Question about 403K from a newbie

[curiosa]

Hi, all
I am a new poster, indeed this is my very first!!, but I have been reading regularly the old msn board.
I feel that I know the regulars, and that I own to your comments most of my financial wisdom (I should mention that I am from Italy, living in USA for about 6 years), and all my lunch-break fun. I follow the drama-posts as well as the serious discussions, and love them both!!
Anyways, I decided to post for two reasons
First o fall to thank everybody involved in creating this forum for not letting it go.......
Secondly, I have a silly question about my 403 (b). I only started to have one in 2009, but in reviewing 2010 results (from 403K (b) and rothIRA, which is a target retirement fund at Vanguard), I noticed that my 403K does not have dividends!!
My 403k is invested in mutual of America, about 80% in the equity fund and 20% in the intermediate bonds. Should the equity fund have dividends?
Honestly, it is very little money, but I am trying to learn. I discover that I am very passionate about investing. I am reading a lot (I loved "the four pillards of investing). My husband (and the reason why I stayed in USA) is American, but he never had any retirement planning (or financial sense!!) and he does not even know what I am talking about.....Additionally, few of the coworkers I asked were in the dark as well.....I just feel very stupid

Thanks a lot
new member/old affectionate lurker!!

[Deleted]

It is either a 401k or a 403b, which do you have? What fund is in the 403b/401k and what are you other options in that account?

[Deleted]

A 403b is usually the retirement vehicle for a non-profit or government agency. It defers income, much like a 401k. But it often has a very limited number of choices and high expense ratios. Is yours matched?

Anyway, are you invested in a mutual fund? I thought dividends were for individual stocks. If the holdings of a mutual fund pays dividends, don't they just go into the mutual funds return? Do you even know that they are paying dividends?

I'm no expert, though. I just don't remember ever hearing that any of my mutual investments paid a dividend even though surely some of them must have.

[Deleted]

Southern- If a mutual fund is composed of dividend paying stocks it will pay out dividends.

[curiosa]

It is a 403 (b), sorry for the k......
And, yes, it is matched.

It has limited options. I picked the "Mutual of America Equity Index Fund" that " seeks to provide investment results that correspond to the performance of the Standard & Poor's 500® Composite Stock Price Index (the S&P 500® Index). This Underlying Fund invests primarily in common stocks that are included in the S&P 500® Index."
because the cost was very low compared to other options (with similar exposure)

[curiosa]

Ah, my understanding was that (at least some) of the stock in a S&P500 do pay dividends. So I was expecting this equity fund to pay some dividends. But, maybe I am wrong

[phil5185]

stock in a S&P500 do pay dividends. So I was expecting this equity fund to pay some dividends. But, maybe I am wrong

No, you are right. The index 'return' comes from two things - the increase in share value and the dividends. (For 2010 the total return was 15.1%). About 2% to 2.5% of that return was from dividends, it should show up as additional shares in your portfolio. Eg, if you had 100 shares at the first of the year, you should have about 102 shares now.

[The J]

Phil's right -- it'll show up as additional shares in your 403b, not as a cash balance.

[curiosa]

Hi, phil
thank you for your answer, I am a big fan of yours!!

yes, indeed my target fund (at Vanguard) paid some dividends. It is possible that I just cannot find the world "dividends" on my 403 (b) account, but it seems that the last activity of the year was the contributions (from me and employer)

[curiosa]

What I mean is that there are increases in the number of units from the december contributions, and increase in total value from these contributions and from the increase in share values (this was a good year for the stock market), but I could not find dividends, and I wonder if it is possible to have a 403 plan that does not pay them

[The J]

It's all in how they display them. There may be more shares added from a dividend distribution, or they may roll them into the value of the fund. If the fund pays dividends, the 403b has to pay them. It's just a question of accounting, since the tax issues no longer exist.