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Ultra

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  1. Now, now. Just because I have a slightly different view than others on the board doesn't mean you should insinuate that I am a plant. It's not nice to question another poster's integrity. If you read my posts you will see that, I have been bashing the NEA Valuebuilder product. It's a bad product because the expenses far exceed the industry averages. In my opinion, total expenses for NEA Valuebuilder should be below 0.75% with less than 0.1% of that spent on marketing and that should be in the next RFP. (Feel free to suggest your own percentages.) What seems to be lost in the shuffle here is that I took concerns from this board and brought them up to a trustee of NEA MB (Secretary-Treasurer Lily Eskelson) at the NEA Representative Assembly in Philadelphia. In other words, keeping pressure on about the NEA Valuebuilder within NEA leadership. I reported back on how concerned NEA members can get the NEA MB reports from their NEA Board of Directors. (NEA MB trustees report out to the NEA Board.) Concerned members can also push their state NEA Directors to put effort into getting the NEA MB trustees to improve NEA Member Benefits. (It's an election year for the top folks.) I also brought word that NEA MB is investigating low cost options that hopefully will be available soon. When JudyS was planning something similar last year she got lots of support from folks. I can't find what the outcome of all that was but if nothing changes then I'll meet up with you guys next year and we can pass out flyers at the Rep. Assembly in D.C. and at the finance meetings. I'm going out of town on vacation for a few weeks so I'll close out here. When I get back I'll be working on helping my school district offer better 403(b) options and then we can all be friends again. JMacDonald: Thanks for the link. I'm willing to pay 0.12% in order to be able to walk over and deposit checks/change and be able to get cash out same day. If the branch hadn't been so close I would have gone for an online bank. Bank of America branches are sprouting up like weeds where I live so it's a good fit for me.
  2. Wow! I listed a ton of reasons why NEA Valuebuilder is bad but because I give justification on how the money from Security Benefits might be legitimately used to market the product, I am labeled as being biased. Well if so, then I think it balances out the strong bias in the other direction. There are two different rules. 1. Don't be evil. 2. Do no harm. My fundamental argument is that NEA and NEA MB didn't violate rule #1. People are painting with a very broad brush in saying that NEA and NEA MB are corrupt which to me equals evil. I am presenting the perspective that NEA isn't evil but rather offered a bad product in a market filled with bad products. My school system offers 17 403(b) vendors with loaded funds and high expense ratios. They only offer 1 vendor with low fees. Employee benefits won't just say to employees, hey check out the state 457 plan it's a better deal or look carefully and compare everything to the TIAA-CREF option. I am frustrated with my school system but I don't think they are evil or corrupt. I agree that NEA MB violated rule #2. They are doing harm by offering a product with expenses so far above industry average and should either get out of the market OR offer something better. I believe that they intend to offer a better option soon and look forward to reporting back when that happens. As advocates for teachers, I think the NEA members on this board should be sending a message that says, "NEA MB shouldn't offer a retirement product unless the expense ratio is below ######. NEA MB shouldn't have marketing expenses above Y. NEA Valuebuilder should have low cost index funds as a major part of their offerings." As an advocate, I am working within my organization to make changes. I have talked with NEA officers about the concerns of the 403(b) wise community and I have also reported back here my findings. Does NEA Member Benefits offer anything good? I recently opened a money market account through a link from the NEA Member Benefits website. It offers 5.08% interest with a 1% bonus for the first two months from Bank of America. The interest rate is not the absolute highest but it is competitive and beats the pants off what I was receiving from my savings account or what I could get at Bank of America on my own or even get from a CD. I chose this option because the Bank of America branch is literally a block from my house and is more convenient than an internet bank. I'm also enjoying my free subscription to Kiplinger's from the magazine service.
  3. Virginia Retirement System 457 plan has an expense ration of 0.28% + underlying fund cost. It's run by Great West. S&P Index fund is cheapest with expense of 0.02% for a total cost of 0.30%. 13 indexes are available and 3 target allocation funds. https://vadcp.gwrs.com/Redirect.do?nodeId=2...monthly.history In comparison it sounds like Connecticut has a good deal. Half the cost.
  4. While good advice, this doesn't address my question. 1 & 2 would help to determine how much I need to invest, factoring in inflation, anticipated rate of return, expected life span, current financial situation, etc. I've already done this and have a goal of 10% of gross income before the end of the year. 3. Because past returns are not related to future returns then there is no asset allocation that will yield a specific dollar amount at a specific time. Asset allocation (appropriate mix of funds) is determined by risk tolerance and time horizon to retirement. I've already determined my ideal asset allocation. My question was about classifying a defined benefit plan as an asset category. ie. If I had three bars of gold in my basement, would you consider that high risk like an emerging market fund or stable like a bond fund. Or would you just ignore other assets and only consider the 403(b) funds when doing your yearly reallocation? kev: Your answer makes good sense. When reading about asset allocation most sources act as if the 401(k) is the main source of retirement income. Those of us that still have 'pensions' are lucky. fishermh: Yes. I anticipate participating in the DB plan my entire career (11 years and counting). However, if there is a termination of service then I can roll over all contributions and interest or leave it in the plan if I choose.
  5. There are a number of reasons to be critical of the NEA Valuebuilder products, but if you are going to be critical you should be critical of the right things. The argument that I'm hearing seems to be that Security Benefits showed up at the door of the NEA. They dropped off a sack with 2 million dollars and so the corrupt union endorsed Security Benefits which then went off to pillage and loot the retirement accounts of members. From my interview with the Secretary-Treasurer of the NEA (who is on the board of trustees for NEA MB), NEA Member Benefits (a subsidiary of NEA with the goal of breaking even) put out a Request for Proposal (RFP) for a 403(b) and 457 plan. An RFP is a competitive bid process. There were a number of factors in the selection process including the ability to provide service nationwide and to Department of Defense schools, be financially stable and have a proven track record. Security Benefits was chosen. Now the big problem people have is that Security Benefits gave money to NEA Member Benefits. This money is used to advertise the NEA Valuebuilder program to members. I will again mention all the advertising stuff that is given to promote the NEA Valuebuilder program. Let's pretend that we are on the NEA Member Benefits Board of Trustees and we select Vanguard as a provider through the RFP process. One of the options is Vanguard Total Stock Market Index (VTSMX) with an expense ratio of 0.19%. Great!!! Now, we have a very low cost option that beats the industry average of 1.09%. But wait, we have to let the members know that the product is available. Let's go cheap and just post something up on a website. We hire someone to design and post a page about our new offering for $5,000. We can't use dues dollars to promote Vanguard because that would be unethical and we aren't making any profits from offering Vanguard. We need to recover the cost, otherwise members won't know that we have this great low cost retirement program. The answer is obvious, we ask Vanguard to help pay for the cost of promoting their product. Vanguard comes back and says sure here is a check for $5,000. I think everyone would probably be very happy with that scenario. No problem with Vanguard paying NEA Member Benefits $5K to announce the availability of the product. Now let's imagine that after a few months Vanguard tells NEA Member Benefits that they are getting calls from NEA members that want to know more info about the plan. Vanguard tells Member Benefits they can't keep a low expense ratio for their other customers if they have to spend time working with teachers that don't know anything about investment. NEA Member Benefits says okay and opens an 800 number for questions. Suddenly the costs of offering the Vanguard programs are much higher because NEA Member Benefits now has to have someone staffing the 800 line during the day. (Not to mention the long distance to help those teachers in Okinawa and Germany.) So, NEA Member Benefits goes back to Vanguard and says that they have to break even and are currently losing money by offering the products. Vanguard realizes this will be a recurring expense and says, okay but lets come up with a fair advertising and support percentage to add to the cost of the underlying fund expense. (0.19% + some percentage to NEA Member Benefits to advertise) Back to reality: NEA Member Benefits takes money from Security Benefits to advertise the NEA Valuebuilder that Security Benefits profits from. In this case though, it's not just a single webpage and an 800 number (in English and Spanish) but there is also direct mailings to 3.2 million members, a team of member benefits directors for each region that goes to state and local meetings then there are pamphlets, refrigerator magnets, tote bags, water bottles, etc, etc. All of which can't come from dues. The provider that is making the profit is the only appropriate place for NEA Member Benefits to obtain funds for advertising the product. So if you want to be critical of money given to NEA Member Benefits from Security Builder then it should be over the amount. So, is $2 million too much? Given that there is at least $750 million assets under management that represents less than 0.25% for advertising. It seems equivalent to 12b-1 expenses for funds that advertise. If you want it to be less then give your cost saving measures for informing and supporting the rank and file members. The real problems are: -Low cost index funds do not "sell themselves" as a 403(b) option otherwise we wouldn't all be here complaining about how hard it to get our school systems to offer them. -funds offered through NEA Valuebuilder are more expensive than the industry average -NEA Valuebuilder does not offer low cost core index funds -Broker service costs from Security Benefits adds another layer of costs to the already expensive funds -Security Benefits charges administration fees for accounts under $25K -Security Benefits charges contingent deferred sales charges and variable account fees that range from 0.35% - 1% -NEA Member Benefits advertising and member support adds a layer of cost to the already expensive funds. -The vast majority of the 403(b) industry is geared to drain the retirement savings of educators. It is almost impossible to work within the current broker based system and receive a good value. -Direct channel investing for 403(b) is the exception and not the rule. (Wait, I'm repeating myself so I'll end here.)
  6. I'm in a state with a Defined Benefit Plan (pension) that should give 40-60% or average final compensation based on the last three years. I also participate in Defined Contribution plans (403b & 457). I use a lazy portfolio type of asset allocation that has about 30% bonds with the rest in international index, domestic index and a REIT. In the latest edition of Kiplinger, there was just a sentence or two that got me to thinking. Should I consider the pension as the 'conservative' part of the portfolio? Then instead of having bonds in my 403(b) and 457, I could add a small cap index or just increase the percentage of the other allocations. I'm also being influenced by something I saw in USA Today that said that bond yields may be dropping. Has anyone else pursued this line of thinking? I'm sure a fee only financial planner could help with these types of questions but I'm more of a DIY type.
  7. It's good to be skeptical but the details are important. 1. NEA Member Benefits is not the same as NEA. NEA Member Benefits is a self-contained little sub-unit. It doesn't use any dues dollars and it doesn't give any money to NEA. It's like the school store at my high school. Instructional funds aren't used to run the school store and profits from the school store aren't used to buy textbooks. I am attempting to obtain the NEA MB financial report. If you are a member you may be able to get info from your state NEA director. Now, I did mention all the advertising stuff including the 10,000 or so NEA Valuebuilder bags, keychain, luggage tags, water bottles, etc. I did see dollar signs as all that stuff was passed out and felt bad that each item given away represented a higher expense ratio for participants. I'm also assuming that part of that money is going to the many direct mailings that members receive from NEA MB on a regular basis. There are also regional directors that travel around distributing information about NEA MB programs. Assuming that there are still 750 million under assets as is claimed on the site, then 2 million would represent around a 0.26% expense which is something we would prefer not to see but is probably consistent with 12b-1 expenses. So, to me a kickback would be money that goes directly back to NEA to support other stuff. The $2 million you are talking about seems to be going to advertise and distribute program information. 1-a. I was told that there is a Request For Proposal (RFP) process for NEA MB programs. I have not seen the RFP for the NEA Valuebuilder program. (Somehow I don't think Vanguard submitted a proposal.) The TIAA-CREF discussion indicates to me that a low cost company was desired. Hopefully, we will see some changes if some of these lower cost self-directed internet options become available. However, there is no getting around the fact that NEA MB will need money to advertise the program to members so even if Vanguard or other low cost companies were an option there would still be a layer of expenses added to let members know that the programs exist. I think the argument isn't whether Security Benefits should give money to NEA MB, but what should the expense ratio limits be in relationship to assets under management. 2&3. We can absolutely say that educators have to compare their local options and in all likelihood will find something better than NEA Valuebuilder. (Will also probably find things worse.) The true conflict of interest here is that NEA MB can't say on the website, "Hey, you can probably do better! Be sure to check out your other options." The current situation is that the only companies interested in dealing with NEA are full service shops with high expenses. Most of us here on the board (and bogleheads) know that full-service doesn't give more value but rather less. The other option would have been to offer nothing at all. We do need to keep advocating for NEA MB to offer better products but I can't find any evidence of unethical behavior on the national level.
  8. In the past few months, I've begun learning about retirement options and have found this site to be an invaluable resource. I am also an active member of the National Education Association (NEA) and was very concerned when I read some of the negative articles and posts about the NEA ValueBuilder program run by Security Benefit. Even though the program is not an option in my school system, I felt it was important as an advocate for teachers that I should find out what I could about this issue. I recently attended the NEA Representative Assembly in Philadelphia as a delegate. After hearing the year's financial reports, I saw little mention of Member Benefits and if any money was received from vendors such as Security Benefits. I wrote a note with some of the questions I had about how Member Benefits products are selected, how much is received from vendors and how it is spent to the secretary-treasurer of NEA. She promptly wrote me back and I went up to meet her and we spent about 20 minutes discussing some of the issues around Member Benefits and the NEA Valuebuilder program. I didn't take word for word notes, so the quotes are pulled from the web site www.neamb.com “The NEA Member Benefits Corporation is a subsidiary of the NEA, established to develop, implement and administer NEA Member Benefits programs and services. Its governing body includes a Board of Directors which oversees the corporation to ensure the quality and consistency of the programs.” “The NEA does not profit from NEA Member Benefits programs. The goal of NEA Member Benefits programs is to break even--no program is supported by dues dollars.” The key point here is that NEA isn't receiving kickbacks from Security Benefits. There is no money in the main NEA budget from vendors. Now Member Benefits does receive money and they sure do give out a lot of canvas bags, and luggage tags, and key chains and water bottles and anything else you can put a logo on. (Side note: On the one hand it seems over the top the amount of stuff they had for the 8,000 delegates on the other hand these delegates represent 3.2 million members and will presumably use info for their state and local programs from Member Benefits to use as a recruiting/retention tool.) The NEA Member Benefits trustees report to the NEA Board of Directors. Interested members should be able to contact their state NEA Director for more info. I will be trying to get info from my state directors to find out how much is received from vendors and how it is spent. The next issue was how are Member Benefits programs selected. “NEA Member Benefits also demands strict criteria from prospective corporate providers. All providers must have the ability to serve NEA members on a nationwide basis, be financially stable, demonstrate a commitment to quality and a proven track record of success, comply with all federal regulations, be willing to collaborate closely with NEA Member Benefits in marketing efforts, and provide a competitively priced product backed by excellent service, exclusively for NEA members and their families.” An RFP process is used to select vendors meeting the criteria for a particular program. This sounds good in most cases but the 'nationwide basis' causes big problems for the NEA Valuebuilder program. The program has to be available in all 50 states AND to our overseas members teaching in the Department of Defense schools. Now, TIAA-CREF was mentioned specifically as a vendor that would have been a great fit. It makes sense, they deal with colleges, why not K-12? TIAA-CREF didn't want anything to do with NEA because they don't want to deal with one teacher in a school system in a small system in Delaware, and then another two or three bus drivers in Nevada and maybe a teacher in Okinawa. TIAA-CREF can keep costs low by dealing with the staff of an entire university, they can't do that by offering services to every member of the NEA. In my mind, the very high costs associated with the NEA Valuebuilder product are paying for Security Benefits to deal with thousands of local school districts and advertise to those 3.2 million members. My school system doesn't offer NEA Valuebuilder but I have no doubt that if I called up Security Benefit then they would have someone do the paperwork to be registered as a vendor on my local list. SO, out of those companies that responded to the RFP and could meet the selection criteria especially 'nationwide basis' and 'proven track record', Security Benefits was the best of the lot. There was a note of optimism though, apparently enough 'financially stable' companies with 'a proven track record' are finally making use of the internet that NEA members may eventually have choices with much lower expenses. i.e. Self-directed option rather than a full service option. I think it's clear that the Security Benefits choices are a bad deal for anyone that has access to lower cost choices. The full service model doesn't add much if any value to the individual investor. However, I'm not sure that they are much worse than the Primerica 403(b) I signed up for when I had just started out teaching. I will continue to believe that NEA and NEA Member Benefits is doing the best they can for NEA members under the limitations they have. Hopefully the future will bring better choices. Now, my experiences are with the national and my individual state organization. It is certainly possible that leadership in locals or other states may have engaged in behavior that was not in the best interest of the members.
  9. My wife and I are both teachers in the same school system. What strategies do teacher couples take in retirement investment? Do you invest with the exact same allocations? Do you worry about making sure the overall allocations are balanced or each individual? Or do you go for different funds to provide more diversification?
  10. Found the following paper that seems to argue that TIAA-CREF is underdiversified which leads to a big difference in returns. http://econ.claremontmckenna.edu/papers/2005-05.pdf I skimmed the thing but some of it is beyond my current understanding. My take away is that my asset allocation in the equity part of TIAA-CREF doesn't really matter that much because they track so closely together. (And avoid the TIAA Traditional Annuity until close to retirement.) I keep tying to find the absolute best answer to the particular retirement choices I have available but I guess doing something is better than doing nothing even if it isn't quite the optimal choice.
  11. So, here is the allocation that I've come up with on my own. (Talk about high stakes testing!) TIAA-CREF 40% Equity Index 40% Global Equities 10% Real Estate 10% Bonds Are there some major advantages that I would be missing by going with the 403(b) and not with the the 457?
  12. I thought I was all set with choosing from the 20 403(b) vendors on my county list. I ordered up the TIAA-CREF starter package and was ready to look at how to divvy up the money. I then found out that the county has a 457 option. So now I am trying to figure out whether to go with TIAA-CREF for the 403(b) or with the VRS 457. What should I think about with asset allocation other than follow the interactive guide on the TIAA-CREF site? (I'm 35 with a wife/daughter, career educator planning to stay in VA. Have $10K in another 403(b) that I will switch over. Plan on putting in $300 a month now and then $300 more when the raise hits in September. My wife is 30 and also a teacher and she will be contributing the same amounts.) TIAA-CREF Investment Choices CREF Stock Account CREF Global Equities Account CREF Growth Account CREF Equity Index Account (Expenses 0.41%) CREF Bond Marker Account CREF Inflation-Linked Bond Market CREF Money Marker Account TIAA Real Estate Account TIAA Traditional Annuity CREF Social Choice Account Virginia Retirement System 457 Plan Tier I: Asset Allocation Funds Income & Growth Fund Balanced Growth Fund Long-Term Growth Fund Tier II: Passively Managed Funds Bond Index Fund S&P 500 Index Fund (0.32% Expenses) Russell 1000 Value Index Fund Russell 1000 Growth Index Fund Russell 3000 Index Fund (0.39% Expenses) Real Estate Investment Trust Index Fund Small/Mid Cap Equity Index Fund International Equity Index Fund Tier III: Actively Managed Funds Money Market Fund Active Inflation-Protected Bond Fund Active Bond Fund Active High-Yield Bond Fund Stable Value Fund Active Small/Mid Cap Equity Fund Active Global Equity Fund
  13. Found the info. It is under the small business section. https://flagship.vanguard.com/VGApp/hnw/acc...wInvContent.jsp Doesn't seem unduly onerous for the school system.
  14. Hi, I'm a teacher in Virginia pushing for Vanguard as an option from my local school system. What exactly does the school system employee benefits office have to do to offer Vanguard funds directly? Is there a specific form or webpage or contact person? I want to be able to go to an employee benefits committee meeting and say, "Offering Vanguard is as simple as going to this url, filling out this form which is the third link, and mailing it to this address."
  15. Put e-mails in to the county person in charge of 403(b) yesterday but no response yet. Also put in a request to my local association office to see if they can help with the process. In the meantime I called the TIAA-CREF office and the secretary said she would mail me info. Didn't seem like she was interested in having me talk with an agent. Guess that is what keeps the fees so low. Meanwhile, Fairfax County which is right next to us has an RFP process for vendors. Didn't appear to have any better/different vendors but I wonder if the pricing/fees are dramatically lower.
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