Key 403(b) Plan Resources
April 18, 2023
By Barbara O'Neill, CFP®, AFC®
Successful 403(b) investing requires knowledge of plan characteristics (e.g., investment options, expense ratios, and fee structure), tax implications, enrollment process steps, and more. Where do plan participants get the information that they need? They use 403(b) plan resources.
403(b) plan resources are available from numerous places in a variety of formats. This post describes ten common sources of 403(b) plan information: 1. Blogs, 2. Books, 3. Calculators, 4. Custodians of 403(b) accounts (a.k.a., vendors), 5. Government agencies, 6. Podcasts, 7. Prospectuses and annual reports, 8. Seminars, 9. Webinars and video conferences, and 10. Websites.
It is wise to obtain information from multiple sources to confirm its accuracy. For example, plan participants might attend an in-person seminar and a webinar and read several blog posts about 403(b)s. Doing this will help identify possible misinformation and reinforce correct information that is presented in several ways.
This post briefly describes each of the above types of 403(b) resources, research results, three “need to know” facts, and six take-away action steps conclude this discussion.
Blogs
The best-known and most comprehensive 403(b) blog is arguably Dan’s Blog [i.e., Dan Otter, 403bwise Executive Director] on the 403bwise website. Full disclosure: my monthly guest posts are published there also. The posts include an eclectic array of topics including 403(b) fees, high-cost vendors, federal and state laws affecting 403(b) plans (e.g., the SECURE 2.0 Act), and actions taken by school districts and regulators. Several “one off” blog posts can also be found online using the search term “blog posts about 403(b) plans.”
Books
403(b) plans are typically included in books about retirement savings plans, in general, particularly 401(k)s. These books can be found online using the search term “books about 403(b) plans.” The few books that are written solely about 403(b)s appear designed for plan sponsors to guide them through plan administrative and compliance requirements. For example, 403(b) Essentials for the ERISA Plan (Klein, 2017).
A useful book for plan participants that includes information about 403(b) plans is Teachers Can Be Financially Fit (2020) by Ferrarini et al. The book describes how even people with relatively modest salaries, such as teachers and other 403(b) participants, can build wealth over time.
A second book that presents targeted financial information for teachers is Teach and Retire Rich by Dan Otter. This book also describes how teachers can retire with six- or even seven-figure sums by combining a pension with 403(b) and 457(b) defined contribution plans. It also describes predatory practices used to pitch high-cost investment products.
Calculators
Experts recommend trying at least three financial calculators because their data inputs and assumptions can vary. Look for similarities and differences in data output and the range of responses.
Calculators worth trying include the Bankrate 403(b) Savings Calculator, the CalcXM What May My 403(b) Plan Be Worth? calculator, and the Money Help Center What is My 403(b) Plan Worth? calculator. For additional options, use the search term “403(b) plan calculators.”
Key inputs for 403(b) calculators involve current age, expected age at retirement, assumed return on 403(b) plan investments, annual savings amount, marginal tax bracket, and amount of 403(b) savings to date.
Custodians
Plan custodians provide periodic statements with account balances and online access for real time account information and transactions. Some vendors also provide educational webinars and/or seminars at workplaces and complimentary “wealth managers” for participants with large accounts.
Beware of “hard sells” of high-cost financial products by commissioned sales representatives.
Government Agencies
The IRS has a comprehensive list of FAQs regarding 403(b) plans, including information about participation requirements, contribution limits, plan investments, and loan and distributions. Tax information can also be found in IRS Publication 571, Tax-Sheltered Annuity Plans.
The U.S. Securities and Exchange Commission also has a publication, Retirement Investing Through 403(b) and 457(b) Plans, and the General Accounting Office (GAO) recently published a research report, 403(b) Investment Options, Fees, and Other Characteristics Varied.
Podcasts
The best-known and most comprehensive 403(b) podcast is Teach and Retire Rich featuring Dan Otter and Scott Dauenhauer, CFP® from 403(b)wise. New episodes drop weekly and over 250 previous episodes are archived. Another 403bwise limited series podcast is Learned By Being Burned, which explains problems associated with 403(b)s for K-12 schools and how plan participants are advocating for better plan options.
Prospectuses and Annual Reports
Both annuities and mutual funds used in 403(b) plans have prospectuses.
A prospectus is a legal document that summarizes the objectives, fees, performance history, risks, management, and investment policies of an investment. Prospectuses are typically available on 403(b) vendor websites or may be mailed upon request.
Annual reports contain information about the finances and performance of an investment during the time period covered in the report, including a summary of its investment portfolio.
Seminars
In addition to plan custodian programs, seminars about 403(b) plans may be available through employer HR departments, community adult education programs (e.g., community colleges, Cooperative Extension, and public libraries), and professional associations and unions for teachers (e.g., state or local affiliates of the National Education Association).
Webinars and Video Conferences
Each month, 403bwise hosts a one-hour videoconference called Office Hours where participants can log on with questions about their 403(b) plans and receive information and answers from Dan and Scott. Dates and times for upcoming Office Hours sessions can be found in the Events section of the 403bwise website.
An online search of “ 403(b) plan webinars” found several designed for plan sponsors. For plan participants, Next Gen Personal Finance converted a previously-recorded webinar about 403(b) plans into a 50-minute podcast that describes hidden fees and other 403(b) pitfalls.
Websites
Every 403(b) plan participant’s first stop should be https://403bwise.org/. Other useful websites, beyond those listed above, include 403bCompare provided by CALSTRS, Vanguard 403(b) Services from Vanguard, and other websites found using the search term “403(b) websites.” The 2023 Forbes article, 403(b) Plans Help Non-Profit Employees Save for Retirement, is also a useful primer.
Research Results
A study by Bayer et al. found a positive association between workplace financial education and retirement plan savings. They found that both participation in, and contributions to, voluntary savings plans (e.g., a 403(b) plan) are significantly higher when employers offer retirement seminars. In addition, the effect is typically much stronger for non-highly compensated employees than for highly compensated employees.
Hauff et al. studied whether fact-related or narrative (i.e., story-telling) financial information results in more informed choices about retirement savings. The research found strong support for financial messages in a narrative format, which result in stronger emotive responses and purchase intention. Financial messages in a narrative format have positive effects on processing financial information.
Three (More) Things
- The GAO report, noted above, found that large 403(b) plans had lower administrative fees than smaller ones. It cautioned that even slightly higher fees can erode participants’ retirement savings over time.
- The private 403(b)wise Facebook group, with 11,500+ members, is a good place to ask questions about 403(b)-related topics such as how to exit a high-cost 403(b) plan.
- Good records for 403(b) accounts are essential when information is needed quickly. Take the time to organize paper and/or digital records and set up online account access with two-factor authentication.
Six Smart Strategies
No. 1: Do Due Diligence — Take out a highlighter and carefully read 403(b) documents provided by your employer and plan vendors. Pay particular attention to information related to past investment performance, fees, and expense ratios.
No. 2: Follow The Rule of Three — Use at least three paper or online financial calculators to calculate the potential growth of 403(b) plan savings or how long savings might last.
No. 3: Organize a 403(b) File — Save account statements, annuity contracts, the most recent prospectus and annual report, beneficiary designation forms, and important vendor correspondence.
No. 4: Start a Study Group — Consider organizing an informal group of like-minded colleagues who are interested in learning more about 403(b)s and/or lobbying administrators for low-fee investments.
No. 5: Pay It Forward — Share the information you have collected and the insights you have gained with new plan participants who are starting their 403(b) plan journey. They will appreciate your help and expertise.
No. 6: Make. Decisions. Slowly. — Gather the information you need from multiple sources. Be wary of overly “helpful” salespeople who show up uninvited to a classroom or employee lounge in an effort to solicit business.
In Summary
No 403(b) plan participant should invest alone. There are dozens of helpful, unbiased sources of information. Take the time to get the information needed to make key decisions to secure your future financial security.
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Dr. O'Neill is the owner/CEO of Money Talk: Financial Planning Seminars and Publications where she writes, speaks, and reviews content about personal finance. She is a Distinguished Professor Emeritus at Rutgers University and a long-time 403(b) plan participant.