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Would it would be wise to stop contributing to my current 403b retirement fund and switch to an IRA?

Current Situation:

  • 403b has no employer match .
  • 403b is currently with Fidelity.
  • I am young and a new homeowner.
  • I currently set aside 5% (I know I should do more) per paycheck into the fund.

My current investment portfolio is:

  • JPM US EQUITY R6 (50%)
  • EV AC SMID CAP R6 (15%)
  • FID TOT INTL IDX IPR (15%)
  • HTFD INTL OP HLS IA (10%)
  • PRU TOTAL RTN BD Q (10%)

My MAGI is just under 61,000$

My thought is that I might be able to find more diverse options with lower fees if I move out of my 403b, and I really gain nothing from being in the 403b at this time since there is no match (other than convenience). However I'm already mostly in index funds so I'm not sure how much lower in fees I can go.

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    It sound like you still employed at the place where you have the 403(b). If so, you can't move that money to an IRA.
    – RonJohn
    Commented Jan 30, 2018 at 14:47
  • Eeek -- pays to read some of that fine print. I have changed my original question to better suit the circumstance - you are correct I would not be able to take my balance out of the 403b unless I left my current position.
    – Christopher
    Commented Jan 30, 2018 at 14:58
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    @RonJohn But it sounds like the OP's total contributions are currently less than $5500 / year so the OP could choose to direct future contributions to an IRA instead of the 403b.
    – Eric
    Commented Jan 30, 2018 at 15:03
  • @Eric Yes, I have re-phrased my question for this to be the case.
    – Christopher
    Commented Jan 30, 2018 at 15:04
  • @Christopher Are there additional expenses for your 403b beyond the expense ratios on the individual funds you hold?
    – Eric
    Commented Jan 30, 2018 at 15:07

2 Answers 2

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However I'm already mostly in index funds so I'm not sure how much lower in fees I can go.

There are fees paid to the 403(b) administrator. Compare the fund fees in your 403(b) to the fees you'd pay if it were a plain old IRA.

If they're less in the IRA, then start contributing to the IRA instead of the 403(b).

Even though you can't move your existing 403(b) money to an IRA, since you're earning less than $110K/year (61000 * 0.05 = 3,050) and there's no employer match, you can just stop contributing to the 403(b) and contribute directly to an IRA. The existing 403(b) money would have to stay in the account until you change employers.

Pay attention to your contribution level, though, so as not to go over $5500. Your spouse can also contribute to his/her IRA to boost total contributions to $11K.

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Something to consider when rolling over any retirement account is liability. People seem to always poke at the fees of some retirement accounts and limited options, however depending on the state you are in or the state(s) you plan to live in in the future. Rolling over your account to an IRA could potentially be a bad move for liability reasons. This will vary by state.

As the other post mentioned you normally cannot roll over payroll retirement plans from your employer while you are working with them.

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