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Posts posted by FrenchTeacher

  1. You could put that calendar aside! Please don't be fooled by the current account value. They have been quite unsuccessful! They are in the process of transferring all of their loaded mutual funds to a no-load firm. They are embarrassed to learn that they paid $100,000 in fees to the brokerages over the past dozen years.


    I hope I'm unsuccessful enough to pay $100k in fees and retire with more than a million dollars. I could really wallow in that sort of dismal failure.


  2. I just had a conversation with a couple that have about 6 college degrees between the two of them. They have been investing in mutual funds for a dozen years and their accounts are worth about $1,000,000. They never heard of the term "no-load". Go figure!


    Joel, you're not suggesting that investment success is possible WITHOUT no-load funds, are you?


    I'm marking this day on my calendar.

  3. Suggestion: Take half of your ING VA and effectuate a 90-24 Transfer to Vanguard and manage it yourself for 5 years. At the end of the five year period compare it to the "advice" you took with the half that remained in ING. Should be fun.


    Let's do it together: YOU take half of your Vanguard money and effectuate a 90-24 transfer to ING. Let them manage it for five years, and compare the results. Should be fun, indeed!


    Better hurry on that 90-24, though...those new regs you love so much are about to ban them.

  4. You have been on this site for a while and are aware that the extra 1 percent plus a year that you pay inhibits greatly the amount that you will wind up with when you retire.


    You say that you have paid the cost of admission which was worthwhile to you.

    OK. Why do you continue to pay this cost of admission based on the above?



    Ira, the numbers I ran beforehand clearly illustrate that EVEN IF I continue to pay 1% a year to an agent, I'll finish well ahead of where I would have otherwise. But no, I have no plans to continue paying out of blind loyalty. I continue to pay because I continue to receive my money's worth in financial advice, plain and simple.


    I've said before, and I'll repeat here, that there may indeed come a day when I'll "outgrow" the need for financial advice, or when my balance will mean that my annual fee has "outgrown" the value of the advice I receive. That hasn't happened yet, but I'll be ready to move my money if/when it does. Contrary to the "straw man" argument posted by someone else, I haven't taken a blind oath of fealty to ING or to my advisor. But so far, he's been worth what I pay him, is all.

  5. Detailgal: Tell your boss to drop ING and elect Vanguard. Limit the menu to the Vanguard Target Funds. These are "automatic pilot" investments and they cost about 22 basis points. KISS


    Peace and hope,



    Department of Labor tip #4: fulfill fiduciary responsibility by "diversifying plan investments."


    Something tells me they have something more than a handful of target funds in mind when they wrote that.

  6. TR


    "So, Ira, why don't you just dispense your unfailing advice for free and we'll all be rich? Where should we invest next?"


    OK, I'll be glad to help you, invest in no load low cost index funds. Contact Vanguard.




    Cool. Is this gonna be one of those "20-baggers" you were talking about? :-)


    On a serious note, if there is genuine interest, I'd love to start a new discussion (in the "General Money Topics" section, perhaps) where we could share promising stock picks and see what transpires over the months and years. Could be fun.

  7. IRA, just imagine an agent, whom we will call "French Teacher" and he doesn't have many friends but does have clients who he overcharges for many years because they believe his rap about annuities...he knows what he is doing, in fact he is very proud to make his money that way because if he didn't "someone else would". Then he finds a friend, we could just call him "TR1982". They are friends because they like the idea of supporting the financial institutions as loyal fans, truly believing that giving them money to invest and paying through the nose somehow makes them part of what makes America and capitalism great. The moral of the story: it is great to have friends. Dan


    It's a cute little fiction, Dan, unsupported by facts as it is.


    Is there any post anywhere where I have even hinted that people should support financial institutions as loyal fans? Or pay through the nose in order to support capitalism? Or just pay and pay and pay without expectation of anything to show for that money?


    Of course not. But the straw man arguments are SO much easier to win. So by all means, have at it.

  8. Anyway, I feel that you have ommitted any potential investment that "Ira" made during the first five years because he was prudent and looked for an ivestment that offered an optimal return.



    Fair point. My guess is that someone who's smart enough to look for an investment like the one you describe is also smart enough to start investing for his/her retirement, unprompted by an agent. I do agree that if we both start at the same time, and you're outearning me by 1% a year, all other things being equal, you win. My point was that working with an advisor has made all other things UNequal, and that I've gotten a huge jump start on what I would have saved had I not had this advisor talk to me. That has, indeed, made it worth the price of admission.


    Hope you feel the same way next year when districts who used to offer Vanguard & Fidelity alongside full-service options announce that their single provider is some high-priced outfit like Equitable or Travelers. I really want to see everyone beating the drums about this great "pro-consumer" abolition of the 90-24 transfer then, and sing the praises of how districts are accepting fiduciary responsibility.

  10. FT et al.:


    1) Does fiduciary responsibility include offering a low-cost plan?


    2) Is it considered irresponsible to offer a high-cost plan to employees making modest incomes?


    3) What are the other fiduciary responsibilities to which you, FT, refer?


    4) Can you tell me of an online resource that defines "fiduciary responsiblities?"


    Thank you,



    The Department of Labor defines fiduciary responsibility this way:




    A brief excerpt:


    Fiduciaries have important responsibilities and are subject to standards of conduct because they act on behalf of participants in a retirement plan and their beneficiaries. These responsibilities include:


    * Acting solely in the interest of plan participants and their beneficiaries and with the exclusive purpose of providing benefits to them;


    * Carrying out their duties prudently;


    * Following the plan documents (unless inconsistent with ERISA);


    * Diversifying plan investments; and


    * Paying only reasonable plan expenses.


    Clearly, the limiting of expenses to what is "reasonable" is an element here, though not the ONLY element. The DOL is also kind enough to leave the word "reasonable" deliciously undefined, much as they do with the word "prudently" a few clauses above. What is "prudent" and "reasonable" in one person's view will almost certainly not correspond to everyone else's definitions.


    From what I have read about your company, they appear to be "acting solely in the interest of plan participants and their beneficiaries and with the exclusive purpose of providing benefits to them." They are clearly concerned that the plan participants make informed decisions about their financial futures, to which end they have determined that a full-service plan best meets the needs of MOST of the participants. If they prioritize cost over service, then they apparently fear being stuck with a plan that is cheap, but that offers little to no guidance or resources in terms of advising people on their accounts.


    I'm certain that many people will chime in here in favor of the lower-cost plans, arguing against the existence of service in "so-called" full-service plans, etc. That's another fight for another day, and probably won't interest you too much anyway. The truth is, though, when you consider ALL of the fiduciary responsibilities that are outlined by the Dept. of Labor, it's really hard to make the charge that simply going with a full-service plan is a breach of their responsibilities.


    On the other hand, if 90% of your employees insist that low cost should be the primary determinant of what makes a good plan, then you might have more impetus behind you.


    Hope this is helpful.



  11. Ira, since you seem to enjoy numbers, here's another series of them for you to ponder.


    Let's say it's the year 2000, and someone...we'll call him "French Teacher"...opens a 403(b) account at the behest of an agent. He invests an annual total of $2,000. The market returns 9% per year, but our silly French Teacher pays a 1% M&E fee, because he isn't smart like you, so he only clears 8% per year. His account balance looks like this.


    In 2005: $11,733

    In 2010: $28,973

    In 2015: $54,304

    In 2020: $91,524

    In 2025: $146,212


    French Teacher has a colleague...we'll call him "Ira." Ira doesn't trust salesmen, doesn't listen to them, and is waaaay too smart to open one of those high-expense 403(b) accounts. But he's not financially savvy enough to open the account in 2000 when his friend the French Teacher does. One day in 2005, he stumbles across 403bwise, and the site really educates him not only as to the need to save for retirement, but the bestest, smartest way to do it. So Ira opens his account, contributing the same annual amount of $2,000, five years later but oh so much smarter. He's making 9% instead of FT's paltry 8%, because he's not paying that wasteful M&E fee. Here's Ira's account:


    In 2005: $0

    In 2010: $11,969

    In 2015: $30,386

    In 2020: $58,722

    In 2025: $102,320


    But Ira must catch up to French Teacher at some point, right? Well, let's fast forward to 2040, at the joint retirement dinner for both of them.


    FT: $518,113

    Ira: $431,421


    On the other hand, if Ira contributes an extra $500 per year (that's 25% more per year, year after year, than dopey ol' French Teacher), he WILL catch and surpass French Teacher's account balance. In 2037. Juuuuust before retirement.


    What's the moral of the story? An early start to retirement savings is far more important than maximizing every dollar of return. And the entire reason I got my early start to retirement savings is because I had a full-service agent tell me how important it was, and I started my account with him. And that's a simple FIVE YEAR difference. I know teachers in their 30's and even their 40's who have no 403(b) account going.


    Is it preferable for teachers to begin their careers fully informed as to the importance of retirement savings, and ready to begin their low-cost investing without needing any hand holding? Sure it is. How many teachers actually do that, though? I don't know about where you teach, but around here, the number is TINY. The reason most teachers get involved with 403(b) plans--if they get involved at all--is because there are agents who "talk them into it" and "sell" them a plan.


    Where is TIAA-CREF, the great educational wonder, in all this? Nowhere to be found. In some districts, they can be troubled to offer their products. If it involves a hold harmless agreement, of course, they head for the hills. Can't be bothered with THAT, now, can we? And can't be bothered with hiring a few wholesalers whose uncommissioned, salaried job it is to make the same simple presentation I just made, now, can they? With all the billions they have under management, they could raise the cost on their product by a handful of basis points, and with that sum of money, fully fund a small army of people whose sole job it would be to educate people about the importance of retirement savings. But they are nowhere to be found. Nor is Vanguard. Nor are any of the other no-load companies that are so gleefully touted around here. You want to talk about biased opinions? How do you defend THAT, especially while attacking the companies that DO take a responsible role in the financial education of teachers from the OTHER side of your mouth?


    Biased? You bet I am. The agent that opened my eyes to the importance of retirement savings did me a favor that will pay for itself many times over. And yet despite my personal experience, which I know to be FAR more common than the teacher who's savvy enough to handle his or her own investments, I have never once cast aspersions on anyone else with an opposing point of view.


    If you think I'm misleading people, by all means, tell me how. I'll extend you the same courtesy.


    (And remember that my agent is also a CFP, and has assisted me with numerous other financially-related issues apart from my 403(b) account...this post deals ONLY with the virtues of having been educated as to the importance of retirement saving. Even were his skills limited to that single thing, though, I think I've illustrated quite clearly here that that one thing would pay for itself many times over.)

  12. I say, MAKE EVERY 403(b) PLAN AN ERISA PLAN WHERE A SPONSORING EMPLOYER HAS A FIDUCIARY OBLIGATION TO PLAN PARTICIPANTS. Employers, even SD's - have the resources to properly govern these plans and keep an eye out for these and other sorts of scams. They need to have a financial incentive to care.


    I know there will be many who will raise the flag of consumer choice - which is sacrificed when an employer has liability (& hence takes control). But consumer choice in this arena means high ME Fees, excessive loads, and outright theft.



    I'd raise the flag of consumer choice myself...but it may be possible to have our cake and eat it too. If a district has options that include the full-service companies right alongside the no-loads, the consumer then has all the choices (s)he needs...along with the caveat that (s)he still needs to examine the options and read the fine print before making a decision, of course. (I go back to READ BEFORE YOU SIGN as an essential life lesson.)


    If the current administration has its way, though, your wish will be granted, as 403(b)'s and 401(k)'s will go the way of the dodo and ERSA's and LRSA's will replace them. The funny thing is, everyone automatically assumes that if this happens, Vanguard will be everywhere and the full-service companies will simply disappear. I've heard people suggest that the need for "fiduciary responsibility" will inevitably lead to one no-load selection after another. But we see the exact opposite in place now, where companies such as the one detailgal works for cite "fiduciary responsibility" in keeping full-service companies in place.


    From where I'm sitting, it would be FAR preferable to keep the current systems in place, warts and all, so that consumer choice is maintained. And for all those whose knee-jerk reaction is to disagree, contemplate how you might feel if you work in a district where Vanguard is on the menu and you're using them now, only to discover that your new SOLE option for an ERSA or a LRSA is the devil's spawn (aka ING). What then?

  13. 3. Related to number 1... I have also never heard of anybody educator or otherwise that could not wait to get out of a low fee company into a high priced company.



    You've honestly never heard of someone who started investing on their own, believing it was easy, then got a bit overwhelmed and turned to professional guidance (and their corresponding "high prices")? I think you have to talk to more people, not just confine yourself to the M* crowd. It's more fun hanging around only those who believe the way you do, but talk to people with opposing viewpoints from time to time. You may not wind up agreeing with them 100%, but you just may learn that (gasp!) there's more than one right way of doing something.

  14. Joe........I have to be honest. I also average fees of 0.31, but I'm one of the ones not happy investing in my funds. I want to pay more. I feel that I need to spend more to sales reps and load organizations to keep our economy strong. I am hopeful that I can get advise from Mr. French on how I can do this( and be happy )......Ira


    Hey Ira,


    If the sarcasm and the snarky tone make you feel better, have fun. Doubtless you'll get lots of chuckles from the other self-educated folks on this site, and you can all revel together in your sense of superiority. I have never once tried to come on this site and claim that my way is better, nor have I belittled anyone who has chosen a different path. If that's your MO, like I said, have fun.


    You believe I'm wasting my money. Bully for you. You've all made that point dozens and dozens of times. I can't imagine for the life of me why it's so important to the lot of you that I invest my money a different way, but do me a favor and leave me out of your efforts to proselytize. If you really want to know why I invest the way I do and why I could possibly be content spending 1% of my balance to do so, you can do a search on this site and read any of my hundreds of posts. Or not. I really don't care. That's my "advise" [sic] to you, Ira. Have a nice day.

  15. Hi,

    FT: Over at the Vanguard Diehard Forum on M*, there are lots of people who are very happy investing their funds with Vanguard, and they express it. You are the only person that I know who has stated on this website who is happy paying an extra 1% to an agent. Quite frankly, I think that is too much to pay for advice. If I had to pay an advisor 1% over the .31% average that I am paying Vanguard now, it would cost me an extra $4,000 a year. No advice is worth that much. Best Wishes.




    Hi Joe,


    My "happiness" in paying an agent probably has everything to do with a.) what I have gotten back from that agent, b.) what my balance would be without that agent (most likely, zero), and c.) the apparently large difference in our respective balances.


    If an extra 1% would cost you four grand a year, then you apparently have $400,000 socked away. Good for you! The 1% that I pay for advice costs me far less than that. So we're really talking about apples and oranges. I think paying an agent as you are first starting out probably makes a lot more sense than paying an agent in the twilight of your career. Given that financial planners routinely charge hundreds of dollars per year for their services, 1% of a beginning balance is not a bad price to pay at all. Naturally, the proof of the pudding is in the eating, and whatever you are paying to ANYBODY for financial advice, you have to have your expectations met. Mine have been. For the apparently thousands of people that are throwing 1% of their balance away for slipshod service and no advice, I think it's obvious that they need to raise their expectations of who they are working with and respond accordingly: get a new agent, switch to a different company, or educate yourselves.

  16. Hi,

    We keep getting told here that VA are a good deal, but I never read about happy clients. Here is a <A HREF="http://socialize.morningstar.com/NewSocialize/asp/FullConv.asp?forumId=F100000069&convId=148518">LINK.</A> Best Wishes.




    It's possible that this is because unhappy people are far more likely to complain than happy people are to boast about how happy they are. True on chatboards everywhere, not just 403bwise. :)

  17. If you have a total of 6.5 million in 403b assets that will be switched. You will paying about 35K in extra costs a year, compounded after withdrawal. What services do you require from the financial planner for this. Perhaps you can buy direct and get a discounted rate from a fee paid financial planner, who can help employees develop custimized asset allocations.


    $35,000 / 500+ employees = < $70 a year per employee for financial planning.


    If the financial planner in question is worth anything at all, then this strikes me as an extremely reasonable cost.

  18. This article is a brilliant illustration of the glaring need most people have for financial assistance. "People make bad decisions when it comes to their futures, the report said, citing data concerning: saving too little; not knowing when retirement will occur; living longer than planned; not facing facts about long-term care; trying to self-insure for a long life; not understanding investments; relying on poor advice; not knowing sources of retirement income; failing to deal with inflation; and not providing for a surviving spouse." Each and every one of these issues is one that a qualified financial planner could address. Such a planner would be worth his/her weight in gold!


    The article does have its limitations, though: "...private accounts as cited by the Bush administration are the best answer for Social Security's long-term solvency issue." I might be halfway to agreeing with that statement if someone could explain to me how the trillions of dollars of new borrowing needed to finance this venture would be accomplished. The only responsible answer--the rollback of tax cuts to the wealthy that will be this administration's legacy--is the one item that's not up for debate. Appropriately, therefore, the whole issue of private accounts for Social Security remains DOA in Washington. Kudos to the Democratic party for its ability to bury this one before it drew its first breath. Until the party in power takes a fiscally responsible approach to paying for such boondoggles, they can and should be avoided at all costs.


    Joe, good point. I've been thinking of this sort of risk strictly in terms of fixed annuities, where the "guarantees" issued are based exclusively on the company's ability to pay. Perhaps it also extends to the variable marketplace too, though.


    And your story from Miami is chilling...the notion that any of the insurance companies are one hurricane away from folding is a bit more than most people would care to hear, I'd wager.


    Hey Sierra, I'll shut my mouth when you shut yours. I'm sure my rep's silence will speak for itself; I've already told you he reads this boards, albeit infrequently, but has no intention of contributing. Having said that, he's a big boy, and can surely do whatever he wants.

  21. Hi,

    FT: "I agree that we should not treat the unlikely as impossible...but neither should we treat the unlikely as likely."


    I don't think in today's world you can take anything for granted anything. We have witnessed in the past few years things that were not expected from airplanes flying into buildings, the collapse of high tech and the stock market in 2000, the Enron bankruptcy, the Orange County bankruptcy, and the loss of retirement and health benefits for many workers in different industries. I am sure that I could think of more things that have caused economic hardship for large numbers of people.


    There is real risk in many different areas. That is why it is necessary to diversify. So I think that the collapse of a large insurance company is very much a possibility.


    I live in a condo. Each year the insurance agent for the master policy of our building comes to a meeting and talks to us about our insurance. He is a State Farm agent. He told us about when the big hurricane a few years ago came close to Miami. He said that if the hurricane had actually hit Miami itself, State Farm would had gone under. They wouldn't have been able to handle the loss. So I agree with Larry Swedroe, you can't treat the unlikely as impossible. Best Wishes.




    Joe, I'd add the failure of a huge hedge fund (Long-Term Capital Management) to your list of unexpected disasters, as well as the failure of several airlines (though they admittedly came with far greater warning than anything else we've listed here).


    I don't disagree that you shouldn't take such possibilities, as far-fetched as they may seem, into account. But what's the solution? Insuring your property with several different companies? Sierra noted one example of a company that went under in the early 90's, but he claims that was AAA-rated before its demise. If that's the case, I don't know how to guard against that possibility.

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