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Is the STIRS 403b/self managed/acct a good deal at .95 yearly fee plus the funds Ex/R a good deal? Do the other funds available charge a management fee also plus the regular funds ex/r.?

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Hi Fredhirz,

I could not get a straight answer from CalSTRS or State Street about the fees of the self managed account. I was especially outraged at the outrageous $34 transfer fee charged by State Street to some no load companies (that was initially denied by one phone consultant of CalSTRS). I came away not trusting either and obviously, no I do not think it is a good deal or a good plan. That was one reason of several reasons why I decided to run for the CalSTRS retirement board to try and make this a good plan.

I am quite happy with TIAA CREF. I urge others to take a look at TC. Their fees are explicit and extremely low.

Hope this helps,

Steve

 

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I have to respectfully disagree with Steve on this one. No offense Steve - I still think your the best!!

 

I think the the CalSTRS VIP 403(b) is a good plan. I think there is room for improvement, especially in the self managed account, but the core investment options are very good and reasonably priced (though not dirt cheap). It has loan features (not that I advocate for them), it has online account management tools, and you can build a very well diversified portfolio with the account. As much as I like TIAA, they have lagged in upgrading their 403(b) account and I don't believe it allows for enough diversification as I typically like to see. I do believe TIAA is the best option for any fixed income money and if you are going to purely match the broad market - however if you want more exposure to other assets classes the TIAA 403(b) is rather lacking in my opinion. The IRA accounts on the other hand are great, they have nearly every asset class - the question remains why TIAA doesn't upgrade the 403(b) account. I suspect it will happen in the future as they are going through some major transisitions - I like TIAA as a company a lot and use them a lot for my clients - however in certain circumstances I do use the CalSTRS VIP plan. Again, it isn't a panacea, but it is better than probably 90% of the other plans available and they have a commitment to lowering the costs in the plan as assets rise. I have been lobbying them for some changes and so should you - but they are one of the shining lights in a 403(b) world of falling stars!

 

ScottyD

 

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Thanks for the info. I too like TC. But I'm seeking diversity and better returns at this point. The stirs self managed account gives me access to 3,000 funds. Yes some no loads charge a $34 fee every time you buy or sell but they are very few. I joined Stirs/403b when they opened. However my statements don't add up and why two anyway? I'm always charged more in fees than I recieve in dividends on the Stirs account and my self managed statement shows no fees. They say it's because they are built in. Also when stirs offered Dodge and Cox Stock which I already had for my core acct. in the S/M acct. I had to close it-$34 fee and transfer it to my stirs acct. Only in the Stirs acct. can you dollar cost avg. a plus. I also own Bridgeway for my small cap and Matthews Growth & Income for a china play. All have done extremely well and are now closed. MY question is for example with D&C I pay the fund .54 expense/ratio and Stirs management fee of .95 does this mean I'm paying 1.49 for this fund. Do the other fund families charge a fee on top of their ex/ratios? This week I got stirs and state st. to agree they charge a .95 yearly custodial fee. So I think you can see what I'm getting at here. Thanks

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Guest Joel

Question: Has the CalTRS negotiated the fee structure for all of the funds on their 403b platform? If not---why not?

 

Peace,

Joel

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STRS uses Vanguard institutional funds which have lower expenses, but the other funds are at retail, which do make them more expensive. The window does not charge 95 basis points, the window makes money off the load funds commissions and off 12b-1 funds of the NTF no-loads. I have submitted suggestions to improve the mutual fund window by eliminating all load funds and replacing with the same funds at NAV - give access to all funds at NAV along with an asset based fee to cover admin costs. The current .95% fee is starting to sound a little high considering the plan now has $75 million in assets - I am not sure when the breakpoints start coming, but I am told the plan will begin and continue to reduce expenses as assets rise. I think the plan is a fine plan, not the best plan, but better than most. It does need to be revamped. If it was revamped correctly it could become a huge player in the California market and attract hundreds of millions in assets.

 

ScottyD

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Hi Scotty,

I am a bit confused. I think we agree. I don't like, never liked the CalSTRS' self managed account because it is pricey, as you admitted. Sure it has some very good features (which I do like), access to good no load mutual fund companies, but letting them do the transfers and take out "management fees" is too expensive IMO. I think we agree on that point, but can't quite tell from your post.

 

fred: A suggestion:

I looked online for the three 403b accounts that are not self managed but managed by CalSTRS, not State Street. I could not find them, but I am sure they still have them available. One of them was a very low fee Money Market account. A friend used that account for their initial 403b contributions and then transferred once or twice a year to Vanguard (Vanguard is not available on our districts list of 403b providers). There were no surrender fees and the annual expense ratio was very low, a lot lower than what you are paying now. But the catch is that you have to initiate the transfers because if you let CalSTRS or State Street transfer your money to a company of your choice in the self managed account, they want a piece of the action and they want to be paid for "managing" your money. By reading your posts, I don’t think you need their help.

IMO, you are paying too much in fees.

 

Good luck,

Steve

 

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Guest Joel

It is stunning that the STRS one of the largest pools of invested capital on the globe does not use its bargaining strength to negotiate much lower fees for its STRS 403b business. I feel the fees are extremely high when you factor in the fact that they have the opportunity to negotiate the pricing structure and simply do not give a damn. It is begging the question to say that the 403b Program has only $75 million so we have to wait for a larger asset base before we have the right to have the fees teachers pay lowered. One does not need an MBA to demand a lowering of fees NOW. As far as I am concerned you reached the break point on fees many billions of dollars ago. And when you factor in the other family member's wealth---THE CALPERS---you have reached the breakpoints for negotiating fees even before the CalStrs 403b Program was started.

 

If the public officials in charge of the investments of the STRS do not feel that teachers et. al., are entitled to be treated as institutional investors when it comes to using the STRS 403b platform then how can the public at large expect the mutual fund industry to voluntarily lower its fees when it comes to true retail investing?

 

The STRS has some ARROGANCE in pointing it finger at the abuses going on in the industry without publicly demanding a lowering of fees in its own 403b program. Before telling your neighbor that his house needs a cleaning make sure your own house is clean. WHAT CHUTZPAH!!

 

Peace and Hope,

Joel L. Frank

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