Question: I just changed jobs so am trying to figure out what to do with the 403b account that was left behind. It is with an Insurance company (New York Life) so the account fees are higher (generally 2 times as high) than my Vanguard accounts where I would prefer to move it. There is a 7% surrender charge which falls to 6% year 4, and so on. Not until it's hit year 9 (7 years from now) will it be zero% penalty. They charge $30 a year in general fees, plus 1.3% for various annual fees. The account balance is approx $7800 so there is an added fee for being below $10,000. I think it would be worth it to simplify my life for the $500 or so they will charge me vs. letting the account sit there for the next 7 years where they nickel and dime me with fees that would approach that same $500. What do you think?
Thanks for your help. I love the podcasts and enjoy learning so much from you guys there at Marketplace and Marketplace Money. Keep up the good work. Regards, Kevin, San Clemente, CA
Answer: I don't understand why management locks their employees into high cost retirement accounts like this. Worse yet, a major reason behind a defined contribution savings account--like a 401(k) or a 403(B)--is that you take more risk but in return the pension is portable--it can go with you. Pension plans like this don't violate the letter of the law but I do believe they go against the spirit of the law. .
If it were me, I would pay the price and put my money where I want it. Over the long haul, I believe you'd come out ahead.