district, so I can roll the roughly $14,000 into a Vanguard Traditional IRA with simple index funds for a 4% withdrawal charge, or wait. Each year on January 30, the withdrawal charge will decrease 1% until January 30, 2021 when there are no further surrender charges.
Should I consider the $560 a stupid tax and get it out of AXA and into a Vanguard IRA or let it sit there until 2021?
For what it's worth, I have a new 403b at my new school district and it is not with a company that has horrendous surrender charges like AXA listed above.
Thank you -
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What are the expense ratios for your current investments (in the old plan)?
If you can't save 4% over the next 4 years, it might be better to wait.
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What are the expense ratios for your current investments (in the old plan)?
If you can't save 4% over the next 4 years, it might be better to wait.
Yeah, it really comes down to what their fees are and if their investment options are any good. I'm going to go out on a limb here, though, and speculate that they've got this structured such that they get paid no matter if you wait or withdraw early. And by waiting I bet they have all kinds of other shady fees just waiting for you in the wings. For example, on top of your withdrawal fee I bet they have an "account closing fee" of a couple hundred bucks as well. Ah the joys of government retirement plans. Luckily they're still a good deal, but my usual thinking is get the money rolled out ASAP so they can't keep blindsiding you with fees.
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If your cost to get out now is $560 and you principal is $14K than even if their MERs were just 1% higher than Vanguard you would break even withdrawing now vs. waiting 4yrs - not factoring in inflation or investment profit/loss. So I would pull the money unless the differential in MERs is lower than 1%.