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Kaye

Does The Match Offset All The Fees?

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First off, thanks for the good advice from my first post a while back. I approached my employer (hospital) and asked them if they would consider adding one of these vendors: Vanguard, T.Rowe Price or Fidelity. Their response was "no" because they are currently widdling down their vendors to just one choice (however, I don't see how "one" can be a choice) but anyway, all they are offering at the moment, until they pick the final one, is AIG Valic, D.A.Davidson, Edward Jones or Investment Centers of America. These all seem to have fees and commissions attached to them and I'm just wondering if getting into my companies 403 is worth it just to get the "free" match contribution. It is a 3% match plus a few extra per number of years worked so I would get a total of 4.6% match to start. Not sure how to figure out the math to see if it is worth it or just do something else with my money. I already max out my Roth IRA with Vanguard and the only other thing I have is a stupid money market account that now only has 2.2% interest. I know you guys gave me lots of reading to do and maybe the answers will come from some of these readings, but for now, does anybody have some words of wisdom to help me quit thinking so hard.

Kaye

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Hi Kaye,

Not sure how the new regs change the matching feature of your plan. Before the regs, it was generally accepted that the match would off set the fees, but depends on how costly. However, beyond your initial question, you have no choices or options out side of the companies in the plan because your employer is involved. I would take the match and be happy, unless I am missing something because of the new regs. Others will chime in to clarify this for both of us.

Take care,

Steve

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Kaye;

 

1. Stop thinking so hard.

 

2. Definitely - do what you need to do to maximize hospital contributions - this is the single most important factor in building up your retirement fund. It is highly unlikely that your costs outweigh the benefits of 4.6% per year employer contributions to your account.

 

3. You are choosing investment funds for long term capital accumulation. So even though the Hospital is going to one Vendor, your interest is in multiple and "good" investment choices.

 

3. Keep lobbying for low cost no-load & index investment funds. Even within the single vendor the hospital selects, these types of choices should be available. I know AIG will offer a menu of no-load & low cost index funds - pay attention to what your fund choices are.

 

4. Know your 403b investment expenses. The hospital plan should give you the ability to pay reasonable fees. What is "reasonable" is hard to say, but if you are paying alot more than 1/2% for index funds or 1% for active management, you may be approaching the limits of reasonableness. FWIW, your plan is probably subject to ERISA (Federal Law) and therefore is under the regulatory jurisdiction of the US Department of Labor (DOL). The DOL Webite can direct you to more information about the hospital's fiduciary obligations to plan participants under ERISA.

 

Hope this helps a bit.

 

DC

 

 

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