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#776180 - 08/02/12 07:35 PM 403b plans
AKLisa- Knitting Editor Offline
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Gecko

Registered: 08/07/10
Posts: 723
Loc: Fairbanks, Alaska
Since I work in education I have the option of signing up for a 403(b) plan. This is like a 401K for public educators. Right now I am trying to get prospectus' and then I plan to make a spreadsheet comparing plans. Below is the list of what categories I will put on the spreadsheet. My questions is if anyone has any other suggestions as to what they would add?

_-average return rate
-yearly fees-
-penalties for early withdrawal, by program and IRS
-minimums to start and contribute
-plan type (annuity, money market, etc.)
-if I can choose to throw in extra money when I have it

Well, what would anyone else add? what other criteria did you use when selecting your plan for 401K, 403b, or similar program?


Edited by AKLisa- Knitting Editor (08/02/12 09:14 PM)
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#776501 - 08/05/12 03:57 PM Re: 403b plans [Re: AKLisa- Knitting Editor]
Sandra Investing/HFinance Offline
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Koala

Registered: 07/13/12
Posts: 2024
Lisa,

I think you have a good idea of what to look for in your plan options. I would stay away from annuities and go with mutual funds.

With the mutual funds, look for no-load funds and low fees if they are offered. Also, consider how the funds performance compares to similar funds and the benchmark index to which it is compared.

Keep us posted. I'd love to hear everyone else's thoughts on this issue as well.
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#776512 - 08/05/12 05:05 PM Re: 403b plans [Re: AKLisa- Knitting Editor]
AKLisa- Knitting Editor Offline
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Gecko

Registered: 08/07/10
Posts: 723
Loc: Fairbanks, Alaska
I don't really understand what an annuity is, but it keeps coming up that these are NOT good investment vehicles for these types of plans. Sadly, I think most of my coworkers have their 403(b) in annuities.
There is a guy who comes by our school from one of the companies allowed in the plan, so almost everyone has their 403(b) set up with him. I don't even think they looked at all their options. It's kinda scary, really.
When we got back to work I plan to ask my coworkers some questions very delicately about why they chose the plans they did.
Until then, I plan to keep investigating. I have to contact about 10 different companies for prospectus (or is that prospectii?) I asked our human resources if any charts had been prepared to help us choose plans, and they told me I have to do that myself or hire a CFP to do it.
I want to understand this stuff better, so I am going the DIY route. I really wonder how much my fellow educators understand investing.
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#776575 - 08/06/12 08:45 AM Re: 403b plans [Re: AKLisa- Knitting Editor]
Sandra Investing/HFinance Offline
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Koala

Registered: 07/13/12
Posts: 2024
Lisa,
I agree with you. It is scary. I think too often people are so busy with their careers and families that they don't feel they have the time to understand their options. Sadly, from what I understand, many 401k and 403b plans are set up to benefit the companies offering the plans and not the people participating in the plans.
I admire your due diligence and wish everyone else would do the same. Company salesmen can make any investment sound wonderful even when they are not.
As for annuities, the big drawback is that you lock up your money for years. Returns will either be a guaranteed minimum with a chance at a higher return or will fluctuate with the market. They do defer taxes which I think adds to the allure but the main drawback is that they charge high fees which erode your returns. Plus high penalties to withdraw early.
Please keep me posted and I'll be happy to answer any questions you have.
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Sandra Baublitz, Investing/Home Finance Editor
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