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jbs

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Everything posted by jbs

  1. Thanks so much to Tara Siegel Bernard for taking on this too often ignored topic! The series is off to a great start. Please forward the link to the article to school system administrators and school board members who need to be educated. This is what we have needed for a long time. John Sparks http://www.nytimes.com/2016/10/23/your-money/403-b-retirement-plans-fees-teachers.html
  2. Here was my comment to a New York Times article on this topic. It rehashes a post I made on 403bwise in the past: I don’t see any mention of non-ERISA 403(b) plans, the 401k-like plans available mainly to public education organizations. IRS changes in 2009 to 403(b) were touted as a modernization of the 403(b). The changes made the educational institution a fiduciary, where in the past they were just a conduit for the money to a variety of high fee insurance companies and a few low-cost providers. At that time many school systems pushed out the low-cost providers and chose one or two of the high fee insurance companies as their 403(b) plan. These decisions were often due to sweet-heart deals for administrators, old-boy network connections and financial ignorance. At my wife’s school she initially had Vanguard as an option, but in 2009 it was pushed out for AIG-Valic and ING based on the recommendation of an insurance consultant. At the roll out meeting I questioned the AIG rep about this and she said, "You people just don't get it. You have had 15 options for all these years. If you were in business and had a 401k, you would only have one option. You still have two good options. At VALIC, all we have is one option. We only have Vanguard..." I have never seen someone want to take back what she had said more than she did at that moment. What a smoking gun! It was as if the sky opened up and light was finally coming through years of darkness. My wife then asked why VALIC employees could have a true low-cost option, but she couldn't.
  3. Hello, In response to your last sentence I had to resend my post from the summer of 2008. Sorry to re-post, but it seemed appropriate, especially after the AIG debacle: Below you will see a post from the summer that many of you may have missed. It points out that AIG-Valic does indeed know what is best for retirement savings. I thought that after the events of the last few days it deserves a repeat posting. This spring my wife's school district and my school district have taken alternate paths in working with the new IRS regulations. My school district chose a CPA firm to assist us. The firm really seems to understand that the spirit of the new regs is to modernize the 403b and make it more transparent. My wife's school district, on the other hand, chose as consultant a firm that seems most focused on promoting the insurance industry at the detriment of teachers' retirement savings. Previously my wife had Vanguard as an option, but after the consultant's advising, they were left with just ING and AIG-VALIC. The consultant refused to pursue Vanguard or Fidelity. After this shady deal was struck, there was a meeting for all employees who weren't previously with VALIC or ING. The purpose of the meeting was to explain the IRS changes and give the VALIC and ING time to sell their products. After the business manager gave an introduction, I asked if I could say something and ask a question. I proceeded to read a page and a half prepared statement aggressively bringing light on the past practices of the two companies and the amount of money people lose by going with annuities. (Thanks to 403bwise for a lot of my information). When I finished, the crowd cheered and the tone for the night was set. Next the representative from VALIC spoke and rolled out their high-fee annuities and their new mutual fund platform, or as I like to say, the bait and switch. I am sure no one will be encouraged to take this option. Of course in true VALIC fashion, she could not produce a list of fees, but promised it would be available later. (So they were chosen to be one of the two options, even though they hadn't shown a fee schedule. Typical). My wife, another audience member and I continued to hammer her with questions and she became more and more agitated. Finally, she said, "You people just don't get it. You have had 15 options for all these years. If you were in business and had a 401k, you would only have one option. You still have two good options. At VALIC, all we have is one option. We only have Vanguard..." I have never seen someone want to take back what she had said more than she did at that moment. What a smoking gun! It was as if the sky opened up and light was finally coming through years of darkness. My wife then asked why VALIC employees could have a true low-cost option, but she couldn't. The ING guy was next and had to completely change his presentation, because after what he had just witnessed, his new platform 1.35% "all-in" (which I'm sure is a huge improvement) wouldn't have been such a great sell with us in the audience. So maybe school systems should follow the first good advice that VALIC has ever given (albeit indirectly) and make a low-cost option available to employees.
  4. Thanks for your help and support. Does anyone have access to an on-line calculator that can create a bar graph or other chart that shows what fees do to investment returns over a number of years (10, 20, 30)? I would like to show the difference between a Fidelity index fund (S&P 500, Total Mkt., etc.; with a .1% fee) and the same Fidelity fund with an additional 1.0% fee. I guess I would assume an 8% annual return though that seems a bit optimistic right now. And also use something like $250 monthly investments in the 403b. I've shown the Meridian Wealth Mgt. graph I think I got from 403bwise, but I think the actual comparison would be most effective because that one didn't seem to register with my committee in the past. Thanks, John john.sparks@duneland.k12.in.us
  5. Yesterday we had our 403(b) committee meeting with our consultants, a CPA and a CFP. The CFP's recommendation was The Standard as custodial and we would pay a fee of 1.1% of assets for tpa, record keeping, service, etc. If other schools in our area banded together, we could possibly lower the fees to an unknown amount over time. The Standard would be in a single vendor environment and will only work with us as an exclusive. The investment choices are quite good. Just about any mutual fund you can think of could be brought into our pool of 25 or so offerings. Through the course of our discussion we realized that if we chose the multi-vendor option we would have Legend Group as an option very similar to The Standard with a 1% fee and Fidelity Direct as the other option. As a current Fidelity customer I was ecstatic. This seemed like the best of both worlds. Unfortunately the discussion spiraled into this paranoid discussion that people would be forced into making their own decisions with Fidelity. Legend Group would provide what appeared to be nearly identical service, but they were fixated on a fear of Fidelity. In the end we took a vote and the committee voted 10-2 to go with The Standard. I was floored. I have explained the power of fees until I am blue in the face, but people just don't get it. I have also explained that people at Fidelity are incredibly helpful and there is the option of hiring a CFP every year or two for a reasonable price. In the past our k-12 403(b) plan has been dominated by AIG-VALIC and ING, with a few Fidelity and American Funds investors. Whatever we do, we are getting away from surrender fees and annuities. But isn't a 1.1% fee pretty comparable to the recently discounted annuity fees? I have one more chance to convince the teachers on the committee that we need to have package that includes the Fidelity option. I am at my wits end with these people. I made the mistake of letting them know that I have an undergrad degree in finance and they think that you have to some specialized knowledge to pick a few mutual funds. With a bad pension, mediocre salaries, and a Metlife local pension, we need to be able to invest with a low cost provider for our 403(b). Does anyone know anything about the Legend Group? Or do you have any ideas about how I can sell my committee on this extremely important decision.
  6. In a recent post I explained that our 403b consultant recommended that we go with The Standard as our single vendor. ScottyD said, "If you compare The Standard to 403bASP you will find there is no comparison. If a single vendor environment is what you are searching for there is probably nothing better than 403bASP." Currently I have my 403b with Fidelity and really don't want to lose it. Can a company like The Standard or 403bASP provide the type of low-cost options I am used to? Are most school systems being pushed toward single vendor environments for cost savings? I believe that the recommended single-vendor format will be a huge improvement for people who have used AIG-VALIC and ING in the past, but for someone like me, this does not seem like a good step. Will Fidelity in a multi-vendor format, become significantly more expensive under the new regulations? Or are schools maintaining the .1% index funds without the layer of fees? How is this playing out in other places? Thank you.
  7. jbs

    The Standard

    My 403(b) committee just received a recommendation for our new 403(b) investment structure. After analyzing a large number of options and vendors, our consultant made the following recommendation: The best option is a custodial account using The Standard (www.standard.com). They said that it gives the greatest flexibility in investment fund choices and greatest flexibility in cost control. The account can be completely bundled as a single fee. Does anyone have any knowledge of the company, The Standard? What do you think of this approach? We currently have Fidelity and the usual suspects (AIG-VALIC, ING, Metlife, American Funds, etc.). The Standard is Roth eligible and has over 8000+ mutual funds available. The annual expenses are negotiable and can range from less than .30% to 1% or more. Does this sound like a decent plan?
  8. Below you will see a post from the summer that many of you may have missed. It points out that AIG-Valic does indeed know what is best for retirement savings. I thought that after the events of the last few days it deserves a repeat posting. This spring my wife's school district and my school district have taken alternate paths in working with the new IRS regulations. My school district chose a CPA firm to assist us. The firm really seems to understand that the spirit of the new regs is to modernize the 403b and make it more transparent. My wife's school district, on the other hand, chose as consultant a firm that seems most focused on promoting the insurance industry at the detriment of teachers' retirement savings. Previously my wife had Vanguard as an option, but after the consultant's advising, they were left with just ING and AIG-VALIC. The consultant refused to pursue Vanguard or Fidelity. After this shady deal was struck, there was a meeting for all employees who weren't previously with VALIC or ING. The purpose of the meeting was to explain the IRS changes and give the VALIC and ING time to sell their products. After the business manager gave an introduction, I asked if I could say something and ask a question. I proceeded to read a page and a half prepared statement aggressively bringing light on the past practices of the two companies and the amount of money people lose by going with annuities. (Thanks to 403bwise for a lot of my information). When I finished, the crowd cheered and the tone for the night was set. Next the representative from VALIC spoke and rolled out their high-fee annuities and their new mutual fund platform, or as I like to say, the bait and switch. I am sure no one will be encouraged to take this option. Of course in true VALIC fashion, she could not produce a list of fees, but promised it would be available later. (So they were chosen to be one of the two options, even though they hadn't shown a fee schedule. Typical). My wife, another audience member and I continued to hammer her with questions and she became more and more agitated. Finally, she said, "You people just don't get it. You have had 15 options for all these years. If you were in business and had a 401k, you would only have one option. You still have two good options. At VALIC, all we have is one option. We only have Vanguard..." I have never seen someone want to take back what she had said more than she did at that moment. What a smoking gun! It was as if the sky opened up and light was finally coming through years of darkness. My wife then asked why VALIC employees could have a true low-cost option, but she couldn't. The ING guy was next and had to completely change his presentation, because after what he had just witnessed, his new platform 1.35% "all-in" (which I'm sure is a huge improvement) wouldn't have been such a great sell with us in the audience. So maybe school systems should follow the first good advice that VALIC has ever given (albeit indirectly) and make a low-cost option available to employees.
  9. Perhaps AIG's troubles will force schools to look beyond AIG and start to deal with companies that are less expensive and more transparent. This should be a wake-up call!
  10. jbs

    A Smoking Gun

    This spring my wife's school district and my school district have taken alternate paths in working with the new IRS regulations. My school district chose a CPA firm to assist us. The firm really seems to understand that the spirit of the new regs is to modernize the 403b and make it more transparent. My wife's school district, on the other hand, chose as consultant a firm that seems most focused on promoting the insurance industry at the detriment of teachers' retirement savings. Previously my wife had Vanguard as an option, but after the consultant's advising, they were left with just ING and AIG-VALIC. The consultant refused to pursue Vanguard or Fidelity. After this shady deal was struck, there was a meeting for all employees who weren't previously with VALIC or ING. The purpose of the meeting was to explain the IRS changes and give the VALIC and ING time to sell their products. After the business manager gave an introduction, I asked if I could say something and ask a question. I proceeded to read a page and a half prepared statement aggressively bringing light on the past practices of the two companies and the amount of money people lose by going with annuities. (Thanks to 403bwise for a lot of my information). When I finished, the crowd cheered and the tone for the night was set. Next the representative from VALIC spoke and rolled out their high-fee annuities and their new mutual fund platform, or as I like to say, the bait and switch. I am sure no one will be encouraged to take this option. Of course in true VALIC fashion, she could not produce a list of fees, but promised it would be available later. (So they were chosen to be one of the two options, even though they hadn't shown a fee schedule. Typical). My wife, another audience member and I continued to hammer her with questions and she became more and more agitated. Finally, she said, "You people just don't get it. You have had 15 options for all these years. If you were in business and had a 401k, you would only have one option. You still have two good options. At VALIC, all we have is one option. We only have Vanguard..." I have never seen someone want to take back what she had said more than that ###### at that moment. What a smoking gun! It was as if the sky opened up and light was finally coming through years of darkness. My wife then asked why VALIC employees could have a true low-cost option, but she couldn't. The ING guy was next and had to completely change his presentation, because after what he had just witnessed, his new platform 1.35% "all-in" (which I'm sure is a huge improvement) wouldn't have been such a great sell with us in the audience. So maybe school systems should follow the first good advice that VALIC has ever given (albeit indirectly) and make a low-cost option available to employees.
  11. Hello, My wife just found out today that her school system has chosen to limit its 403b vendors to AIG-Valic and ING. The school system hired RE Sutton & Associates as the consultant to help them determine how they would handle the new 403b regulations. RE Sutton is a firm that consults for insurance companies. Up to this point Vanguard has been an option for teachers to choose and now it has been lost in this shady deal. I am trying to stay ahead of the snake oil salesmen and have already let it be known to my school system's administration that I am working to become educated on this matter and will not stand by quietly and let AIG-Valic and ING push out Fidelity from our choices. My questions are as follows: 1. What legal recourse do employees have if their school provides no low-cost option? 2. Does anyone know of a good source that lists fees for different providers in an easy-to-understand format, so that you could show them to many teachers and administrators and have them realize quickly the costs associated with companies like Valic and ING? 3. Does anyone have any advice on how either of us should approach this issue? My wife is meeting with system's business manager and the union president who apparently agreed to sham.
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