Bad 403b what can I do ?

[mcguiret]

I'm a teacher and have about 50 k in a 403b with Axa. Unfortunately they are raping me on fees. I have since stopped contributing to this account and started a Roth with vanguard. What can do with my 403? I'm 33 and am not planning on separating from my current employer so I think an Ira conversion is out. My employer offers other 403b vendors but they are all snakes as far as I can see. My wife has a Tiaa cref account, can I roll my money into her account ....probably not. Looking for some out of box thinking here... I own a farm and plan on beginning a phd if either of these matter. Thank you for any input.

 

[samclem]

Is there an employer match? If so, then you should probably still contribute at least up to the limit of the match. Even if the fees are high and the choices stink, if the employer is giving you a match of 50% it doesn't make sense to turn it down because the fees are 5%.

. Looking for some out of box thinking here... I own a farm and plan on beginning a phd if either of these matter. Thank you for any input.

The farm offers an option. That's a small business, and if you've got any income from it you can put quite a bit of it into a solo 401K. You can contribute every bit of the first $17,500 of income, and approx 22% (?) of income above that up to an income of $260,000.

Of course you can also contribute to an IRA or Roth IRA, in addition to this other stuff.

 

[Chuckanut]

Teacher 403b's are notoriously lousy when it comes to fees and investment results. Mine were high fee funds, often with loads attached. Just awful. Fund performance was mediocre at best. However, my home state had a deferred income plan and they decided to allow teachers to join that. Fees were in the Vanguard range, no loads, and a descent combination of managed and index funds. No match, but since I had a pension plan, I figure that was fair.

Interestingly, after the initial announcement of the deferred income plan eligibility, they went silent. Most teachers never knew we had it. Neither our supposedly omnipotent teacher's union nor the district human resources office did much to inform teachers about the deferred income plan. I can't help but suspect somebody was getting paid off.

I ended up funding my ROTH IRA to the max. It was the best alternative, IMHO.

 

[mcguiret]

Is there an employer match? If so, then you should probably still contribute at least up to the limit of the match. Even if the fees are high and the choices stink, if the employer is giving you a match of 50% it doesn't make sense to turn it down because the fees are 5%.


The farm offers an option. That's a small business, and if you've got any income from it you can put quite a bit of it into a solo 401K. You can contribute every bit of the first $17,500 of income, and approx 22% (?) of income above that up to an income of $260,000.

Of course you can also contribute to an IRA or Roth IRA, in addition to this other stuff.

No there's not an employer match. I do like your solo 401k idea. It's probably not possible to roll a 403b into a 401k- correct? I am still currently employed by the school district in which I began my 403b.

 

[mcguiret]

Teacher 403b's are notoriously lousy when it comes to fees and investment results. Mine were high fee funds, often with loads attached. Just awful. Fund performance was mediocre at best. However, my home state had a deferred income plan and they decided to allow teachers to join that. Fees were in the Vanguard range, no loads, and a descent combination of managed and index funds. No match, but since I had a pension plan, I figure that was fair.

Interestingly, after the initial announcement of the deferred income plan eligibility, they went silent. Most teachers never knew we had it. Neither our supposedly omnipotent teacher's union nor the district human resources office did much to inform teachers about the deferred income plan. I can't help but suspect somebody was getting paid off.

I ended up funding my ROTH IRA to the max. It was the best alternative, IMHO.

Which state do you teach in? I teach in Michigan.

 

[samclem]

It's probably not possible to roll a 403b into a 401k- correct?

Assets in a 403b can be rolled over into a solo 401K, but I don't know if it can be done while you are still employed with the 403b provider. Your plan administrator might know. If it can, this would be a great way to get your present money into a better plan and also to just shuttle money through the crappy 403b and into your solo 401k every year: qualify for the tax deduction, but minimize your fees in the bad 403b.

 

[lhamo]

Check out 403bwise.com -- lots of good advice about what to do with a crappy 403b plan. Do you plan on transitioning into academia at some point after the Ph.D.? If so, you could put money into your current account options and suck up the fees for now, then transfer the balance to your new account later. Most universities use TIAA-CREF for their plans.

 

[Helios]

I converted a 403b to a db pension. Think the forms were called a 1035 exchange. Check with where you want to go, they will have a form & can tell you if kosher. I do remember, did it before RE. No tax issues or problems to move.

 

[photoguy]

You should be able to transfer money from a 403b at an existing employer to a frozen plan at vanguard. I don't remember exactly how I did this, but I would call vanguard and ask a rep how this can be done. It might need sign-off from your current 403b administrator.

However, in a frozen 403b at vanguard I was not able to invest in admiral funds even if I met the minimum amounts. But paying 0.2% for investor class sure beats 1% at the old provider.

This link might be helpful (I just skimmed it).

403(b)wise : Features : Transferring Out of a High Fee 403(b)

 

[mcguiret]

Thank you for the response. I've contacted vanguard on this and it seems that it can only be done if my employer offers vanguard as an option. Unfortunately they do not and the third party affiliate that oversees my employer's 403b options foresees vanguard as a liability due to lack of consultation. I know... What a bunch of garbage. Thanks again!

 

[mcguiret]

Check out 403bwise.com -- lots of good advice about what to do with a crappy 403b plan. Do you plan on transitioning into academia at some point after the Ph.D.? If so, you could put money into your current account options and suck up the fees for now, then transfer the balance to your new account later. Most universities use TIAA-CREF for their plans.

Yes, I hopefully would move on from my current employer. You're probably correct waiting is probably best, but I see a lot of interest lost in this time. If I cannot find any other alternatives this will most likely be the path I take.

 

[LitGal]

You might find my post helpful in "Switch to Vanguard from Edward Jones."

When I was teaching in CA, we had to choose from the district's list of 403B's to which they would send our $. Researching the ins. companies on that list was the beginning of my investment education. When we relocated to OH, I wanted to roll over that $, but couldn't do so until I'd waited out the last few years of surrender charges.

It's hard enough to keep up with everything on the job itself. But waiting out those surrender charges taught me a major personal lesson: I needed to learn how to make meager savings serve my purposes. Since teachers don't get performance bonuses or profit-sharing, what was I going to do, if I wanted to quit the rat race?

I had to learn a new subject: How to ER With a Decent Income

 

[photoguy]

Thank you for the response. I've contacted vanguard on this and it seems that it can only be done if my employer offers vanguard as an option.

Interesting. I wonder if the rules have changed (either vanguard policy or law). I did this 10 years ago and my employer definitely did not offer vanguard as an option (otherwise I just would have chosen them).

 

[mcguiret]

Interesting. Yes, I have thoroughly questioned the vanguard retirement specialists on two separate occasions with not luck. I wish I were smarter 10yrs ago.

 

[mcguiret]

I converted a 403b to a db pension. Think the forms were called a 1035 exchange. Check with where you want to go, they will have a form & can tell you if kosher. I do remember, did it before RE. No tax issues or problems to move.

I checked on this and it seems that it cannot be done in my state. I do have a defined pension from the state, but I cannot transfer funds into this plan.

 

[LitGal]

Oh, and Another Idea....

Federal tax laws changed (in about 2001, I think) to provide more "portability" in retirement accts. That made me ecstatic. I had wanted to buy more service credits in CalSTRS but the cost was prohibitive. (Had withdrawn 3 years of credit when I went to grad school; plus I wanted to buy credits for my adoption leave, college teaching, and out-of-state teaching; also, at the time, CalSTRS allowed members to buy 5 years of "air time.")

Once the surrender charges were "up," I was able to roll over that 403B $ into my CalSTRS acct. purchasing the "air time," the 3 "back years," out-of-state teaching, and the adoption year. (Then I ran out of $ to roll over. Had to use new earnings to buy the college teaching credits.)

This worked out really well: the additional service credits helped make it possible for me to ER. (A lesson learned on "How to ER With a Decent Income.")

Does your state retirement system allow teachers to purchase service credits? In CA, a teacher can also buy credits for military and Peace Corps service, as well as teaching overseas.

It might be worth asking them.........and see if your district would allow you to roll over the 403B $ into your state pension.

Good Luck!

 

[mcguiret]

My state did allow us to purchase service credits and I did purchase the maximum amount. To my knowledge I cannot transfer any additional guns into this plan. Because this may serve as a route out of my 403b, I will recheck. Thanks again!

 

[mcguiret]

Funds not guns ... Autocorrect issue

 

[LitGal]

Did you ever take family leave, teach summer school, or take on "extra duties" that might qualify? I remember hearing talk, in the faculty room, from teachers who were able to buy credits for reasons that didn't apply to me (so I forgot about them).

IOW maybe your state has a nice long list of "other reasons" why you could buy some credits?

 

[samclem]

I'd think carefully before increasing my stake in nearly any pension plan: municipal, state, federal, union, or corporate. It is not necessarily a bad move (can be looked on as another means of diversifying to decrease overall risk) but some plans are simply not going to be able to keep their promises.
If you've got money in an account you control (IRA, 401K, etc) you can always buy an annuity to get an income stream, if that's what you want. It's usually not possible/practical to go the other way.

 

[youbet]

I converted a 403b to a db pension. Think the forms were called a 1035 exchange. Check with where you want to go, they will have a form & can tell you if kosher. I do remember, did it before RE. No tax issues or problems to move.

Are you saying that you purchased an annuity?

 

[youbet]

I'd think carefully before increasing my stake in nearly any pension plan: municipal, state, federal, union, or corporate............. some plans are simply not going to be able to keep their promises.

+1

I'd be especially careful regarding state plans. They're hardly regulated, sometimes run by crooks and sometimes use political math rather than actuarial math to determine funding levels. With all the recent publicity, it's possible things will be a bit more on the up and up for a while, but caution is in order.

 

[Chuckanut]

Thank you for the response. I've contacted vanguard on this and it seems that it can only be done if my employer offers vanguard as an option. Unfortunately they do not and the third party affiliate that oversees my employer's 403b options foresees vanguard as a liability due to lack of consultation. I know... What a bunch of garbage. Thanks again!

Yea, I tried the same thing and other ideas. I was thwarted at every attempt. My suggestion is to fully fund a Roth IRA.

Complain to your [-]supposedly omnipotent[/-] teacher's union. Mine would fuss over minor stuff in the contract while the teacher's were being financially violated by the 403b funds. Over time I am sure many dedicated and hard working teachers lost many thousands of dollars to high fees and poor performing funds (compared to an index fund, for example). I never understood that. Had it been cuts in pay or benefits they would have been screaming, but.... Of course I was an unusual K-12 teacher: Business major in college with a minor in Chemistry.

 

[Helios]

Youbet, I used the 403b to exchange for years, which added to my total years, i think i added 5.9 years. With age and years, I was able to retire at 55.5. Including investments, it has worked out well. Not sure when I will take social security, Seems the math supports waiting, but longevity stats are questionable. Hope this helps.

 

[youbet]

Youbet, I used the 403b to exchange for years, which added to my total years, i think i added 5.9 years. With age and years, I was able to retire at 55.5. Including investments, it has worked out well. Not sure when I will take social security, Seems the math supports waiting, but longevity stats are questionable. Hope this helps.

Yes, thanks.