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About gerryborn

  • Birthday 12/17/1963

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  • Gender
  • Location
    LaGrange, Georgia
  • Interests
    403b / 457 Reform

    I believe every teacher should have a low-cost 403b and 457 option.
  1. Hey Mr. Trusty Advisor, just curious...do you adhere to a fiduciary or suitability standard?
  2. This post might be of some use. My Webpage I share your frustration; I used to write more about the subject, but I got tired of being the "crazy" guy.
  3. "I have explained the power of fees until I am blue in the face, but people just don't get it." ######, do I know what you mean! I get so tired of talking about the subject. Maybe some of your co-workers will find this post useful: Post on Fees
  4. Fun with Numbers: AIG Valic vrs. Vanguard http://403bboondoggle.blogspot.com/search/label/AIG%20Valic
  5. Greetings 403bwise readers, I have been looking at the negative impact that cost have on the long-term investment performance. Check out this post and let me know what you think. Am I off base here? If so, where? Thanks, Gerry Born Do Investment Costs Really Matter? If So, How Much?
  6. Dan, "I am currently struggling what to do once I get the message that Vanguard won't be available anymore because they won't sign all the Security Benefit forms/agreements. I'm hoping that this won't happen but I can't see our TPA administering Vanguard funds when they would rather sell their high cost products." I feel your pain. I am involved with the RFP process in my school district. It looks like we are already at 75 basis points for plan administration and plan consulting fees. This does not include any fees for the underlying mutual funds; they will be chosen later. We chose AIG Retirement to administer the plan since they were the best option presented. (I guess a shit sandwich is better than a smorgasbord of shit.) We do have a self-directed option that is supposed to make fee-conscious investors happy, but I am still unclear as to how much this option will cost. One thing is for sure, it will cost more than our Vanguard 403b account.
  7. My district is reviewing some 403b / 457 proposals from some of the "big ######", but nothing really looks that great to me. There are six proposals and the two "best" ones leave me wanting less. Here are some details: Company A: Initial administrative cost of about 90 basis points, use of mutual funds charging from 20 to 125 basis points, no self-directed option to escape the plan, agreement is for a period of one year. Company A's model allocations have no fee information; I could sit down with a spreadsheet and enter in the expense ratios and do some math, but my life is not that pathetic. The bottom line, why is there a lack of fee transparancy here? Company B: no administrative cost based on assets under management, yearly account management fee of $35, use fee-bloated mutual funds with fees of 100 to 150 basis points, a self-directed option ($50 a year) that is limited to 4% participation among plan members (if exceeded, it appears they can change the terms of the agreement...undoubtedly to their favor), agreement is for a period of 5 years. Thing that rubs me wrong: use of T. Rowe Price target retirement funds (R shares) that have the highest expense ratios; this expense includes a 60 basis point "kick back" to Company B. Of course, this is purely for adminstrative purposes. Supposedly, one of the benefits of consolidating our 403b and 457 plan with one company is that we should be able to leverage our retirement monies to get a really good plan. So far, I don't see that shaping up. The chosen company will deliver personal service and educational seminars to our district, but I envision more glib talk and glossy pamplets. Of course, I don't expect that there will be any mention of how high costs are detrimental to your long-term retirement savings. (I wonder, do these sales reps have index funds in their own retirement plans? If so, why?) I don't know what I'm trying to say here...it is starting to look like the 403b boondoggle is going to continue. What I am seeing touted as new and improved products looks live the same old ...just without an annuity wrapper. The frustrating part is that I know how good the Vanguard 403b(7), the Fidelity 457, and Georgia's Peach State Reserve plan would be for people who already know what is good for them. The problem with those plans is that they don't have the hand-holding component that so many participants want. Unfortunately, the hand-holding comes at a tremendous price; usually in the tens or hundreds of thousands of dollars.
  8. After reading that article about AIG Valic's new improved 403b offering, I have yet to come across any more inforamtion about the product. There is nothing about it at their website, or have I missed something? Will this plan be offered as a 457 plan option too? If you have any info or links, please post it. It is amazing to me that AIG Valic is not advertising this new improved plan. Gerry Born LaGrange, GA
  9. Tony, Send Bloomberg this article. Send them this one too. Gerry Born LaGrange, GA The 403b Boondoggle
  10. Greetings All, I was told that by a Valic employee that Valic products no longer have surrender charges. Is this true? Gerry Born LaGrange, GA 403b Boondoggle
  11. FUN WITH NUMBERS I am sure many of you saw the John Bogle interview on PBS. He has an interesting take on the financial services industry. http://www.pbs.org/wgbh/pages/frontline/re...iews/bogle.html Here is my attempt to get to the heart of the interview: http://403boondoggle.blogspot.com/2006/07/...ks-it-down.html John Bogle Breaks It Down! Here is yet another reminder of why John Bogle is a hero of mine. This link has some very interesting information related to the topic of retirement: http://www.pbs.org/wgbh/pages/frontline/re...iews/bogle.html In essence, Bogle explains how over a 65 year period financial institutions keep roughly 80% of the market return while the investor keeps about 20% of the market return. These numbers are very easy to duplicate with a financial calculator. Remember in this scenario the investor puts up 100% of the investment and bares 100% of the market risk. The financial institution puts up 0% of the investment and bares 0% of the market risk. Here is a section of the interview from the Frontline show: Interviewer: So if I do your average, what percentage of my net growth is going to fees in a 401(k) plan? John Bogle: Well, it's awesome. Let me give you a little longer-term example. The example I use in my book is an individual who is 20 years old today starting to accumulate for retirement. That person has about 45 years to go before retirement -- 20 to 65 -- and then, if you believe the actuarial tables, another 20 years to go before death mercifully brings his or her life to a close. So that's 65 years of investing. If you invest $1,000 at the beginning of that time and earn 8 percent, that $1,000 will grow in that 65-year period to around $140,000. (Summary = A one time investment of $1,000 invested for 65 years at 8% should come to $140,000. Note: this scenario is a ONE TIME investment with no further contributions.) Now, the financial system -- the mutual fund system in this case -- will take about two and a half percentage points out of that return, so you will have a gross return of 8 percent, a net return of 5.5 percent, and your $1,000 will grow to approximately $30,000. (Summary = A one time investment of $1,000 invested for 65 years at 5.5% should come to $30,000. Note: the 5.5% figure is the 8% market return minus the expenses associated with the average mutual fund.) One hundred ten thousand dollars goes to the financial system and $30,000 to you, the investor. Think about that. That means the financial system put up zero percent of the capital and took zero percent of the risk and got almost 80 percent of the return, and you, the investor in this long time period, an investment lifetime, put up 100 percent of the capital, took 100 percent of the risk, and got only a little bit over 20 percent of the return. That is a financial system that is failing investors because of those costs of financial advice and brokerage, some hidden, some out in plain sight, that investors face today. So the system has to be fixed. Interviewer: I've got to unscramble what you just said. You said that in the case of the $1,000 invested for 65 years, the financial system is taking 80 percent of the money. But most of us aren't doing that. In the first place, at 20 we're out spending it; we're not putting it away. But set that aside. We're really talking about people who are probably saving from 35 or 40 or 45 at best for retirement at 55, 60 or 65. and they are plunking the money away into 401(k)s. I'm just asking you, in that system, roughly what chunk of it are people getting back themselves out of their gains, and what chunk of that is going to go to the financial system for managing their money? John Bogle: Well, in the long run, it's 80 percent to the financial system, 20 percent to you. In a given year, it's about 80 percent to you and 20 percent to the financial system, so if you look at 10 years or 15 years, you're probably talking about 60 percent to you and 40 percent to the financial system maybe over 20 years, something like that. But the longer the period, the greater the impact of that tyranny of compounding costs is. What is the moral of this story? The financial services industry enriches itself on the backs of ignorant, duped investors. Do yourself a favor and approach all dealings with financial service reps as you would an open-water swim with a great white shark or the feeding of an uncaged tiger.
  12. Do sales reps hawking 403b, fee-bloated annuities have to invest their own retirement money in annuity products? For example, what kind of 401k plan does AIG Valic offer its employees? Certainly, they don't offer their employees an annuity-only plan. Someone please spill the beans. Do companies give expense/fee rebates to their employees while screwing the rest of us? Gerry Born LaGrange, GA http://403boondoggle.blogspot.com/
  13. Groundswell, My wife and I max out our 403b accounts; the 457 plan is above and beyond our 403b allowances. We also fully fund our IRAs. I use the 457 like a money market account. I am in the 15% tax bracket, so for every $1,000 dollars I save $150. This seems like a good idea to me. Plus, I am getting a 3% return. Maybe I'm an idiot, but that looks like an 18% swing in my favor. Ultimately, my 457 money will be used to buy service purchase years. As far as fiduciary responsiblity, that would not be a factor if the state plan were included. If it is good enough for the state, it should be good enough for the district. I don't understand that argument that every district needs a full service nanny to watch over the schools accounts. That sounds like foxes guarding the hen house to me. It's hard for me to understand how any true financial advisor could suggest , with a straight face, an index fund with an expense ratio of 1.4%. I spoke with one rep who was advocating an annuity with an insurance charge over 1%, invested with funds of over 1%, with a portfolio advice feature of 1% a year. That equals 3% a year! That is both hilarious and extremely insulting. As for my own investing, I'm doing fine. Most of my money is invested in low-cost Vanguard and Tiaa-Cref funds. I sleep very well at night. Sure, it bothers me to know that Valic has its fee-bloated hands on about $14,000 of my money, but I keep reminding myself what I am planning to do with that pool of money. Gerry
  14. TR, Good question. I bought a 457 just buy service purchase credit with my state retirement plan. I park money there until I need to buy years. I put it in a fixed account. I also view this account as a worst case scenario if I were suddenly unemployed. I would be able to get to the money without the 10% penality if I were to separate service from my current employer. For that reason, I do not anticipate putting that much money there. I would consider putting more in a 457 account if I had cost-effective options. I don't use my 457 for its investments; I use it for other purposes. Most of the funds have total expenses of 1.8% or higher. While this is not the worst case scenario in the industry, it is far from optimal. I receive ZERO added value from these expenses; the Georgia's state plan looks far superior to me. I would love to have access to it. Yes, I do and moan a lot about this issue. I will continue to do so until better choices are made available. Gerry http://403boondoggle.blogspot.com/
  15. Hey Steve, I have a great index fund in my Valic 457 account. It's similar to an S&P 500 index fund and it has a total expense ratio of 1.4%! What a joke. The state plan of Georgia, the Peach Reserves Plan, has the same fund for .05%. In other words, the Valic option is 27 times more expensive. Would you pay $27 for something that costs $1? Lipstick on a pig just doesn't do the trick. Index funds in fee-bloated annuities just don't do it for me. Gerry
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