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jec2004

Newbie Starting Out 403(b)

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Hi everyone! I am 26 and starting my first job ever in my residency in a few weeks. I have to fill out some paperwork regarding my 403(b) plan, and am in need of desperate advice as to what to do. Here are my questions:

 

1) Which investment company should I chose? My hospital gave me 5 choices, and I don't know what would be a good company for me: TIAA-CREF, Vanguard, VALIC, Fidelity, American Century. Should I make voluntary contributions to these places?

 

2) Is it simpler and better to just go with one company or two?

 

3) Which company should I direct my University contribution (which is 1-1.5% of my base salary)?

 

4) I heard that TIAA-CREF is a pretty stable company with low fees. If I pick this company, how should I allocate my portfolio? Is 40% TIAA Traditional, 10% CREF Bond Market, 50% CREF Stock reasonable? Should I be even more aggressive or more conservative? Should I allocate to TIAA Real Estate or CREF Inflation-Linked Bond? As you can probably tell, I really need help!

 

5) Under the 403(b) should I be making voluntary contributions per month, or hold off when I have more money. Right now I have so many expenses (car, new apartment, new computer, etc), I don't know if I can set aside the $15 minimum a month. On the other hand, should I be more aggressive and make the effort to set aside more of my paycheck?

 

6) What is the difference between a TIAA-CREF Regular Annuity (RA) and TIAA-CREF Group Supplemental Annuity (GSRA)? Should I be investing in both or either? What are the pros and cons?

 

 

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jec2004

You've come to an excellent site to learn. That said, your questions tell me that you need to educate yourself, in addition to the resources here, about investments, investing and yourself in relation to both. Others here can tell you about those companies, although you can also search in archive discussions.

Read the articles offered on the home page.

Go get "Financial Planning for Dummies." It's extremely important to your financial future that you ground yourself in the basics.

Re: contribute now or later. I would encourage you to pay off your debts before you contribute.

Good Luck.

 

detailgal

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Hi Jec,

Agree with detail gal. Congratulations for thinking about your retirement at such a young age. Now for your questions:

The only thing I disagree with detail gal is to start now, don't wait until you pay off your debts. I believe the minimum is $50 a month with TIAA CREF.

 

1. You have an excellent choice of companies with TIAA CREF, Vanguard and Fidelity investments. Avoid Valic and American Century, they have expensive insurance products that you don't need.

 

2. You are right about TIAA CREF. Vanguard has many more choices. Both are touted on this site because of their non-profit status (a claim no other investment company can make) and extremely low fees. Don't believe the rhetoric that paying high fees and getting "pro" advice automatically puts you at an advantage, it doesn't. Educating yourself does.

 

3. It is simpler to go with one company.

 

4. A good asset allocation for your age is to be more aggressive, but you must understand the risks. Educating yourself by reading and asking questions here will help you with diversification. Just to get started make it simple. With the 403b, you only have the TIAA side to choose from. If you choose TC, stay away from the Traditional Annuity. Your money is locked up. You can't move it without getting hit with a surrender fee.

 

5. I don't know the difference between TIAA-CREF Regular Annuity (RA) and TIAA-CREF Group Supplemental Annuity (GSRA). You can always call TIAA CREF and ask them. Also, if you live in a major city, you can get face to face consulting with a TIAA CREF. They do not charge commissions.

 

Hope this helps,

Steve

 

 

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I would like to know why is it that we never get a poster that complains about the low cost pricing and poor service of the no-load firms? No one has ever asked us for advice on how he/she can get a higher cost product that provides better service than the no-loads. Does anyone out there know of someone who effectuated a Revenue Ruling 90-24 transfer from a no-load to a load?

 

Peace,

Joel

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Pathfinder,

Damn, thought for sure we got away with another one. But you saw right through this. You are so smart. Wow!

 

 

Jec2004,

Seriously, don't pay attention to the few obstructionists with their quick liners and sarcasm. As you can see Pathfinder offers nothing but criticizes anybody who dares suggests low fee companies.

Educate yourself and watch those fees and commissions.

Steve

 

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jec2004,

 

Congrats on your new job and your willingness to begin saving for retirement now. You basically have three ways to go:

 

1) You can do-it-yourself and go with a low-cost provider (in your case TIAA-CREF and/or Vanguard and/or Fidelity). In this scenario you will need to educate yourself (which you are already doing) and make your own investment decisions. Low cost providers typically have telephone support and web based support to help you but not face-face service. Some do, but that is usually the exception.

 

If you decide to go wtih the do it yourself route I encourage you to read more about Target Date Retirement Funds. My peronal opinion (and some have disagreed on this board) is that these funds are a great, cost effective way for a beginner to get started. You simply choose your estimated retirement date and contribute to one fund (example the 2035 fund of company ). Managers of the fund make all investment decisions and automatically reallocate your chosen fund to become more conservative as you approach your retirement date. You only have to regularly contribute money to this one fund. This approach has also been called the "Fire and forget" approach. Fees for the TDR approach can be as little as 0.21% from Vanguard and as high as 0.90% for Fidelity. Though Fidelity generally employes more actively managed TDR funds. If this approach interests you I encouarge you to read the following story:

The One Fund Solution?

http://www.403bwise.com/wisemoves/targetdate.html

 

2) You can use a representative who, for a fee, will provide you with investment services (It looks like in your case Valic and American Century will be offered via reps.). Agents can and do provide valuable services. The key is to determine what services you are getting and what fees you are paying. Only then can you determine the true value of the service.

 

3) You can go with a low-cost provider(s) yet employ a fee-only Certified Financial Planner to help you device an investment strategy. Under this approach a CFP may choose from your "buffet" of choices and select the best choices for each category (fixed and equity).

If you use this approach I would encourage you to seek out a planner who charges by the hour. You can check out Certified Financial Planners at: http://www.cfp.net/default.asp

 

You are lucky to have such a diverse selection (mulitple low-cost and rep-based). It looks like your employer is on the ball. Good luck and let us know what you do.

 

Dan Otter

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Steve said: "Educate yourself and watch those fees and commissions."

 

I would say: Educate yourself and watch those fees and commissions turn into ADDED wealth for you and those you care about.

 

Steve, your reaction to Path was entirely accurate.

 

Path, If you think the post was planted why don't you make a case for Valic?

 

Peace,

Joel

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