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Everything posted by bruceinwayne

  1. Liu, Fidelity is an excellent company, on par with Vanguard in my opinion. Just make sure you aren't getting access to Fidelity funds through a 3rd party provider like an Insurance Company. Often times I have heard someone say that they have Vanguard in their district, only to find out that it is actually just access to Vanguard Funds through another provider which of course would result in high fees for low cost Vanguard funds. If in fact you do have direct access to Fidelity, consider yourself lucky, we seem to be a dying breed. Bruce
  2. I have to chime in because I am one of those knuckleheads that has spent countless hours advocating for good 403(b) choices in my district. While it has been extremely rewarding to get Vanguard into my district, and educate enough people so that we now have over 80 people with Vanguard, it has been a tremendous time committment, and I really don't even like to think about the amount of time I have put into it. I consider it my charity work for the year. We all know the 403(b) system is a joke and the way it's run should be illegal. We all know the Insurance Companies have gotten rich off teachers and that selling Variable Annuities inside a tax-deferred account should be some sort of SEC violation, but it isn't. The real crime is that the Federal Government has it's Thrift Savings Plan (TSP) and we're stuck with Variable Annuities. HEY FED, THANKS FOR LOOKING OUT FOR US! There is one thing I will never understand though, is if there's a way to do it right, namely one low-cost provider, that is easy to manage, and truly gives teachers the opportunity to "Teach and Retire Rich," why haven't we been able to make it happen? Why aren't we that strong?
  3. Tony, When I was first trying to get Vanguard in 3 years ago, the first thing I did was ask to meet with the business administrator. He told me that the Board was, "not interested in adding Vanguard at this time." He didn't know what he was talking about and had no idea even what Vanguard was so he was a dead end. Next, I wrote a 5 page letter and sent it to each Board Member explaining how fees erode away retirement savings and one of the Board Members was a college professor and knew a little bit about 403(b)'s and she was nice enough to e-mail me back and say "tell me more." It was through her that my efforts started to gain some traction. It's my opinion that if even one Board Member takes an interest in your cause, you have the foothold you need to make a difference. As we all know, all it takes is a good education about 403(b)'s and you understand why Variable Annuities and the fees they charge have no place in our 403(b) plans. So you answer your question, YES, I would definitely e-mail your Board Members and find out why they don't think you should have a low cost option. The chances are they will have no idea what you are talking about, but one of them might be willing to learn. As a good friend told me, "when you speak to the Board of Education, speak honestly, speak with passion and conviction, and hope that someone cares enough to listen." We will only get what we are willing to fight for. Bruce
  4. Hi Everyone, It's been a while since I've posted but that's because I've been busy making sure my district here in New Jersey keeps Vanguard. Three years ago I worked my tail off to get my district to approve Vanguard as a 403(b) vendor. Then I rested. A year ago, with the new regs on the horizon, I got back to work. I began e-mailing the Business Office in 2007 requesting a meeting to discuss their plans for meeting the new regs. They ignored me, but I was cc-ing my Union President and Board President on all my e-mails. Over time, I was able to convince my Union President how important it was that we don't allow the district to take away our access to Vanguard. The Board President has been extremely sympathetic to my concerns as well. On December 8th we finally had our meeting with the Business Administrator, where we were told that the district would be using Great America Plan Administrators as the TPA and we would be losing Vanguard. We were told, "the people with Vanguard will just have to pick a new provider," as if there was no difference between Vanguard and the 5 Insurance Companies I could choose from. Needless to say I was seething. We were also told that Great America performed the TPA services for free to both the district and the participants. That struck me as very suspect. After the meeting we put together a packet of articles for all the Board Members showing the importance of having a low cost 403(b) provider in the district and the Union President wrote a letter on behalf of the Union Membership stating the same. On Dec 11th, I spoke at the Board of Education Meeting to the importance of keeping a low cost 403(b) provider in our district. (The approval of Great America as the TPA has already been withdrawn from the agenda so I knew we were in good shape.) The Board Members listened, and of the 5 who spoke, they all essentially stated, "this is the teachers plan, and if they want Vanguard, then they should be allowed to keep Vanguard." How this plays out moving forward is unknown. As of January 1st, the district will be managing the plan, and it will certainly take a while for them to get the mechanisms in place to adequately run the plan, and in the future, we may need to fight this fight again, but for now Vanguard is safe. It should be said that I have been very outspoken in the 403(b) world in my district for a few years and I have earned enough respect that when I speak about 403(b)'s, the Board Members are willing to listen, and they trust what I have to say, but there is no reason YOU can't do the same in your district. Turns out that the power of the truth makes a very compelling argument. Just because your district has already decided what to do moving forward does not mean they can't change. Get out there and fight for what you know is right. Good Luck. Bruce
  5. When I was offering presentation about the perils of the 403(b) in my district a teacher came, who then switched to Vanguard, and who is now our Union President and he is totally on board with making sure our district maintains a low cost provider in whatever plan they come up with. A board member at the time also came because she was a college professor with access to a 403(b) and she has since become our Board President and she is on board with maintaining low cost choices. All that said, our new business administrator has informed me that when he gets up to speed on the new regs we will be meeting to work together to establish a new plan that meets the new regs and is satisfactory to the teachers. My fingers are crossed, but the message is to get out there now and advocate for low cost providers before it's too late. If you make enough noise they will listen. Go to a Board Meeting and make your voice heard. If you sit back and do nothing, don't be surprised if your plan stinks.
  6. Like many of you, my district is working on meeting the new regs and I've been appointed by my Union to act as the teacher representative to the Board while they figure out what to do. I'm sure they will consider using a Third Party Administrator (TPA), which I am completely against because it will create more expense to the teachers, but my question is exactly how a TPA charges. I went to a presentation last year and listened to a TPA tell me that they had one of the lowest costs in the industry at around 1%. I argued with him that that represented 5 TIMES what I currently pay for my account at Vangaurd and he argued that I was getting great value...blah, blah, blah for my 1% which I easily identified as a hollow sales pitch but my question is this. If my district does in fact decide to use a TPA that charges 1%, and my 403(b) is currently with Vanguard, and Vanguard ends up still being a part of our plan, does that mean that the TPA will be entitled to take 1% of my current assests? If I have $150,000 in my 403(b), am I correct that the TPA in that first year will be entitled to $1500 of that money? Thanks, Bruce
  7. I don't know what my district is going to do. I have tried to get the district to get going to meet the new regs but our district is in such flux, interim Assistant Superintendent, no current Superintendent, interim Business Administrator, that nothing has been done. I have little confidence that I will like what they come up with when they get around to it however.
  8. Hey Bangs, Check out my website at www.mcnuttmath.com and follow the links for 403(b)'s. When you get to the main 403(b) page there is a link on the left called "How I Got Vanguard." There you will find my Vanguard story. Bruce
  9. I you really want the numbers, try this financial calculator at Bloomberg.com http://www.bloomberg.com/invest/calculators/savings.html
  10. What a fun thread to read, but I think it's going in circles, so let me summarize from my perspective. The entire financial industry is designed to allow investors the OPPORTUNITY to make some money, while GUARANTEEING that advisers and advisory companies make money. It's a total sham and everyone knows it. There is very little that seems truly honest about the financial industry; that's the way it's been; that's the way it is; and that's the way it's going to continue to be. The fact of the matter is that just the fact that the legitimacy of the financial industry is debatable implies that it's not legitimate. The fact that disclaimers exist on every piece of financial literature is further evidence that something isn't on the up and up. Hidden fees, undisclosed fees, hypothetical past returns, it's a lark; but...... ...the greatest thing about the entire industry is that it is TOTALLY BEATABLE. It just doesn't take that much to learn that diversified, reasonable allocated, dollar cost averaged, low cost, indexed portfolios, over time, make a your portfolio a guaranteed winner too. I know a guy who works at one of the big investment firms, and he oversees many millions for many personal investors, and I asked him, how does your boss assess you each year? Does he compare how your clients have done versus the S&P 500, or does he compare your clients performance to a Target Date Fund? His response, "performance is never assessed, I am assessed by assets under management, the more people I bring in, the happier my boss is." The industry is crooked. If you claim it isn't, you're either part of the industry or delusional, my guess is part of the industry, and while I readily admit that there are honest people IN the industry, the industry itself is designed to take advantage of the weak. Keep this thread going though, I am really enjoying it!
  11. Intruder, I understand your point about SD's using a TPA to protect themselves from being in violation of the new regs, and I understand why the participants should bear the cost, but 1% of net asset value is absurd, and I'm sure most TPA's are much higher. Instead of being gouged by the insurance provider, I will be gouged by the TPA, and in many cases the participant is likey to be gouged by both. There has to be a better way to be in compliance with the new regs, yet I still keep most of the growth of my investments. Are there any TPA's out there that just do the record keeping at a reasonable cost and do not force me to pay 1% for investment guidance that I don't want or need? Is it possible that a district could charge all it's participants a flat fee, or a small percentage of contributions, and use that to pay someone to oversee the 403(b) in a district? For a district with 1000 people contributing, if everyone paid $50 per year, that's $50,000 to hire someone to manage the 403(b). I would gladly pay $50 per year, or some fair percent of contributions to offset the cost to the district. Is there anything that says that can't be done?
  12. Tony, I busted my ###### to get Vanguard in and I have no intention of letting the district blindly bring in a TPA now. I started this thread to get some insights into what others think, and increase my own knowledge base, so that when I fight this fight I win. The responses were excellent, especially JSimmons with "4) As part of the NAGDCA Web-seminar of 1/22/2008, Elaine Immerman, Associate General Counsel for TIAA-CREF, suggested as an option "Eliminate plan features that make compliance difficult, E.g., plan loans, hardships, catch-up contributions" (Slide 58 of that presentation)" I will research that Web Seminar and incorporate make it part of my own. I too think that by trimming the fat, i.e. loans, hardship withdraws etc. we can keep a low cost plan that makes a lot of sense for the VAST MAJORITY of 403(b) contributors.
  13. I don't need to run it on Morningstar. The average weighted expense ratio as reported on the Vanguard website for the 2035 Target Date Retirement Fund at Vanguard is .19% (I actually thought it was .18%, I think they may have raised it) $150,000 ###### .18% = 285 plus a $15 yearly fee is $300. Pretty good deal if you ask me. "Better in my pocket" by the way is just my way of thinking.
  14. OK, maybe I'm being a little greedy wanting my SD to offer a 403(b) and then also pick up the tab on managing it to meet the new regs, but the thought of having a TPA charge even 1% is revolting. I would hope that my employer out of the goodness of it's heart would pay someone in the business administrators office to manage the plan. It would be a very nice perk if they were to do so, but I have no great answer to the question, "It's your benefit, why should they pay for it." Are there really only 2 choices? Either my SD covers the cost or they hire a TPA that runs the plan at a minimum of 1% of assets. I currently have $150,000 in my 403(b) and in my 2035 Target Date fund at Vanguard this year I will pay about $285 in expenses. If my SD brings in a TPA I will pay an additional $1500 with no added benefit what so ever. When I found out what my fees and expenses were at Valic I almost threw up, then I got my SD to add Vanguard and I felt better, I think I'm starting to feel queasy again. I will try to go with Tony's idea, if my SD wants to hire a TPA that's fine, but leave us and Vanguard out of it.
  15. At a 403(b) meeting I was recently at, a TPA extolled the virtues of using his services. Yes, his platform offers many different fund choices, but being that I am a hard core index investor, his choices mean nothing to me. I know for a fact that I can't pick winning stocks, thus I am convinced that I can't pick mutual funds or mutual fund managers any better than if I were to guess. I am however a believer in diversification and low costs, so Vanguard, which is one of our current providers, gives me all I need. This TPA announced at the meeting that his company, "serves as a record keeper." So I asked him, "doesn't that mean that instead of the district assuming the responsibility of managing the 403(b) plan as the new regs require them to do, they hire a TPA to do the work for them and pass on the costs to the participants?" His answer was that I would get tremendous value out of the 1% I would pay and my investments would certainly perform better. I know that is a salesman load of *$#&, he can't guarantee beating the market by 1% over the next 30 years which begs the questions... What does a TPA really do other than the districts paperwork? Won't the net effect of a TPA be higher costs for my investments? Is it really that hard to manage a 403(b) plan if you limit the district to one or two providers? It seems to me that a TPA is just one more way to erode my nest egg over time with fees and costs that I should not have to pay.
  16. jyork, I think it would be beneficial to all if you were to post some insights you gained from your experience, and a little bit about the experience itself.
  17. Judy, playing it through your car radio is simple. You just need to buy an FM Transmitter for your iPod. Mine is the Griffin iTrip Auto Tramsmitter. It is not cheap at $70, but the cheaper one I had bought I had to return because it had static. This one is crystal clear 99.9% of the time. By the way, I also use a pair of normal headphones with my iPod b/c my ears are too big for the little ear buds. My students wonder what they are.
  18. Thanks Steve, I will go home today and subscribe to the Index Investing Show, sounds right up my alley. By the way, the three shows I mentioned are all free on iTunes, and I assume the Index Investing Show is as well. If you have never listened to a podcast check 'em out. I think you will be surprised how entertaining, engaging and UNDERSTANDABLE finance can be, even though the annuity salesmen would like us to think we can't do it without thier "help". Bruce
  19. Since I got an iPod last year I have become a podcast addict and I just wanted to share a few Financial podcasts that I listen to, and that I highly recommend. You don't have to have an iPod by the way to listen to a podcast, you can also listen to it on your computer. If anyone doesn't know what a podcast is, or how to subscribe to them, post a reply asking for help and I will write a short podcast primer. I usually listen to these shows on my drive to and from work. The first podcast is from our friends at Vanguard and is called "Vanguard's Plain Talk on Investing." You can find it on the Vanguard website or through iTunes. The show is produced bi-weekly, and each episode is about 10-15 minutes long and discusses a specific financial theme. For example, there is one on how to decide whether a Roth or Traditional IRA is right for you, one on the difference between active and passive investing and another on how to invest after you retire. They're from Vanguard, so you know they're good. The next podcast that I recommend is called "The Money Guy." This podcast is about 1/2 hour long and is produced by Brian Preston who is a fee-only financial adviser outside of Atlanta. Typically, he takes an article that has appeared in a financial publication and uses that as a springboard to talk about something financial. One week he talked about what the best credit card deal is, often he talks about standard investing stuff, the past two weeks he has been talking about how to choose a financial adviser. He is a proponent of indexing for large stocks, but believes some managers can outperform in small stocks. He is a financial adviser, so you would expect him to encourage people to use an adviser, but much to his credit, for the beginning investor he recommends using dirt cheap Target Date type funds, and then once your balance is in the hundreds of thousands of dollars, then consider finding an adviser to help you get the most out of your retirement account. He is a nice southern guy and I really enjoy his podcast. You can find this podcast on iTunes or by searching "The Money Guy Podcast." The final podcast is "Money Gi.rl, Quick and Dirty Tips to a Richer Life" which can be found through iTunes or by searching Money Gi.rl. This podcast is only about 10 minutes long and is more just an education about different financial topics. One week the podcast was about using Gold in your investing portfolio, another week was about what a weak dollar means. This past week was about buying on margin, which I would never recommend to anyone, but it's my opinion that the more you learn about the investing world, the less likely you are to be taken advantage of and the less likely you are to screw something up. If anyone is interested in these podcasts but isn't sure how to listen to them, just post a reply and I will write a short how-to on using an iPod.
  20. So here is my report on the meeting. It's a little long for a discussion board post, but it was a fun meeting. The meeting took place at the NJEA (New Jersey Education Association) offices in Trenton, NJ. I was asked by the Member Benefits Committee (MBC) to speak to them from a teacher/member advocates viewpoint on the issues involving 403(b)'s. The MBC has decided to start a Financial Literacy Program to help it's members better understand all things financial, and since the 403(b) falls under Financial Literacy, I was asked to come speak. At the meeting were, the 15 or so members of the committee, the NJEA leader of the committee, an independent contractor selling the FTJ FundChoice Platform to school districts, and 3 representatives from the NEA Member Benefits Committee, one of them being a higher up type. Just one thing before I tell you about the meeting. When I got there I was told that my previous posts about the meeting in this thread on the 403bwise Discussion Board had been read by the reps from NEA so let it be known that people do pay attention to this Discussion Board, even if they don't post. I spoke first at the meeting and went through my usual presentation explaining the differences between a 403(b) and a 403(b)(7). I explained what you get in each one, death benefit etc, and the total costs associated with each type. I then went on to show how differences of even 1% in investment costs can result in huge differences in net assets over time. Most of the members of the committee seemed to follow and in fact, after the meeting, one member of the committee asked me how to move her 403(b) to a low cost provider. The higher up from the NEA said that my presentation was excellent and I don't think there were any questions from the committee. The next to speak was the Independent Contractor. He started by saying that he agreed with everything I said and then made his sales pitch for districts to adopt his FundChoice Platform. For those who don't know, the FundChoice platform is a way to offer 403(b)'s in a district. I guess it's considered a TPA (Third Party Administrator). The fees range from about 1% to 2.5% depending on who is selling FundChoice, and essentially they manage the 403(b) in a district as well as managing a participants investments. This particular salesman offered FundChoice at 1% of assets for all participants in the plan, regardless of whether you managed your own investments or they manage them for you. FundChoice allows the use of many different Fund Families including most of the well known ones so if you had FundChoice you would be able to invest in a large selection of funds. The point of the meeting was to introduce the committee to some of the financial issues that teachers have to deal with so I didn't feel it was appropriate for me to be too combative with the other presenters, but after the FundChoice guy was done I did have a couple questions for him. One question was that since it costs the district nothing to have FundChoice run their plan, but it saves the district the cost of running the plan themselves, isn't it fair to say that the teachers are being forced to pick up the tab. His response was that yes we are picking up the tab, but that the 1% we will be paying represents a tremendous value because he basically guaranteed that our investments will perform well above average. I didn't ask my follow up question wondering if he would be willing to put in writing that our investments would perform at least 1% above benchmarks because like I said, it was not the arena to debate, but I doubt he would be willing to do that. The next to speak was the gentleman from NEA member benefits. This guy was smooth, classy and if he was ever a salesman he sure didn't seem like it. He spoke about the NEA Valuebuilder and mentioned that about 78% of Valuebuilder clients are in the 403(b)(7) investments and only 22% were in the 403(b) TSA investments. He also mentioned that the NEA understands that the "new" investor is young and has internet savvy and because of that, he knows that many investors would rather do it themselves and maybe use a fee-only adviser every couple years. Because of that, the NEA will be adding a section to their web page which will help people locate a fee-only financial adviser in their area which I think is a great idea. If this guy made any money off sales of 403(b)'s, he certainly didn't show it. He sounded genuinely interested in offering teachers the tools to help them make sound investing decisions that they were comfortable with. One other thing he spoke about was "suitability," and he mentioned that the Valuebuilder reps are trained to identify what investments are most suitable for their clients. At the end of his presentation I asked him a couple questions and once again it wasn't the arena to debate, but I couldn't let a couple things go without raising concerns. My first question was about suitability. My question was, "I find it very hard to believe the 403(b) TSA option is "suitable" for a full 22% of the investors in Valuebuilder. It is my opinion that the 403(b) TSA option isn't suitable for any of them and I am wondering , if the NEA really cares about it's members, why doesn't the NEA eliminate the 403(b) option entirely?" Unfortunately he didn't answer, the Valuebuilder guy jumped in and responded that if they were to eliminate the 403(b) TSA, then they would lose the TSA share of the market to those other guys. Obviously that is not a satisfactory answer to someone like myself because translated into "sales-speak" is says, either we rip them off or someone else will but it was not the arena to debate. The other question I asked him dealt with his sales force. I asked him if salesman make more by selling 403(b) TSA's than 403(b)(7)'s and he answer was basically yes, so I asked him "what keeps a salesman from pushing a 403(b) TSA on someone, even if they aren't really suitable for it, when the salesman knows they will make more money when they do?" He replied that they train their sales staff to do a professional job but he freely admitted that it is not a perfect system. Like I said, I found the NEA guy to be very honest, professional and forthright. The reason I asked the questions I did was for the benefit of the NJEA committee. I wanted them to get the idea that just because a product is endorsed by the NEA does not make it a perfect product. The Valuebuilder 403(b)(7) by the way is full of no-load T. Rowe Price funds and I personally wouldn't trade my Vanguard choices for it, but between it and AXA, MetLife, Nationwide, Valic etc, it's a no brainer better choice. The committee has asked me to continue to be involved in their financial literacy campaign, to which I of course said "yes", and I explained to the head of the committee that the NJEA does not need to support or endorse a particular product or company, just educate the members as to how the system works and the truth will be enough to set them free. On a final note, I'd like to give the NJEA credit for stepping up to the plate and taking on the task of educating it's members in financial literacy and 403(b)'s. Unfortunately most teachers probably won't use this resource, but at least it is a step in the right direction. I encourage those of you in the other 49 states to request your state union do the same. It may be slow, but I think maybe the tide is turning away from 403(b) TSA and towards 403(b)(7)'s. At least I hope so.
  21. I had the feeling that Understanding was an Insurance Salesman in his first post, but regardless, I think a nice thread to learn about VA's has been created for those interested in learning. Keep up the good work everyone.
  22. Crickets... ;-) An excerpt from Burton Malkiel's book "The Random Walk Guide To Investing" "I would avoid buying variable annuity products, especially the high-cost products offered by insurance salespeople" "Unless your mutual fund declines sharply with a fall in the stock market and you drop dead soon after purchasing a variable annuity, the value of this insurance is likely to be small." "The only reason you should even consider a variable annuity is if you are super wealthy and have maxed out on all the other tax-deferred savings alternatives. And even then you should purchase such an annuity directly from one of the low-cost providers such as TIAA-CREF or the Vanguard Group." In the above quote, Burton Malkiel is talking about buying a Variable Annuity in general, not even in a 403(b), and even then he suggests that they are only for the super wealthy. It is simply not appropriate to have a variable annuity within a 403(b) account. The super wealthy buy variable annuities for the tax deferral, which of course 403(b)'s already have.
  23. Consider these quotes. “It’s absurd to put a tax-sheltered investment like a variable annuity into an IRA, which is already tax sheltered. The only person who makes out on this deal is your broker.” Lani Luciano, MONEY, January 1997, p.141 “As qualified retirement plans offer tax advantages beyond those offered in a Variable Annuity, investors should generally contribute the maximum allowable amount to qualified retirement plans prior to contributing to a non-qualified Variable Annuity . Moreover, it is generally not appropriate to purchase a VA within a qualified (tax-deferred) retirement plan such as a 403(b).” Schwab Center for Investment Research Nov 2002 “I am sure you do know 60 percent of annuities are sold in IRA accounts [and other] retirement accounts. The absolute worst place for them to be. You’re putting a tax shelter in a tax shelter and your paying for it.” Attorney and financial planner Gary Schatsky appearing on the CNN Financial Network “If anyone ever tries to sell you a variable annuity within a retirement product, turn and run the other way” Fee Only Financial Advisor Brian Preston and host of the "Money Guy" podcast Let's see some quotes from well known financial professionals, who aren't associated with Insurance Companies, that recommend Variable Annuities inside 403(b)'s.
  24. First of all, and this is from a guy who was threatened "legal action" by an AXA rep if I continued to speak out against them, not all salesman are bad. The problem is, there is overwhelming evidence that having a Variable Annuity within a 403(b) retirement account is inappropriate in nearly every case, (in my humble opinion, every case) yet most 403(b)'s are in a Variable Annuity. Why? I too have a friend who has been contributing to her 403(b) with AXA for over 30 years and has about $250,000 to show for it. It will nicely supplement her retirement income and would easily fund a new deck, but it is my contention that had she been in a diversified, low-cost, no-load 403(b) Custodial Account over that same time period, she would have well over $500,000 in the same account. I too would recommend you search some of the older threads on this site and then get back to us, and be sure to formulate your opinion based on what you find, not what one or two of us has to say.
  25. To all, This is great stuff, thanks. I'm not sure what will change, but they will all leave understanding that I think... 1. Having a variable annuity inside a 403(b) should be illegal, and they will understand why I think that. 2. Most teachers have VA's inside their 403(b)'s because salesman have been the only significant force educating teachers about the ills of the 403(b). 3. If Unions wanted to, they could start a 403(b) education campaign and change the way teachers invest in their 403(b)'s, thus resulting in TRILLIONS more at retirement for teachers as a whole. After that, I'll see where it leads. I will certainly let you all know how it goes. Bruce
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