Dump the 403b?

[cute fuzzy bunny]

Having just finished our first married-filing-jointly return, I see our federal tax rate was about 7.5% along with a 6.1% california rate.

My wifes been pushing up her 403b contributions, as in her former 28% tax bracket that made a lot of sense. In our current tax environment, I'm not sure its worth the tradeoff. Her 403b only has a small selection of funds, none of which I'm thrilled with, and all of which carry ~1-1.5% expense ratios.

There were enough options for me to cobble up an AA mix of s&p500, broad bond, reit, small caps, mid caps, and a smidgeon of global bonds. But wow, the expenses are sky high and except for the s&p500 index its all managed funds with lagging returns.

I'm terribly tempted to have her drop the 403b contributions completely. At that point her income would more than satisfy our monthly cash requirements, allowing me to completely stop withdrawing from our portfolio with the exception of major capital purchases or special expenses.

We'd also get to do our investments in the fund choices I prefer at 1/5th the costs, and withdraw that money anytime without penalties as opposed to waiting until we're 59.5 to start withdrawing from the 403b's. All with after tax money though, which I think is our only downside. I would still fully fund both of our Roth accounts each year, and her hospital contributes to an annuity pension setup that should pay her a nice sum when she retires.

Any holes in that plan?

And yes, its pretty sweet to marry a nurse with a purse