Three 403b questions

[ChristopherMD20]

1. What is the penalty if one accidentally over fund the annual contribution limit for a 403b?

- My wife has started with a new employer. She had contributed $1,384.60 for FY2018 to her previous employer Fidelity account. Leaving her $17,115.40 to contribute to the new 403b account.

- I called Prudential because they only allow one to input % per paycheck instead of the total amount we want to contribute throughout the year. When I explained the information, they essentially said "do the math." Per their guidance, it *usually* takes 2 pay periods for things to take effect. Thus, I expect my wife to have 21 pay periods since she is paid biweekly.

- My math:

> $17,115.40/21 pay periods= $815.01 per pay period

>$112,028.80/26 pay periods= $4308.80 per month pre-tax

> $815.01/$4308.80= 18.9% per paycheck

- Prudential only allows whole numbers to I have to undershoot it to 18%

- If the 21 pay periods is incorrect and she actually gets enrolled before that then there is a possibility that she over contributes. It will not be much but I don't want the cost to be exorbitant.

2. Is there a way to get better funds in a retirement account for a large medical system? There are only 2 low cost index funds offered through this Prudential plan. I will be working at this employer and subject to the same crappy, high expense ratio funds for my 403b and presumably 457. There are no good bond options, so I guess when I start adding bonds to my portfolio I guess I have to do it through our backdoor Roth considering most bonds (save for munis) are not tax efficient for when I eventually have the funds to start a taxable account. I wanted to use my Roth for REITs and other high turnover investments, but I guess I cannot.

3. Silly question: Since there is only a way to do % per pay period, does Prudential automatically cap the contributions at the annual limit? I will be starting 8/1/2018. You cannot sign up for Prudential until the Tues after your first paycheck. I wanted to put my signing bonus but because of they delay (essentially 3 pay periods so I won't start contributing until ~9/15/2018). I was planning on just setting my contribution per pay period to 80% to quickly max out 403b followed by 457 for FY2018. Should I not do this? I don't want them to put $30k into the 403b by accident.

Other thought: Maybe ask for my sign-on bonus to be paid in 10/2018?

 

Thanks!

[jfoxcpacfp]

1. Go ahead and contribute a higher % and cut down on the last check when you are about to max out to the $117,115.40. If she overcontributes by accident, she will have to notify one of the employers before 4/15/19 that she has gone over by $X and ask for them to refund the difference + earnings.


2. Probably not.


3. Yes, they will (should) automatically cap contributions at $18,500. This works only if you made employee contributions to one 401k/403b in a calendar year, of course.

Other thought - not sure why you asked this, sorry ops:

[cgossage]

1. Your math all tracks.  What I would do, is look at the pay-stub when they actually start the 403(b) deductions and recalculate the % at that point.  Expect to be a little off at the end of the year, but if you go over, you can always have the plan refund the overage.


2. Some 401(b) plans will offer you self-directed brokerage if you are looking for something that isn't offered.  I will say, it is fairly frequent, that 403(b) plans are stuffed with active managers with higher fees.  For bonds, I wouldn't mind being somewhat active and would be surprised that they didn't have any decent options.  Which funds do they offer?


3. They will automatically max your contributions at $18,500 in the new plan, but obviously won't reduce what was contributed to your prior plan.

[ChristopherMD20]

jfoxcpacfp wrote:

Other thought – not sure why you asked this, sorry

Click to expand...

If they delayed the sign on bonus I could use that to contribute a lump sum to the 403b. Negligible in the grand scheme of things. I prefer to "pay myself" first so I like to save money before figuring out what to do with the rest. It is an odd OCD-like quality I have about money.

[ChristopherMD20]

cgossage wrote:

Which funds do they offer?

Click to expand...

Fidelity (Previous Employer)
Investment Name	Symbol	Asset Class	10yr ROI	Net Exp Ratio	Gross Exp Ratio
Fidelity Extended Market Index Fund	FSEVX	Stock	9.28%	0.07%	0.07%
Fidelity 500 Index Fund- Premium	FUSVX	Stock	8.47%	0.04%	0.04%
Baird Core Plus Bond, Fund Class	BCOIX	Bond	5.28%	0.30%	0.30%
iShares U.S. Aggregate Bond	WFBIX	Bond	3.28%	0.05%	0.07%
Prudential (New Employer)
Principal Preservation Separate Account			1.68%	0.10%	0.10%
Metropolitan West Total Return Bd M	MWTRX	Bond	5.35%	0.67%	0.67%
Principal High Yield A	CPHYX	Bond	7.15%	0.91%	0.91%
Prudential Income Flex Target Balanced Fund Class Z		Blend	8.65%	2.10%	2.10%
Diamond Hill Large Cap A	DHLAX	Stock	8.02%	0.98%	0.98%
Oakmark Investor	OAKMX	Stock	10.44%	0.89%	0.93%
Vanguard Institutional Index I	VINIX	Stock	8.30%	0.04%	0.04%
T. Rowe Price Blue Chip Growth	TRBCX	Stock	10.48%	0.72%	0.72%
Jhandcock Disciplined Value Mid Cap R2	JVMSX	Stock	11.03%	1.27%	1.27%
Vanguard Mid Cap Index Admiral	VIMAX	Stock	8.81%	0.06%	0.06%
Artisan Mid Cap Institutional	APHMX	Stock	8.98%	0.95%	0.95%
Principal MidCap A	PEMGX	Stock	10.98%	0.99%	0.99%
Virtus Ceredex Small Cap Value Eq A	SASVX	Stock	8.80%	1.48%	1.48%
Gabelli Small Cap Growth A	GCASX	Stock	9.41%	1.39%	1.39%
Voya SmallCap Opportunities A	NSPAX	Stock	9.47%	1.41%	1.41%
American Funds Europacific Growth R4	REREX	Stock	3.35%	0.85%	0.85%
Oppenheimer Developing Markets A	ODMAX	Stock	4.10%	1.32%	1.32%
Cohen & Sters Realty Shares	CSRSX	Real Estate	7.35%	0.96%	0.96%
Principal Diversified Real Asset Instl	PDRDX	Blend	4.09%	0.89%	0.89%

 

I have summarized her previous Fidelity account into the funds we would actually invest in.

We have all of her previous 403b in the Extended Market Index Fund now since we plan to fund the rest everything this in our 403b x2 and 457 in the VINIX. We are keeping 100% equities for now, but may start adding bonds in the next few years. There are good bond options in the Fidelity account so I guess I could always rebalance to put money in the bond options there. I really like the Extended Market Fund in Fidelity though so I would prefer not to do that. I guess I could find comparable products in the Vanguard Roth IRAs though. Still a rookie.. still learning slowly.

 

Thanks!

[cgossage]

ChristopherMD20 wrote:

cgossage wrote:

Which funds do they offer? 

Click to expand…

Fidelity (Previous Employer)
Investment Name	Symbol	Asset Class	10yr ROI	Net Exp Ratio	Gross Exp Ratio
Fidelity Extended Market Index Fund	FSEVX	Stock	9.28%	0.07%	0.07%
Fidelity 500 Index Fund- Premium	FUSVX	Stock	8.47%	0.04%	0.04%
Baird Core Plus Bond, Fund Class	BCOIX	Bond	5.28%	0.30%	0.30%
iShares U.S. Aggregate Bond	WFBIX	Bond	3.28%	0.05%	0.07%
Prudential (New Employer)
Principal Preservation Separate Account			1.68%	0.10%	0.10%
Metropolitan West Total Return Bd M	MWTRX	Bond	5.35%	0.67%	0.67%
Principal High Yield A	CPHYX	Bond	7.15%	0.91%	0.91%
Prudential Income Flex Target Balanced Fund Class Z		Blend	8.65%	2.10%	2.10%
Diamond Hill Large Cap A	DHLAX	Stock	8.02%	0.98%	0.98%
Oakmark Investor	OAKMX	Stock	10.44%	0.89%	0.93%
Vanguard Institutional Index I	VINIX	Stock	8.30%	0.04%	0.04%
T. Rowe Price Blue Chip Growth	TRBCX	Stock	10.48%	0.72%	0.72%
Jhandcock Disciplined Value Mid Cap R2	JVMSX	Stock	11.03%	1.27%	1.27%
Vanguard Mid Cap Index Admiral	VIMAX	Stock	8.81%	0.06%	0.06%
Artisan Mid Cap Institutional	APHMX	Stock	8.98%	0.95%	0.95%
Principal MidCap A	PEMGX	Stock	10.98%	0.99%	0.99%
Virtus Ceredex Small Cap Value Eq A	SASVX	Stock	8.80%	1.48%	1.48%
Gabelli Small Cap Growth A	GCASX	Stock	9.41%	1.39%	1.39%
Voya SmallCap Opportunities A	NSPAX	Stock	9.47%	1.41%	1.41%
American Funds Europacific Growth R4	REREX	Stock	3.35%	0.85%	0.85%
Oppenheimer Developing Markets A	ODMAX	Stock	4.10%	1.32%	1.32%
Cohen & Sters Realty Shares	CSRSX	Real Estate	7.35%	0.96%	0.96%
Principal Diversified Real Asset Instl	PDRDX	Blend	4.09%	0.89%	0.89%

 

I have summarized her previous Fidelity account into the funds we would actually invest in.

We have all of her previous 403b in the Extended Market Index Fund now since we plan to fund the rest everything this in our 403b x2 and 457 in the VINIX. We are keeping 100% equities for now, but may start adding bonds in the next few years. There are good bond options in the Fidelity account so I guess I could always rebalance to put money in the bond options there. I really like the Extended Market Fund in Fidelity though so I would prefer not to do that. I guess I could find comparable products in the Vanguard Roth IRAs though. Still a rookie.. still learning slowly.

 

Thanks!

Click to expand...

I think the Extended Market is a good fund too.  The only thing I don't like is being extremely tilted towards it since it doesn't invest in the S&P500 and those stocks make up the largest chunk of the market.  Investing in VINIX will help correct that. The MetroWest Fund isn't terrible.  It's too bad they don't offer a share class with lower fees, but you should expect to get about market returns.  I don't think you are going to see materially different net-of fee performance if you pick a lower cost fund in an IRA account.  It doesn't hurt to monitor it though after a few years and reevaluate after the balance has grown.