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02-13-2014, 08:32 PM
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#1
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Dryer sheet wannabe
Join Date: Feb 2014
Posts: 12
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Bad 403b what can I do ?
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.
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02-13-2014, 08:43 PM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2004
Location: SW Ohio
Posts: 14,404
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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%.
Quote:
Originally Posted by mcguiret
. 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.
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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.
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02-13-2014, 10:17 PM
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#3
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2011
Location: West of the Mississippi
Posts: 17,263
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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.
__________________
Comparison is the thief of joy
The worst decisions are usually made in times of anger and impatience.
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02-14-2014, 02:45 PM
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#4
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Dryer sheet wannabe
Join Date: Feb 2014
Posts: 12
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Quote:
Originally Posted by 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%.
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.
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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.
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02-14-2014, 02:47 PM
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#5
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Dryer sheet wannabe
Join Date: Feb 2014
Posts: 12
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Quote:
Originally Posted by 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.
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Which state do you teach in? I teach in Michigan.
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02-14-2014, 05:11 PM
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#6
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2004
Location: SW Ohio
Posts: 14,404
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Quote:
Originally Posted by mcguiret
It's probably not possible to roll a 403b into a 401k- correct?
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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.
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02-14-2014, 06:15 PM
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#7
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Recycles dryer sheets
Join Date: Apr 2007
Posts: 410
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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.
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02-14-2014, 06:29 PM
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#8
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Recycles dryer sheets
Join Date: Apr 2005
Location: World Citizen
Posts: 150
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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.
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02-15-2014, 08:16 AM
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#9
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Thinks s/he gets paid by the post
Join Date: Jun 2010
Posts: 2,301
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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)
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02-15-2014, 08:26 AM
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#10
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Dryer sheet wannabe
Join Date: Feb 2014
Posts: 12
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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!
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02-15-2014, 08:31 AM
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#11
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Dryer sheet wannabe
Join Date: Feb 2014
Posts: 12
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Quote:
Originally Posted by 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.
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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.
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02-15-2014, 08:37 AM
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#12
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Full time employment: Posting here.
Join Date: Jun 2012
Location: Ohio Suburb and WV Farm
Posts: 519
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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
__________________
"Everything becomes more itself." --C.S. Lewis
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02-15-2014, 08:39 AM
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#13
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Thinks s/he gets paid by the post
Join Date: Jun 2010
Posts: 2,301
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Quote:
Originally Posted by 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.
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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).
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02-15-2014, 08:42 AM
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#14
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Dryer sheet wannabe
Join Date: Feb 2014
Posts: 12
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Interesting. Yes, I have thoroughly questioned the vanguard retirement specialists on two separate occasions with not luck. I wish I were smarter 10yrs ago.
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02-15-2014, 09:03 AM
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#15
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Dryer sheet wannabe
Join Date: Feb 2014
Posts: 12
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Quote:
Originally Posted by 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.
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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.
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02-15-2014, 09:06 AM
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#16
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Full time employment: Posting here.
Join Date: Jun 2012
Location: Ohio Suburb and WV Farm
Posts: 519
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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!
__________________
"Everything becomes more itself." --C.S. Lewis
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02-15-2014, 09:10 AM
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#17
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Dryer sheet wannabe
Join Date: Feb 2014
Posts: 12
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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!
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02-15-2014, 09:11 AM
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#18
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Dryer sheet wannabe
Join Date: Feb 2014
Posts: 12
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Funds not guns ... Autocorrect issue
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02-15-2014, 09:35 AM
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#19
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Full time employment: Posting here.
Join Date: Jun 2012
Location: Ohio Suburb and WV Farm
Posts: 519
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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?
__________________
"Everything becomes more itself." --C.S. Lewis
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02-15-2014, 09:41 AM
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#20
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2004
Location: SW Ohio
Posts: 14,404
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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.
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