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TracyC13

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  1. Joel - I investigated the Kansas Deferred Compensation Plan last year after reading about it in this forum. School districts don't participate, from what I was told by our central office. We teachers are employees of our individual Boards of Education. Our BOE has approved one 457 provider, and it is the Hartford (now MassMutual) - A fairly costly option, alas, even if you forgo the annuity option in favor of direct investments into mutual funds. While there are some NTF funds, there are no Vanguard funds & they impose a .75-.85% annual fee on assets on top of the fund fees. I like the idea of presenting a petition to the board to add a low-cost 403(b) vendor, but I worry that if the BOE starts to think that they have a group of litigious employees on their hands, they may decide to take away all 403(b) and 457 options altogether to avoid the hassle. Teachers are also about to lose due process rights (tenure) in Kansas and become "at will" employees, so I think we'd be a bit nervous about pulling the potential lawsuit card. We've only talked with the Benefits Office on this matter. Perhaps the members of the district BOE will be more sympathetic.... Ah, the joys of teaching in a right-to-work state....
  2. Yup. Even if given a "good" choice, many will stay with their current plans. They trust the "nice man" who brings pizza, cookies and platters of subs to the lounge and who dazzles them with talk of "dollar cost averaging" and the "time value of money." They are led like sheep to slaughter by annuity hucksters. In general, these poor folks are not very saavy about investment options, don't read or understand the prospectus, and have blind trust in their "advisors." You're right -- Even with an option like Vanguard, "all" teachers are not likely to jump ship! However, some will. I have several teacher friends who have a good understanding of the situation & who would quickly sign with Vanguard (or other low-cost provider) when one is added -- these include one teacher who is a Certified Financial Planner who teaches business at the high school level and a retired CPA who now teaches math. These are people who have a clear understanding of the damage that fees can do to erode savings... And we talk. Instead of using our district's outrageous 457 & 403(b) options, there is a sizable group of us across the district who routinely discuss the dearth of viable district 403(b) options -- This group includes both teachers and administrators who "get" that there is a problem. We talk among ourselves about retirement savings & strategies -- All of these people have been funding IRAs (both Roth & Traditional, depending on family income) and most of us also use taxable brokerage accounts for nest eggs beyond the IRA. Several of us were previously in a TIAA-CREF 403(b) plan, but since that is not an "approved" vendor for us, we can no longer fund the 403(b)s we hold there. Like me, my friends refuse to put money with our current crop of Shylocks. Unfortunately, our central office people are really too busy to care about our concerns.... I guess all we can do is educate our colleagues... Dan's book (Teach & Retire Rich) should be required reading for all first year teachers! Thanks again, and keep the faith! Tracy
  3. Tony, Thanks very much for your insight. I agree that having no advisor is a "bonus" as in my experience they tend to lead teachers down the road to annuity perdition while they rake in financial benefit for themselves....I'm feeling relieved that you believe that the PlanMember Direct is actually not just another 403(b) hidden-fees-galore scam and that the only drawback is the .35 custodial fee (which I agree is high.) Sadly, .35 is far, far lower than any of our other "annuity-with-a-front-load-subaccount-plus-custodial-fee" options currently available. It is a sad state of affairs, as it is in many districts. PlanMember Direct does offer quite a few of Vanguard's index funds that according to the FINRA fund analyzer average about .1% in operating expenses. With the .35 on top, expenses will average around .45, which is more than I'm currently paying for the ETFs & mutual funds in my taxable brokerage account. Another disadvantage is that PlanMember doesn't offer any of Vanguard's sector index funds, which I'd love to have to balance out other holdings in my taxable portfolio. However, the tax savings should make it "worth it" to liquidate taxable accounts & move monies into a 403(b). And the day we get Vanguard approved as a district vendor, our teachers can all jump ship and direct future contributions to Vanguard! I'm intrigued at the idea of "negotiating" the fees downward. I didn't realize that that could even be an option! Do I just call PlanMember & try to work a "deal"? Is there a specific department at these companies who deal with such requests? Are teachers generally successful in trying to do this? (My husband & I plan to fork over $40-46K per year to them for the next 4-6 years -- Is that usable for negotiating leverage?) I'm very glad I decided to investigate here and I really appreciate the information! Tracy
  4. Yesterday, I learned that one of our district's 403(b) vendors -- PlanMember Services -- offers teachers a "direct" investment option in addition to their "advisor" accounts. This "direct" plan appears on its face to be the best option on our district's list of high-fee insurance company vendors. According to the PlanMember website & the customer service rep with whom I spoke, I could invest directly into Vanguard funds -- no mutual fund wrappers, no sub-accounts, no nonsense (seemingly). PlanMember Direct lists funds with tickers & it seems straightforward on its face. Your 403(b) contributions go right into self-directed investments -- You get no advice (which is fine by me) & never have to talk to anyone on their sales force. With the "Direct" account, a participant pays Vanguard's internal fund expense, and the only fee collected by PlanMember (according to their site & rep) is a .35% annual asset-based service fee. Of course we'd love to have Vanguard (or TIAA-CREF or anyone reasonable) added to our district's Vendor List, and several of us are still lobbying for this, but it is taking forever to get our district's Benefits Office to review our list of vendors. In the meantime, does anyone know anything about this "Direct" PlanMember Services Program? Are there hidden fees other than the .35% annual service fee? I have read in this forum that this company's advisor-based 403(b) accounts are ridiculously expensive, and so sadly, I just don't have any confidence in the good folks at PlanMember to tell me the truth about their "direct" plan. Thanks so much to anyone who may have any insight into or experience with this plan. Tracy in Wichita, Kansas
  5. When I read this post, I kept wishing there were a "Like" button. Congratulations to New Jersey teachers on fighting for and gaining this benefit, and especially to Joel and the others who fought the fight for better investment options for themselves and their colleagues. You are an inspiration to those of us in other states and districts who are still lobbying for low-cost 403b and 457 providers. Your success makes the rest of us believe that change *is* really possible. Way to go, Joel & New Jersey teachers!
  6. Sorry for the delayed reply... I only check this board every few weeks. Hmmm... Interesting. Our district, Wichita Public Schools, which is the largest district in Kansas, negotiated with our local teachers' union (in which I am a member of the executive board, but not on the negotiations team)several years ago to contract with The Hartford as our exclusive "approved" 457 provider. Our district has never offered any state option for funding a 457 through ING. However, although I haven't fully researched the ING fee structure for the KS public employees, I have investigated the fees they charge for the 403B plan that they offer our teachers: In a word, "unacceptable." I'd surmise that ING's 457 fees are likely to be far more than I'd like to pay... Maybe I'm misjudging based on their 403B offerings. My husband and I currently pay between a 7-8% effective federal income tax rate -- I am incredulous that when we retire in 15-20 years that the federal income tax will be this low. US taxpayers are now enjoying historically low income tax (as well as dividend & capital gains tax) rates. For my husband and me (and probably for many of those who follow this board), there is absolutely NO reason to defer taxes to a later date when we'll likely be paying a higher marginal federal rate than we currently pay. Basically, in my current situation it is a "no brainer" to fully fund our Roths, pay the 7% income tax now, earn tax-EXEMPT growth for many years, take the money tax-free in the future, and avoid the outrageous fees of our currently nefarious 403B and 457 vendors. If we get a low-cost 457 or 403B provider, we will certainly take a look at those and crunch the numbers. If the costs are low enough, we'll start moving large chunks of cash from our brokerage accounts into a 457 or 403b. I'll investigate the Kansas statewide 457 plan, but I'm skeptical... but THANK YOU for the tip. I will definitely check it out! Just call me a cheapskate. And a teacher advocate :)
  7. Howdy, Newteacher - First off, welcome to your first year of teaching and best of luck during your first year... And kudos on already thinking about saving for retirement! Your 403B choices pretty much mirror our choices in Wichita Public Schools -- all very costly offerings that are designed to put money into the pocket of the salesperson rather than in YOUR pocket. I agree with Tony above when he suggests that you first and foremost fund a Roth IRA. If you are under 50 years of age, you can put $5000 in your Roth IRA every tax year. Once you turn 50, you are allowed a "catch up" amount that increases the amount you can save to $6000 per year. If you are married, your spouse can also contribute $5000/$6000 per year. My husband (who is also a teacher) and I both fully fund our Roth IRAs. If you are planning to sock away $5000 per year, if I were you I would completely forgo the 403B choices you have and go with the Roth. If you sign up online for an account with a low-cost brokerage firm such as Fidelity, you can open a no-fee Roth with them and set up automatic monthly investments into mutual funds (Vanguard and other low-cost & index funds aplenty -- plus ETFs, and individual stocks & bonds, if you want to go that route). If you decide to "max out" your contribution, you can have $416.66 deducted from your bank account on payday and transferred automatically to your Roth IRA. We're working hard in my district to get at least one low-cost provider such as TIAA-CREF, Vanguard, or Fidelity added to the list which, like yours, contains nothing but Shylock Insurance Companies... It is such a scam that I could scream. Have a great year and good luck with saving!
  8. Tony, I completely agree that tax-managed mutual funds (especially those low cost Vanguard funds) would be a great idea for dc9husker's potential "Not Security Benefit" taxable account. I think most Vanguard funds are also available through Fidelity, and I imagine other low-cost online brokers offer them as well. With online brokerages, it is very easy to set up a taxable account. Further, with the online brokers there is a LOT more transparency and investment info than with the insurance company 403(b) websites. Another good choice for dc9husker's possible taxable account would probably be ETFs -- ETFs have the advantages of an indexed mutual fund (less risk, more diversification, low fees) but with the ability to defer most capital gains until you decide to sell your shares -- mutual funds get hit with capital gains more frequently. So ETFs can work like tax-managed index mutual funds. Again, like their mutual funds, the Vanguard ETFs have low expenses -- a real plus. The caveat with ETFs, however, is that every time you buy shares, you pay a commission (although Fidelity has a current promotion for 30 free ETF trades, but the offer doesn't include any Vanguard ETFs, I don't think) -- so ETFs can be costly if you invest a smaller amount on a regular basis. ETFs are a good place to park a chunk of change, though, such as when you get back a hefty tax refund! Yes, I'm just another cheapskate public school teacher...
  9. To Invest in Security Benefit Or Not To Invest... Another Twist I agree that it is better to do "something" than nothing when it comes to retirement savings. 1. Fabulous that you are fully funding your Roth. We are currently experiencing the lowest federal tax rates on ordinary income in modern history, so it is brilliant to pay the historically low taxes now and then let that money grow, grow, grow as long as possible when you can take all of your earnings tax free. Does anyone really believe that in 20 years we will be paying lower income tax rates than we are right now? 2. If all you have are high-fee 403b options (a la Security Benefit), I feel pretty strongly that it is in your financial interest (after maxing a Roth) to invest completely outside of the 403b/ 457 world and open a brokerage account at a low-cost broker such as Fidelity, eTrade, etc. Here is my rationale: Yes, you will be paying taxes on dividends and capital gains (should you trade) on your investments yearly. However, the current federal tax rate on qualified dividends is only 15% and long term capital gains are also taxed at this low rate. Even assuming that the Bush tax cuts expire at the end of 2012, the rate on capital gains will only go up to 20%. In sharp contrast, your investment earnings in a 403B will be taxed at the ordinary income rate when you withdraw them -- which is very likely to be higher than the 15-20% you would be paying within a brokerage account. For most retired teachers, their marginal rate is still 25% - even after retirement! AND, you can basically completely avoid management fees by investing on your own through a low-cost brokerage in ETFs (or stocks or bonds, or if you're up to paying some management fees, in mutual funds.) So yes, do "something" -- but do it for YOURSELF. NOT for the guy who brings pizza to the staff lounge and sweet-talks the sheep into the 403B Vortex of Never-Ending Fees. Just my two cents! Tracy in Kansas
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