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SPerk15

Help Choosing Between Limited 403B Options

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Hello Everyone!

 

This is my first time posting and I am hoping I can get some advice and expertise. I am starting a job in a new school district in Illinois and am dismayed that my options for 403b are not ideal. I was hoping for Vanguard, Fidelity or TIAA-Creff based on a lot of posts seeming to say these are good low fee options. Here are my choices, could you all please help recommend a best possible option between these? Do one or two stand out as definitely good choices? Any stand out as ones to for sure avoid? Thanks! Here are my options:

 

Ameriprise Financial

AXA Equitable

Great American Life Insurance Company

Lincoln Investment Planning

MetLife

Thriven Financial for Lutherans

VALIC Financial Advisers

 

Thoughts?

 

Steve

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Steve

 

Take a closer look at Lincoln Investment Planning. I am not familiar with them but I believe Dave Grant one of our posters once mentioned they have some decent options-If I remember correctly. Maybe Dave will comment.

 

Also take a look at Valic. They have a non-annuity mutual funds only platform where the costs are lower. See if you have access to that. Maybe Krow will comment. The problem is you will have to deal with their financial advisors who are commissioned.

 

The others are losers. You need to do some work getting your school system to add a Fidelity or an Aspire option. Every school district should be required to offer at least one low cost non annuity-non insurance company product. I would push for this once you get established in your new job if valiv or Lincoln do not fit the bill.

 

Tony

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Congratulations and welcome to IL teaching! It takes a brave person to sign up in a state with a governor that is so clearly anti-unions.

 

Tony and Dan nailed the best advice, but let me add that if you have not started a Roth IRA with a brokerage firm, it's probably best to do that first. I suggest Schwab. Their ETFs, Funds, and Target Date funds are my favorite.

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Thank you all for your kind words and suggestions! Tony I think you are right on those two being my best options. Dan good call on seeing if I may be able to add even better options, I will call my new district's business office today or Monday.

 

Dustin I do have a Roth IRA but with Horace mann, so the fees are more than I should be paying, should I put that into a schwab Roth instead?

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I do have a Roth IRA but with Horace mann, so the fees are more than I should be paying, should I put that into a schwab Roth instead?

 

 

You need to transfer that Roth to Vanguard, a Fidelity Index fund or a Schwab index account asap. Its easy and you can do it now. Why wait.

 

Tony

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Yep, talk to Chuck (Schwab) about transferring. One of the benefits of Schwab is that if you use their low cost mutual funds and ETFs they're commission-free!

 

While you're there, look into their banking services if you're stuck in any of the big national well-known banks out there. Schwab has no fees, no minimums, reimburses all ATM fees, and even pays a little interest.

 

Tell them my referral code if you're feelin like it:

REFER2GI7D

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I agree with Tony that you should only bother to check out Lincoln and VALIC. They both have 403b plans that are mutual fund based, as well as their very expensive annuity based 403b plans. Unfortunately their MF 403b plans are not low cost, with annual expenses around 1.0%. Certainly your school district should add a low cost providor to their list—Fidelity would be an outstanding addition, and Aspire would be a good second choice.

As for deciding whether to start with either Lincoln or VALIC, I think there are several things to consider. How much do you expect to contribute to your 403b and IRA retirement accounts? Do you have a spouse with a decent 401k or 403b that she can contribute to? An unemployed spouse can establish an IRA based on the employed spouse’s income. Sometimes beginning teachers can only afford to put 11k per year towards retirement and funding the IRAs is the best choice because you choose the providor, a low cost one of course.
I see from a recent post that you have an IRA with Horace Mann. They are expensive (high expense ratio and possibly load funds) and you should move it to a low cost providor such as Vanguard, Fidelity, Schwab. The Schwab OneSource mutual funds and ETFs are very low cost and are a good way to go. However I and most of the posters here and on the Boglehead forum prefer Vanguard (or Fidelity) as a vendor for our low cost retirement accounts. Moving an IRA from one providor to another is fairly straightforward, and we can give you some tips.
Another consideration about using an expensive 403b is that change is afoot in the 403b world. Your district and others will receive increasing pressure to provide lower cost 403b plans. When the better plans arrive, you will be able to transfer your account into it. Another possibility is that you could change districts, which would allow you to start contributing to a lower cost 403b and to roll over the old 403b into the new 403b (or into an IRA).
If you want to learn more about what the Lincoln and VALIC plans look like, let us know. 403bcompare.com has information on them. You would need to confirm the 403compare info with the rep.

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My ears were burning, so I thought I'd add a response. Thanks Tony!

 

SPerk15 - welcome to teaching in IL. You should be aware that you're entering on the Tier 2 program, so your retirement benefits are far different than teachers would started prior to January 2011. With that in mind, you need to start saving for retirement earlier and more aggressively than you would have otherwise.

 

As far as 403b vendors go, krow36 nailed it. I have nothing more to add. Lincoln will allow you to do Vanguard Target Date Retirement funds so you can get everything you need (investments and management fees) for under 1%. It's not the cheapest vendor in the marketplace, but the best on your list right now.

 

Before that, as your income will be lower as you start and so will your tax bracket, I would look to start with a Roth IRA. (I'll caveat by saying I don't know what your household income looks like, so if you have a spouse who is killing it, then this advice may not be appropriate). Open a Roth IRA and either max it out or invest 6% of your income (9% is going to your pension, so this will get you to a good savings rate of 15%). Open one at Vanguard and automate the investments. Once you max it out, then look at the 403(b)s in your district. Until you get to an income that puts you in a 25% tax bracket, I would stick with a Roth. Choose a target date fund again so it rebalances itself and stays aggressive - maybe looking out to the 2050-2060 ranges.

 

You've got a lot of time ahead of you to save. Even if you can't do much now, start with something. You'll be amazed at how fast and far it will grow.

 

(I cover the basics for teachers in a free book on my website - www.financeforteachers.com "Dollars and Sense for Teachers" if you care to read the why behind these responses.)

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Hi Sperk,

I also welcome you to this site. You are very lucky to find and value this site. 99% of educators hardly ever think about finding good information online.

 

I just want to add on to your reading list that Dave started as well:

 

1. Read any book by John Bogle, founder of Vanguard, especially his famous "Little Book on Common Sense Investing." He shows you how indexing works from the inside out.

2. His followers also wrote a book called "Bogleheads Guide to Investing," by Taylor Larimore, et. al.

3. Paul Merriman, also an indexing follower has one or two free books on his website. One is how to evaluate a financial adviser "Get Smart or Get Screwed," highly recommended IF you think you need an adviser.

 

You can google these books and they are on Amazon. Merriman has a website to get his free books.

 

If you read just one of the above books, you will be on your way to being financial secure for the rest of your life.

 

Good luck,

Steve

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SPerk 15

 

Everything is relative. To me 1% expense fee sounds awful now but years ago I would have killed for it in my choices. Now my average expense ratio is one tenth of that. I have made progress, We have made progress. You can make progress! Just don't fall into the teacher group think that if the school system offers it ,they must know what they are doing; so it must be good. Investing is a different ballgame than health insurance or dental insurance benefits.

 

 

I hate recommending insurance companies like Valic, but sometimes you have to go with the best you have in order to start your saving journey until something better comes along. However if you are planning on saving less than $6,500 a year why not do what has been suggested by going the Roth route? If you are married your spouse can also do a Roth if he/she works. You can go Vanguard that way.

 

The important thing is to follow-up. Push for better choices and keeping saving one way or another. Also always listen to Steve Schullo's advice. He helped me see the light on multiple occasions.

 

Tony

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Tony, I just noticed you said "If you are married your spouse can also do a Roth if he/she works." above. Actually an unemployed spouse can use the employed spouse's income to set up an IRA if they are married and file their income tax jointly (MFJ). It would be a shame not to make use of this rule.

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Thanks Krow

 

 

 

I think in the back of my mind I knew that . I just assumed everybody's wife works outside the home in the modern world.

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Hello...I posted this list on another spot but think it fits better here. I am so grateful for all the good...free!!!...advice. If someone has time, could I ask for input on this list of choices from my district? (OMNI offerings) I am going to encourage the addition of TIAA-Cref and Aspire. But for now, this is it. Thanks in advance.

 

 

 

American Century Services LLC


AXA

Equitable Life Insurance Company

Foresters Financial (First Investors)

MetLife


Oppenheimer Shareholder Svcs.

PlanMember Services Corp.

RiverSource Life Insurance Co of NY

Security Benefit


The Legend Group/ADSERV

Voya Financial (ING Natl NY)

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Have you read this thread on the Security Benefit Direct Invest 403b?

http://board.403bwise.com/index.php?showtopic=6120&do=findComment&comment=33634

Also this thread adds some interesting information on the probable origins of Direct Invest.

http://board.403bwise.com/index.php?showtopic=6184&do=findComment&comment=33805

 

I think you should certainly work to get Fidelity, Vanguard or TIAA added to your district's vendor list. In the main time you might consider SB's Direct Invest's Vanguard index funds.

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