403bwise is a 501(c)(3) nonprofit organization.

The K-12 403(b) is broken.
Together we can fix it.

How to Get Out of a Bad 403(b)

A bad 403(b) is expensive

The majority of K-12 403(b) plans are high fee. That’s because the majority of the financial firms servicing the plan sell expensive, commission-based products. As the chart below demonstrates, high fees can be devastating to retirement plan balances. What should you do if you discover you have a bad 403(b) plan and want to get out of it?

By the Numbers

Total value of investment after 35 years, assuming $250 contributed monthly with an 6% average annual return:

Note: The chart above is presented for illustrative purposes only and does not reflect actual performance, or predict future results, of any investment account.

How to get out of a bad 403(b)

  1. Breathe. Help is available. 
  2. Do not beat yourself up. You didn’t know what you didn’t know. If you want to get mad, get mad at your credential program for not educating you about teacher retirement plans. Get even madder at your employer who let this happen.
  3. Locate your district’s 403(b) vendor list. This is the list of available financial companies. Ask your benefits office for this information. If you are in California, you can find your vendor list through 403bcompare. 
  4. Post your vendor list on the 403bwise Facebook Group to get feedback on your options
  5. The hope is that you have at least one of the following Green Light a.k.a. "Go” companies available: Aspire Financial Services (non advisor), CalSTRS Pension 2 (California only), Fidelity Investments (not American Fidelity), MissionSquare (formely ICMA-RC), T. Rowe Price, or Vanguard.
  6. If you don’t have any Green Light companies, there’s still hope. The following companies are known for high-cost investments but they do each offer a low-cost option (in parenthesis). Let’s call them the Yellow Light a.k.a. "Caution" option: Lincoln Investment (RetirementSolutions Participant Directed Program); PlanMember (Participant Choice); and Security Benefit (DirectInvest), You can read more about these choices here
  7. If you have no Green Light or Yellow Light companies available, see the 403bwise advocacy resources to assist you in lobbying your employer to add at least one low-cost vendor. The 403bwise Facebook Group can be helpful in this effort. Also check to see if you have a 457(b) plan available. This is another supplemental retirement plan available to teachers and school employees. It has features that can make it superior to the 403(b). If you have a 457(b) plan available, post the vendor choices on the 403bwise Facebook Group. You can read more about the 457(b) here.
  8. If you have at least one Green Light or Yellow Light company available, open an account with one of these companies. You will have to contact the company directly. Wait until the account is established before moving to step 10.
  9. Decide which investments through your chosen company you want to invest in. You can read about Asset Allocation here. Additionally, 403bwise has a free on-demand learning module on the basics of investing Get Wise to the Basics of Investing
  10. Fill out a new Salary Reduction Agreement with your employer. This is an agreement indicating how much money you want to contribute to a 403(b) each pay period, and which company you want that money to go to. Cease contributing any money to the old vendor. Direct all money to the new vendor.  
  11. Celebrate this first victory  
  12. Move money from the high-cost vendor to the new low-cost vendor. You might want to pour yourself a stiff drink before continuing. Why? Not only do the high-cost companies gloss over or ignore their high costs, it’s doubtful they told you about the surrender charges. Unfortunately, many of these companies charge a penalty for moving your money. Some charge it on a rolling basis. This means each new contribution is locked into a period of typically five to 12 years.    
  13. Contact your old vendor and ask if there is a fee for moving money to the new vendor. If there is, ask if any of the money can be moved penalty free. Also, ask when the rest of the money will be able to be moved penalty free. Fill out the forms carefully. Continue to update the 403bwise Facebook Group on your progress.
  14. If your old company charges a fee for moving, you have two choices: a) Rip off the band-aid, pay the fee, and move the money. Chalk up the experience as a life lesson; b) periodically move money that has passed out of the penalty phase. 
  15. Celebrate this second victory. Now warn your colleagues. Wait, reverse that. Warn your colleagues. Now celebrate. 


  • Avoid going through the sales agent who sold you the product (if that’s how you got into your expensive plan). He or she is going to try and talk you out of seeking better options. Instead, contact the firm at the highest level to initiate a transfer.  
  • The firm you are transferring your money to should be able to assist with the process. After all, it is in their financial interest.
  • Don’t get down on yourself for getting wrapped up in a bad 403(b). Very few colleges of education or school districts teach about the 403(b). Unfortunately, most school personnel are on their own to get wise to the 403(b). This is why 403bwise.org exists
  • Resource: How to Get Out of AXA/Equitable
  • A Roth IRA is a great option if you don't have good 403(b) vendor options because you can choose any vendor you want. It's a great idea even if you have good 403(b) vendor options. Learn more about this easy to open plan here

Special thanks to teachers Dan Dews and Crystal Duffy, author of Retirement for Teachers: How to Come Up with a Retirement Plan That Works for You, for their assitance in updating and improving this guide. 

Related Podcast:

How to Get Out of a Bad 403(b) Updated information on exiting a bad 403(b). Also, Dan shares two animal adventures.  Listen Now »