403b Transfer

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Topic Author
SuperSaver123
Posts: 21
Joined: Mon Nov 29, 2021 2:17 pm

403b Transfer

Post by SuperSaver123 »

My school district recently went from 15+ 403b vendors to just a single vendor. Although I agree with the idea of simplifying things for the average consumer, I just attended an informational meeting and am already concerned.

Although the previous options included many bad vendors, I opted to use Vanguard (through The Newport Group), paying a simple $5 per month, or $60 per year for the account and having access to all sorts of low cost Vanguard funds. Now, without even knowing the fund options, I'm told Lincoln Financial Group will be charging .83% per year. I'm incredibly frustrated to hear this!

I can no longer direct new contributions to Vanguard, but I can keep my existing funds there. Since I have approximately $22,000 there currently, it makes sense to keep it with Vanguard and pay $60 per year for the privilege, rather than bring it over to Lincoln and pay $182.60 per year (.83% of $22,000), right?

And, since I already have a 403b account with Vanguard, would I be able to transfer additional contributions from Lincoln over to Vanguard once they hit my account? I know many folks do this with their HSAs - monthly, quarterly, or even annually move HSA money to Fidelity from whichever subpar provider their employer uses. Seems like this isn't going to be an option for me, but I'm pretty frustrated about the .83% fee at Lincoln.
krow36
Posts: 2444
Joined: Fri Jan 30, 2015 5:05 pm
Location: WA

Re: 403b Transfer

Post by krow36 »

SuperSaver123 wrote: Mon Jan 23, 2023 4:45 pm And, since I already have a 403b account with Vanguard, would I be able to transfer additional contributions from Lincoln over to Vanguard once they hit my account? I know many folks do this with their HSAs - monthly, quarterly, or even annually move HSA money to Fidelity from whichever subpar provider their employer uses. Seems like this isn't going to be an option for me, but I'm pretty frustrated about the .83% fee at Lincoln.
No, you can't move money from the Lincoln Financial 403b to your Vanguard 403b unless you change employers (districts). For most of your colleagues who are in the usual high-fee 403b vendors with total fees between about 1.5% and 2% plus, the district's move is an improvement. But not for you and other users of Vanguard. If you are retiring in a few years, or moving districts in a few years, you could put up with the high fees. It's over time that the higher fees do the real damage to your balance. Or you can
contribute to a low-cost taxable brokerage account, Vanguard, Fidelity or Schwab? Using it for index equity funds is fairly tax efficient.
Topic Author
SuperSaver123
Posts: 21
Joined: Mon Nov 29, 2021 2:17 pm

Re: 403b Transfer

Post by SuperSaver123 »

Thank you for the response! So I guess the next question is how does a 403b with a high account maintenance fee compare to investing through a taxable brokerage account in the long run? Anyone know of a standard calculator for that? Or, I also have a 457 through my school district, but the only option is Nationwide. I'll have to doublecheck, but last time I looked, they also take a large yearly maintenance fee in the range of .5% or more.
krow36 wrote: Mon Jan 23, 2023 11:10 pm
SuperSaver123 wrote: Mon Jan 23, 2023 4:45 pm
No, you can't move money from the Lincoln Financial 403b to your Vanguard 403b unless you change employers (districts). For most of your colleagues who are in the usual high-fee 403b vendors with total fees between about 1.5% and 2% plus, the district's move is an improvement. But not for you and other users of Vanguard. If you are retiring in a few years, or moving districts in a few years, you could put up with the high fees. It's over time that the higher fees do the real damage to your balance. Or you can
contribute to a low-cost taxable brokerage account, Vanguard, Fidelity or Schwab? Using it for index equity funds is fairly tax efficient.
GG1273
Posts: 437
Joined: Sat Sep 29, 2018 3:21 pm
Location: NJ

Re: 403b Transfer

Post by GG1273 »

this happened with my DW's hospital 403b - 8 years ago
Vanguard was sole option but could choose any of the funds. Then they moved to MetLife (no Vanguard funds). Then to Empowerment (Vanguard Target Funds and 500 index only).

With the first transfer, we had the option of staying with Vanguard, which we did and put new money into the MetLife options (which had multiple different fund families involved). At that time, our balance was $450K
With the move from MetLife to Empower (also multiple fund families involved), that option WAS NOT AVAILABLE.
All the money in MetLife was moved, we were fortunate to have the Target options and used TRowe Large Growth and DODGX.
$22K and the option to stay with VG would be best and maybe post the funds that Lincoln is offering. There may be some options that you can use with future contributions to lessen account charges.

Disclosure - we both have Roth IRAs with VG and I have an IRA with VG (former job payout). My 401k is managed by FIDEL.
anonenigma
Posts: 995
Joined: Thu Apr 21, 2011 11:58 pm

Re: 403b Transfer

Post by anonenigma »

krow36 wrote: Mon Jan 23, 2023 11:10 pm
SuperSaver123 wrote: Mon Jan 23, 2023 4:45 pm And, since I already have a 403b account with Vanguard, would I be able to transfer additional contributions from Lincoln over to Vanguard once they hit my account? I know many folks do this with their HSAs - monthly, quarterly, or even annually move HSA money to Fidelity from whichever subpar provider their employer uses. Seems like this isn't going to be an option for me, but I'm pretty frustrated about the .83% fee at Lincoln.
No, you can't move money from the Lincoln Financial 403b to your Vanguard 403b unless you change employers (districts). For most of your colleagues who are in the usual high-fee 403b vendors with total fees between about 1.5% and 2% plus, the district's move is an improvement. But not for you and other users of Vanguard. If you are retiring in a few years, or moving districts in a few years, you could put up with the high fees. It's over time that the higher fees do the real damage to your balance. Or you can
contribute to a low-cost taxable brokerage account, Vanguard, Fidelity or Schwab? Using it for index equity funds is fairly tax efficient.
OP doesn't mention the expense ratios on the investment options - that could change the picture entirely. 0.83% as plan charge is not great. It would be interesting to see what the other bids were, assuming there was an RFP. Did the district receive any money in exchange for doing the deal?
teacher2163
Posts: 229
Joined: Wed Jan 15, 2020 7:21 am

Re: 403b Transfer

Post by teacher2163 »

I can tell you the expense ratios for Vanguard funds in my 403B are very low, in the .03 to .10 range. I also pay $60 per year for the service as well. Our school district used to have only expensive vendors, but one of my fellow teachers approached the treasurer about adding Vanguard. She said she would add it if he found 5 other people to invest. He found the people, and it was added.
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