403(b) Investment Options: Annuities, Mutual Funds, and What to Look For
The two types of 403(b) investments, named provider comparison, and the specific products to favour or avoid. Updated 17 April 2026.
The two types of 403(b) investment
403(b)(1) Annuity contracts
Insurance company products. Include variable, fixed, and indexed annuities. Carry M&E charges, surrender periods, and embedded insurance costs. Most K-12 school district plans use this type. AXA, Voya, Lincoln, VALIC, and Equitable are common providers.
403(b)(7) Custodial accounts
Mutual funds held at a bank or brokerage custodian. No M&E charges, no surrender periods. Like owning mutual funds in a regular account but with 403(b) tax treatment. Vanguard, Fidelity, and Schwab operate these. TIAA also offers mutual fund custodial accounts.
How to tell which you have: Log into your provider account and look for the word "annuity" or check whether your funds have surrender charges. If you see a surrender schedule, you have an annuity contract. If you can move money freely with no penalty, you likely have a custodial account.
Named provider comparison
All-in annual cost estimates. Actual figures vary by specific product and plan structure. Always check your contract or prospectus for exact costs.
| Provider | Type | All-in fee range | Surrender period | Notes |
|---|---|---|---|---|
| AXA Equitable | Annuity (403(b)(1)) | 1.6% to 2.8% | 7-10 years | Variable annuity. High M&E charges. Heavily marketed to K-12 teachers. |
| Voya Financial | Annuity (403(b)(1)) | 1.4% to 2.2% | 5-8 years | Group annuity contracts. Some group plans have lower costs; check your specific plan. |
| Lincoln Financial | Annuity (403(b)(1)) | 1.5% to 2.5% | 7-9 years | Variable annuity with optional income riders (add cost). Long surrender periods. |
| VALIC (Corebridge) | Annuity (403(b)(1)) | 1.3% to 2.3% | 7-9 years | AIG subsidiary. Large K-12 and healthcare presence. Some mutual fund options in newer contracts. |
| Equitable Financial | Annuity (403(b)(1)) | 1.5% to 2.5% | 7-10 years | Formerly AXA. Maintains large K-12 school district presence. |
| Horace Mann | Annuity (403(b)(1)) | 1.2% to 2.0% | 5-7 years | Teacher-targeted marketing. Annuity products. Some plans have improved but check your contract. |
| TIAA (mutual fund window) | Mutual fund (403(b)(7)) | 0.1% to 0.8% | None on mutual funds | Wide range depending on product. Institutional funds (CREF Stock) are competitive. TIAA Traditional is different (see below). |
| Vanguard | Mutual fund (403(b)(7)) | 0.03% to 0.2% | None | Low-cost index and target-date funds. Available in many university and large hospital plans. |
| Fidelity | Mutual fund (403(b)(7)) | 0.03% to 0.5% | None | Zero-expense index funds available. Strong platform. Increasingly common in 403(b) plans. |
| Schwab | Mutual fund (403(b)(7)) | 0.03% to 0.5% | None | Low-cost index funds. Less common in 403(b) plans than Fidelity or Vanguard. |
What to favour
- Index funds with expense ratios under 0.2%
- Target-date funds with total expense ratios under 0.3%
- Institutional share classes if offered (lower than retail)
- Any Vanguard, Fidelity, or Schwab fund option in the plan
- TIAA institutional equity funds (CREF Stock, TIAA-CREF equity index)
- The mutual fund window if your plan offers one alongside annuities
What to avoid
- Variable annuities with M&E charges above 0.5%
- Funds with 12b-1 fees over 0.25%
- Surrender periods longer than 3 years
- Any product where the rep receives a commission
- Riders you did not specifically choose (add to all-in cost)
- Products you cannot clearly explain the total annual cost of
Special case: TIAA Traditional Annuity
TIAA Traditional is not the same as a variable annuity. It is a fixed annuity with a minimum guaranteed interest rate (currently around 3%) and no expense ratio. It is effectively a low-risk, low-volatility bond substitute.
The tradeoff: TIAA Traditional has liquidity restrictions. You cannot move the full balance immediately; withdrawals are typically spread over 9 payment periods (lump sum options vary by plan). This makes it appropriate for the bond/stable-value portion of a portfolio, not the entire account.
Most university participants should hold TIAA Traditional alongside CREF Stock (TIAA equity mutual fund) for a complete allocation. The TIAA mutual fund window also offers Vanguard index funds in many university plans.
The mutual fund window question
Many 403(b) plans that appear to be annuity-only actually offer a mutual fund window alongside. This is a critically underused option. Ask HR specifically: "Does my plan have a 403(b)(7) mutual fund option or a mutual fund window alongside the annuity provider?" If the answer is yes, you may be able to move your balance to index funds immediately, potentially avoiding future surrender charges on new contributions.