403b Question

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portiadeans1
Posts: 2
Joined: Sun Oct 29, 2017 6:42 pm

403b Question

Post by portiadeans1 » Sun Oct 29, 2017 6:51 pm

Hi-

End of year planning trying to sock away all that we can to minimize taxes. We are in the 33% bracket. I have maximized 401k and match. Hubby is a teacher. Just learned that he has a 403b option in addition to his pension. Not crazy about the way it is set up or the choices.

At the end of the day, we would select Aspire Financials 403b and that would give us access to a wide array of funds. There is a $40 annual account fee and a 0.15% annual custody fee. This would be on top any fund management fees associated with our selected fund(s).

So, I am not a fan of paying the account fee or the custody fee. But given our tax situation, are we better off eating the fees so that we can save tax deferred? Or, do we walk away from this and just put money in a Roth?

We won't be able to get too much into the 403b this year, maybe $6k. But, we could maximize it going forward.

Thanks in advance-
Beth

krow36
Posts: 1388
Joined: Fri Jan 30, 2015 6:05 pm
Location: WA

Re: 403b Question

Post by krow36 » Sun Oct 29, 2017 7:43 pm

portiadeans1, welcome to the forum! A 403b using a self-directed Aspire account is a good choice. That's assuming that you use low-cost index funds such as those at Vanguard's or Fidelity's. It's possible there are other providers on the district's list. Please post all the possibilities as some are not obvious.

portiadeans1
Posts: 2
Joined: Sun Oct 29, 2017 6:42 pm

Re: 403b Question

Post by portiadeans1 » Sun Oct 29, 2017 9:09 pm

Sure:

-AXA Equitable Life Insurance Company
-Great American Insurance Company
-Horace Mann Life Insurance Company
-Lincoln Investment Planning Company
-Met LIfe
-Oppenheimer Shareholder Services


The TPA is The Omni Group.

krow36
Posts: 1388
Joined: Fri Jan 30, 2015 6:05 pm
Location: WA

Re: 403b Question

Post by krow36 » Sun Oct 29, 2017 9:33 pm

It's possible that Lincoln Investment has a lower cost vender than Aspire. Lincoln Investment is only available in certain states, all of NJ, sometimes NY and IL, possibly others. Their DIY option charges $60/year but no additional percent on Vanguard's Admiral class funds. viewtopic.php?f=1&t=175295#p3188168
What state are you in? Also some states have state-wide 457 plans that teachers can use.
Last edited by krow36 on Mon Oct 30, 2017 12:00 am, edited 1 time in total.

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FiveK
Posts: 3125
Joined: Sun Mar 16, 2014 2:43 pm

Re: 403b Question

Post by FiveK » Sun Oct 29, 2017 11:25 pm

portiadeans1 wrote:
Sun Oct 29, 2017 6:51 pm
But given our tax situation, are we better off eating the fees so that we can save tax deferred?
Most likely. See the part about Expensive or mediocre choices in a 401k - the same logic applies to a 403b.

mega317
Posts: 1097
Joined: Tue Apr 19, 2016 10:55 am

Re: 403b Question

Post by mega317 » Sun Oct 29, 2017 11:27 pm

It is very likely worth it.

If you have a reasonably priced fund (and you only need one), 0.15% is not a whole lot to pay on top of it.

And if you contribute the max next year ($18,500), $40 is like adding another 0.2% the first year, and will quickly become a rounding error as you contribute more.

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CyclingDuo
Posts: 839
Joined: Fri Jan 06, 2017 9:07 am

Re: 403b Question

Post by CyclingDuo » Sun Oct 29, 2017 11:42 pm

portiadeans1 wrote:
Sun Oct 29, 2017 6:51 pm
Hi-

End of year planning trying to sock away all that we can to minimize taxes. We are in the 33% bracket. I have maximized 401k and match. Hubby is a teacher. Just learned that he has a 403b option in addition to his pension. Not crazy about the way it is set up or the choices.

At the end of the day, we would select Aspire Financials 403b and that would give us access to a wide array of funds. There is a $40 annual account fee and a 0.15% annual custody fee. This would be on top any fund management fees associated with our selected fund(s).

So, I am not a fan of paying the account fee or the custody fee. But given our tax situation, are we better off eating the fees so that we can save tax deferred? Or, do we walk away from this and just put money in a Roth?

We won't be able to get too much into the 403b this year, maybe $6k. But, we could maximize it going forward.

Thanks in advance-
Beth
Beth, for the voluntary 403b plans that school employees have access to, the .15% custodial fee is not too bad at all. In fact .18% to .20% is considered really good for these plans - so the .15% is pretty competitive once you add in the $40 annual account fee.

Look at all the 403b plans your husband has to choose between, and see which ones carry the Three Fund Portfolio low-cost Vanguard Funds (Total Bond Market, Total International, Total Stock Market - or the Institutional S&P 500 with the option to combine that with the Vanguard Extended Market to equal the Total Stock Market). I would imagine if you shop through them all, and compare the custodial fees (wrap fees) and any annual account fee with the actual funds ER fees that you should be able to cost compare and make a good choice.

In your tax bracket, if you can max out the voluntary 403b starting next year, that will certainly help with your current taxes and move some more money into tax deferred for retirement. Do take advantage of using the rest of this year to get it started (don't be surprised if it takes them a few weeks to get all the paperwork processed and the pre-tax deductions from the salary going into that account to get up and running). Once you figure out which plan looks the most cost-effective, you can sign your husband up online to at least get the account opened. Then, he'll have to do some paperwork with HR and get it going ASAP.

All the best with your decisions.

KESP
Posts: 92
Joined: Sat May 07, 2016 8:24 pm

Re: 403b Question

Post by KESP » Mon Oct 30, 2017 8:22 am

I just had to fight for nearly a year to get Aspire added to our list of choices for a 403b provider. Most people would be extremely happy to have another choice beside the variable annuity pushing companies. Unless Lincoln has a self-directed option, your pick of Aspire is likely your best bet. Those fees aren't bad at all. You are definitely better off to start investing ASAP.

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