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matt rector

questions to ask my plan manager

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Hello

How do I know if my 403B is bad in terms of fees? I was going to email the "plan manager" for my Security Benefit 403B, but I don't know what questions to ask him to find out good information. Is there a generic list of questions to ask to find out if my fees are too high? Thank you. 

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1 hour ago, matt rector said:

Hello

How do I know if my 403B is bad in terms of fees? I was going to email the "plan manager" for my Security Benefit 403B, but I don't know what questions to ask him to find out good information. Is there a generic list of questions to ask to find out if my fees are too high? Thank you. 

Hi Matt       Welcome to the forum. 

https://403bwise.com/pdf/403bwise_Advisor_Questionnaire.pdf  Mostly likely they will say that "the company pays the costs, not you." Or "the fees are paid for by the growth of your investments so you are getting great value." It's bull! They are extremely capable of evading questions. Security Benefit 403b is a terrible plan. However, if you can enroll in their NEA self-directed plan, I am told that the fees are very low and they provide decent options to construct a low-cost diversified portfolio. Low-cost employer-sponsored plan ranges from .25% to .50%. Over 1.0% is too expensive. 

Here is a discussion about NEA self-directed: 

Let us know what happened. We are here to help, 

Steve

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I'm reinforcing Steve's answer.  If you are with any Security Benefit Product chances are 100%  you are paying too much. You do not need to ask anybody anything.

As Steve has pointed out, your only good choice with Security Benefit will be the NEA Direct Invest option. Plenty has been written about it. Follow the link

If you need help contact us. 

 

Tony

 

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If I were you, I’d cancel the meeting with the Security Benefit “plan advisor”, and spend some time learning about Security Benefit plans, their Direct Invest option, and possibly other vendors you might be able to use instead of SB.

As Steve and Tony have mentioned, SB salespersons sell very expensive 403b plans to K-12 employees. The fees on these plans are usually over 1% in addition to each fund having an expense ratio (ER) of 1% or more. In addition if there’s an “advisor” fee, that can add even more cost.

The CA teachers pension system (CalSTRS) runs a website called 403bcompare.com and any 403b product sold to CA teachers must register the product and disclose the fees on this site. Here are the SB products offered in CA, and these generic plans are also offered in other states: https://www.403bcompare.com/vendors/1022#/productlist  As you can see, there are several annuity based products and several mutual fund based options. Are you signed up with one of these options? You can check out the fees as well as the mutual funds (if any) offered and each fund's ER.

As has been mentioned, SB and NEA (the national teachers union) have a very low-cost option called NEA Direct Invest. This option is internet (and phone and email) based, and does not involve any local rep. The local rep will not mention NEA Direct Invest because he/she and SB do not make any money on it. Ask about it on this forum, don't ask a local rep.

NEA Direct Invest is the ONLY SB plan we recommend. You should realize that you can stop your contributions to your expensive SB plan and sign up for the SB DI plan. This might take a few weeks to get set up and get contributions started again. Then you can transfer your current high cost SB balance to the low cost DI plan.

You should find out what other 403b vendors your school district allows. It’s also possible that the district offers 457 plans that are low cost. There should be a 457 vendor list also. Many states offer low cost 457 plans to their k-12 teachers. What state are you in?

I repeat, you will learn a lot more about your 403b options here than by meeting with the rep. Ask questions here and you’ll get answers from K-12 teachers (active and retired) that have gone through what you are experiencing. Bash Dash and Ed are currently contributing to SB DI. Welcome to the forum!

 

 

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Rough rule of thumb for how to evaluate your plans: it better have low cost total market index funds and as far as costs:

Elite Plans

0.06% for a three fund portfolio.

0.15% for a one fund portfolio.

Acceptable Plan

0.2% for a three fund portfolio.

0.3% for a one fund portfolio.

Unacceptable Plan

Anything more costly.

Other Comments

You might want to read my Investing 101 page to get a basic understanding.

You might want to read about the best plans I’ve studied that are offered in Florida (proxy for the nation).

I’m enrolled in Security Benefit’s NEA DirectInvest; it is an elite plan and I love it  I documented it here. I can answer any questions you have and help you through it.

I agree you should identify all of your 403b and 457b options.

 

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If Ed means that if the “Unacceptable” fund expense (expense ratio or ER) is more than 0.2% to 0.3%, that you should work to get a lower-cost vendor, then I agree. If Ed means that plans with no ERs lower than 0.3% should never be used, then I do not agree.

In the for-profit 401k world, the average ER is somewhere between 0.7% and 1.0%. These plans are certainly not ideal, but there are good reasons for contributing to them. Yes, a significant percentage of the investment return is lost to fees. However there is a benefit in lowering current taxable income by deferring taxation until distribution in retirement in a lower income tax bracket. When the employee changes employers, the 401k can be rolled into a very low-cost IRA (or into a lower-cost 401k at a new employer). These advantages apply to expensive 403b plans as well as to 401k plans. https://www.usatoday.com/story/money/markets/2018/02/08/ask-a-fool-how-much-does-my-401k-cost/110041408/ 

In the K-12 403b world, there are 2 basic categories of plans, those that are annuity-based and those that are “custodial accounts” and are mutual fund based. The annuity-based plans usually have fees in the 2 to 3% range and should certainly be avoided. I believe that a K-12 403b mutual fund based plan with fees as high as 1% should be considered usable. Certainly working to add a low-cost internet-based vendor should be done at the same time. And if there's a super-low cost option available such as NEA Direct Invest, Fidelity or Vanguard, it's a no-brainer to use it. You do not need a face to face with a 403b salesperson selling a high-cost plan.  

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36 minutes ago, krow36 said:

If Ed means that if the “Unacceptable” fund expense (expense ratio or ER) is more than 0.2% to 0.3%, that you should work to get a lower-cost vendor, then I agree.

That’s exactly what I meant, thanks for the clarification.

Just how high the expenses could be before you’re better off contributing to a taxable account is a complicated question. That depends on the number of years you expect to remain in the plan, current tax bracket, expected tax bracket in retirement, possible tax code changes, and a bunch of other factors. Others have done the calculations and made spreadsheets for it.

Personally, I feel comfortable paying around 1% before I feel compelled to perform the calculations. Thankfully, I’m paying around 0.06% instead 😀

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43 minutes ago, krow36 said:

You do not need a face to face with a 403b salesperson selling a high-cost plan.  

Just wanted to add emphasis...

Not only do you not need them, but they’re bad for your financial health. Even in the rare case where they aren’t exploíting you, it still costs a lot of money to pay for a professional. On top of that, we could teach you everything you need to know in an afternoon. 

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Thanks for all your advice---I will look into the NEA self directed plan, I'm not sure my school district will allow me to enroll. I am a teacher in Vermont---I will look into it and be in touch! Thank you. 

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45 minutes ago, matt rector said:

I will look into the NEA self directed plan, I'm not sure my school district will allow me to enroll.

It is my understanding that Security Benefit offers DirectInvest in all of their plans. You can read on my site about how I was told I wasn’t allowed to enroll...they were either lying or misinformed. So don’t take no for an answer. 

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1 hour ago, matt rector said:

Thanks for all your advice---I will look into the NEA self directed plan, I'm not sure my school district will allow me to enroll. I am a teacher in Vermont---I will look into it and be in touch! Thank you. 

I would recommend that you not ask your district about the NEA Direct Invest plan. They should not be involved in which of Security Benefit's plan you choose. That is between you and Security Benefit. Since the local SB rep is not involved, your first step should be to go to the Security Benefit NEA Direct Invest website, fill out the application form and send it in. Usually the district and the district's Third Party Administrator will not interfere with your using NEA Direct Invest. The resistance that Ed encountered with his FL district is unusual. If they do try to interfere, deal with it at that time.

You will no doubt have to eventually meet with your current "plan manager" and tell them what you want to do, and stop contributions to your current SB plan. She will no doubt try to discourage you, but if you are firm, he/she will admit you are allowed to change to NEA Direct Invest, and they shouldn't interfere. Part of those high fees is very likely returned to her/him. 

I have seen a situation where a district had a unique 403b plan through Security Benefit where the school district contributed to employee's account. After much discussion the district allowed the teacher to use NEA Direct Invest for their contributions and the district continued to contribute to the established plan. You should tell us if your district is contributing to your SB 403b account. This is VERY rare, but is possible.

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Hi Matt,

Welcome to the group. You have received great answers from the best minds here! I'd like to add another thought.

Oftentimes, the best option is the Self-Direct option because the others include a higher cost salesperson which of course adds to your cost. A possible solution I read here is to request that Vanguard or Fidelity be added to your list of vendors but because of annoying nuances, that is not possible anymore in some districts.  What is possible is using, or adding, the Aspire vendor to your lineup. They are approved in most districts and hand-pick advisors who act in your best interests without the high cost. That has been my experience and I have done a bit of research. Once you choose Aspire as your vendor, you can then buy Vanguard or Fidelity funds and get the benefit of their low ER. Aspire will charge you about $40 per year, or something like that (I forget the exact dollar amount ) plus 0.15 in fees in addition to the funds ER.

Something to keep in mind should you decide not to Self DIrect,  or when speaking to a colleague, they don't want to self-direct.

Good luck and keep spreading the word!

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I agree with Moe about Aspire.  Its a decent alternative.  Even if  you go Direct Invest, it wouldn't be a bad idea to try and get your school system to add better choices through both your 403b and 457b choices. We need to crowd out the bad choices the best we can but it will certainly be  a challenge. Good people like you Matt can make it happen.

 

 

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