Author Topic: Benefits Clarification?  (Read 3521 times)

thurston howell iv

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Benefits Clarification?
« on: February 18, 2015, 01:29:21 PM »
My wife recently started a new job with a University. She was given a benefits package but no one could explain it to her. Benefit plans have always eluded my understanding as well so I'm having a hard time figuring out how to set this up.

The retirement plan states it offers a 200% match. Required contribution is 5% of base salary on pre-tax basis. University will contribute 10% of the base.

They offer two options. 403(b) through TIAA-CREF or 403(b) through Fidelity. (This is the mandatory retirement set up)- If no election is made, they automatically set it up as a 50/50 split

Then there is a "voluntary" set of options that include : pre-tax voluntary 403b; Roth (post-tax) voluntary 403b; and a voluntary 457b

The paperwork provided for the "Mandatory retirement" does not give any info on the TIAA-CREF option. It does however, provide a huge book of options for the Fidelity 403b

We want to max out anything that has a match but we are not sure how to proceed. I'd like to make an informed decision rather than to put it on autopilot.

Any benefits guru's out there that can guide us a little?

seattlecyclone

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Re: Benefits Clarification?
« Reply #1 on: February 18, 2015, 01:49:21 PM »
I would probably go with Fidelity, especially if their list of funds includes some with the word "Spartan" in the name (that's their line of low-cost index funds). TIAA-CREF isn't terrible, but I think you'll probably find better fund options with Fidelity. Whatever you do, don't take the 50/50 split; that just sounds like it would add an unnecessary amount of confusion to your financial life.

After the mandatory 403(b), I might be inclined to save in the 457(b) next. The nice thing about the 457 plan is that you can withdraw your money at any age without paying an early withdrawal penalty. You'll only have to pay regular income tax on this money. Of course if the 457 has terrible investment options you might want to go with the 403(b) instead, but you should find out more about what's available to you here.

FLBiker

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Re: Benefits Clarification?
« Reply #2 on: February 18, 2015, 01:51:35 PM »
I can't claim to be a full-on expert, but I am a university employee so I have some of this same stuff available to me.

It sounds to me like you don't really have an option re: matching.  You're going to contribute the full amount.  I have a similar deal -- I contribute a required 3%, the university "matches" 5%.

Between the two, I'd go with Fidelity.  Technically, it depends on the expense ratios of the available funds, but my guess is that Fidelity has better offerings.  I actually have TIAA-CREF, and they're OK, but not great.  Fidelity isn't an option for us.

However, for our voluntary contributions (the 403b), we have more options.  I use Vanguard.  You could do Fidelity for both, but if Vanguard is available you might want to do that.

Personally, I do the regular 403b as opposed to the Roth because I expect that I'm earning more money now than I will be when I retire.  I know that for IRAs, there is a backdoor to a Roth, but I'm not sure if that also works for 403bs.  457b is deferred compensation.  My wife and I currently max out our 403bs and traditional IRAs.  If we reach a point where we had additional money for retirement, we'd do 457bs.  I think they basically work like 403bs, but I've never had one.

After reading the previous posters comments about 457bs, though, I might have to re-think this.

thurston howell iv

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Re: Benefits Clarification?
« Reply #3 on: February 18, 2015, 02:12:46 PM »
Sadly, all of this is "new" to me.  I'd been adrift for so long that when I discovered mmm, I was way out in the deep end of the pool. I had thought I was doing it right but I haven't had much guidance and math is not a strong suit for me so I've just muddled along.

I tried some roth 401k's at my local bank some years ago but the fees were more than the earnings (I'm still not sure what the hell was going on with that) So I cashed them in and paid bills.

We really want to do the matching but we also have a huge mountain of student l out loan debt so I am hesitant to allocate extra funds until we dig out from under it.  I figured the 200% match was a god deal so I figured I'd ask here where everyone seems to know way more than me...

I looked in the benefits book (it's 136 pages of options)  for Fidelity and they do offer Spartan.

Spartan:
Inflation protected bond index fund- fidelity advantage class
intermediate treasury bond index fund- ""
long term t-bond index fund-""
short term t-bond index fund ""
u.s. bond index fund- institutional class
500 index fund- ""
extended market index fund - advantage class
mid cap, small cap, total market index funds- advantage class
emerging markets index fund- ''''
global ex u.s. index fund- ""
international index fund - ""
real estate index fund- ""

There's also lots of American Century...
Tons of options. What am I looking for?



FLBiker

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Re: Benefits Clarification?
« Reply #4 on: February 18, 2015, 02:24:10 PM »
We really want to do the matching but we also have a huge mountain of student l out loan debt so I am hesitant to allocate extra funds until we dig out from under it.  I figured the 200% match was a god deal so I figured I'd ask here where everyone seems to know way more than me...

Again, it doesn't look like you have a choice -- you'll do the required contribution, and they'll match.

Tons of options. What am I looking for?

Not knowing anything about you (age, risk tolerance, etc.), here's what I'd do:

Spartan:
u.s. bond index fund- 20%
total market index funds- 50%
global ex u.s. index fund- 30%

It's a three fund portfolio (http://www.bogleheads.org/wiki/Three-fund_portfolio).  If you're older / more conservative, raise the bonds and lower the stocks.  If you wanted to get a little fancier, there are lots of ways people tweak it (adding an inflation-protected or international bond component, adding a REIT, etc.).  The core is bonds, US stocks and INT stocks, though.

And (personally) I'd just do the required and pay off the student loans if the interest rate is above 6%.  From like 4.5 to 6 it's a coin toss.  If the interest rate is less than 4.5%, I'd invest first.  I just pulled those numbers out of the air, though.  In my case, we paid off my wife's 6% loans and kept the ones that were 2.5%.

There's a lot of info out there, but try not to get overwhelmed by the complexity.  99% of it is irrelevant.  Pick a 3-5 fund asset allocation of low-cost index funds and stick with it.
« Last Edit: February 18, 2015, 02:29:04 PM by FLBiker »

DrF

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Re: Benefits Clarification?
« Reply #5 on: February 18, 2015, 02:32:05 PM »
I would probably go with Fidelity, especially if their list of funds includes some with the word "Spartan" in the name (that's their line of low-cost index funds). TIAA-CREF isn't terrible, but I think you'll probably find better fund options with Fidelity. Whatever you do, don't take the 50/50 split; that just sounds like it would add an unnecessary amount of confusion to your financial life.

After the mandatory 403(b), I might be inclined to save in the 457(b) next. The nice thing about the 457 plan is that you can withdraw your money at any age without paying an early withdrawal penalty. You'll only have to pay regular income tax on this money. Of course if the 457 has terrible investment options you might want to go with the 403(b) instead, but you should find out more about what's available to you here.

+1000
Go with Fidelity for the mandatory, then do the 457b for the voluntary. Find low cost INDEX funds and just keep adding, rain or shine. If you are able to fully max out the 457b (that would be $18,000), then start contributing to the 403b.

Are you saving in a 401k or similar with your employer? If so, make sure and get the match, but then look and see which one of you has the better investment options and put all extra money into that person's account. If it were me, I'd push all available money to the 457b, it has amazing features for those seeking early retirement.

thurston howell iv

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Re: Benefits Clarification?
« Reply #6 on: February 18, 2015, 03:09:07 PM »
Excellent! Thank you all for the suggestions.

At this time, we'll do the matching program and nothing more.  We've managed to accumulate a massive mountain of student loan debt that is costing us a pretty penny. So, we don't have any extra to spare for several years.




BarkyardBQ

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Re: Benefits Clarification?
« Reply #7 on: February 18, 2015, 03:35:48 PM »
Excellent! Thank you all for the suggestions.

At this time, we'll do the matching program and nothing more.  We've managed to accumulate a massive mountain of student loan debt that is costing us a pretty penny. So, we don't have any extra to spare for several years.

Could she contribute $10 a check to the 457b just so you don't forget it's there... It's the only account that allows you to have TWO retirement accounts maxed out each year when you get a chance...

thurston howell iv

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Re: Benefits Clarification?
« Reply #8 on: February 19, 2015, 07:13:56 AM »
I did not know that. Thanks for the info. I'll do that as well.

Thanks again to all who posted... This stuff feels like rocket surgery to me. Glad to have some experts to chime in.