Should I get out of my 403(b)?

I am a teacher and signed up for a 403(b) when I first started teaching 13 years ago. I did no research and did not realize that their were multiple companies affiliated with my school. I signed up for AXA (ModeratePlus Allocation) since they were the only ones to actively seek out new customers. Since then, I have taken $125 out of each bi-weekly pay check. That's $3,250/year and about $39,000 total. My total account value as of today is just under $43,000. Am I wrong to be upset about only $4,000 worth of gains over the past 12+ years? I'm no expert, but that seems ridiculously low. My question is not whether I should leave AXA or not, because I feel like that is a given, but instead whether I should roll over the $42K into another 403(b), an IRA, Roth IRA, or something else.

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October 2016
75% of people found this answer helpful

Your question is timely. This article just came out yesterday and is almost exactly like your situation. I'd encourage you to give it a read.

The long and short of it is, you are likely being taken advantage of from a fee-perspective and this has likely had a huge impact on your low account growth. 

As to whether you should roll to another 403(b), or an IRA, or even convert to a Roth IRA, there are multiple things to consider. 

- There is creditor-protection on employer based plans that can become limited if rolled into an IRA. Probably not top-of-mind, but also not something that should be wholly ignored. 

- Depending on your income and your other assets, you may want to consider converting a portion of those assets. You likely wouldn't want to convert all of it in one single year, as the conversion is considered taxable income. However, a phased-in conversion can and often times does make sense. If interested in this, I would encourage you to talk to a financial planner or tax advisor. 

- Consider fees. Not all 403(b)'s are made equal and not all IRA's are made equal. Example, a compounded 1% decrease in return (via fees, for example) can result in a decrease of approximately 25% of actual dollars. Fees are inevitable, but also somewhat controllable. That isn't a message to find the least expensive investment option or least expensive investment advisor, but rather to make sure that the fees you are paying are actually justified.

October 2016