Opinion on 457 b and 403 b investment options

[Planta88]

Hey guys, I was hoping for some advice. My work's Retirement Accounts have limited investment options for their 403b and 457b investments. I've listed two tables below. The first table is a list of all the investments offered. The second is the distribution that they suggest for aggressive growth. I'd would like to follow the 3-fund asset class for simplicity but I just don't have a grasp on how these other asset classes fit within the 3-fund portfolio.

What funds would you guys recommend and at what allocation?

Investment	Asset Class
Guaranteed Income Fund – Prudential, Now Empower	Stable Value
Vanguard Total Bond Market Index Fund Admiral – (VBTLX)	Fixed Income - Intermediate Core Bond
Metropolitan West Total Return Bond Fund Plan Class – (MWTSX)	Fixed Income – Intermediate Core-Plus Bond
First Eagle Global Fund Class R6 – (FEGRX)	Allocation – Global Allocation
Vanguard Wellington Fund Admiral Shares – (VWENX)	Allocation – Balanced Blend
Putnam Large Cap Value Fund Class R6 – (PEQSX)	Large Cap - Value
Fidelity 500 Index Fund - (FXAIX)	Large Cap - Blend
Harbor Capital Appreciation Fund Retirement Class – (HNACX)	Large Cap - Growth
American Century Mid Cap Value Fund R6 Class – (AMDVX)	Mid Cap - Value
Vanguard Mid-Cap Index Fund Admiral Shares – (VIMAX)	Mid Cap - Blend
Carillon Eagle Mid Cap Growth Fund Class R6 – (HRAUX)	Mid Cap - Growth
Vanguard Small-Cap Index Fund Admiral Shares - (VSMAX)	Small Cap - Blend
Fidelity Total International Index Fund - (FTIHX)	International - Large Blend
American Funds EuroPacific Growth Fund Class R-6 – (RERGX)	International – Large Growth

Their Calculated "Aggressive Growth Asset Calculation"

Investment	Asset Class	Current % of Allocations
Putnam Large Cap Value Fund Class R6 - (PEQSX)	Large Cap - Value	19%
Harbor Capital Appreciation Fund Retirement Class - (HNACX)	Large Cap - Growth	19%
American Century Mid Cap Value Fund R6 Class - (AMDVX)	Mid Cap - Value	13%
Carillon Eagle Mid Cap Growth Fund Class R6 - (HRAUX)	Mid Cap - Growth	13%
American Funds EuroPacific Growth Fund Class R-6 - (RERGX)	International - Large Growth	36%

Thanks

[spiritrider]

Note: Their suggested portfolio is loaded with high expense ratio funds.

There is no total market index fund, but you could do a three fund portfolio with:

• Fidelity 500 Index Fund - (FXAIX)
• Fidelity Total International Index Fund - (FTIHX)
• Vanguard Total Bond Market Index Fund Admiral – (VBTLX)

To replicate total market you could use the following in the correct proportions:

• Fidelity 500 Index Fund - (FXAIX)
• Vanguard Mid-Cap Index Fund Admiral Shares – (VIMAX)
• Vanguard Small-Cap Index Fund Admiral Shares - (VSMAX)

[uksho]

Nothing more to add after spiritrider, I would add I am also using FXAIX and FTIHX

[JBME]

the only thing I would add is what is your goal with the 457? You don't necessarily want the exact same asset allocation percentages in each of the 457 and the 403b (though you may want the exact same funds that SR recommended). If you want the 457 money before the 403, you might want to have a more conservative AA in that plan than the 403, which means a greater percentage of the money in bonds in the 457

[Tim]

the only thing I would add is what is your goal with the 457? You don't necessarily want the exact same asset allocation percentages in each of the 457 and the 403b (though you may want the exact same funds that SR recommended). If you want the 457 money before the 403, you might want to have a more conservative AA in that plan than the 403, which means a greater percentage of the money in bonds in the 457

Just a reminder, IF the 457 is planned for a purpose other than “retirement” , don’t count it as a contribution for the 20% retirement contributions. No mention whether this 457 is gov or NG. That greatly impacts the distribution/rollover options. Just points to consider.

[Planta88]

Thank you for the replies and the help. I appreciate it. I'm planning on using the 457b for retirement. It is a non-government 457b.

[Hank]

Thank you for the replies and the help. I appreciate it. I'm planning on using the 457b for retirement. It is a non-government 457b.

Careful about the non-governmental 457. It’s an asset of the employer, not your asset, when it comes to creditors’ rights. I’d be hesitant to put too much into a non-governmental 457 until five or maximum ten years prior to retirement.

Also, what are your withdrawal options? Lump sum? Five years? Ten years?

[Tim]

Make sure you understand NG 457 plans.

• “Non-governmental 457 plans must remain unfunded. Plan assets are not held in trust for employees but remain the property of the employer (available to its general creditors in the event of litigation or bankruptcy).” IRS requirements.
• Your withdrawal options will be restricted and not flexible,
• You can only rollover to another NG 457.

This is drastically different than any “retirement plan.” The rules work against you, rather than for you.

[artemis]

Also, what are your withdrawal options? Lump sum? Five years? Ten years?

Also, be sure you know what the withdrawal options are prior to retirement, not just at retirement. They may be different. It's not uncommon for employees who leave prior to retirement to HAVE to take the 457b money as a lump sum (no option to just keep it invested with the old employer, or to withdraw it over a 5 or 10 year period); Needless to say, if you've been invested for many years this can cause your taxes that year to explode.

You might want to consider investing that money into a taxable account instead, then switch over the the 457b a decade before your planned retirement (and make sure the 457b allows for an early retirement and not just retirement at a "normal" retirement age).

I have invested for about 20 years in my hospital's nongovernmental 457b and it has worked out well for me, but I got lucky, because when I signed up for it I didn't understand it couldn't be rolled into an IRA if I left. Had I chosen to depart for greener pastures instead of staying with my current employer, I doubt I would be happy I had invested in it.