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Subject:  Re: to 403b or not to 403b? Date:  10/14/1998  8:45 AM
Author:  Tiddman Number:  6003 of 88045

You might want to see my rants about 401(k) programs in msgs #5775 and #5776 of this folder.

> 1. Has anyone bailed on thier 401k's or 403b's, and
> how would you rate the transition

I have never done this but some friends of mine have, and I've always considered it a huge mistake. The 401(k) is the best way to set aside a significant amount of pre-tax money for retirement. I think the biggest problem people have is that they are limited in their choices of investment vehicles. However most 401(k) programs at least have index funds which have performed well historically. Yes you can probably find better vehicles (Foolish Four, a good stock pick, etc) but it would be very hard to get ahead of the tax breaks you get in the 401(k).

If you have a 401(k) or 403(b) account right now, what you might do is roll that into a self-directed Roth IRA account so you can invest that as you wish, and start a new 401(k) or 403(b) account with your new employer.

>2. A question of logistics: since I will be funneling
> a certain amount of cash for month into
> retirement, if I were to adopt the Full on Foolish
> approach (Dow Dividend, small caps, etc.) should
> I put that money in to a holding pattern, like a
> money market account, and acquire the securities
> every 6 mos. to avoid outrageous friction costs

I think what you're asking is how to incrementally invest money over a long period of time. I have been struggling with the same thing. I have never used the Foolish Four approach for exactly this reason -- I did not start with a chunk of cash to invest, rather I add to it every month.

I have been using DRIP plans and no-load mutual funds with low minimum contributions. I always set them up to withdraw automatically from my checking account so they are off and running. For instance I contribute to a no-load mutual fund (which has outperformed the market annualized for the past 10 years) on the 5th and 20th of every month. Most DRIP plans offer similar programs. It seems like a sound strategy would be to pick 2-5 good stocks (either the Foolish Four or just good long-term stocks) and add money to them automatically every month.

My broker (AmeriTrade) also offers automatic deposit so I contribute to that every month. Over time the cash builds up enough for me to make a buy. At $8 per trade, it doesn't take a lot of cash. I try to keep the commissions down to 0.5% or less of my trade amount so I make a purchse when I'm up to around $1,000-1,500.


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