Author Topic: 403(b)/457 plan advice?  (Read 2533 times)

cmd296

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403(b)/457 plan advice?
« on: October 26, 2017, 08:04:37 PM »
Not sure if this should go here or in a case study section, but I would appreciate some advice on (what looks to be poor) 403b/457 investment options. 

http://www.houstonisd.org/cms/lib2/TX01001591/Centricity/domain/16904/403b%20457%20docs/ProviderList.pdf

Back story: My wife and I are recently married, and I've recently received a promotion.  She is a teacher making about 50k/year, and I'm now making almost 200k.  I maximize my 401k, but my wife has 403b and/or 457 options available in which we can also invest, in addition to her pension plan.  However, none of the options for 403b/457 look particularly good, as most of them are insurance companies and annuities.  A few of the 403b options have potential (Fidelity), but the 457 options are lacking.  Is it worthwhile to put any money towards the 403b or 457?

Thank you!

Pigeon

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Re: 403(b)/457 plan advice?
« Reply #1 on: October 26, 2017, 08:24:57 PM »
I can't get the links to work for some readout. While the investment vehicles may not be optimal, it sounds like you have the awesome opportunity to theoretically defer nearly all of your wife's income and 18k of yours. Fidelity probably has some ok funds and while not awesome Voya might be worth looking at.

RWD

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Re: 403(b)/457 plan advice?
« Reply #2 on: October 26, 2017, 08:30:10 PM »
It is probably worthwhile to invest in the 403b at least. Can you get a list of fund options for each provider? And if any of them have additional management fees? Fidelity is probably a good place to start looking. Ideally they would have no management fee and low cost index funds. Though seeing how the provider website listed is a third party and not directly through Fidelity I wouldn't hold my breath on no management fee...

My wife has an account with VALIC which charges her an annual 0.5% management fee, but at least they offer Vanguard index funds. Your particular management fee may vary. You should also check the other two 457 providers' management fees (if any) and fund options.

MDM

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Re: 403(b)/457 plan advice?
« Reply #3 on: October 27, 2017, 02:39:42 AM »
Fidelity is probably a good place to start looking.
+1

See Great 403b for teachers? - Bogleheads.org for a discussion about Security Benefit.

See also To 401k or not to 401k? That is the question.  Applies equally well to 403b and 457 plans.

westtoeast

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Re: 403(b)/457 plan advice?
« Reply #4 on: October 27, 2017, 04:59:54 AM »
It would be awesome if you could use all three of these pre-tax accounts!

You may already know this, but the great thing about a 457 is that you can withdraw the funds when you leave your position and pay no penalty. It's a great choice if you are looking to retire early.

hadabeardonce

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Re: 403(b)/457 plan advice?
« Reply #5 on: October 27, 2017, 03:59:25 PM »
My 457 provider had a SDBA option that I'm taking advantage of, maybe some of yours do too? It allowed me to gain access to the Vanguard TDF that I like and avoid the extra .25% fee the company charges(I pay a flat $50/yr) instead.

The rules for 457 plans are great for early retirement, so I would look into them if you need a place to park money. Just the tax deferral could make it worthwhile.

My district has a "benefits fair" during open enrollment where representatives from different providers try to shop their plans. It was a quick way to get answers and compare vendors. I would recommend going if there's a similar event at your wife's district. The PDF with the links is an ugly way to try to get information... I was also able to ask the payroll techs at the district which vendors were most popular at the district, which did turn out to be the two with the lowest fees.

Good luck!

BJC

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Re: 403(b)/457 plan advice?
« Reply #6 on: October 28, 2017, 09:03:02 AM »
Im in a very similar boat, and we are maxing my 401k and my wifes 403b and 457, but in NY.

Valic has BTIIX which is not Vanguardish, but .24% fee should make it very worthwhile to fund the 457.

cmd296

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Re: 403(b)/457 plan advice?
« Reply #7 on: October 30, 2017, 10:37:35 AM »
Thank y'all so much for the help.  All this information has given me a lot of research to do.  Here's what I've found:  NEA DirectInvest is available for the 403(b) plan, making that decision relatively easy.  The 457 plan is a little trickier, since DirectInvest is not available.  For the 457 plan, I have three options: Security Benefit, Valic, and USAA (none of which are responsive, but I'll remain persistent).  I cannot find much about VALIC fees online.  BJC, do you find the management/administration fees for your plan to be reasonable?  Have you noticed any other hidden fees?

As for the Security Benefit plan, these look to be the options (in addition to fund operating fees):
Option 1: No longer available for new accounts.
Option 2: No longer available for new accounts.
Option 3: No up-front sales charge; 1.00% wrap fee: 1%, 0% non-rolling Contingent Deferred Sales Charge (CDSC).
Option 4 (A share): 5.50% up-front sales charge (rights of accumulation apply); 0.35% wrap fee; No Contingent Deferred Sales Charge (CDSC).
Option 4 (load waived): No up-front sales charge; 0.35% wrap fee; No Contingent Deferred Sales Charge (CDSC).
Option 5 (NAV): No up-front sales charge; 1.25% wrap fee; No Contingent Deferred Sales Charge (CDSC).
Option 6 (C share): No up-front sales charge; 1.20% wrap fee; 1%, 0% non-rolling Contingent Deferred Sales Charge (CDSC).
Option 7 (L share): No up-front sales charge; 0.25% non-unitized asset based fee, no contingent deferred sales charge (CDSC).
NAV Option: No up-front sales charge; 0.25% non-unitized asset based fee, no contingent deferred sales charge (CDSC).
Administration Fee (for all applicable options)
$35 a year for accounts less than $50,000. No administration fee for accounts over $50,000.

I'm not sure what "NAV", "L Share" and "C Share" plans are, but would Option 7 be our best bet if we have to go with SB?  Any other fees I need to ask about?

Thanks again for all of your help, it's much appreciated. 

cmd296

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Re: 403(b)/457 plan advice?
« Reply #8 on: October 30, 2017, 02:14:14 PM »
VALIC finally called me back...  Their management fee is 0.71%.  They do offer a handful of Vanguard funds (at a quick glance, VTSAX is there), but this was higher than expected.  At this total expense ratio, is the 457 worth it?

MDM

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Re: 403(b)/457 plan advice?
« Reply #9 on: October 30, 2017, 03:40:04 PM »
At this total expense ratio, is the 457 worth it?
What did To 401k or not to 401k? That is the question. suggest?

cmd296

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Re: 403(b)/457 plan advice?
« Reply #10 on: October 30, 2017, 04:48:25 PM »
Well, I'm feeling a little slow today since you've had to point that out to me twice now...  Thank you for answer (and your patience).  It said to invest in the 457.  I sincerely appreciate all the help. 

JSMustachian

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Re: 403(b)/457 plan advice?
« Reply #11 on: October 31, 2017, 01:22:22 PM »
My wife is also a teacher in the same general area (Cy Fair ISD). She uses TCG Administrators. Through their 457B we have access to a few Vanguard funds including the Total Stock Market fund index. They have always been helpful when we needed to call their support number.
« Last Edit: October 31, 2017, 01:27:04 PM by JSMustachian »