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Plan for Retirement: Have you reviewed your 403(b) investments?
Established in 1958, the 403(b) plan was specifically created for non-profit organizations, making it an accessible retirement savings option for educators like you. While a 403(b) allows you to save for retirement, it's important to be aware that certain investment choices may incur higher fees. Taking the time to select the right investment for you could help you save on fees and plan for your future. In this overview, we will cover the types of investments you can make in your 403(b) and why having an advisor can be beneficial with your planning.
Types of Investments in your 403(b)
Within your 403(b), you generally have two main investment choices: annuity products and mutual funds.
Annuity products, which are contracts typically offered by insurance companies, often carry higher costs compared to mutual funds due to associated fees and commissions. However, they might still be a suitable option for some individuals, especially those looking for guaranteed income during retirement or those who prefer a more conservative investment approach.
On the other hand, mutual funds, which pool money from multiple investors to purchase diversified stocks or bonds, can provide more liquidity and flexibility. These funds can be accessed through a 403(b)(7) custodial account, allowing participants to diversify their investments across a wide range of asset classes, while taking advantage of the tax-deferred growth that 403(b) plans offer.
Choosing the right investment option depends on your financial goals, risk tolerance, and retirement strategy.
Key Considerations When Reviewing Your 403(b) K-12 Plans in California
Like any retirement plan, no plan is perfect. So here are some things to look out for when reviewing or selecting your 403(b) investments:
- Check the annual fees on the products: The annual fees for 403(b) products can reach as high as 4.58%. This can have a substantial impact on the overall returns for educators who are trying to save for retirement.
- Look out for surrender charges: Additionally, 60% of these products carry surrender charges, which can penalize individuals for withdrawing their funds prematurely, limiting their financial flexibility.
- Be aware of the sales commissions you may be paying: Furthermore, a striking 70% of the available products include sales commissions, which can further erode the value of the investments made by educators. This raises questions about the transparency and fairness of these investment options.
Despite the challenges outlined, it's important to note that the average annual cost of all 403(b) plans is 1.78%. While this figure may appear lower than the higher fees previously mentioned, you should check your investments, as even minor differences in costs can accumulate significantly over time, ultimately affecting your retirement savings.
How can a professional review your 403(b) plan?
Contributing to a 403(b) is a wise decision and an excellent way to enhance your retirement security. However, navigating the 403(b) landscape can be daunting, with numerous vendors, platforms, and potential pitfalls. Speaking with an advisor can help you implement a plan tailored to your requirements. An advisor can help:
- Compare total costs: Annual fees, administrative fees, and investment expenses.
- Conduct investment analysis: Identify an appropriate investment strategy.
- Compare platforms and vendors: Find the best option for your needs.
- Explore your options: Accelerate the growth of your savings.
- Tailor your investor profile: Customize it to fit your unique needs.
Meet
Drew Martino
Hello there 👋🏼 I'm Drew Martino, and I bring over 20 years of experience in financial services, specializing in retirement planning, retirement income, investment selection, and custom asset allocation models. My mission is to help clients achieve financial independence and secure their future through comprehensive, personalized financial planning.
Resources
https://www.403bcompare.com/
403bwise.org
Disclosure: Material prepared herein has been created for informational purposes only and should not be considered investment advice or a recommendation. Information was obtained from sources believed to be reliable but was not verified for accuracy. It is important to note that federal tax laws under the Internal Revenue Code (IRC) of the United States are subject to change, therefore it is the responsibility of taxpayers to verify their taxation obligations.
Savvy Wealth, Inc. (“Savvy Wealth”) is a tech company and the parent company of Savvy Advisors, Inc, (“Savvy Advisors”). All advisory services are offered through Savvy Advisors, Inc., an investment advisor registered with the Securities and Exchange Commission (“SEC”). For the purposes of this blog article, Savvy Wealth and Savvy Advisors may be referred to together as “Savvy”.
Plan for Retirement: Have you reviewed your 403(b) investments?
Established in 1958, the 403(b) plan was specifically created for non-profit organizations, making it an accessible retirement savings option for educators like you. While a 403(b) allows you to save for retirement, it's important to be aware that certain investment choices may incur higher fees. Taking the time to select the right investment for you could help you save on fees and plan for your future. In this overview, we will cover the types of investments you can make in your 403(b) and why having an advisor can be beneficial with your planning.
Types of Investments in your 403(b)
Within your 403(b), you generally have two main investment choices: annuity products and mutual funds.
Annuity products, which are contracts typically offered by insurance companies, often carry higher costs compared to mutual funds due to associated fees and commissions. However, they might still be a suitable option for some individuals, especially those looking for guaranteed income during retirement or those who prefer a more conservative investment approach.
On the other hand, mutual funds, which pool money from multiple investors to purchase diversified stocks or bonds, can provide more liquidity and flexibility. These funds can be accessed through a 403(b)(7) custodial account, allowing participants to diversify their investments across a wide range of asset classes, while taking advantage of the tax-deferred growth that 403(b) plans offer.
Choosing the right investment option depends on your financial goals, risk tolerance, and retirement strategy.
Key Considerations When Reviewing Your 403(b) K-12 Plans in California
Like any retirement plan, no plan is perfect. So here are some things to look out for when reviewing or selecting your 403(b) investments:
- Check the annual fees on the products: The annual fees for 403(b) products can reach as high as 4.58%. This can have a substantial impact on the overall returns for educators who are trying to save for retirement.
- Look out for surrender charges: Additionally, 60% of these products carry surrender charges, which can penalize individuals for withdrawing their funds prematurely, limiting their financial flexibility.
- Be aware of the sales commissions you may be paying: Furthermore, a striking 70% of the available products include sales commissions, which can further erode the value of the investments made by educators. This raises questions about the transparency and fairness of these investment options.
Despite the challenges outlined, it's important to note that the average annual cost of all 403(b) plans is 1.78%. While this figure may appear lower than the higher fees previously mentioned, you should check your investments, as even minor differences in costs can accumulate significantly over time, ultimately affecting your retirement savings.
How can a professional review your 403(b) plan?
Contributing to a 403(b) is a wise decision and an excellent way to enhance your retirement security. However, navigating the 403(b) landscape can be daunting, with numerous vendors, platforms, and potential pitfalls. Speaking with an advisor can help you implement a plan tailored to your requirements. An advisor can help:
- Compare total costs: Annual fees, administrative fees, and investment expenses.
- Conduct investment analysis: Identify an appropriate investment strategy.
- Compare platforms and vendors: Find the best option for your needs.
- Explore your options: Accelerate the growth of your savings.
- Tailor your investor profile: Customize it to fit your unique needs.
Meet
Drew Martino
Hello there 👋🏼 I'm Drew Martino, and I bring over 20 years of experience in financial services, specializing in retirement planning, retirement income, investment selection, and custom asset allocation models. My mission is to help clients achieve financial independence and secure their future through comprehensive, personalized financial planning.
Resources
https://www.403bcompare.com/
403bwise.org
Disclosure: Material prepared herein has been created for informational purposes only and should not be considered investment advice or a recommendation. Information was obtained from sources believed to be reliable but was not verified for accuracy. It is important to note that federal tax laws under the Internal Revenue Code (IRC) of the United States are subject to change, therefore it is the responsibility of taxpayers to verify their taxation obligations.
Savvy Wealth, Inc. (“Savvy Wealth”) is a tech company and the parent company of Savvy Advisors, Inc, (“Savvy Advisors”). All advisory services are offered through Savvy Advisors, Inc., an investment advisor registered with the Securities and Exchange Commission (“SEC”). For the purposes of this blog article, Savvy Wealth and Savvy Advisors may be referred to together as “Savvy”.
