I'm trying to help a friend who is a 26 year old school teacher. He's contributing the max to a roth IRA in a standard Vanguard Retirement Fund (roughly 80/20). In addition to having ~ $17,000 in the Roth at this point. He's accumulated around $100,000 and has minimal expenses. He wants to begin investing beyond the relatively minimal Roth IRA. He's got a perfect mind-set and won't touch the money under any circumstances because, well, he just doesn't get it. So I've suggested he max-out the 403 b available at his school, as well as put the max of $10,000 (stat tax deductable max) into a 529 plan in Illinois. The 529 plan has fine fund options for low cost indexers. But the 403 b, which does NOT have an employer match, has really poor options.
The 403b is administered by Mutual of America, so there are a bunch of Mutual of America funds. The Equity index fund looks OK, but it seems to be the only one with a low ER. There some fidelity "VIP" funds, an Oppenheimer Main Street Fund, two DWS funds, and an American Century fund. I can basically tell by the names that none of these are going to make sense for a low cost indexer.
The only exception is two Vanguard funds -- the Diversified Value fund which looks pretty lousy, and the Vanguard International Fund which is obviously fine.
So I guess the question is: without the employer match, would you still invest in the 403b or would we prefer to just go with a personal account at Vanguard?
And would it make sense to go with something like let's say 70% Mutual of America Equity Index Fund, 30% Vanguard International Fund, and then get a cheap bond fund in the 529 plan? That would (roughly) work out to be in line with a 70/30 or so asset allocation which would be fine for this individual.
Or is there something really notably bad about the Mutual of America Equity Index Fund?
Finally, would it make sense for him to make it a Roth 403b or just a normal 403b?
Thanks in advance.