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Subject:  Re: 403b Date:  2/4/1999  10:06 AM
Author:  TMFPixy Number:  8332 of 81982

Greetings, Jofool, and welcome. You wrote:

<<Very eager to save money my first yaer as a teacher , I started a tax deffered annuity. After 1.5 years i decided to buy a home. All my cash was tied up in this shelter, so against better judgement, I broke it and used the money for the closing. I paid 20% fine to the irs and another 10% for a penility.>>

Just as a point of clarification, you did not pay a "20% fine" on the money you withdrew from your 403b plan. That 20% was withheld for the potential taxes you had to pay on that distribution. In that sense, it's no different than the money withheld for taxes from your paycheck each pay period. The 10% penalty you paid on the withdrawal for an early distribution was the only "fine" you paid to the IRS. Ordinary income taxes are always due on withdrawals from retirement plans like a 403b.

<< I was only allowed to take the principal out, so the interest 1,500 is still growing and reinvesting and buying more shares of the 4 funds i have allocated. I have a chance to start the 403b again this march. My question to the wise is should i stay with the same vendor (fidelity) or start another one with a better company? Also sould I leave the money with fidelity and forget about it and wait until i;m 59. any projections as to how much money that would be worth then, I'm 32 now. Thanks again for ALL the advice. >>

If you're looking for an answer from the "(W)ise" on this board, then you should be aware that very few in that category post on the Fool's boards. From this Fool's perspective, though, I would say the decision to stay with Fidelity or to use another provider is strictly up to you. Certainly if you're dissatisfied with Fidelity and believe you can do better elsewhere, then you should change. Only you know what you're investing in today versus what you would move to, and only you know the difference in the possible returns you would get in either. If an alternative looks better to you over the long term, then by all means switch.

As to the possible value of your account 27 years from now, again only you can run those numbers. Obviously, a return of 6% per year will produce a signicantly less amount than a return of 10%. At 6%, that $1.5K would grow to $7,234. At 10% it becomes $19,665. What return do you think you can get in Fidelity versus something else? Decide that issue, and you can run the numbers yourself.


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