UnThreaded | Threaded | Whole Thread (5) | Ignore Thread Prev Thread | Next Thread
Author: Synonymous Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 74759  
Subject: Is a lousy 403(b) better than IRA? Date: 7/10/2000 1:27 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
I'm hoping some of you folks can give me some guidance. My wife works at a small, not-for-profit agency and participates in a 403(b) plan, to the tune of $100.00 per month. (There is no contribution by the employer.) She has about $12,000.00 built up in it. The problem is, the mutual fund she is in has performed at more than 14% below the S&P 500 over the last 5 years. (While still carrying above-average fees, I might add.)

My first thought was to just switch into an index fund. She can only invest in Mainstay funds, however, and the index fund has a minimum $1000.00 contribution. They justify this by saying that if you leave your money in for 10 years you are guaranteed to get back at least what you put in. In addition, it would cost us $538 to switch funds.

I don't know what to do. I can't stomach the thought of staying in this under-performing fund. should I switch the money in there now into the index fund, then find a less-bad Mainstay Fund for her furture contributions? Should we ditch the 403(b) completely and put the money into an IRA? We do make separate contributions to a Roth IRA, so this option would cause problems with the $2,000.00 limit on IRA contributions.

If anyone has any thoughts, they would be greatly appreciated.

Tom
Print the post Back To Top
Author: Crosenfield Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 23237 of 74759
Subject: Re: Is a lousy 403(b) better than IRA? Date: 7/10/2000 2:37 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
" We do make separate contributions to a Roth IRA, so this option would cause problems with the $2,000.00 limit on IRA contributions."

Not true. At such point as your wife leaves her present job, you can roll the 403b into an IRA without affecting your annual Roth contribution in any way.

However, your wife may not be able to access her 403b money without leaving her present job, which seems pretty drastic.

Where's the $538 to switch funds come from? I don't understand why there would be a fee to switch within the same family.

Best wishes, Chris


Print the post Back To Top
Author: peppermintpatty Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 23248 of 74759
Subject: Re: Is a lousy 403(b) better than IRA? Date: 7/10/2000 11:08 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Tom -

403b plans can be very useful (even "bad" ones) for accumulating pre-tax deposits that grow tax-deferred for retirement. You wife's account must have several different subaccounts to select for investment...
Make an appointment with a representative from the company that manages the retirement plan (John Hancock?) and discuss your needs & preferences for your retirement dollars.

If you get no satisfaction after such a meeting, you could arrange for periodic partial transfers from the 403b plan to another 403b or 403b(7) account with another vendor (insurer or mutual fund company). This can be done while still working for the same employer.

After terminating service from that employer your wife may opt to "rollover" the 403b account to an IRA of your choice. A little paperwork, perhaps, but it can be arranged to your satisfaction.

Good luck, PP

Print the post Back To Top
Author: Carpian Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 23250 of 74759
Subject: Re: Is a lousy 403(b) better than IRA? Date: 7/10/2000 11:24 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
Make an appointment with a representative from the company that manages the retirement plan (John Hancock?) and discuss your needs & preferences for your retirement dollars.

I would be careful with this one. They do not always have your best interest at heart. The world is full of horror stories of people getting bad advice from such people (not that there couldn't be some good ones). If you want to go see someone, I would suggest seeing an independent consultant who is not affiliated with the company that runs the 403b. They will be more likely to present your options in an unbiased manner, and may present some options that you wouldn't hear otherwise (the 403b7 option, for instance--that one certainly doesn't get publicized by the insurance companies that operate 403b plans).

P.S. Handy-dandy website with lots of 403b information:

http://www.403bwise.com/




Print the post Back To Top
Author: Synonymous Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 23448 of 74759
Subject: Re: Is a lousy 403(b) better than IRA? Date: 7/18/2000 1:09 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Thanks, everyone, for your advice. My wife's situation is a little unusual, in that she works for a very small agency and there really is no one for her to talk to about these things. (She's the boss, and she doesn't know anything about it, herself.) I think what I will probably do is pick the "least bad" fund that's in her plan and go into that.

Thanks again.

Tom

Print the post Back To Top
UnThreaded | Threaded | Whole Thread (5) | Ignore Thread Prev Thread | Next Thread
Advertisement