Author Topic: Pay the 4% Withdrawal Charge ($560) or Wait Until 2021?  (Read 1446 times)

cdgreg

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Pay the 4% Withdrawal Charge ($560) or Wait Until 2021?
« on: March 28, 2017, 05:31:55 PM »
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 -

MustacheAndaHalf

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Re: Pay the 4% Withdrawal Charge ($560) or Wait Until 2021?
« Reply #1 on: March 28, 2017, 06:29:25 PM »
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.

LAGuy

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Re: Pay the 4% Withdrawal Charge ($560) or Wait Until 2021?
« Reply #2 on: March 28, 2017, 06:34:15 PM »
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.

Retire-Canada

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Re: Pay the 4% Withdrawal Charge ($560) or Wait Until 2021?
« Reply #3 on: March 29, 2017, 11:06:33 AM »
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%.