This is my first post on the forum, but I have learned a lot and appreciated reading it over the past couple years. I help my mom with her investments, and I would appreciate any input/advice on the following. She is 53, works at a private school, and has roughly $50K invested in her 403(b) plan, which is run by Valic. The school currently offers no match and hasn’t for a few years. The school administrator is unsure whether they will resume matches anytime soon, but my guess is not. My mom has had the plan since she started working there, and initially she was invested in funds suggested by the plan representative. As I became more financially literate, I reviewed her plan and realized that the funds carried very high expense ratios and overlapped considerably. I then changed her funds so that now she is invested 89.4% in Vanguard Lifestrategy Moderate Fund (ER 0.16%) and 10.6% in Fixed Account Plus (let’s call it ‘FUP’.) I have no idea what the fees are in FUP, as this is a “Fixed Income” account offered through Valic. They call it “Fixed Income” because it pays a paltry fixed 2%. I would love to rebalance 100% into the Lifestrategy Moderate Fund, but Valic limits annual transfers out of FUP to 20% of the existing balance. They offer no index funds.
Her account statement from Valic says nothing about fees they charge, and the account representative is very evasive on this topic. I can only imagine how high they must be. Her annual contributions to the plan (100% to Lifestrategy Moderate) are $4,200 and she is maxing out her Roth IRA. I am trying to decide what to do. Should we stop making contributions to the 403(b), while continuing to transfer out of FUP and into Lifestrategy Moderate, and instead invest new money into a taxable account in tax-efficient TSM/TIM? I understand the tax benefit here that these would qualify for LTCG versus ordinary income tax rates upon withdrawal during retirement. Or should we continue (or perhaps even ramp up) contributions to the 403(b), as the plan’s tax deferral feature more than offsets investing in a taxable account despite the 403(b)'s likely high fees? Depending on the answer, I will rebalance her investments across the 403(b) and Roth IRA to mimic as much as possible the 3-fund portfolio suggested here. Thank you all for any advice you might have, and I apologize for the lengthy post!