403b and Load funds

[disneysteve]

I posted earlier that we recently learned that my wife has a 403b plan at work. I definitely want to participate as we have no other tax-advantaged retirement plans except our IRAs.

I spoke to the agent yesterday who handles the account. He is with Janney Montgomery Scott. I was afraid the only choice would be an annuity, which I know some 403b's do, but that fortunately wasn't the case. We get to pick from any of the funds offered by Oppenheimer. I'm waiting to get the plan details and enrollment paperwork, but did some preliminary research last nite. Oppenheimer offers load funds. Class A shares have a 5.75% front-end load. There seems to be some language on their site suggesting that the load might be lower or waived for certain types of accounts. I'm hoping that just maybe 403b's with non-profit groups might qualify for lower or waived loads.

I guess the bottom line is that paying a 5.75% load is still a lot better than paying 25% income tax on the money, plus it grows tax free for the next 20+ years. Also, the load percentage decreases as the amount in your account increases (5.5% over 25K, 4.75% over 50K, etc.). We should hit the 25K mark within 2 years and the 50K mark after about 4 years if all goes smoothly.

I'll get all the details by the end of next week and sign her up to get started.

[CRFSaver]

I would be quite shocked if you had to pay a load. Most "group" plans waive the load and if it doesnt I would be questioning the benefit group on their fiduciary responsibility to the participants...

[Ima saver]

Let us know which fund you chose and if there is a load??

[disneysteve]

Originally Posted by CRFSaver

I would be quite shocked if you had to pay a load. Most "group" plans waive the load

That's what I was figuring. I read more at Oppenheimer's site and it does list qualified retirement plans as ones that have the fees waived.

[Ima saver]

Well, that is good, now you just have to chose a fund!

[LuxLiving]

A good suggestion is to look at their index funds. We have ours at Fidelity in several different index funds. When one is down a bit, the others are up and things generally even out on the upside.

[Ima saver]

I don't think they have an index fund??

[disneysteve]

Originally Posted by Ima saver

I don't think they have an index fund??

They do not. I'll be choosing based on our overall asset allocation. When we open this account, I will be stopping our contributions to a couple of taxable mutual fund accounts so I will choose funds to match those as closely as I can.

[slimcustomer]

Be careful. There are a lot of 403b plans that still charge loads. Worse yet are funds with high expenses. You will often do better saving in a low expense taxable account than you will in a high expense tax deductible, tax deferred account. I would visit 403bwise.com and learn more about these type of plans before investing. If you are stuck with a plan with mostly load funds with high expenses, there may be a no load money fund you can place your money in before transfering it to another institution. See 403bwise for more information.

[LuxLiving]

Thanks slimcustomer for posting this website. My FrugalSon has one w/his employer. We'll be reading up!!