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  1. Alec


    Steve, I wouldn't really call it a surrender fee, you just can't transfer all of the money in TIAA traditional fixed account, in RA's and GRA's, to other accounts all at once. GSRA's and SRA's don't have this restriction - probably why the RA version of TIAA fixed account pays a higher interest rate. TIAA Real Estate, held in RA's or GRA's, also has transfer restrictions. - Alec
  2. Can't you roll the old 403(b) over into an IRA with someone like Vanguard, Fidelity, or TIAA-CREF? If you can, and do, then you can always roll the rolled over IRA money back into your new 403(b) whenever you so choose. I think there is more flexibility this way. Unless you have access to the Legg Mason institutional versions of their funds, I'd rather go with T. Rowe Price. It looks like the regular Legg Mason funds levy those dreaded 12b-1 fees, which just go to compensate the distributer of those Legg Mason funds [i.e. the broker, financial advisor, etc.] for selling those funds. A backhanded load. Past performance is an absolutely horrible way to choose funds. But in case you can't tear yourself away, there are plenty of T. Rowe Price funds that have done just as well as the Legg Mason funds. - Alec
  3. Hey SmWonder00, Here are some more links, mostly from the IRS website: 403(b)/457 plans http://www.irs.gov/retirement/article/0,,id=111442,00.html Publication w/ comparison chart of defined contribution plans [have to print it out to view - full chart over numerous pages] http://www.irs.gov/pub/irs-pdf/p4406.pdf IRS Publication 571 – 403(b) plans http://www.irs.gov/publications/p571/index.html 403(b) vs. 457 plan comparison – from American Century http://www.americancentury.com/services/types/non_profit_comparison.jsp This next link is more of a general knowledge link: Long-term investment and planning concepts [Morningstar conversation] http://socialize.morningstar.com/NewSocialize/asp/FullConv.asp?forumId=F100000002&convId=60825 As far as those "investment professionals" pressuring you, that should be a sign that they're not real professionals, but rather just salemen. This is just SOP for a lot of 403(b)'s. Real professionals should give you all the information necessary, and then give you the time to make an educated decision. And by "real professionals" I mean people with advanced degrees in investment related fields (Economics, Finance), and a professional designation [i.e. Certified Financial Planner]. The NASD has a list of these here: http://www.nasd.com/stellent/idcplg?IdcService=SS_GET_PAGE&nodeId=465&ssSourceNodeId=453 I think you also want to consider the motivation and conflicts of interest that each investment company has with you. For example, the people that own each investment company obviously want to get the highest return possible for their investment. And where do investment companies make their money from? From charging you fees. So, the investment companies that are owned by someone other than you have a vested interest in charging you as much as they can to maximize profits for their owners. I think this is the biggest advantage Vanguard has, since it is owned by its mutual funds, which are in turn owned by those mutual fund shareholders [i.e. the investors]. And how does Vanguard maximize profits for its owners (the investors)? By charging fees just enough to cover the costs of running the company. Another acid test is to see if the people that work for each investment company use the same products, with the same fees and bells and whistles, being pushed on you. Do they eat their own cooking? - Alec
  4. Gerry, It looks like the $12/year for the Def Comp and 401(k), and $24/year for the 403(b) are the only extra fees [see http://www.gms.state.ga.us/employee/defer-ques2.asp#14]. You could also try and contact the Georgia Merit System [see http://www.gms.state.ga.us/contact/index.asp] to get verification. There's also a cost comparison Excel spreadsheet [see http://www.gms.state.ga.us/excel/defcomp/cost.xls], which includes the $12 annual fee [$3/quarter]. The self directed brokerage account, if used, charges an additional $60/year, plus any additional transaction costs. Also, all the Vanguard funds, except for the institutional index, are the Admiral shares. Perhaps Georgia finally saw the light! If you have an account you could see if the NAV's of the funds are the same as reported on M* for the same day. That'd be a clue to see if there are any extra fees attached. Also note that some of the funds, like Ariel [ARGFX] and the American fund [AEPGX] could possibly levy the dreaded 12b-1 fees, even though the loads may be waived. Also check in each fund prospectus to see if there are any extra "admin fees" or "other expenses". A lot of American funds and Ariel charge these as well. This could be where Great West is making their money. - Alec
  5. I think that there will be more tax efficiency going forward. Less companies are paying out dividends than in the past, and I don't see (or have read about) any trend of a lot of companies suddenly increasing or starting dividend payments (except for a small few like Microsoft). Companies still have to pay taxes on the money they pay out in dividends, so they really have no incentive to change dividend policies. Index funds (like those based on the Wilshire 5000, Russell 3000, S&P 500) have been some of the most tax efficient mutual funds out there that aren't specifically tax managed. And now there are even better options, like Vanguard's Tax Managed funds and Bridgeway's tax managed funds (BRLIX). There still is the problem of having to pay taxes on the dividends, but with the lower taxes on qualifying dividends (if the new lower taxes stay in effect past 2008 or so when they're set to sunset), the high cost 403(b) looks even worse. - Alec
  6. Alec

    Lausd 403b's

    Same old, same old. ;-) Sorry, Roy, but that "argument" seems like the same old thing that a lot of vendors have been using for years and years: "I use Vanguard, Fidelity, TIAA-CREF, for my investments... BUT, you (participants) should use my company for your retirement because that will benefit me [GREATLY] financially" [note sarcasm]. We don't use our own products for our own employees, but they're fine for you. Hmmmm... where are all the stock-brokers' clients' boats? If the chef doesn't eat the food from the kitchen, send it back. Oh, and feel free to enlighten us on these "excellent products" [please be EIA's, please be EIA's, please be EIAs - I've got some good links on them]. The simple fact is that the financial services industry, and mutual fund industry is set up to make gobs and gobs of money off of investors. How do you think they can pay CEO and Chairman tens of millions of dollars, economies of scale? Also, it is those "educate people", like Steve Schullo, Behavorial Economists, and other very highly educated people (MBA's, Phd's, etc) who keep saying over and over and over and over and over and over and over that the number one (#1) way to increase returns is to decrease costs: expenses, admin fees, bid-ask spreads, tax drag, etc. Why do you think Vanguard actively managed funds, index funds, and bond funds, have risen to the cream of the crop? - Alec
  7. Dreamer, Here’s some more food for thought on the comparison. Let’s say that you choose not to pay the $75,000 now for $1,000 per month more in a gov’t pension 4 years from now, but instead wait 4 years and then buy an immediate fixed annuity (or Single Premium Immediate annuity) from an insurance company. You can go to http://www.immediateannuity.com to get quotes for a 58 year old (your age 4 years from now) to get $1000 per month with various payout options. You can also go to http://www.vanguard.com, and get immediate annuity quotes from Vanguard’s Lifetime Income program. As an example, I used age 58 for you and spouse, SPIA of $1,000/month, and 0% & 100% survivor benefits to see what lump sum investment would have to be given to an insurance company. The Single Life annuity (w/ no survivor option) would cost around $165,000. The 100% survivor option would cost around $185,000. I highly doubt that you could make the $75,000 now grow to either of the above numbers in 4 years. If your gov’t pension plan is only charging you $75,000 (which is less than half of both above quotes!!), that’s an extremely sweet deal. Talk about a subsidized early retirement offer. If your pension is COLA’d at all, the offer is even sweeter. There are also questions like, “Do you want to annuitize this money?”. - Alec
  8. On personalized service. All the members of my family that use TIAA-CREF for their 403(b) can meet with TIAA-CREF reps one-on-one. All they have to do is to sign up for an appointment. Also, competition and more choices are not always better. Especially if people have limited investing knowlegdge and limited willingness to learn. Talk about easy pickins' for salesman. The only 403(b) vender that I've seen with lower expenses than TIAA-CREF's retirement annuities is Vanguard. Fidelity's fees are higher and Fidelity doesn't provide personalized service. - Alec
  9. Steve, You could try contacting Ellen Schultz of the Wall Street Journal. She loves the things employers try to get away with. My company also tried to offer the same types of things - "free advice" about life insurance, etc. And it was also called a "Voluntary Benefits Program". Coincidence? I met with the rep and asked a couple of questions. It was pretty funny to see her squirm: Q: Do you have a degree in business or finance? A: No. Q: Are you a Certified Financial Planner? A: No. Q: Do you have a CLU certification? A: Umm.. No (I don't think she even knew that this was) Q: Do you get compensated if I buy products through your company? A: Yes. Q: Do you get compensated if I buy products through another company? A: No. Q: Can I have 5 other quotes on insurance rates for these types of products from other companies? (I got this one from a Geico commercial) A(rep): Can I get back to you on that? A(me): No. Bye. Alec
  10. I found some links: http://www.in.gov/trf/ - Indiana State Retirement Fund From the FAQ page: http://www.in.gov/trf/investments/faq.html “Q: What is the Guaranteed Fund? A: Until 1996, when the voters of Indiana approved a referendum permitting investment of public retirement funds in stocks as well as bonds, all the TRF funds were invested in bonds and were in a fund called the Guaranteed Fund. Member's individual Annuity Savings Accounts have also primarily been vested in this fund. The interest rate for this fund is determined by the TRF Board of Directors on an annual basis. The rate is guaranteed for one year, until the Board approves a new rate. This investment option still exists and is guaranteed under state law. Unless a member opts to move some or all of their Annuity Savings Account into the new investment options, the money in that member's account will remain in the Guaranteed Fund.” If you look at the last couple of fiscal years (http://www.in.gov/trf/investments/fiscal.html), it appears that the guaranteed fund has returned b/w 8% and 7% (most recently). If you look at the financial reports, the rate on the guaranteed fund has slowly been dropping from 10% in 1993 to 6.75% presently. Not too shabby considering a lot of other guaranteed accounts are currently down around 3-4%. Per the most recent newsletter (http://www.in.gov/trf/newsletter/spring2003.pdf'>http://www.in.gov/trf/newsletter/spring2003.pdf'>http://www.in.gov/trf/newsletter/spring2003.pdf'>http://www.in.gov/trf/newsletter/spring2003.pdf), the board has decided that the fund will earn 6.75% per annum from 7/1/2003 on. There isn’t any minimum guaranteed rate, as w/ TIAA-CREF’s fixed account. From the general program (http://www.in.gov/trf/pdfs/annuity.pdf), it appears that the guaranteed fund is invested in 90% bonds and 10% stocks. As an Indiana teacher, I think you should be able to get some documentation (fiscal reports, etc) as to the exact investments. Note also from the newsletter (http://www.in.gov/trf/newsletter/spring2003.pdf), from “Newland’s Notes”, Bob Newland talks about the funding of the Indiana Teachers’ Retirement fund. It is a “pay-as-you-go” system, kind of like Social Security. Is this how most state retirement funds are managed? Yikes. I was a little confused on who exactly is guaranteeing the assets in the guaranteed fund. Is it the state teachers’ pension fund, which as a “pay-as-you-go” system really has no assets (although appears to have a little in reserves)? It would seem to be guaranteed by the ability of the state of Indiana to make good on its pensions promises to (or make contributions for) its teachers. I suppose you could also look at the S&P 500 index in the pension system as an alternative to Vanguard’s Total Market Index fund, if you want to use equities. The expenses of the S&P 500 index seem to be quite small (around 0.01% if I read correctly), compared to 0.20% for the TSM index. Since both track the stock market fairly closely, I’d opt for the fund w/ the lowest expenses. Plus, as you near retirement, you can begin to transfer whatever money you have in the stock and bond funds (if you have any) into the guaranteed fund, if you so choose. This is an option that is not available w/ the 403(b). It also appears that if you choose to annuitize the money in the Annuity Savings Account, you will get a COLA’d annuity. Again, not currently available w/ Vanguard (I think). Also note that you can roll the extra money (at withdrawal, retirement, or death), which you contribute in the Annuity Savings Account, to an IRA if you don’t wish to annuitize at retirement. So, it does not appear to be totally irrevocable. Hope this helped. Alec
  11. Dan (and others), Does anyone know what has happened to Tim Younkin's "403(b) Advocate" website? It had some excellent articles and other resources/links. I have not been able to access it. Thanks, Alec
  12. 2) I know VALIC will push the personal service of a rep. How do I easily combat that versus Vanguard. I think the service will be better, but how do I convince people. The Valic reps will come around and TELL participants what to do: what Valic funds to invest in. Vanguard has lots of educational material that will SHOW participants how to go about asset allocation and retirement planning (for no extra cost). Vanguard will also educate participants about stocks, bonds, retirement income planning, etc (for no extra cost). Are the Valic reps available every working day, like the Vanguard phone reps are? You can pick up the phone any working day and contact someone at Vanguard. How hard is it to contact and get info from a Valic rep? What happens when they’re sick or out of town? Are the Valic reps in any way qualified to give investment selection and asset allocation advice? If so, what are their qualifications? Any degrees, certifications, exams, experience, etc? Just because they work for VALIC doesn’t mean they have any qualifications. How can you be sure that you’re actually receiving good advice? Isn’t there a conflict of interest? How can this NOT be avoided when taking advice from a VALIC rep? How is VALIC’s personal service better than Vanguard’s? Valic may come to your company. So what, I can call Vanguard anytime I please to get info. I don’t have to wait for a rep. I can download any info I want from their website, including educational material. Another difference you may want to point out is the organizational structure of the two companies. Who owns Valic? Its shareholders/stockholders. Valic (owned by AIG) has to pass some of its profits to its outside stockholders and company owners. Who owns Vanguard? The people who buy shares of its mutual funds, e.g. the clients. Because Vanguard does not need to pass any of its profit onto outside stockholders, it can pass the profit onto its shareholders (you and me) in the form of lower costs. I also believe that Vanguard clients have access to Financial Engines for free. Is Vanguard up front about their charges to the company and employees? How up front has Valic been? Have they volunteered such info, or have you had to ask a couple of times? Again, I can call Vanguard and find out in 5 minutes, or use their website. I don’t have to pour through pages of annuity contract info (in small print). Alec
  13. Alec

    Pros Vs. Cons

    Interesting Paper from TIAA-CREF's Research Institute on the Pros and Cons of Lifetime Annuties: http://www.tiaa-crefinstitute.org/Publications/wkpapers/wp04-08-02.htm
  14. Alec

    Pros Vs. Cons

    JLF, A lifetime annuity is a type of "longevity insurance". Turning some of your retirment accumulation into an income (which never varies) can take some of the anxiety out of retirement. The fact that most people do not opt for lifetime annuities may (among many other things) say that they think they can successfully manage their own retirement assets. Does the general public have the financial knowledge to do this? Alec
  15. Alison, If you wouldn’t mind could you list the companies that you can go with? In both the 403(b) and 403(b)(7). Then perhaps some forum members and guests could give you some pros and cons about each company (perhaps some relevant experiences) and related approaches. If your 403(b) options are limited, maxing out a Roth IRA before contributing to the unmatched 403(b) might be a wise decision. If you choose Vanguard for the Roth IRA (another wise decision, in my opinion), you will likely have better and cheaper investment options. You can do something like choose the best investment options in the 403(b) and then use the Roth IRA to fill out your asset allocation. Alec
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