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Everything posted by MNGopher

  1. I think they would always benefit more by investing OUTSIDE of an annuity. In their old age, if they are worried about running out of money, they could always purchase a Single Premium Immediate Annuity (SPIA) and create their own homemade pension from a bucket of cash. This would only be advisable well after retirement, not during the working years.
  2. krow36, I followed your link for MN that took me to the MSRS website. MSRS is primarily used by non-education state employees, but you got me curious as to if we could contribute to it we wanted to. Going through my Third Party Administrator forms it appears that my district cannot currently contribute, but there very well could be school districts in the state that do participate. We have a pretty strong state pension system (TRA), that just this year got new legislation passed that will increase the funding ratio and further stabilize the system. Just 4 years ago my district added Fidelity and Vanguard to the approved vendor list for 403B's. I have never really looked into 457's because between the good 403B vendor choices, Roth IRA, and a relatively strong pension I can save about 50% of my gross in tax advantaged space.
  3. I don't have a 457b, but I have heard they are a little easier to get money out of earlier, if you need to, prior to age 59.5. 403B's usually have better investment options and, I believe are easier to roll over to an IRA. Both are tax deferred. Hopefully others can give you more specific information. To give my opinion on your questions... 1. Vanguard and Fidelity are the low price leaders in the mutual fund and etf world. They will have lower expense ratios (er) than most other companies. This is an annual fee you pay as a percentage of the value of the fund that you own. Lowest is best! Also, these two companies invest directly in the stock and bond markets without the insurance wrap around costs of a variable annuity. Avoid insurance companies as investments! 2. A Fidelity 403B would be superior to a non-fidelity 457b because of the lower costs. I am not familiar with the Massachusetts plan you mentioned. Is that a mandatory state pension fund? Perhaps others will chime in on that. 3. There is debate among the experts between tax deferred vs. Roth IRA. I like to do both for tax diversification when I want to take the money out in retirement. The general rule of thumb is that during your lower income years, putting after-tax income into a Roth is best, and during your highest income years you want to defer as much of your income as you can (because you should be in a lower tax bracket in retirement).
  4. I have no problem with annuity salesmen making a living as long as they agree to disclose the following information, before being allowed on school grounds: 1. That they are a commissioned salesperson, and not a fiduciary advisor. 2. List all fees including loads, expense ratios, annual service charges, and surrender penalties. 3. The length of the surrender charge period for getting your money out. 4. Define exactly what an annuity is (most new teachers have no idea). 5. Don't tell potential clients that you need to annuitize to get the benefit of tax deferred investments (this is a big selling point in my area).
  5. Yep, the older me can't do anything to help the younger me, but I certainly try to help others.
  6. The biggest red flag for me about TSA's is the very long surrender charge period. I had a 15 year period with VALIC that the salesman never told me about. Sure it's in the fine print of the prospectus somewhere, so ultimately it's my fault for not doing my due diligence. What does that say about a product if you are locked into it for 15 freaking years!
  7. As far as switching companies, it is easier to pull your accounts than push them. Meaning the new company (Fidelity) will be much more helpful in "pulling" the money to them, than the old company will be with releasing the accounts. You probably won't have to call AXA at all. Call Fidelity and start the ball rolling. They will set up a 3 way conference call with the old company if needed. This gives AXA much less of a chance to try to talk you out of the move. Just be aware they will probably drag their feet somewhat in releasing your money, by making you sign release forms, etc. I think they figure if they stall a bit, some people will just give up and leave the money there. Don't fall for this ploy.
  8. MNGopher


    If neither the "advisor" or his supervisor can tell you what fees you are paying, I would consider this a huge red flag. They want you to pay them a management fee on top of the fees that they don't know the amounts of? Unbelievable.
  9. MNGopher


    SJP-3, Do you have 47 different accounts or 47 different funds in your accounts. Either way it's a lot, and should be streamlined. For example, I have 3 vanguard accounts: Roth IRA, 403B, and Taxable....But I own 6 different funds across those accounts (VTSAX, VTIAX, etc.)
  10. Thanks, It's great that there is a place like this where people can learn about the confusing world of 403B's. The advise I got as a new teacher was something like, "You don't really need to invest, you have a pension, but if you do, just put a minimal amount into a variable annuity". I'm glad I eventually did my own research. Today I do everything I can to steer young teachers away from variable annuities, without being pushy about it. I wish more of them would take an interest in their own finances, especially with the shrinking of pensions.
  11. Saving $40 per 100K in a taxable account doesn't make me want to run out and switch companies, especially until more data about the tax efficiency of the Zero funds comes out. If it turns out that they are equally or more tax efficient then it might be something to consider.
  12. It's not always that they don't want to be involved with their portfolio, but as it says near the end of the article, it can be emotionally difficult for people to sell over performing assets to buy under performing assets. Listen to Dave Ramsey, he is constantly telling people to look at an S&P past performance chart and pick the fund that beat the index in the past.?
  13. I agree with Tony that Fidelity and Vanguard are by far your best choices. The differences between them are minimal. Some would say that Vanguard has slightly better fund choices, but Fidelity has slightly better custom service. I use Vanguard and have not had any significant customer service issues myself. For someone new to investing I would recommend an all in fund like a Target Date Fund or a Vanguard Life Strategy fund. If you choose a target date fund, it doesn't have to match your expected retirement year exactly. Just pick one that matches your desired asset allocation, and be aware that it will adjust slowly more towards bonds as you approach the target year. If you pick a life strategy fund like Vanguard Life Strategy Growth (VASGX) it will keep the same stock/bond ratio permanently, 80/20 in this case. The amount you save by maintaining your own 3 fund portfolio as opposed to an all-in-one fund is about 10 basis points, or 1/10th of 1% annually. If you have $100,000 in your account, the Target Date Fund or Life Strategy Fund will cost you about $100 bucks a year more than the 3 fund portfolio, but rebalancing to maintain the desired asset allocation will be done automatically for you.
  14. Ed, Thanks for posting the $66K amount. I couldn't remember what the crossover point was for Admiral fund advantage paying for itself, so to speak. I'm over that amount in my 403B but still like the convenience of the target date fund. The way I look at it I'm paying about 80 bucks a year extra to not have to worry about rebalancing myself. At some point in the future my cheap side will probably come out and I'll start using the Admiral shares.
  15. Here's a link to the Vanguard IRA page. https://investor.vanguard.com/ira/iras When I did it a dozen years ago, I called an advisor at Vanguard to walk me through it. It looks like the website lays it out pretty simply though. You'll just have to decide what fund(s) you want to buy and whether you want to do a lump sum purchase or a regular automatic purchase from your bank on a certain day of the month for example.
  16. I have a 403B with Vanguard, which is now managed by the Newport group as you said. I don't have any horror stories, just a minor inconvenience when trying to roll over a very small 401K from a side job I did over a decade ago. It took a few more phone calls, emails, and paper forms than I thought would be necessary for such a small amount, but who knows I might have had the same issues with Vanguard themselves if they were still managing. I don't like their website format and detail quite as much as I do with the Vanguard home page, but that's just personal preference. Newport charges $5/month on top of the expense ratios of your funds for their management. In exchange for this you have complete access to Vanguards admiral funds (lower ER). At this point I have not taken advantage of this, because I like the convenience of the TDF 2025, and target date funds don't have admiral shares. As my account grows I may consider switching to Total Stock market, Total Bond, Total International (the underlying funds that make up TDF 2025) to get the lower ER, but at this point the amount that I would save is not worth it to me.
  17. Horace Mann is also bad. They are the most popular vendor at my school, but that is because the salesman is a very popular guy in the community and is always bringing donuts, gifts, etc. to the teachers lounge, lol. If only they knew how much those donuts are really costing them. Do you have an employer match at your school? If not, I would consider maxing a Roth IRA ($5500) before doing the 403B. The reason is, at your young age you are probably in the lowest tax bracket now that you will be in during your entire teaching career (?<12% effective). For newer teachers paying the tax now (Roth) is often better than deferring income. A Roth growing for 30+ years and compounding tax free is a very powerful tool. Then a decade from now or so, when you have a higher income, you can increase your tax deferred 403B options, and cut back on the Roth if you can't afford to do both.
  18. Three years ago our school district set up an after school meeting designed to explain 403B's to employees. Only about 1/3 of eligible employees at our district participate in a tax deferred plan, so I guess our administrators wanted to promote participation. Our district had recently started to use a Third Party Administrator, so someone from the TPA office came out and presented a power point and discussion. Very basic presentation; just the differences between pensions, social security, and tax deferred plans, but it was a useful thing for newer employees to see. One of the slides of the ppt. showed the names and logo's of a bunch of the vendors that were approved; all the usual annuity companies like Valic, AXA, Horace Mann, etc. Vanguard and Fidelity were not included in the ppt. presentation, even though I had noticed on our schools website (in very small print) that they had been added to the approved vendor list. I was very excited to see this addition of low cost vendors to our list because I had Roth and taxable accounts with Vanguard already, and was in to the Boglehead style of investing. When it came time for Q and A following the presentation, I asked "I notice Vanguard is now on our approved vendor list, even though you did not include it on the list on your power point, so are they an approved vendor?" There was about 5 second awkward pause as she appeared to ponder my question. Then her response was simply a very cold, "They are on the list." I have no idea of what her issue with Vanguard was, but she definitely didn't want to talk about them.
  19. My district quietly added Vanguard, Fidelity, and Aspire to our list of approved vendors about 3 years ago, so change is slowly happening. I opened a 403B(7) account with Vanguard as soon as I could, but didn't exchange my old 403B (from an insurance co.) right away because there was a 15 year surrender penalty period. This period elapsed about 1.5 years ago and Vanguard was very helpful in "pulling" the old account over.
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