3 reasons why new teachers should avoid the 403b.
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- Опубліковано 20 жов 2024
- New teachers should look closely at the 403b plan they are offered and weigh it against your other choices.
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Investment related questions 📧 Dustin@JazzWealth.com
Business Affairs 📧Carolyn@JazzWealth.com
Roth 403b plans exist. Low cost options are available with no-load mutual funds with extremely low fees (no advice) or annuities with slightly higher fees.
Bottom line, saving makes sense! You must due your do diligence to find the right plan with the right investments.
I have a 403B with my school district. I use their little-advertised brokerage window option with the 403B. This allows me to invest in stocks, ETFs, another securities all inside my 403B. I was 100% in Tesla and now 100% GBTC bitcoin (for the duration of the 2021 bull market cycle) in my 403B. My balance is currently over half a million dollars. I expect to be a multimillionaire by 2024, barring a prolonged major market crash.
you can also do that with a ROTH IRA
Ouch. This comment didn’t age well.
I'm a substitute teacher and they offered me the 403b on Tuesday, but they said to give them my number to schedule an appointment. I'm glad I ran into you. Thank u!
Hey Dustin- In CA check out CalSTRS pension2 fund. I'm wondering if this would be an exception? I don't think any teachers in CA earn more in retirement. Would love to watch more teacher videos. Thanks! Love this site.
The biggest problem with a lot of teacher 403bs is that they might be annuities charging 1-2% in fees. Better to focus on the Roth IRA and just invest in VTI (low fee, total market stock index fund or some other similar fund)
we have a Roth version and it has a Vanguard self directed accounts with unlimited low cost options.
they can choose within their 403, like indexed fund coz they have employer match not that high compared to most 401 k matches but there are some 403”s that have 5% match,that’s free money that can compound more.
I agree with everything in your video about teachers and 403bs. Your video is only a brief introduction in my opinion. You forgot to mention another extremely important point that you may not even know about for several reasons. You are young and you may not have looked in the latest Medicare booklet.
If a person goes over a certain amount of income when he reaches 70 1/2, when distributions from 403b=IRAs must begin, one must pay more for Medicare B, prescription drugs. There is also an income adjustment if one goes over a certain amount.
For 2016 if a single person went over 85,000.01-107,000.00 in income one is charged for having income over 85,000.00. This is difficult to locate in the Medicare booklet but it should be there.
Medicare will adjust one's income each year for what Medicare calls the Modified Adjusted Gross Income or MAGI. There are tiers of income for singles, married, head of households etc. Each tier will charge you higher fees for having a MAGI.
Most mutual funds charge fees but some are known for low fees such as Vanguard. There are others such as Fidelity, Charles Swab....I recommend Vanguard.
civbrown thanks for the detailed post. I am not a financial planner so I try and give brief overviews on those topics. Thanks for watching!
Pension in my school district is 2.5% multiplied by years of service multiplied by the average of my yearly salary for the last three years of employment. So my annual pension is certainly not going to be more than my last year's salary.
@@BernWag Good point. But my professional lifestyle won't keep me in one place for nearly 40 years.
No offense but I believe you aren't correct at all, and you are misleading. 1- I invest in growth stock mutual funds in my 403b not an annuity. I do not get the fees you described. 2- I put in $800 and defer $150 a month. That's significant. 3- When I retire at 30 years I'll get 60% of my last highest year for my pension. It's extremely rare, that as a teacher you retire and receive 100% of your last highest paid year. Therefore, a 403b is better than a Roth IRA if you can't invest more than $19,500 a year.
I agree. That roth account can’t and won’t grow to what a 403 or 401 could grow to based off the limitation alone.
I know NO teachers in NV will make more with their pension than their highest check. Best case scenario (full 30 years of service, which I'm approaching) you MIGHT get 75% of your highest income amount and that figure only applies to teachers who started before 2010.
That being said, does anyone have thoughts on 403b plans for veteran teachers? I just enrolled in one and I'm already having doubts.
Mine ,403 b,did great 👍🏼 I m retiring and rolling the money over to my husband’s 401 K after retiring . The 403b helped me immensely by keep my adjusted amount low especially after 50 when I maxed mine out.
His advice was for new teachers and doesn’t apply to all teachers.
I retired two years ago after 31 years teaching. I have a pension; however, I also started a 403b my second year teaching making $19K a year. I agree with the idea that the 403b is not that beneficial with a lower salary but here is the game- study the tax brackets each year and figure out where you will fall after the deduction (the taxable income). Basically if you make $40K and you are single, anything between say $39-83K is 22% tax after the $12K deduction so tax deferral cannot help much unless you make around $85K and are able to defer enough to stay in a lower bracket per se. The same holds true once you retire as the pension+any drawn funds are considered income and taxed on the bracket. There are plans that are better. Consider a ROTH savings account. You pay tax when putting money in but do not pay on accrued money or any taxes when you take it out. The money is "net income" and a better situation and you do not have to worry about tax brackets etc.
Great info. I like hearing from fellow teachers who speak from experience.
I'd take a lump sum asap out of the that pension and put it into a Roth IRA (I'm imagining you're over 59). A pension will roughly give you 5-8 % return an IRA 10-12%. Also, if you pass away, so does your money with a pension. With your IRA it becomes an asset - That's from Dave Ramsey's advice.
@@Manatti06 Not true about, "if you pass away, so does your money with a pension." When you choose your monthly benefit option (at least our pension allows us to choose) you can choose one where your monthly benefit continues to go to your beneficiary, the benefit option I'll be choosing will pass on 100% of my benefit to survivor.
I found out my 403b has over 2% in fees!!! It sucks because it has like $75k now. Good news is I have a Roth version available through Vanguard. Time to roll it over!!!
What if I retire with a choice of my income from the institution? For example, say I decide to lower my 1FTE salary to have a lower tax bracket than the year when I started my 403b. There are options to reduce your salary voluntarily. If I don't retire at a higher pay scale, then it's all good. Isn't it?
Question: If I have to potion to "roll-over" my 403b into a 401k after retirement, would that be a way to avoid all the taxes?
No, they are both "tax deferred" retirement accounts.
Doing a “rollover” is a non taxable event. All it’s doing is combining accounts. The “tax later” (deferred status) still exists. IF your 403b is an annuity one… which has become much less popular now a days, it may not be something you can do that. And annuities aren’t all bad. There’s a time and a place. A WHOLE financial plan and path needs to be looked at first.
First, I don’t agree that when you have a small paycheck, tax deferral doesn’t mean anything to you. Every penny counts and saving is never unnecessary. Second, you didn’t tell us where that 8% comes from. 8% of what? Third, doesn’t Roth 403b let you withdraw tax-free money when you retire?
Anyway, still give you a thumb up
I think the 8% comes from the roughly 1% fee the annuity charges. The 8% is actually low. For example, if the funds did a 9% return and the fee is 1% the actual cost close to 11% of your possible return.
Lol , he is absolutely incorrect about annuities . FYI : he makes money when he helps someone . I agree the 403B is crap , but there are more reasons than he gives to steer clear of 403Bs . 403Bs for medical community seem to deliver higher yields while correct teachers are taken advantage in multiple ways are screwed by these low yield vehicles .
So... we're incorrect but you agree? That's a first. Also you are incorrect about our company ;)
I know it's difficult to know every product out there, but there are annuities without fees. Also, having a ROTH does not guarantee income and does not guarantee NO LOSSES like a fee-free indexed annuity.
Thank you so much for watching and adding a comment!
Nannette DiMascio some 403b offer Roth as well.....
Teachers are very conservative by nature. I guide my clients through the investment process to accumulate growth throughout their working years by finding a risk allocation they’re comfortable with. Indexed annuities typically have a floor of 0%, no fees, but very low cap rates as well, so it defeats the purpose of accumulation.
Nannette, The market did just under 22% last year. If your cap is 5% you paid 17% in fees! How don't you see that? No fees? In 1 year you paid more than someone in a roth might pay in decades. I don't care if they call it a fee, a cost, a charge, a cap, or a unicorn. It's money in vs. money out. You have been scammed. HELLO!!!!! You really need to talk to an actual financial professional who can teach you whats actually going on.
You are combining Variable Annuities with Fixed Annuities. FIA have surrender charges and a guaranteed floor no lower than Zero, so it doesn't diminish your funds. And yes there are surrender charges, but they don't matter if the person is investing long term...plus they usually have a 10% free withdrawal. So with Fixed Annuities, you only pay a fee if you withdrawal early, and it is on the funds over the 10% free withdrawal amount.
I just noticed my 403 with pension 2 has a voya III fixed plus which is a annuity I believe. I also have van guard in this portfolio. Shoukd I consider removing the voya III ?
I
Yes all great. unless roth 403b is there also 457 may be good if you get pension if you get into the field early at 22 you may be able to retire at early 50s with pension and want that 457 to not have to wait till 59 1/2 or mess with the rule of 55 in 401k. So many ways but forsure go roth if you can. More people need this info
Helpful information.
Curious... Can a 403B be cancelled /closed and transfered to an IRA ... Without tax penalty?
Yes. Not sure if you ever found this out. It's called a rollover IRA. If you have a traditional 403b, you can roll it to a traditional Roth without penalty. KEEP IN MIND, if you are working with an advisor, they may have fees penalties. So be careful if you don't know for sure.
@@Alex-cj7nc thank you!! ❤️
So my district discovered that my investment company was contributing to my roth and not a 403b. So the company wants to move the money (3000) into a 403b and they offered to pay me the lost gains as well (about 500) if I sign a release that will indemnify them. They claim that both of these money moves will be non taxable events. Is that true?
Personally I wouldn’t trust what that company says especially making a mistake a huge as that!
Hmmm, not the best advice- Saving in a 403b, Roth IRA is good and is never bad. You will sleep much better at night as you grow your wealth and have years of salary saved up. Not doing so becuase of these reasons is not good advice.
Thanks for disagreeing respectfully. Hard to come by these days on the internet :)
Good vid, very informative . Dope music at the end
I signed up for a 403b through my school district. I got a 20 page contract, but I can't seem to find any page that shows the fees.
And you know they don't pay for the printing of that 20 page contract themselves :)
@Jazz Wealth Hello. What would you recommend for a new teacher? A roth IRA? The only thing with the Roth IRA is that I don't think most education employers match your contributions? I do think they match the 403b though.
Yeah most of the time a Roth IRA is your best bet as a new teacher. Your in a lower tax bracket and satisfying your tax obligation now rather than later when your in a higher tax bracket is the best option.
Jazz Wealth Managers.. Why should people take advice from someone that isn’t a CFP nor do you know the distinguishable difference between your and “you’re”... You just enjoy bullshitting, go sell used cars kid!
Bobby Robinson your right I'm not a cfp and never will be. I'm a registered financial advisor but thank you for the spelling lesson. I'm happy that you are good at something. Thanks for watching!
There are Roth 403(b)
The pension makes up only about 1/2 the average of your last few years pay. Social security might cover another portion but you’re still left with a gap.
Annuity plans are not for everyone and the fees for a 403b are no where close to 8%
Please offer a full picture before you make videos. Thank you
Hi Dustin,
I'd like to provide some insight to teacher 403b's from the perspective of a public school teacher in California. I participate in my districts plan and would like to tell you how it works in California. Your misinformed about fees and mutual funds available to us teachers. I look forward to hearing from you so I could "teach" you about 403 b's in California.
Take care
How about if my district matches 100 bucks a month for my 403b? Wouldn't it be free money I shouldn't pass up on? I mean, over my career, we are talking thousands of dollars.
Any workplace plan that matches you have to take advantage of ONLY up to the match ;)
Yes, I have a question: what's the smallest percent that 403b is allowed to take away from your paycheck/earnings (including fees)?
1%
@@ellaxoxo15 thank u for replying.
@@vanessabayardo9788 :)
That's why you get a roth 403b.
Agreed. Roth 403b with Vanguard if your plan offers it. Pay only expense ratio of index funds (only 0.09% for target date. 0.04% for the S&P 500 index fund) and $5/month record-keeping fee. I only wish I did my research sooner
@@GeoffreyHart_ClementsHS exactly this. Most people are unaware of all this and just do what the financial adviser tells them to. Which obviously is going to be something that makes the adviser money.
There is nothing wrong with a 403b retirement account. Telling people to "avoid" them is just daft.
A lot of misinformation here. The advice does not apply to most teachers. In NYC we have a 403 B with a fix option of a guaranteed 7% and a variable one that has averaged over 12%. Also, our pension is definitely not more than our salaries. I make close to 130k as a 22 year teacher, when I retire at 25 years my pension will be approximately 65,000. If I leave now there will be a steep penalty and my retirement income will be 40k. Most teachers don't make it to retirement. They tend to leave early.
There is such a thing called fixed index annuity !
liza dowdell that’s what all annunitys are, a fixed amount but usually high commissions and low rate of return they guarantee. Stay away and put it in you own vanguard, fidelity or TRowe mutual funds.
Index annuities are wonderful vehicles once you reached a substantial account . It is not a good growth vehicle , but it’s a great protection of principle and guarantee of retirement funds , something most investment advisors can’t or won’t do. They like their annual residual investment checks .
Am a nurse. My job offer roth 403b and regular 403b. I plan on going for my nurse practitioner in abt 1 year. So which one do you think i should pick. Thanks
Roth for sure. Good luck with the NP!
Fixed index annuity
If I retire after less than 45 years of service, I will not make more than I was earning my last year. Not even close.
Maria Garcia sorry to hear that. You may want to start a retirement savings plan that you can control.
I'm going to invest $6k/year into my Roth, Growth Stock Mutual Funds, and remaining percentage into a Self-Employed retirement account until I've invested 15% of my gross. I am a small business owner and will start teaching next year. Total investment is planned to be $15k annually, without factoring in annual salary increases. If it averages 10% over 25 years, I should have a nest egg over $1.6MM, and a teaching pension on top of it. So probably over $200k annual retirement income. I'm starting my teaching career older than most. I'll be 43, retire at 68. Hopefully sooner.
My Roth IRA is maxed out, and thanks to a mortgage I hold I currently owe over $1,000 in taxes. Might a 403(b) (if I can get one without high fees) be suitable for me in order to avoid a 4-digit tax bill?
Or a traditional IRA
Thanks for the reply!
But I don't think a Traditional IRA is an option, since I contributed $5,500 to my Roth last year. Although I could contribute to both types in the same year, I can''t exceed the $5,500 limit in all IRAs combined, right? BTW, I recently discovered your videos, and will be watching more.
Ah yes...time to get creative ;)
You definitely want to contribute to your pretax employer sponsored plan as in it, you can deduct a much larger portion of your income from being taxable.
Great video!
+Devin Carroll thanks!
Painting with a broad brush so your advice is bad. New teacher aren't getting cash defined pensions. There are good 403B plans, it just depends on your district.
Hi,
I'm a teacher making 6 figures. I was told to invest in a 403b bc my salary is high and I dont pay high fees or have an annuity and when I retire the taxes will be lower then according to my pension. What do you think?
Invest in a 457 or a Roth IRA. Especially now.
I have 403b at work the company match what i put on my retirement. My question is IUL is it better that ira or 403b?
The 403b. When you leave your job one day you get to take all of it with you ;)
ask mefirst An IUL is a Indexed universal life insurance policy it should not be compared to a retirement account an IUL has great benefits for its use while a 403b has great benefits for its use it would actually be recommended to invest in both incase you die to soon or live to long
@@aaronquijano6224 most teachers I know invest I'm both . That's your answer .
Appreciate the video... How does a matching contribution by your school district alter your opinion of 403b for new teachers? Thanks for the video.
Hot Juan the right advice is to take the free money and contribute as much as you can to get the match. Thanks for watching!
Retired teachers are some of the wealthiest retirees in the country.
Thank you for the info, I Thought all a teacher get was the trs pension fund.
I don't pay fees on my 403b ???
Maria Garcia yes, though they are pretty clever how they hide the fees, you do pay them.
@@Jazzwealth He Jazz love you voids bro. I have a 403b and Roth. After watching your vid I'm a little nervous. I'm 43 and have about 40G in 403b. My district will not let me roll over into my Roth that grew 12% last year. I was planning on maxing both accounts out and deal with a rollover at a later date. But now I'm thinking that wouldn't be wise putting off. Any suggestions?
Rubbish. This is another example of why it's foolish to go on UA-cam to get financial "advice." Your first reason against a 403(b) is unintelligible (you shouldn't get in the habit of saving with a tax-deferred account because you don't have a lot to save or be taxed on your salary?). Secondly, it's patently false that fees on the instruments inside of 403(b)'s can reach 8% - that's ridiculous (maybe with a variable annuity, but that's a market investment product). And annuity salespeople are not paid from the funds invested from a client, this is an old false canard that displays real ignorance. And I wouldn't be surprised to see Maserati's these days driven by the "fee-managers" (wealth managers), some of whom (and I respect those who are credible and give good advice) who take their nice 1% per year forever from the client while convincing you to stay in mutual funds or the stock market no matter how badly they perform. So you begrudge how someone else is paid as being unseemly, when you're not at arms length yourself. And you suggest a ROTH instead of a 403(b), not even explaining that $20,000 per year can be placed in a 403(b) and only $6000/yr in a ROTH. A better strategy is to put a great deal into a 403(b), and put a safe vehicle into it like a flex annuity which can earn 3.5 to 8.5% with a floor - a contractual guarantee of no loss. And some of them now carry sizeable bonuses, too. As opposed to the stock market, which is averaging 15-21% losses across the board over the last year. And then add a separate ROTH IRA, that makes much more sense. Hundreds of thousands of 403(b)'s have funded a very substantial portion of teacher retirements over many decades, so you do a great disservice to educators in advising them against it. You're going to need better arguments than these three.
Now you tell me!!!!
I absolutely cannot stand CalSTRS! I really wish that they gave teachers a choice on where and how much to put our own money. I don't like that it is a law. I'd rather be able to take my money and invest in real estate.
I’m in Massachusetts. 11% mandatory contributions!
I actually make good money
Pensions 😂. No one gets pensions anymore
bro imagine being a teacher... yikes
Imaging clicking a video for teachers and not actually being one; so your just watching this for fun ….. yikes
@@Demifan39 mad boomer mad boomer
Demifan39 he might be a school district employee making more than the teachers which is also... yikes
Why narrow your video to just teachers? Second, what if your employer matches up to 19k a year? Is it worth it then?
Wow! What employer offers matching up to 19k?!
It's narrowed to just teachers because its a video about 403b accounts...
This info was completely incorrect. National Life offers a Roth 403b with zero fees!!
Think about it. They just cover their costs to be nice? They operate at a loss? Look deeper. It's not free ;)
This is not a teacher I hope I want to be in her class lol
Jazz Wealth Managers what fees sir?
My 403b is a Roth. So point one is out.
Put your money in your mattress
THROUGH MY SCHOOL DISTRICT, I PAY $ 4/YEAR
LA Nazaakat you think so?
I never paid any "fees" on my 403 b.
So they work for free? (He says sarcastically)