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tony

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Everything posted by tony

  1. I no longer need to offer my opinions on this site any further since you are now the resident expert.
  2. tony

    Please retweet this

    "Indeed, the Texas Legislature was so concerned about the well-being of salespeople in financial services last year that it removed the 2.75%-a-year maximum fee limit for 403(b) products offered to teachers. Now the sales folks can earn more for themselves on teachers’ savings". I mean why not, there are a lot of teachers in Texas, and while they all may not make big salaries, they do have steady monthly incomes, paid by state and local taxes so why not allow this to go on. It's giving back to the business community. (I am being cynical here) Texas is not the only states where Vanguard is being blackballed. I have to say though Fidelity's 403b list is an accident waiting to happen. You can hardly find the index funds hidden among all the other managed higher cost funds if are your average teacher with limited knowledge. That list looks designed to fool you too.
  3. This is not market timing. This is diversification and buying and holding.It's simply balancing 'further diversifying" The Total Market Index which tilts more to larger companies. My index small cap fund has outpaced all my other index funds for two decades. Its added not subtracted.This method does work in theory and has been discussed in research. I'm not encouraging it. I mostly encourage target funds for most folks who post here. But even there many are not 3 fund portfolios. Frankly the worst performing class has been internationals for me over time. I could easily eliminate it and be fine even though it's often heavily promoted as essential. Ed you are an investment puritan to the extreme. Nothing wrong with that but nothing wrong with what I am doing either. If a newbie decided to add a small cap index component to your 3 fund portfolio, I seriously doubt their sky would fall.Should I start calling you John Bogle Jr. ? Incidentally John Bogle's real son runs a managed fund outfit LOL!!
  4. I can't imagine them putting this money in a instrument that charges surrender fees which would limit access further. We will have to see of OP returns to clarify.
  5. Wow , never heard of this being done but it might make sense. I was just written a paycheck for my days. She should be allowed to just take the money but my check was taxable and was gutted by taxes and other deductions.. But maybe the money is not taxable this way and might be to her benefit..She is retiring , so she should be able to do what she wants since it's her money. Even if school officials put it in a Voya 403b for whatever reason she can then send that money immediately to an IRA by transfer and no taxes paid on it . That seems her escape route, an IRA outside a 403b by way of separation of service. In an regular traditional IRA it's totally in her hands where it goes. She can do a transfer. I spent my money. Her arrangement might serve her better. Did I miss your point? Also, since the money is given as a school benefit /perk they may be able to award it to you as they wish. I would bet there is some advantage to the employer to doing it this way. Perhaps with so many teachers retiring this arrangement might in some way ease their budget burden.
  6. Teachers Pay High Fees for Retirement Funds. Unions Are Partly to Blame. Groups representing municipal employees and teachers are often paid to endorse investment products By Anne Tergesen and Gretchen Morgenson Dec. 18, 2019 10:57 am ET The pitch from the president of the Indian River County teachers union couldn’t have been clearer. Liz Cannon, who heads the Indian River chapter of the Florida Education Association, urged union members to buy retirement investments from Valic Financial Advisors Inc. through a firm owned by the union. That way “we also make money,” she said in a November 2017 newsletter, through regular dividends. What Ms. Cannon didn’t mention was that investments from Valic, a unit of giant insurance company American International Group Inc., can carry high costs that may translate to a smaller nest egg when teachers retire. The setup is one of an array of similar deals in which unions and other groups get income from endorsements of investment products and services—often at the expense of teachers and other municipal employees. The ties help explain why many local-government workers continue to pay relatively high retirement-plan costs, while fees in corporate-based retirement plans are often lower and have been falling for years. At issue are 403(b) retirement savings plans for teachers and 457 plans for government workers—variations on the 401(k) plans many companies offer. About $900 billion was held in 403(b) plans for public-school teachers and 457 plans at the end of June, according to the Investment Company Institute, a mutual-fund industry trade group. In the crowded market, an endorsement from a union or municipal organization or affiliate can help an investment-product provider stand out. It also can give the provider’s sales agents access to union meetings, teachers’ lounges, benefit-enrollment fairs and professional conferences to pitch retirement and other products. Valic’s Portfolio Director, an annuity that is popular in teachers’ retirement plans, charges fees of up to 2.3% of assets annually. Fees average less than 1% in 401(k) accounts, according to research firm BrightScope Inc. and the ICI. The fees 401(k) participants pay for mutual funds that invest in stocks fell to 0.45% in 2017, on average, from 0.77% in 2000, ICI and BrightScope data show. “The unions should be advocating on behalf of members, not selling products to them,” said Scott Dauenhauer, a registered investment adviser in Murrieta, Calif., who specializes in financial planning for teachers. “They are there to protect teachers’ rights, not them.” The Securities and Exchange Commission is investigating sales and disclosure practices at Valic, including its dealings with school districts and retirement-plan participants at schools, the Journal has reported. The SEC is also looking at arrangements Valic had until recently with a company owned by local affiliates of the Florida Education Association, called Creative Benefits for Educators, and with other unions and school districts around the country, according to a person briefed on the inquiry. A spokesman for Valic said, “It is our longstanding policy to cooperate with such inquiries, while also taking any necessary steps to ensure compliance with the law and best practices.” The spokesman said Valic’s Portfolio Director is just one of a range of retirement-plan investments Valic offers, and an investor would pay the top 2.3% fee only if he or she chose a specialized fund that contains a very small part of the assets Valic handles in retirement plans. The average fee investors pay is considerably less, he said. As recently as October, teachers’ unions in central Florida urged teachers who had retirement questions to reach out to Mary L. Thomas, who was a consultant at the union-owned Creative Benefits for Educators. She wore two hats. She also had long been a sales representative at Valic, according to regulatory records. After the Journal asked about her dual role, the Creative Benefits website went dark. Ron Sachs, a spokesman for the union-owned company, said in late October that it no longer employed Ms. Thomas and two other consultants. The salaries for the three were paid by Valic, according to documents from Valic and Creative Benefits. Ms. Thomas didn’t return messages seeking comment. Neither did Ms. Cannon, the union leader in Indian River County. Fee Effect $100,000 invested at 6% a year would grow to $429,000 after 25 years if with no annual fees. With a 1% annual fee, the balance would grow to $339,000 and with a 2.5% fee it would be $236,000. 05101520250100,000200,000300,000$400,000YEARS$429K$339K Source: Vanguard Group Inc. In teachers’ 403(b) plans, annuities account for more than half of invested assets. Annuities, largely sold by insurance companies, typically offer a pension-like lifetime income, but they can entail annual fees as high as 3% of invested assets. Teacher David Hamblen said a recommendation by the National Education Association was a key reason he put 403(b) savings in an annuity before his 2010 retirement from the El Dorado Union High School District in Placerville, Calif. The El Dorado Union High School District Office. Po: Max Whittaker for The Wall Street Journal The NEA is the nation’s largest teachers union, with some three million members. “I thought that if they were recommending it, it must be a very good product,” Mr. Hamblen said. Around 2007, he read an article that mentioned payments an NEA affiliate received from an insurance company. With another public-schools employee, he sued the union, as well as insurance company Security Benefit Corp. and others. The suit, filed in federal court in the Western District of Washington in Tacoma, alleged that 403(b) participants were harmed by an arrangement in which the NEA and an affiliate endorsed high-cost investments from providers. A for-profit subsidiary of the NEA received about $3.6 million from Security Benefit in the fiscal year ended Aug. 31, according to a document the subsidiary filed with the Securities and Exchange Commission. It shows the subsidiary, called NEA’s Member Benefits Corp., could earn 5% to 10% more if certain undisclosed promotional goals were met. NEA-affiliated state unions that referred members to Security Benefit products received $129,263 for the year, according to an SEC filing. Among products Security Benefit sells to teachers belonging to the NEA is a variable annuity with expenses of up to 2.99% a year, plus up to 1.45% for optional features such as a death benefit. A spokesman for Security Benefit, Michael Castino, said, “Most contract owners do not incur total costs that high.” He said the average contract owner pays about 1.95% a year. Security Benefit also makes available an array of mutual funds, which carry fees of up to 2.19% a year. Investors in these have a choice of paying an upfront 5.5% commission or a 1% annual fee, says material published by Security Benefit. Since 2007, Security Benefit has given NEA members an option to invest in relatively low-cost mutual funds from Vanguard Group Inc., T. Rowe Price Group Inc. and others. These are “no-load” funds, entailing no commissions that sales agents could earn. Share Your Thoughts Should unions accept money for endorsing sometimes high-fee investment products for union members? Join the conversation below. Lisa Sotir, chief compliance officer at the NEA’s Member Benefits subsidiary, said it recommends Security Benefit to union members in part because the insurer has a “trained field force” that can educate members on the importance of saving, which school districts may not provide. Ms. Sotir said just 1.5% of the money in NEA-endorsed retirement products is invested in the low-cost option. She said many union members want investment guidance, which the low-cost-funds platform doesn’t offer. For its own employees, the NEA hired low-cost Vanguard to oversee a 401(k), resulting in investment fees a fraction of what many NEA union members pay. Asked why the difference, Ms. Sotir said the “NEA, like many private employers, offers certain levels of online education and advice.” The NEA subsidiary doesn’t return any dividends, profits or royalties to the parent union, but uses the money to promote endorsed products and provide education and guidance to union members, Ms. Sotir said. Mr. Hamblen in California lost his lawsuit challenging the NEA subsidiary’s deal with investment providers. A federal appeals court said the union and its subsidiary didn’t have a fiduciary obligation to make sure that fees on retirement-plan products were reasonable. Generally, public-school teachers’ 403(b) plans are exempt from federal pension law requiring 401(k)-plan sponsors to act in participants’ best interests. Mr. Hamblen said he eventually sold his annuity, worth about $35,000, to cover bills. He was disappointed about how much of his savings went to fees, he said. Now 72, he continues working part time for the school district to make ends meet. Teacher David Hamblen at his home in Diamond Springs, Calif. Po: Max Whittaker for The Wall Street Journal A Nationwide Mutual Insurance Co. subsidiary pays millions of dollars a year to organizations including the National Association of Counties, the International Association of Fire Fighters and the United States Conference of Mayors, or their affiliates, in return for endorsing retirement plans it administers for municipal workers, according to documents filed with regulators and local governments. The Nationwide subsidiary paid $4.58 million to the National Association of Counties in 2017, the latest available data. About 1.6 million county employees and retirees have participated in 457 plans for which Nationwide is the record keeper, said Brian Namey, a spokesman for the county association. He said the partnership doesn’t guarantee Nationwide business: “They still have to compete” to win contracts. Nationwide offers plans with an array of investment options from many companies. Steve Burdett, finance director at the Office of the Clerk of the Circuit Court in Brevard County, Fla., recalled being surprised a few years ago to learn on the internet about payments to the National Association of Counties for endorsements. “Employees are paying for those endorsements,” he said. Around 2012, Mr. Burdett began shopping for a better deal for the 320 employees and retirees of the office. In 2015, the office transferred $3.5 million of people’s savings to a lower-cost 457 plan run by a different company, Massachusetts Mutual Life Insurance Co. Nationwide spokesman Joe Case said the payments for endorsements are another way the company markets its retirement-plan services. He said public-sector employers are attracted by Nationwide’s ability to deploy “extensive staffing” to educate workers about saving. At the International Association of Fire Fighters, about 100,000 of the 292,000 members are in a Nationwide retirement plan, according to union President Harold Schaitberger. He said the union’s for-profit subsidiary, called the International Association of Fire Fighters Financial Corp., earns $3.4 million a year for various product endorsements—$2.5 million of it from Nationwide—and sends the parent union $2.45 million to support programs that benefit firefighters. The Michigan Education Association union has a for-profit subsidiary that both endorses products and owns companies selling retirement investments to union members. The union received $664,000 from this for-profit subsidiary, MEA Financial Services Inc., in the year ended Aug. 31, 2018. It said this represented reimbursement for items including rent and marketing help; the for-profit subsidiary doesn’t provide dividends to the parent union, said union spokesman Doug Pratt. Union members know they can trust the union and its subsidiary to provide quality, credible advice, Mr. Pratt said. At the subsidiary-owned businesses that sell investments to union members—Paradigm Equities Inc. and Fairway Investment Group LLC—representatives use email addresses with the teachers’ union’s name. They share the union’s East Lansing address. Some representatives are current or former teachers. Trading on the union’s name and hiring teachers is brilliant marketing, said Erik Klumpp, founder of Chessie Advisors LLC, a financial advisory firm in Rochester Hills, Mich. “If the sales agent is a fellow teacher you see in the halls, it’s harder to call that person and say, ‘I don’t want to do business with you anymore.’ ” Write to Anne Tergesen at anne.tergesen@wsj.com and Gretchen Morgenson at gretchen.morgenson@wsj.com
  7. This is not exactly new but I ran into by accident and can't remember if its ever been posted. I don't even remember reading it actually. https://www.wsj.com/articles/teachers-pay-high-fees-for-retirement-funds-unions-are-partly-to-blame-11576684664?fbclid=IwAR28ggEHENB12SB522d1BPM5FnF5ylvdjPljNn-b5BdYfIsW3PTSHV3u1fc
  8. Bogle would have loved this two fund portfolio. He didn't much care for Internationals. I'm more a 4 fund portfolio guy adding some extra small caps to the mix because Total Stock Market Index has limited exposure to smaller companies. Some purchase an extended market index fund to add diversity. But a two fund portfolio can do very well as pointed out in the article.
  9. We have a work ethic problem. Too much of it. Lots of people think that if they work hard and long, if they grunt and puff, if they demonstrate serious mental effort, if they read copiously and take notes — if they do all those things — they will be successful investors. Not so. Read more here https://www.dallasnews.com/business/personal-finance/2020/01/19/three-cheers-for-sloth-and-simplicity/
  10. that's a confusing array of choices and easy to end up in higher fee active funds. Can you access a brokerage account with fidelity? in a 403b?
  11. I agree with the recommendations too!! Fidelity is only a good choice as far as sticking to their index funds. The rest of their funds are expensive often sector specific funds. There are only so many equities/bonds in the universe and the basic index funds mentioned by Krow and Ed is all you really need. The reason there are so many other choices is there is money to be made by companies. Its like going to the grocery store to buy basic laundry detergent (index funds) but then when you get to the isle you suddenly realize you are inundated with more choices than you know what to do with( Tide, Fab, Arm and Hammer, All, Oxiclean, Wisk, Clorox etc. which causes you confusion and you might end up paying more than you wanted to and maybe even more product than you need. Advertising also influences your decision with detergents and investments. Salespeople are there to advertise and promote a certain product.Stick with the basic index fund and forget about the rest. Avoid the noise and you will be better served. And as you can see below even Index fund selections can get extreme. You will probably do just as well with a 3 fund portfolio mentioned above. And I also learned the hard way that cleaning products make amazing claims about their cleaning abilities but most work about the same. So stick to the basic low cost concoction in most cases.
  12. JT No question is ever a dumb question. What is "dumb" is not seeking those answers because you stay ignorant otherwise. All of us are ignorant about things until we make the effort to learn. Ed answered your question . Investopedia.com is a great place to go for in depth answers but we don't mind answering them here either. I'm glad to see you are reading the posted articles. Besides following our sometimes animated and sometimes complex discussions on this forum, articles can be useful to add to your knowledge base quickly. Problem is its hard to find well written informative articles these days. I endorse Investopedia and maybe even bank rate.com. as a good place to look for info. This website also has good basic info beyond this discussion board so I would explore that too if your questions are 403b, IRA,or 457b specific. The good news about this discussion board is the folks who frequent here are pretty darn smart and you can trust what they may post. Best, Tony
  13. tony

    Helping a Teacher

    ED its a nice comparison between Aspire and Direct Invest. Now do a comparison in fees between Chris's friend's Franklin Funds and Aspire. That will show the massive improvement her portfolio would experience in going with Aspire If she would go the target route. Just sayin. We don't really disagree. You know what you are talking about. I just believe one size does not fit all. And believe some minor fees offer value for the investor who may not feel comfortable with self management. Plenty of studies show folks often mess with their portfolios when they should just leave it alone. A target fund is a great invention for hands off folks. But we've had this discussion before.
  14. tony

    Helping a Teacher

    Chris the maintenance fees are not a big deal. Expense ratios are the most draining on your assets over the long term. One time fees and ongoing fees are a different kind of fee that most companies will charge . Also unless something has changed, I thought the Vanguard fee disappeared after you reach a certain assets level. But since Newport manages the 403b universe for Vanguard that may have changed again. I've dealt with Newport and I must say they were not very competent. That was a few years ago as they first came on board so maybe now they've got it all together. But having NEA Direct and Aspire is better than anything else in your choices so things really aren't so bad for you guys if you know what you are doing.
  15. tony

    Helping a Teacher

    Believe me , If Ed says it's so than it must be true because he is the low fee expert around here. I nudge him at times for being so adamant for finding the absolute lowest fee possible but he knows what he is doing. It probably is the best choice available to you. However if your friend has no interest in managing her account and her interest in investing issues is low, I would still recommend a Vanguard Target Fund for her through Aspire or a target directly through Vanguard or Fidelity. Also I just read that Jeb just confirmed it as well
  16. tony

    Helping a Teacher

    Check if your friend's social security number might be her plan number. that might explain why everyone is in the dark. Take a look at a post today by Mr. Jenkins on a different thread; Hi all, the journey is complete. The first contribution arrive in my wife’s Security Benefit account yesterday. Very thankful to the forum and members that helped out.
  17. tony

    Helping a Teacher

    Chris I'm not sure she can do this 403b-to IRA transfer until she leaves her employment or reaches a certain age without incurring serious IRS penalties as you mention . Not worth it in my opinion but if we are talking minimal contributions it might not be a big deal. Still she can however transfer it over to NEA Direct Invest or Aspire once the account is established which is a better idea IMHO. Why throw money away? I think it will be hard to add Vanguard directlyi but keep trying. You might have better luck with Fidelity. If you can educate your central office people to truly understand what the 403b cesspool is doing to teachers, you might have some luck changing things. Having said that Aspire and NEA are your way around the other bad choices. Both are superior to the other choices. Unfortunately most teachers will continue to succumb to the commissioned salespeople. A better option might be educating more teachers and staff so they ask for change in larger numbers than just you. There is power in numbers. Another thing is the amount of saving . My experiences with many teachers during my career is that many don't contribute much. For a supplementary retirement plan like a 403b, it will hardly do teachers much good to add better choices if they don't take better advantage of the lower fees by investing more than they do on average. Good luck in your endeavors and hope to hear how things pan out for you, your friend, and your fellow employees. It sounds like to me that if there were more Chris C's in your district, things would change quicker.
  18. tony

    Helping a Teacher

    so why not just send in the paperwork without it and see what happens? What am i missing? If noone knows what it is maybe you can proceed without it. This is very strange and smells fishy. I guess incompetence is a possibility but that info should be accessible and available by any of these folks because that is what an ID is for, IDENTIFICATION. Shouldn't all this info be accessible to all parties involved? Keep us informed.
  19. tony

    Helping a Teacher

    https://www.nearetirementprogram.com/nea-directinvest
  20. tony

    Helping a Teacher

    Bypass the school district . They don't know their butt from a hole in the ground in these matters Just go to the security benefit webpage and look for the Direct Invest form , fill it out accurately and completely with signatures as requested and send it in. Also freeze contributions to any investments you currently have. At a later date you can transfer it over to your preferred company and fund. As we are all aware Security Benefit or even your TPA doesn't want that option to become popular for obvious reasons. Your TPA knows the plan number.. Send the form in even if you can't get a plan number and refer a copy to the TPA. If you don't hear back in a few weeks start calling the security benefit toll free lines and demand their follow through. The squeaky wheel gets the grease but I hope you won't have to do all that. I may be cynical but I think the NEA direct invest option is loathed and delay tactics might be used so you will eventually give up from frustration and succumb to a commissioned advisor who can then cleverly move you to a different but still inappropriately expensive plan. I've seen this all happen to me and others. If you negotiate from a point of power and knowledge you will win. These outfits prey on the uninformed.
  21. tony

    Helping a Teacher

    Chris Let me offer you my perspective. (Again) 1. Since you have NEA direct invest and you or your friend are o.k with a basic portfolio than it's in your best choice in regard to fees. But options are limited. One size does not always fit all. 2. Even though Aspire has a few low extra costs you can self direct into any fund you want. So if Fidelity zero expense ratio index fund or its other low cost index fund are of interest, you would still be getting a tremendous deal even with Aspire's minimal costs. Plus you can access pretty much any Vanguard fund you want. Either way your costs going this route gives you a very good deal compared to what your colleagues are getting. Not even close. So Aspire by self directing gives you more choices. The 40$ yearly fee is not unusual among most options . In Virginia our 457b plan offers tremendous low fee options but also charges a .19% charge administrative cost per year. It did not keep me from using it. Your friend might prefer a hands off self managed approach. If she does, a Vanguard index target fund or Fidelity Index target fund would be available by self-directing and requesting a target fund. Certainly you would not use Aspire to tap into a high expense ratio fund. Aspire offers a good deal by tapping into a very low expense ratio fund offered through Fidelity or Vanguard, their index funds. Incidentally both Fidelity and Vanguard's Target funds are composed of index funds. I realize you are a math person and the numbers add up in NEA's direction as your best choice. I agree up to a point but you have to look at the bigger picture as to what option serves the investor's needs best. Fee is an important but not the only factor to consider. Just offering further perspective, and in realty a few basis point more or less won't always make a huge impact on your portfolio when all factors are considered. Whats killing folks is the money drain from these high cost hidden fee annuity products and similar set ups like you mentioned above that your friend was involved with.
  22. tony

    Helping a Teacher

    I think you are right. Thanks for the clarification. I do know we have a few " Lincoln" names floating around as well in financial services. Easy to get confused and not know what is what. So I guess they operate like Horace Mann. Beyond 403b products they try to load you up with other products you might not need beyond high fee annuities. Years ago a teacher signed up for a 403b with Horace Mann and left the meeting also signing up for life insurance and car insurance too. She was single and had no dependents. But she did leave with a Free pizza coupon too at least so she was happy even though she had no clue at the time that she was taken to the cleaners.
  23. All i can say is I must have no life because we underspent him across the board except for groceries and medical. https://mymoneywizard.com/2019-spending/
  24. tony

    Helping a Teacher

    Can anyone tell me if Fidelity Insurance Company is a Fidelity Investments company or an unrelated entity? If it is a Fidelity offshoot this would again confirm my basic mistrust of Fidelity's motives of offering zero expense ratios on index funds to draw investors over to their company with the hope they can then get them to buy higher cost funds at a later date or use their advisory services. I would imagine they are connected or Fidelity would challenge them using their well known brand or trade name but I may be wrong. Although this outfit is charging loads, plus advisory fees, plus expense ratio IS very disgusting. It may be disgusting but it's totally legal. Buyer Beware.
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