Tax Sheltered Retirement Accounts

Let's talk a little more about 403b TSA investing. For the initiate, a 403b is a Tax Sheltered retirement account generally available to Educational institution and Non-profit Hospital employees. There may some additional employers available as well. 403b is the section of the IRS code that provides for this vehicle.

When investing in 403b's, your employing school district, College, or Non-Profit Hospital generally has available to you lists of "approved" 403b companies. Some of these are Insurance company based Annuities, and others are more traditional mutual fund companies. You can often approach these companies online without need of a broker/agent's services. By mentioning any company here, I am not endorsing or advocating for these companies, rather I am simply attempting to make you aware of the types of companies available. This writer has a natural prejudice in favor mutual fund based investing. Of course if you are very conservative and don't want to risk capital, then perhaps an Annuity is for you. My problem with Annuities are the Annuity charges and loads which serve to reduce the money available to work for you.

Not all mutal fund companies are equal partners for the purpose of 403b investing. Some companies such as Vanguard, Fidelity and USAA generally can provide you with low administrative cost and no-load investments and can be setup online. Some mutual fund companies tend to had high administrative charges as well as some have heavy loads. Check and get answers to those questions before investing.

Also before investing, one should research the track record of your mutual fund managers. While past successful experience doesn't predict the future, a dismal experience might be instructive.

Remember if your first choice turns out wrong, through a mechanism call a 90-24 transfer between 403b companies, will permit you to move your assets (roll-over) without fear of a tax consequence. Always check with your tax advisor before moving money.

And that's all for today. Please feel free to post your questions.

The 403b Horror Show

I recently listened to a well educated teacher who had been investing in one life insurance based Annuity 403b program. He and his wife have been maxing out their retirement contributions, but they sure haven't been doing their homework.

Holy Cow! Imagine paying front end loads (5%) on the annuity, and not having any alternatives for self directing their investments. Today they are achieving "guaranteed" returns of around 3%. They couldn't figure out how to roll this into other vehicles without taking a distribution. Their commission based Financial Advisor sure won't tell them.

Imagine not knowing that you can roll your 403b investment from one vehicle to another with no tax consequences. Of course the danger of the Annuity investment is the penalty on withdrawal as well as a possible tail end load!

Teachers of America, beware, your 403b investments need to be carefully managed. Please research and educate yourself before committing 25 years of retirement investments into a 3% guaranteed return.

The author has managed 403b programs for public schools and colleges and never ceases to be amazed at the greed of many so called Financial Advisors. Imagine one College professor who was talked into rolling his 403b from investment A (an Annuity) into investment B... another annuity! and then seeing his first statement in his new investment wondering where 6 1/2% of his investment principal disappeared to! No one had warned or advised him of the significant front AND back end load that he had committed to.

Investor Risk Management.

Investing successfully while managing risk is everyone's dream. I hope to assist in this discussion with an open ended blog for investors.

By way of background, the author of this blog has degrees in management and holds the professional Risk Management designation of ARM. I hope to help you by using standard risk evaluation tools so we can all end up in the SUCCESS column.

Above all else, there are no sure fire deals and there can be no room for ethical lapses. Let's work together to assure well managed risk and financial success.