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PurpleReign

403b Investment Advice

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I’ve maxed out my 457 plan and will max out my Roth IRA this year.  In addition, I’m thinking about investing in a 403b.  I’m reluctant to invest with the high fee annuity companies such as Voya, AXA, Met Life, Etc. but I have another investment option—this company charges a flat fee of .80 basis points, no surrender fees and offers several Vanguard products.  Would you invest?

(Funds & expenses)

 Vanguard 500 index/Adm—.04%

 Vanguard equity income—.26%

Vanguard S&P 500 index—.14%

Vanguard Mid-Cap Growth Index—.07%

Vanguard  Small-cap growth index—.19%

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Morning Purple Reigh,

I cringe at the 80 bps. Depends on your allocation among equities and how much in % allocated to fixed in your 457b plan. 

Steve

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I agree with Steve. 80 bps is too much. I would avoid it if I could . Are you sure its just a one time fee?  Is it a yearly fee? Or is there a yearly administrative fee on top of that? These companies are good at excluding information in order to make the sale. You may have more fees than you think.. What is the name of this company?

Are you sure a better option is not available in your 403b?  Please list your complete provider list. 

Sounds you are doing a terrific job saving.

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The name of the company I referenced was Holistic Planners. I'm not sure that it's a one-time fee.  Overall, I'm trying to save as much as possible, decrease expenses and fund the accounts that make sense. 

_______

My other providers are:

Axa/Equitable 

Lincoln (Annuity)

Met-Life

New York Life

Valic 

Voya/ ING

Thank you for taking the time to provide feedback!

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Wow, as usual awful choices. You deserve better. Seems like you have found a work around with the 457 and Roth. Perhaps you can further diversify by just investing in a taxable index fund with Vanguard? You would definitely  get very low costs and no middleman hassle.

Tony

 

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Can you give us a link to Holistic Planners' website? 

Whether it makes sense to use a 403b vendor that adds 80 basis points or not should take into consideration your personal income tax situation. Are you in a high income tax bracket where a tax deferral is especially desirable, perhaps due to a spouse with high income?

Another consideration is how close to retirement are you? Are you considering changing employers? After separation from your employer, you can roll the high-fee account into a low-fee IRA. High fees for a shorter period of time, say 5 yrs or so, might be considered tolerable if there was no other option for tax-deferral.  

On the other hand, I agree with Tony that a Vanguard taxable account using Total Stock Mkt Index and Total Int'l Stock Mkt Index funds is a very good way to save for retirement.  

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Here is a link to the Holistic Planners website-- http://www.holisticplanners.com/

____

Although I might be changing employers within the next 3 years, I am not in a high income tax bracket.  As a result, I will pursue investing in Vanguard's Total International Stock Market Index fund, my investment portfolio is very underweight in International Stock.

Thanks again!

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I second everything Krow is saying.

Without doing the math myself or fully knowing your personal details, my gut tells me the 0.8% fee is going to make it a close call.

FYI, I believe Lincoln offers a low cost, self-directed plan in certain areas of the country. 

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Thanks for the Holistic Planners website. They are an unusual 403b vender, being a fee-only financial planning/management outfit as far as I can tell. Their website is broken when I try to look at pages beyond than the home page. I’m a little suspicious. Are you currently using them for financial services?

Are you sure this is a 403b plan that is on your district’s vendor list? Is that 80 basis point fee an advisory fee? Are there any other fees?  Can you copy and paste the complete list of vendors on your district’s 403b list? It’s not always easy to spot a low-fee option.

Since you don’t have an especially great need to lower your taxable income by deferring more of your salary, I think a taxable account for retirement savings with Vanguard might make more sense than a 403b with Holistic Planners. You can buy Vanguard’s Total Int’l Stock Index fund, ER = 0.11% if your balance is >10k, and it’s considered to be very tax efficient in a taxable account (as is Total Stock Mkt Index). A taxable account dedicated to retirement is very useful in the years between retirement and the start of social security.

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You know, we don't often suggest taxable accounts as alternatives here but maybe we should. They do offer some advantages .403b investing is only good under the right circumstances. Same for 457B investments. Roth IRAs are O.K but have limitations to amount you can invest. For a time there when I was pissed off with what I was going through with bad retirement saving choices and dishonest sharks I decided to save in a taxable account for a while until things got better. That money did well.I did improve our 403b choices in our district but it was so aggravating to deal with all the financial ignorance . It was like moving a damn mountain . So when I saved in taxable accounts  I was able to pick any fund I wanted, at any company I wanted, at any fee I wanted. It makes sense sometimes to just forget the 403b until school systems get their act together by limiting their choices to just a few good low cost options . Its really a shame young people today have to still jump through hoops of fire trying to figure out where to park their money for retirement like  I had to  for 30 years ago all the while wondering if I was being ripped off. And yes for half my career I was being ripped off until I got wise. 

I only see these as viable choices:

Vanguard (if you can get them)

State 457 b one vendor plans that actually look after their state employees instead of allowing a multi vendor free for all to confuse them.Why teachers can qualify for them in some states but not others is beyond me.

Fidelity (index Funds only)

Security Benefit (Direct Invest Only)

Lincoln Financial Planning (self direct only)

Aspire (self direct only)

TIAA (lower cost funds only)

Perhaps T Rowe Price  (but hardly anyone seems to have access to them in a 403b plan)

The others are a mess. They are either insurance products or are laden with all sorts of fees and surrender charges and have no business being offered to teachers. Yes teachers were meant to serve mankind, mainly children and young adults in the educational setting. We were not meant to exist to fund other people's retirement ,vacation needs and bonus needs in such a dishonest and complex way. What these companies are doing is the worst kind of thievery.

I am sorry but I am on my second glass of wine and I just think its pathetic what is being done to teachers when it comes to 403b plans. I hurt for all of you.

I know I know, I am screaming at the choir!!!

Tony

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1 hour ago, PurpleReign said:

No, I’m not currently using Holistic Planners for financial services.  

2016 403b Vendor Listing.pdf

PurpleReign, can you copy the list and then paste it here? The pdf doesn't work--says we aren't allowed to open it. 

Tony and I both value our taxable account, used for post retirement needs. Something to think about.

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Purple Reign

ICMA-RC (457)  is the same group that does our 457b choices in Virginia. It is located in D.C.  Your 457 plan is loaded with Vanguard funds.  But you maxed it out. I think you should consider a taxable account at this point. Maybe Lincoln self direct  is your best option if you insist on investing further in a 403b and if its available to you. 

Let us know what you decide. I think we covered your best options.

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