403(b) or pass?

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Topic Author
ggrmv722
Posts: 80
Joined: Wed Jan 01, 2020 8:59 pm

403(b) or pass?

Post by ggrmv722 »

Emergency Funds: Yes (~6 months)

Debt: $25K Auto at 0.99%, $50K of student debt at ~7% (will refinance student debt once interest pause ends)

Tax Filing Status: Married Filing Jointly

Tax Rate: 24% Federal, 6.33% NY State

State of Residence: NY

Age: shy of 30 y.o.

Household Income: ~$195K gross, with current annual expenses of roughly $80k

Desired Asset allocation: 100% stocks / 0% bonds
Desired International allocation: 10% of stocks

Current retirement assets

Taxable ~$180K total
90% Schwab S&P index fund SWPPX, (0.03% expense ratio)
10% Schwab International index fund SWISX (0.06% expense ratio)

His Roth IRA - $14K total
90% Schwab S&P index fund SWPPX, (0.03% expense ratio)
10% Schwab International index fund SWISX (0.06% expense ratio)

Her Roth IRA - $14K total
90% Schwab S&P index fund SWPPX, (0.03% expense ratio)
10% Schwab International index fund SWISX (0.06% expense ratio)

His 401k ~$65K total
90% Vanguard S&P index (VLCSP) (0.01% expense)
10% American Europacific growth R6 (RERGX) (0.46% expense)
Company match of 25% of my contribution up to 5% of my salary

_______________________________________________________________


Contributions

Annual Contributions
$19.5K annually to his 401k (plus employer match)
$12K annually to his and her Roth IRAs ($6k each)
4.5% of her salary annually to pension plan
~$40K annually to joint taxable brokerage



Question:
My spouse and I are trying to determine if it makes sense for her to contribute to her 403(b) plan. After taxes, medical/dental withholdings, 401(k) contributions, etc. our take-home pay is roughly $120K. After expenses, that leaves roughly $40K so she could technically max out a 403(b). However, between maxing out my 401(k), maxing our Roth IRA contributions, my spouse's pension, and social security income, I doubt we'll really need the 403(3) for our retirement. I understand the tax benefits of contributing to the 403(b) but wanted to hear any thoughts.

EDIT:
Updating to include some of the funds offered in my wife's 403(b):

1. SPISX - R6 class Invesco S&P 500 index fund: 0.12% management fees, 0.12% "other" fees (not sure what these are), no sales charge/load, no deferred sales charge/load = 0.24% total annual fund operating expenses
2. AWSSX- Invesco Global Core Equity fund R6 class - 0.78% management fees, 0.11% "other" fees, no sales charge/load, no deferred sales charge/load = 0.89% total annual fund operating expenses
3. IBVFX - Invesco International Core Equity Fund R6 class - 0.75% management fees, 0.37% "other" fees, no sales charge/load, no deferred sales charge/load = 1.12% total annual fund operating expenses
4. OGLIX - Invesco Global Fund R6 class - 0.64% management fees, 0.04% "other" fees, no sales charge/load, no deferred sales charge/load = 0.68% total annual fund operating expenses
5. QIVIX - Invesco International Equity Fund R6 class - 0.75% management fees, 0.04% "other" fees, no sales charge/load, no deferred sales charge/load = 0.79% total annual fund operating expenses

EDITED:
457 options:
1. SP500 index with 0.01% expense
2. MSCI EAFE index with 0.16% expense
Last edited by ggrmv722 on Tue Sep 14, 2021 11:58 am, edited 2 times in total.
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CyclingDuo
Posts: 4456
Joined: Fri Jan 06, 2017 9:07 am

Re: 403(b) or pass?

Post by CyclingDuo »

ggrmv722 wrote: Mon Sep 13, 2021 8:48 am Emergency Funds: Yes (~6 months)

Debt: $25K Auto at 0.99%, $50K of student debt at ~7% (will refinance student debt once interest pause ends)

Tax Filing Status: Married Filing Jointly

Tax Rate: 24% Federal, 6.33% NY State

State of Residence: NY

Age: shy of 30 y.o.

Household Income: ~$195K gross, with current annual expenses of roughly $80k

Desired Asset allocation: 100% stocks / 0% bonds
Desired International allocation: 10% of stocks

Current retirement assets

Taxable ~$180K total
90% Schwab S&P index fund SWPPX, (0.03% expense ratio)
10% Schwab International index fund SWISX (0.06% expense ratio)

His Roth IRA - $14K total
90% Schwab S&P index fund SWPPX, (0.03% expense ratio)
10% Schwab International index fund SWISX (0.06% expense ratio)

Her Roth IRA - $14K total
90% Schwab S&P index fund SWPPX, (0.03% expense ratio)
10% Schwab International index fund SWISX (0.06% expense ratio)

His 401k ~$65K total
90% Vanguard S&P index (VLCSP) (0.01% expense)
10% American Europacific growth R6 (RERGX) (0.46% expense)
Company match of 25% of my contribution up to 5% of my salary

_______________________________________________________________


Contributions

Annual Contributions
$19.5K annually to his 401k (plus employer match)
$12K annually to his and her Roth IRAs ($6k each)
4.5% of her salary annually to pension plan
~$40K annually to joint taxable brokerage



Question:
My spouse and I are trying to determine if it makes sense for her to contribute to her 403(b) plan. After taxes, medical/dental withholdings, 401(k) contributions, etc. our take-home pay is roughly $120K. After expenses, that leaves roughly $40K so she could technically max out a 403(b). However, between maxing out my 401(k), maxing our Roth IRA contributions, my spouse's pension, and social security income, I doubt we'll really need the 403(3) for our retirement. I understand the tax benefits of contributing to the 403(b) but wanted to hear any thoughts.
I'd vote for contributing to the 403b to take advantage of the next 30+ years of tax deferred growth. Does her pension have a COLA? If not, the 403b is a nice way to create your own DIY COLA for it.

CyclingDuo
"Save like a pessimist, invest like an optimist." - Morgan Housel
tashnewbie
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Joined: Thu Apr 23, 2020 12:44 pm

Re: 403(b) or pass?

Post by tashnewbie »

Does she have Roth 403b as an option? Not saying you should use Roth 403b instead of traditional 403b, but I'd prefer Roth 403b (assuming administrative and fund fees were reasonable) over taxable investing.

As an aside: I probably wouldn't use the int'l fund you're using in his 401k (fees are unnecessarily high compared to other options). I'd increase international holdings in the Roth IRAs or taxable.
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MrBobcat
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Re: 403(b) or pass?

Post by MrBobcat »

Look really, really hard at the 403b options and costs. My wife's 403b options were all crap, the best being with a provider that had a 5.5% front load and an expense ratio of about .75% for a relatively mediocre fund. She started putting money in it before we really understood all the costs, once we did we stopped the 403b contributions and directed them towards our taxable account.

To make matters worse, she can not roll it into an IRA until she separates from service.
Admiral
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Joined: Mon Oct 27, 2014 12:35 pm

Re: 403(b) or pass?

Post by Admiral »

I see no good reason to keep putting huge sums into that (large) taxable account. Especially b/c your tax-advantaged balances are low. Use the 403b assuming reasonable costs. I would prob rec pre-tax. You can use all that taxable money to pay the taxes if/when you convert to Roth later. $180k could be $1m in 30 years.
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greg24
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Re: 403(b) or pass?

Post by greg24 »

I would definitely enroll in the 403b. You're saving 30.33% right off the bat.
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ruralavalon
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Location: Illinois

Re: 403(b) or pass?

Post by ruralavalon »

ggrmv722 wrote: Mon Sep 13, 2021 8:48 am Emergency Funds: Yes (~6 months)

Debt: $25K Auto at 0.99%, $50K of student debt at ~7% (will refinance student debt once interest pause ends)

Tax Filing Status: Married Filing Jointly

Tax Rate: 24% Federal, 6.33% NY State

State of Residence: NY

Age: shy of 30 y.o.

Household Income: ~$195K gross, with current annual expenses of roughly $80k

Desired Asset allocation: 100% stocks / 0% bonds
Desired International allocation: 10% of stocks

Current retirement assets

Taxable ~$180K total
90% Schwab S&P index fund SWPPX, (0.03% expense ratio)
10% Schwab International index fund SWISX (0.06% expense ratio)

His Roth IRA - $14K total
90% Schwab S&P index fund SWPPX, (0.03% expense ratio)
10% Schwab International index fund SWISX (0.06% expense ratio)

Her Roth IRA - $14K total
90% Schwab S&P index fund SWPPX, (0.03% expense ratio)
10% Schwab International index fund SWISX (0.06% expense ratio)

His 401k ~$65K total
90% Vanguard S&P index (VLCSP) (0.01% expense)
10% American Europacific growth R6 (RERGX) (0.46% expense)
Company match of 25% of my contribution up to 5% of my salary

_______________________________________________________________


Contributions

Annual Contributions
$19.5K annually to his 401k (plus employer match)
$12K annually to his and her Roth IRAs ($6k each)
4.5% of her salary annually to pension plan
~$40K annually to joint taxable brokerage



Question:
My spouse and I are trying to determine if it makes sense for her to contribute to her 403(b) plan. After taxes, medical/dental withholdings, 401(k) contributions, etc. our take-home pay is roughly $120K. After expenses, that leaves roughly $40K so she could technically max out a 403(b). However, between maxing out my 401(k), maxing our Roth IRA contributions, my spouse's pension, and social security income, I doubt we'll really need the 403(3) for our retirement. I understand the tax benefits of contributing to the 403(b) but wanted to hear any thoughts.
I suggest contributions to her employer's 403b plan , rather than to the taxable account, if any decent funds are offered.

What funds are offered in her employer's 403b plan? Please give fund names, tickers and expense ratios.

Please simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.

"Tax Rate: 24% Federal, 6.33% NY State" Unless the funds offered in the 403b plan are truly horrible there is no good reason to give up the tax advantages over the next 30+ years to retirement.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
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CyclingDuo
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Re: 403(b) or pass?

Post by CyclingDuo »

ggrmv722 wrote: Mon Sep 13, 2021 8:48 am

Debt: $25K Auto at 0.99%, $50K of student debt at ~7% (will refinance student debt once interest pause ends)


Annual Contributions
$19.5K annually to his 401k (plus employer match)
$12K annually to his and her Roth IRAs ($6k each)
4.5% of her salary annually to pension plan
~$40K annually to joint taxable brokerage
Missed this the first time around. I'd throw $40K a year at the student loan debt and be done with it in 5 quarters.
"Save like a pessimist, invest like an optimist." - Morgan Housel
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JupiterJones
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Location: Nashville, TN

Re: 403(b) or pass?

Post by JupiterJones »

Does the 403(b) come with any employer match? Some do, so obviously if that's the case here she should at least contribute up to that point.

(And yeah, not that you asked about the student loan, but I'm with CyclingDuo on that one. Even if you think you can refinace better than the 7%, I'd still get rid of the annoying bugger.)
"Stay on target!" -- Davish Krail
CheepSkate
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Re: 403(b) or pass?

Post by CheepSkate »

$120k income
-$80k expenses
---------------
$40k savings
Tax bracket for those $40k: 24%

Here's what I'd recommend:

1) Send $19,500 to her 403(b), deferring $4,680 in taxes, which is like getting a zero-interest, zero-coupon loan from the government to invest on the scale of decades. That's a deal I'll take 7 days a week. If you would be happy to accept a $10M zero-coupon loan at 0% interest, which would obviously be an instant luxury retirement, you should be happy to accept a $4,680 loan on the same terms every year.

2) Send the remaining $20,500 to pay down the student loan. This will save you $1,435 per year at 7%. Even if you refinance down to 5% that is still a high risk-free rate of return that is only available to you. Wall Street has to live with a meagre 1.35% return on 10y treasuries, which is a fraction of what you can earn at zero risk, and thus you have a better capital allocation option than them. Additionally, the stock market's currently high PE ratio (~35) and low earnings yield (1/35= 2.85%) are related to the currently low 10y treasury yield. So you have a screaming bargain in your risk-free investment space, and scary high valuations on the stock side. Why not choose the risk-adjusted bargain?

3) Pay off the remaining $29,500 in student loan debt from your taxable account, for the same rational as above. I know your preferred AA is 100% stocks, and this move still leaves you at 100% stocks. However, what you're doing by holding this debt and having plenty of money in stocks to pay it off is financially equivalent to borrowing on margin to buy stocks. I.e. ([your net worth] + $50k debt / [your net worth]) is your allocation, and it's currently above 100%. If you want >100% leverage there are cheaper ways to get margin, such as 2.6% through Interactive Brokers.https://www.interactivebrokers.com/en/i ... =46376&p=m
Topic Author
ggrmv722
Posts: 80
Joined: Wed Jan 01, 2020 8:59 pm

Re: 403(b) or pass?

Post by ggrmv722 »

MrBobcat wrote: Mon Sep 13, 2021 9:23 am Look really, really hard at the 403b options and costs. My wife's 403b options were all crap, the best being with a provider that had a 5.5% front load and an expense ratio of about .75% for a relatively mediocre fund. She started putting money in it before we really understood all the costs, once we did we stopped the 403b contributions and directed them towards our taxable account.

To make matters worse, she can not roll it into an IRA until she separates from service.
I updated the original post to answer regarding costs of the options in the 403(b)
Topic Author
ggrmv722
Posts: 80
Joined: Wed Jan 01, 2020 8:59 pm

Re: 403(b) or pass?

Post by ggrmv722 »

ruralavalon wrote: Mon Sep 13, 2021 9:51 am
ggrmv722 wrote: Mon Sep 13, 2021 8:48 am Emergency Funds: Yes (~6 months)

Debt: $25K Auto at 0.99%, $50K of student debt at ~7% (will refinance student debt once interest pause ends)

Tax Filing Status: Married Filing Jointly

Tax Rate: 24% Federal, 6.33% NY State

State of Residence: NY

Age: shy of 30 y.o.

Household Income: ~$195K gross, with current annual expenses of roughly $80k

Desired Asset allocation: 100% stocks / 0% bonds
Desired International allocation: 10% of stocks

Current retirement assets

Taxable ~$180K total
90% Schwab S&P index fund SWPPX, (0.03% expense ratio)
10% Schwab International index fund SWISX (0.06% expense ratio)

His Roth IRA - $14K total
90% Schwab S&P index fund SWPPX, (0.03% expense ratio)
10% Schwab International index fund SWISX (0.06% expense ratio)

Her Roth IRA - $14K total
90% Schwab S&P index fund SWPPX, (0.03% expense ratio)
10% Schwab International index fund SWISX (0.06% expense ratio)

His 401k ~$65K total
90% Vanguard S&P index (VLCSP) (0.01% expense)
10% American Europacific growth R6 (RERGX) (0.46% expense)
Company match of 25% of my contribution up to 5% of my salary

_______________________________________________________________


Contributions

Annual Contributions
$19.5K annually to his 401k (plus employer match)
$12K annually to his and her Roth IRAs ($6k each)
4.5% of her salary annually to pension plan
~$40K annually to joint taxable brokerage



Question:
My spouse and I are trying to determine if it makes sense for her to contribute to her 403(b) plan. After taxes, medical/dental withholdings, 401(k) contributions, etc. our take-home pay is roughly $120K. After expenses, that leaves roughly $40K so she could technically max out a 403(b). However, between maxing out my 401(k), maxing our Roth IRA contributions, my spouse's pension, and social security income, I doubt we'll really need the 403(3) for our retirement. I understand the tax benefits of contributing to the 403(b) but wanted to hear any thoughts.
I suggest contributions to her employer's 403b plan , rather than to the taxable account, if any decent funds are offered.

What funds are offered in her employer's 403b plan? Please give fund names, tickers and expense ratios.

Please simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.

"Tax Rate: 24% Federal, 6.33% NY State" Unless the funds offered in the 403b plan are truly horrible there is no good reason to give up the tax advantages over the next 30+ years to retirement.

I updated the original post to include tickers and costs
lakpr
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Re: 403(b) or pass?

Post by lakpr »

Based on the updated tickers and expense ratios, the only fund I would invest in that 403b is the INVESCO S&P 500 Index fund at 0.24%. Skip all the other crappy funds.

0.24% for a broadly diversified fund is not a bad choice at all.

I would also suggest to skip the RERGX fund in His 401k. Increase the international allocation in the Roth IRA instead, for a cheaper overall expense ratio on the portfolio.
Last edited by lakpr on Mon Sep 13, 2021 12:13 pm, edited 1 time in total.
anonenigma
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Re: 403(b) or pass?

Post by anonenigma »

Duplicate.
Last edited by anonenigma on Mon Sep 13, 2021 12:14 pm, edited 1 time in total.
anonenigma
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Re: 403(b) or pass?

Post by anonenigma »

Does your wife’s employer offer better, lower cost plan providers?

Does she have access to a 457(b)?
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Clark & Addison
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Re: 403(b) or pass?

Post by Clark & Addison »

Is she a teacher in NY? If so, New York state offers a great 457b that I would use prior to using the 403b. Also, if she's a teacher, many (most) schools offer more than one approved vendor for a 403b. If that's the case, make sure she's in the best plan offered to her. You can post your options here, or check out www.403bwise.org (or the 403bwise Facebook group) for help with her 403b.
Topic Author
ggrmv722
Posts: 80
Joined: Wed Jan 01, 2020 8:59 pm

Re: 403(b) or pass?

Post by ggrmv722 »

Clark & Addison wrote: Mon Sep 13, 2021 1:41 pm Is she a teacher in NY? If so, New York state offers a great 457b that I would use prior to using the 403b. Also, if she's a teacher, many (most) schools offer more than one approved vendor for a 403b. If that's the case, make sure she's in the best plan offered to her. You can post your options here, or check out www.403bwise.org (or the 403bwise Facebook group) for help with her 403b.
Yes she is an employee of a NY public school district. There are other 403b providers but they are annuity options, which I understand are to be avoided. Is there a way to confirm that she has access to the NYS 457? Her HR contact has been mostly unhelpful.
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Clark & Addison
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Re: 403(b) or pass?

Post by Clark & Addison »

ggrmv722 wrote: Mon Sep 13, 2021 1:45 pm Yes she is an employee of a NY public school district. There are other 403b providers but they are annuity options, which I understand are to be avoided. Is there a way to confirm that she has access to the NYS 457? Her HR contact has been mostly unhelpful.
I would ask HR if she is eligible for the 457b. If they aren't helpful, try contacting the state run 457b directly (https://www.nysdcp.com/rsc-web-preauth/contact). I'm not from NY, but there are many NY teachers on the 403bwise Facebook group that are familiar with the plan and are very helpful. If you join the group and ask about the plan, you will get answers fairly quickly.
Topic Author
ggrmv722
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Re: 403(b) or pass?

Post by ggrmv722 »

Clark & Addison wrote: Mon Sep 13, 2021 1:58 pm
ggrmv722 wrote: Mon Sep 13, 2021 1:45 pm Yes she is an employee of a NY public school district. There are other 403b providers but they are annuity options, which I understand are to be avoided. Is there a way to confirm that she has access to the NYS 457? Her HR contact has been mostly unhelpful.
I would ask HR if she is eligible for the 457b. If they aren't helpful, try contacting the state run 457b directly (https://www.nysdcp.com/rsc-web-preauth/contact). I'm not from NY, but there are many NY teachers on the 403bwise Facebook group that are familiar with the plan and are very helpful. If you join the group and ask about the plan, you will get answers fairly quickly.
Will do, thanks. It does seem like the S&P index in the NYS 457 is much better than the 403b. It has a 0.01% annual fee vs the 0.24% fee for the option in the 403b
retire2022
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Re: 403(b) or pass?

Post by retire2022 »

Op

I was a member of NYSDCP as a Civil Servant

The newsletter would list towns and or counties and school districts would would join.

Google NYSDCP and the name of your district

Here is an example: https://www.nysdcp.com/rsc-web-preauth/ ... rict&stp=1
Topic Author
ggrmv722
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Re: 403(b) or pass?

Post by ggrmv722 »

retire2022 wrote: Mon Sep 13, 2021 2:25 pm Op

I was a member of NYSDCP as a Civil Servant

The newsletter would list towns and or counties and school districts would would join.

Google NYSDCP and the name of your district

Here is an example: https://www.nysdcp.com/rsc-web-preauth/ ... rict&stp=1
Great thanks, this is very helpful
retire2022
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Re: 403(b) or pass?

Post by retire2022 »

ggrmv722 wrote: Mon Sep 13, 2021 2:42 pm
Great thanks, this is very helpful
You are welcomed found this list: https://www.nysdcp.com/rsc-web-preauth/ ... 0-5451.pdf
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ruralavalon
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Re: 403(b) or pass?

Post by ruralavalon »

EDIT:
Updating to include some of the funds offered in my wife's 403(b):

1. SPISX - R6 class Invesco S&P 500 index fund: 0.12% management fees, 0.12% "other" fees (not sure what these are), no sales charge/load, no deferred sales charge/load = 0.24% total annual fund operating expenses
Invesco S&P 500 Index R6 (SPISX) ER 0.24% is a good, very diversified U.S. stock index fund, with a low expense ratio. So I suggest that she contribute to the 403b plan, as a priority over using the taxable account.

Do contact HR to determine if she is eligible to use the governmental 457b plan, there may be better funds offered there, that could be an even better plan to use.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
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FiveK
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Re: 403(b) or pass?

Post by FiveK »

ggrmv722 wrote: Mon Sep 13, 2021 8:48 am...I doubt we'll really need the 403(3) for our retirement. I understand the tax benefits of contributing to the 403(b) but wanted to hear any thoughts.
What if you want to (or have to) retire earlier than you currently plan?
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Garco
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Re: 403(b) or pass?

Post by Garco »

You're young. Lives can become messy. People can get sick. Families grow.

Put whatever you reasonably can into a workplace 457b or 403b.

You will never regret it.

The employer contributes too, y'know.
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CyclingDuo
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Re: 403(b) or pass?

Post by CyclingDuo »

Garco wrote: Tue Sep 14, 2021 10:28 am You're young. Lives can become messy. People can get sick. Families grow.

Put whatever you reasonably can into a workplace 457b or 403b.

You will never regret it.

The employer contributes too, y'know.
In terms of the bolded underlined statement - that's highly unusual for public school employees. Their employer contributes to their mandatory pension plan (as does the employee). The 403b and 457b plans are additional plans available to the employee to contribute to or not that do not include a match (in the majority of cases).

The limiting factor for a public school employee (and their household) is always how much income do they have remaining after the mandatory pension contribution, health insurance, taxes and enough net income to pay all of the expenses on the home front as to how much remains and is available to contribute to the 403b/457b plans. Most of us would argue to hit up the Roth IRA first, then go back with any leftovers to contribute to the 403b/457b plans.

CyclingDuo
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RXfiles
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Re: 403(b) or pass?

Post by RXfiles »

I wish i had access to a 0.24 ER snp500 index in my 403b and 457. that isnt bad at all. i would definetly contribute to it. the fee doesnt have much effect until the account gets big. chances are youll leave jobs or the funds will change before it really starts to matter. and .24% isnt even bad.
Topic Author
ggrmv722
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Re: 403(b) or pass?

Post by ggrmv722 »

Her employer does not contribute to the 403b/457. In order to keep our desired allocation of 90% US/10% international when enrolling in her 457, I’ve been looking at the international options which seem slightly limited. The best option is a fund that mirrors the MSCI EAFE and has an expense ratio of 0.16%. Any thoughts on that fund as her international choice or should she just go 100% to the SP?
Topic Author
ggrmv722
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Re: 403(b) or pass?

Post by ggrmv722 »

ruralavalon wrote: Mon Sep 13, 2021 2:47 pm
EDIT:
Updating to include some of the funds offered in my wife's 403(b):

1. SPISX - R6 class Invesco S&P 500 index fund: 0.12% management fees, 0.12% "other" fees (not sure what these are), no sales charge/load, no deferred sales charge/load = 0.24% total annual fund operating expenses
Invesco S&P 500 Index R6 (SPISX) ER 0.24% is a good, very diversified U.S. stock index fund, with a low expense ratio. So I suggest that she contribute to the 403b plan, as a priority over using the taxable account.

Do contact HR to determine if she is eligible to use the governmental 457b plan, there may be better funds offered there, that could be an even better plan to use.

She is eligible for the 457. I’ve updated the original post with the fund options and she is thinking of going 90% SP500 and 10% MSCI EAFE. Any thoughts particularly on MSCI EAFE as the international choice?
Topic Author
ggrmv722
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Re: 403(b) or pass?

Post by ggrmv722 »

lakpr wrote: Mon Sep 13, 2021 12:12 pm Based on the updated tickers and expense ratios, the only fund I would invest in that 403b is the INVESCO S&P 500 Index fund at 0.24%. Skip all the other crappy funds.

0.24% for a broadly diversified fund is not a bad choice at all.

I would also suggest to skip the RERGX fund in His 401k. Increase the international allocation in the Roth IRA instead, for a cheaper overall expense ratio on the portfolio.
I’ve updated the original post with the fund options in my wife’s 457 and she is thinking of going 90% SP500 and 10% MSCI EAFE. Any thoughts particularly on MSCI EAFE as the international choice?
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Re: 403(b) or pass?

Post by tashnewbie »

ggrmv722 wrote: Tue Sep 14, 2021 12:01 pm I’ve updated the original post with the fund options in my wife’s 457 and she is thinking of going 90% SP500 and 10% MSCI EAFE. Any thoughts particularly on MSCI EAFE as the international choice?
I'd happily invest in the SP500 and MSCI EAFE index funds at those expense ratios.

Get rid of the high-cost int'l fund in his 401k.
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ruralavalon
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Re: 403(b) or pass?

Post by ruralavalon »

ggrmv722 wrote: Tue Sep 14, 2021 12:01 pm
lakpr wrote: Mon Sep 13, 2021 12:12 pm Based on the updated tickers and expense ratios, the only fund I would invest in that 403b is the INVESCO S&P 500 Index fund at 0.24%. Skip all the other crappy funds.

0.24% for a broadly diversified fund is not a bad choice at all.

I would also suggest to skip the RERGX fund in His 401k. Increase the international allocation in the Roth IRA instead, for a cheaper overall expense ratio on the portfolio.
I’ve updated the original post with the fund options in my wife’s 457 and she is thinking of going 90% SP500 and 10% MSCI EAFE. Any thoughts particularly on MSCI EAFE as the international choice?
ggrmv722 wrote: Mon Sep 13, 2021 8:48 amEDITED:
457 options:
1. SP500 index with 0.01% expense
2. MSCI EAFE index with 0.16% expense
An S&P 500 index fund covers over 80% of the U.S. stock market, and is a very good choice for investing in U.S. stocks.

A MSCI EAFE index fund invests in stocks of companies in 21 developed market countries except the U.S. and Canada, representing about 85% of the international stock market, pdf link.This is also a good fund choice.

The expense ratios are very low, so I suggest using the governmental 457b plan instead of the 403 plan.
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Clark & Addison
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Re: 403(b) or pass?

Post by Clark & Addison »

I'd definitely go with the 457b and those funds you picked would be fine choices. With no match to the 403b, I would max the 457b before contributing to the 403b (the 457b is cheaper and offers the ability to make penalty free withdraws upon leaving her employer regardless of age).
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Re: 403(b) or pass?

Post by rterickson »

OP, it's not clear to me whether you picked up on the suggestion made by several posters up-thread.

You desired asset allocation is 90% S&P, 10% International. That's a good choice, but it is neither necessary not desirable to break up every individual account 90%/10%, especially when it requires you to compromise on the make up of the international funds and the expenses associated with them.

Trust me, your money doesn't care where you put it, but it does care how much you pay for the privilege.

I would put the entire 10% in Total International in either taxable or Roth(s), and go 100% S&P in all of the other accounts with lesser choices.
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ggrmv722
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Re: 403(b) or pass?

Post by ggrmv722 »

rterickson wrote: Tue Sep 14, 2021 4:38 pm OP, it's not clear to me whether you picked up on the suggestion made by several posters up-thread.

You desired asset allocation is 90% S&P, 10% International. That's a good choice, but it is neither necessary not desirable to break up every individual account 90%/10%, especially when it requires you to compromise on the make up of the international funds and the expenses associated with them.

Trust me, your money doesn't care where you put it, but it does care how much you pay for the privilege.

I would put the entire 10% in Total International in either taxable or Roth(s), and go 100% S&P in all of the other accounts with lesser choices.
I’m ditching the international option in my 401k as others have advised. Leaving us invested in just 2 international funds: SWISX (0.06% expense) in both Roth’s and the taxable account, and the HSCI EAFE index fund (0.16% expense) ratio in the wife’s 457. Seems reasonable, no?
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Re: 403(b) or pass?

Post by ruralavalon »

ggrmv722 wrote: Tue Sep 14, 2021 8:55 pm
rterickson wrote: Tue Sep 14, 2021 4:38 pm OP, it's not clear to me whether you picked up on the suggestion made by several posters up-thread.

You desired asset allocation is 90% S&P, 10% International. That's a good choice, but it is neither necessary not desirable to break up every individual account 90%/10%, especially when it requires you to compromise on the make up of the international funds and the expenses associated with them.

Trust me, your money doesn't care where you put it, but it does care how much you pay for the privilege.

I would put the entire 10% in Total International in either taxable or Roth(s), and go 100% S&P in all of the other accounts with lesser choices.
I’m ditching the international option in my 401k as others have advised. Leaving us invested in just 2 international funds: SWISX (0.06% expense) in both Roth’s and the taxable account, and the HSCI EAFE index fund (0.16% expense) ratio in the wife’s 457. Seems reasonable, no?
Either way is reasonable in my opinion. In my opinion using American Funds EuroPacific Growth Fund R6 (RERGX) in his 401k account is reasonable.

Some posters have objected to American Funds EuroPacific Growth Fund R6 (RERGX) ER 0.46% in his 401k account because of the expense ratio being higher than the two MSCI EAFE funds. Morningstar classes the expense ratio for RERGX as "low".

I do generally prefer index funds over actively managed funds, and lower expense ratios.

Diversification is also important. American Funds EuroPacific Growth Fund is more diversified covering both developed markets including Canada and emerging markets. A MSCI EAFE fund (Schwab International Index Fund [SWISX] and the fund in the 457b plan) covers developed markets except Canada, with no emerging markets.

American Funds EuroPacific Growth has had better performance (both higher returns and lower volatility [lower risk], with higher risk adjusted returns) than MSCI EAFE index funds (for example SWISX) Portfolio Visualizer, 1998-2021. I used the oldest share classes to get the longest period for comparison.
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