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Dan Otter

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Everything posted by Dan Otter

  1. Hey Steve, Happy Super Sunday! This is fun... so you see the Seahawks as the tech sector--a new paradigm. This sounds an awful lot like 1999 when the experts said that the runup in Internet stocks was justified because the rules had changed. I don't think so. Football is about physical will--solid steel if you will. Sell now before the crash! Dan Otter (who is actually a Buffalo Bills fan)
  2. The Pittsburgh Steelers are like an index fund because they... 1. Focus on the long term (two coaches over the past 5 decades) 2. Have a winning strategy and stick with it (run the ball and play defense) 3. Post superior long term results - division championships since 1970 (17): 1972, 1974, 1975, 1976, 1977, 1978, 1979, 1983, 1984, 1992, 1994, 1995, 1996, 1997, 2001, 2002, 2004 Super Bowl appearances since 1970 (6): 1974, 1975, 1979, 1980, 1996, 2006; Super Bowl victories (4): 1975, 1976; 1979; 1980; and 2006? Dan Otter
  3. Pittsburgh-based Invesmart constructed a retirement portfolio cost barometer that calculates the average cost of investment management for 64 top mutual funds. The company has determined that 57 basis points (0.57%) or less represents a reasonable price for the net investment management fees that a participant should pay annually for an all-equity portfolio. Retirement Plan Fees Expected to Continue Dropping
  4. January 25, 2006 Treasury and IRS Propose Rules Regarding Designated Roth Contributions Today, the Treasury Department and the IRS issued proposed regulations under sections 402(g), 402A, 403(b), and 408A, regarding designated Roth contributions. Roth contributions were added to the Code by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and are effective for taxable years beginning after December 31, 2005. Designated Roth contributions allow for employees to designate all or a portion of their elective contributions under a section 401(k) plan of a section 403(b) annuity plan as Roth contributions. These contributions would receive tax treatment much like a Roth IRA contribution, meaning that they would be contributed from after-tax income but, later, "qualified distributions" of the contributions plus earnings would be completely tax-free. These proposed regulations address issues with respect to designated Roth contributions not addressed in the final regulations under section 401(k) regarding section 402A that were published in the Federal Register on January 3, 2006 (71 FR 6), including the definition of a qualified distribution, the taxation of distributions of designated Roth contributions that are not qualified, coordination of designated Roth contributions and Roth IRAs and rules for Roth contributions under section 403(b) plans. Treasury Department Press Release
  5. Hey Nesto, Thanks for the kind words about the site. I recommend you contact the companies you are interested in and explain your situation. They should be able to tell you exactly their policy and what it would take to set up a plan. Good luck and good job being so proactive about something that is so important--your retirement. Dan Otter
  6. Hey Folks, In an effort to present a variety of opinions we have just posted the following story EIAs: Friend or Foe? written by a proponent of equity indexed annuties. It would be interesting to get an honest, civil debate about these products here. My personal opinion is that these products (at the least the current crop) should be avoided at all costs. But I also believe in hearing from a variety of voices on this subject. Dan Otter
  7. Hey Brownstone, Good idea for making this a specific FAQ or feature. We will work on something... In the meantime here are a couple of items from our 457(b) FAQ and our 457(b) Must Read pages that may be of interest... Read Between the Numbers: 403(b)s and 457s Unlike the 403(b) plan, the employer must create a plan document detailing the specific rules of the plan. Your employer's plan document will be the best source of information for your particular situation. A 457(b) plan must be held in a trust for the exclusive benefit of the plan's participants and beneficiaries. Section 457(g)(3) of the IRC allows public (governmental) plans to use qualifying annuity contracts and/or custodial accounts in lieu of, or in addition to, a trust to satisfy this requirement. A big advantage to the 457(b) plan is that it is not subject to the age 59 1/2 withdrawal rule. This means there is no 10% penalty for early withdrawal at retirement or upon termination of employment. [Note: This benefit applies only to public (governmental) plans. Private plan participants generally will pay federal income taxes when funds are made available to them. They may, however, defer receiving funds and instead be taxed when they actually take distribution]. --- We tell participants to first contribute to the plan that offers a match, at least up to the match. Then contribute to the plan that offers the best investment choices. This is typically the 457(b) because the employer is required by law to be a fiduciary (i.e. act in the best interests of the employee). This also means that most likely the employer has put the plan out to bid. Such a process often results in vendors lowering cost structure. The 403(b), on the other hand, is more often than not characterized by numerous high fee insurance and brokerage offerings. Good luck. Dan Otter
  8. Thanks Jyork, This is the first I have heard in the 403(b) world. Do you have any more details? How are they educating employees about the availability, workings, etc.? Thanks. Dan Otter
  9. Hey RJSwingle, A lot of folks have been asking about the Roth 403(b). The only information we have from Treasury is this story. We have heard of no employer offering a Roth 403(b). Even on the 401(k) side the appetite for this new product seems small. This is not to say that these investment tools will not be popular in the future. It just seems that all employers are taking a wait and see approach. I would be interested to hear if anyone knows of an employer offering a Roth 403(b). Dan Otter
  10. Greetings all, After one week and many, many headaches the Discussion Board is back. We are still in the process of updating but posts can now be made. Again, we apologize for the inconvenience. Dan Otter
  11. Imity and Joes, Just as it is wrong to say that all advisors are bad it is equally wrong for Joes to say that if you go with a cheaper company you will get a "Cheap product." Not so, unless his definition of a "cheap company" is one that sells products witout disclosing costs and surrender charges, pushes loan provisions, plays on fear, and tells investors to "Just go for it!". The order of the day is due diligence. If you are going to use an advisor you are going to get more face to face services than you will with a direct purchase product (such Vanguard, T. Rowe Price etc.). It should be noted that these direct purchase companies have toll free lines where questions can be asked and answered. You will also most likely pay more for the agent approach. The key is to find out exactly what services you are getting and exactly what fees you are paying. Only then can you make an educated decision. You may come to the conclusion that the agent approach is best for you. Joes speaks in broad generalizations that I think are dangerous and self serving. It is not true that most advisors will tell you to "beat it" if you don't have $250,000. We know that most 403(b) products are sold via agents, and we know most balances are well below $250,000 (Spectrem Group). It is not wise for him to tell you to "just start your account." While it is true that the longer you wait to invest, the less you will accumulate. However, it is not true that each day you wait will cost "tens of thousands of dollars." As Suze Orman says "It is better to do nothing with your money than something you don't understand." I encourage you to educate yourself now and then make a decision soon. His comment "You'll save maybe $10 a year (going with a "Cheap product") based on a small contribution and risk losing it all based on poor decisions" is wildy off the mark. When it comes to investing you can control exactly two things: the products you choose and the cost you pay. You can choose wise investments and save thousands of dollars over time by going with quality lower cost products. I encourage you to read Teachers' Investment Plans Flunk which details how two identical products (a variable annuity product and a mutual fund) have very different costs which add up over time. Joes last comment "Just go for it!" is probably the most dangerous. He seems to be saying: Just do anything with MetLife and forget about it!!!!!! Dan Otter
  12. Hey Spiderman, The procedure is called a 90-24 transfer. Click the link to learn more.
  13. Hi Lynn, This is a tricky question and seems to vary by institution. I have worked as an adjunct at two universities: California State University Fullerton (taught three classes a semester) and American University (taught up to two classes a semester and supervised student teachers) in Washington, D.C. At CSUF, which is a public institution, we were allowed to contribute to the 403(b) plan, at AU, which is private, we were not allowed. I can't say if the public/private designation made a difference. AU did say that my load (2 classes and supervision of student teachers) didn't add up to 20 hours a week. I of course did not agree with this assessment. I know this doesn't answer your question, but I thought I would share my experience. Dan Otter
  14. Dan Otter


    Hey Mike, Welcome back. Go to 403bcompare to get information. On the right hand side select "Find a vendor" and then search each of the products you listed. I don't believe you can find info on Kemper here. Instead go to their site. Dan Otter
  15. Hi Armand, Take a look at this this story on transferring to an outside of plan vendor. Dan Otter
  16. What if it a minimum every employer offered low cost (less than 50 basis points) target date retirement funds? From there employers could choose to also allow agent-sold plans and/or offer a variety of mutual funds, etc. This way every investor would have a simple low-cost option that ensures they are in a fairly decent allocation relative to their age. I realize this isn't a panacea, but would this be a reasonable request? Dan Otter
  17. Hey TR, I am not saying they got a price concession. I am just saying that for those who want it, large or small employer, there are low cost options. Dan
  18. TR, Thanks for sharing your experience. I am sharing mine. Some of the Fidelity funds available to my wife are lower than the prices you just quoted for that winning bid. The 401(k) world, such as my wife's employer, tends to get it. The 403(b) world, as evidence by the current state of affairs, doesn't yet. Some day they will. Dan Otter
  19. I disagree with the statement that small emloyers can't receive favorable 401(k) pricing. My wife's firm has less than 25 employees and they have Fidelity with access to all of their fund choices including index funds priced at 10 basis points. Dan Otter
  20. Just got word that Bob Architect, who oversees 403(b) regs for the IRS, spoke today at American Bar Association's meeting in Washington, DC at the L'Enfant Plaza el. I am curious if anyone attended? And if so, any new info on 403(b) regs? Dan Otter
  21. Roth 401(k) in 2006? Not that likely from CBS MarketWatch
  22. Hey TR, I truly appreciate your perspective and hope you continue to participate. We appreciate your willingness to post your views here, unlike so many reps who are simply viewers of this site (in fairly healthy numbers I might add). [On a side note: despite contacting NTSAA I cannot get one rep to write a first-person account of the value they add to 403(b) investing]. I think I understand your point on fees and I think (hope) you understand mine. I for one rarely use absolutes. That is why I say again and again in this thread "most." I am well aware that some funds (roughly 20%) manage to beat indices. Vanguard is well aware of this as well. The authors I cite are well aware of this and note this in their work. I do think it is folly to think that most investors and advisors are savvy enough to select investments that consistantly beat the market over a 20 to 30 year time period--a general investment horizon for most 403(b) plans--when factored for fees. I think what you are not grasping is that the posters here would in a second invest in managed funds via advisors if they thought they had a sporting chance of beating the market over time. I for one have no allegiance to any investment company. I invest with companies that I deem to serve me best (Wow, I sound like Ayn Rand!). It is as simple as that. We talk an awful lot about Vanguard and John Bogle here and surely you have noticed that they are not sponsors of this site. Your allegiance lies with the company you work for as it should. However, your perspective is shaped and influenced by this fact. As educated investors your ideas simply don't mesh with what we have experienced and read. They do, as you point out, work by default for those unwilling to learn themselves. As you know there exists a group that calls themselves the Vanguard Diehards. These individuals have educated themselves and are very much believers in the Vanguard approach to investing. I highly doubt there exists a similar group who are as committed to the managed or loaded fund approach. Actually, there probably is such a group: those who sell these products. Dan Otter
  23. Hey TR, Your continuous attempts to link and compare education of children to investing are muddled and amusing, and are of very little value in deflecting the central issue: It is very, very, very difficult for the average investor, even with the help of an advisor, to beat the market over the long term with managed funds. No one is saying it is impossible, just improbable over the long term. As Steve pointed out, the 403(b) is a long term investment, which demands a long term view. Your central argument seems to be that investors want advise and don't have a long-term view. I don't disagree with you; much evidence bears this out. They want this advise because they typically don't understand even general investing principals. I think what most here are saying is that if more folks read Bogle, Bernstein, Malkiel, and Buffett, and took their approach to investing (low cost index funds), most (not all) would benefit over the long term. I guess we are both right: you about the current state of human nature as it relates to investing (which is fortunate for the industry), and eveyone else about the effect of fees on performance over long periods of time (which is fortunate for those who understand this). Dan Otter
  24. Hey TR, I think what this research is saying is that if you take say 10 low-cost funds in a variety of asset classes and put them up against 10 higher cost funds in the exact same asset classes, that the lower-cost funds have a much better chance of out-performing the higher cost funds. The words they use are: "only" statistically reliable predictor. They aren't, as you suggest, giving a guarantee. This is hardly revolutionary. Bogle, Bernstein, Malkiel and many others have been saying and proving this exact notion for years. It's not saying always, it's saying chances are much better. As I said, an investor can only control two aspects of investing (1) the investment(s) they choose; and (2) what they pay for their investments. Dan Otter
  25. Greetings to all. Even the cranky! Would it be fair to say that an investor can only really control two parts of the investment process: (1) investment(s) chosen and (2) fees paid? After all performance measurements are based on the past. Even fixed investment guarantees are subject to change. Dan Otter p.s. Per lobewiper's suggestion. The following excerpt comes from: Are Fund Expenses Too High? (free login) In fact, the expense ratio is not only the best predictor of performance, as Kinnel says, it is the "only" statistically reliable predictor, according to a study by the Boston-based Financial Research Corporation. FRC tested 11 popular criteria investors use in picking funds: Morningstar ratings, past performance, turnover ratios, asset size, expense ratios, manager tenure and net sales, plus four risk/volatility measures -- standard deviation, alpha, beta and the Sharpe Ratio. FRC's research showed that the expense ratio was the only reliable predictor. Funds with low operating costs "deliver above-average future performance across nearly all time periods." Conversely, all other criteria were statistically unreliable predictors -- including Morningstar's popular star ratings and the highly-touted Sharpe Ratio that calculates risk-reward variables for investments.
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