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Clueless About 403B

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Hi!

 

I am a first year elementary teacher and need help choosing a 403b provider. I don't know anything about the 403b, or what questions to ask providers. I have met with insurance and investment companies, but they all seem to offer the same things, but contradict each other at the same time (for instance whether I should do a variable or indexed annuity). I am 23, single, and don't have children. I hope someone with experience in this area could offer advice! Here are the providers I have to choose from:

Aspire

Ameriprise

AXA

CitiStreet

First Investors

GALIC

Horace Mann

IA Pacific

ING

Life Insurance of the Southwest

Lincoln Financial Group

Lincoln Investment Planning

MetLife

Symetra

Security Benefit

Thrivent

VALIC

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Hello Welcome to the website

 

From my past experiences and current ones too, I think you should take a close look at Aspire. Thats the one I am currently with and I have access to several Vanguard and TRowe Price funds at a reasonable cost. What makes this possible is you can self direct the account meaning you won't have to pay money to a salesperson for putting you in a fund you can put yourself in. You will pay too much long term.

 

Go to the Aspire website, log in your state and school system and report what choices you have available to you. From their we can help you further set up a 403b thats relatively low cost. I believe its only .15 basis points plus the fund expense ratio. If you stick with the Vanguard index funds you can come out pretty well cost wise.

 

I would encourage you to avoid most of the other choices as they are insurance products. My question to you is ARE YOU SURE YOU WANT AN ANNUITY?

 

 

Here is the aspire website:http://www.403bplan.info

 

Go to plan search.

 

WE look forward to hearing from you.

 

Tony

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Hi Tony!

 

Thank you for getting back to me. I have met with a representative from Aspire, and he stressed to me that this provider was the lowest cost. However, I wanted to make sure that I was getting a good cost as well as going with a company that is trusted and reliable. I will keep Aspire in mind, but keep my options open as well. Concerning the question of going with an annuity, I thought that was my only option? I was told that I could bypass the annuity by going with an investment company, where my money would go directly to mutual funds. However, I was told the annuity would provide me with more options. I was also told about the ROTH, but I am not interested in doing that just yet. Are there any other options besides those listed?

 

Also, are there any other educators or people who have 403b accounts, not provider representatives, that can share their experiences and advice? Thank you!

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Hi BN,

 

I'm not a teacher. I'm a Certfied Financial Planner. I have spent 18 years in the investments business. I would strongly advise you against purchasing an annuity. They have high fees and pay high commissions-which is why most of the salespeople you meet with want you to buy them. You can manage your own funds and do far better in the long run. I would advise you to do more research. Do some more reading on this board. Teachers such as yourself are easy prey for the financial services industry. They are trained salespeople-but they have an agenda-getting paid. Your agenda should be to get the best and cheapest investments you can. The best way to do this is via mutual funds-in my opinion. Ask more questions-you're to be commended for getting a handle on a long term plan at such a young age. Take the time to learn more and you'll be rewarded in the long term. PM if you like and I can give you more info on costs of annuities vs funds.

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Brand New,

 

You read what Mark had to say and I agree. Low cost means alot. Aspire has been O.K with me so far -no complaints. List the aspire choices and we can go from there.

 

Annuities are a danger zone. What better options do you think they offer? Don't do anything until you know what you are doing. I made the same mistake at your age that you may be ready to make.

 

If you do some reading on this website plus buy teach and retire rich you will make a major jump forward.

 

 

Tony

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I forgot to mention the surrender charges. If in 5 years you get a great offer to do something else-you have to pay high surrender charges (1 to 8%) to get your money out. And even then the company will often fight your attempts to do so. Annuities are easy to get into but difficult (and expensive) to get out of. There are loads of examples of this problem on this board.

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Brand New,

 

Don't neglect the fact that you can might get the same tax benefit as the 403b and much lower fees on your first $5,000/year by opening a traditional IRA at Vanguard. [CORRECTION: there are income limitations that apply to who can make a fully deductible trad IRA contribution if you are covered by a pension plan--check these carefully before exercising the trad IRA option.] If you are planning on investing no more than $5,000 per year at this point, you can skip the 403b entirely (though I'm all for you investing as much as possible now... 40 or 50 years from now, those dollars will very likely have grown enormously). I suggest you read a bit to get a sense of the importance of time, asset allocation and fees in long term investments. There's good material on the Fundadvice.com website, or in almost anything written by John Bogle (his "little book" would do the job nicely).

 

You might also consider a Roth IRA, which gives you no immediate tax benefit (i.e., you invest after-tax money), but amazing long-term benefits (you never pay tax on that account, no matter how large it grows to be).

 

And let me add my voice to the chorus: run away from those insurance salesman offering annuities. They may seem sincere and may make their product sound sweet, may even tell you it doesn't cost you a thing, but that's the sound of a great payday for them, not a good deal for you.

Edited by whyme

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Money from a traditional IRA is actually after tax money whereas 403b is pretax. You do get a tax credit (subject to income limits) for the traditional IRA contribution-so it is a good deal but the 403b is a better deal. The Roth offers no tax benefit now-but all growth and withdrawals are tax free-assuming you keep it for a 5 year minimum.

 

On another topic Roth IRA's can be a great way to save for a kid's college education.

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Hi Tony!

 

Thank you for getting back to me. I have met with a representative from Aspire, and he stressed to me that this provider was the lowest cost. However, I wanted to make sure that I was getting a good cost as well as going with a company that is trusted and reliable. I will keep Aspire in mind, but keep my options open as well. Concerning the question of going with an annuity, I thought that was my only option? I was told that I could bypass the annuity by going with an investment company, where my money would go directly to mutual funds. However, I was told the annuity would provide me with more options. I was also told about the ROTH, but I am not interested in doing that just yet. Are there any other options besides those listed?

 

Also, are there any other educators or people who have 403b accounts, not provider representatives, that can share their experiences and advice? Thank you!

 

 

Brand New - If you want a very efficient way to get acclimated to invested and not have to do a ton of research please use on of Vanguard's Target Retirement Date funds. On just a rough guess based on your age a fund that anticipate a 2050 retirement date and use Vanguards funds. The ticker is VFIFX.

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Hi Brandnew,

Welcome to this forum. Congratulations for starting your plan at a young age. You will not regret this decision and the courage to ask questions so that you can get on the right path. Too many of our colleagues are approached by a sales person who has "the right plan for you." You have gotten some excellent advice right here and it’s all free.

 

There is only one good annuity and that is offered by TIAA CREF which is not on your list unfortunately. Ask your district why TIAA CREF is not available. I have used TIAA CREF for my 403b when I was teaching, am now retired. I was very satisfied. I have all of my money in Vanguard now.

 

AVOID all of the other vendors in the list your provided, except for Aspire. Tony does business with them so take his advice. You are so right about the costs of your retirement plan.

 

I would agree with whyme about those books. If you read just one book in investing, you will feel much more confident about what you want and where to get what you need. If you read 2 or more, you can be your own adviser. You will know the crucial difference between a sales pitch and objective information.

BTW 20 years ago when I was an aging 43 year old, I knew nothing about 403b too. I got all of those sale pitch responses to my questions too. It is still going on and our colleagues have no clue, YET.

 

Good luck,

Steve

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Brandnew

 

I bet your hiding under the bed after reading all these posts.

 

 

Do you see what the problem with investing is? Here we are throwing all this information at you and you are probably wondering what you should do. On top of that you have got all these salespeople drooling for your money.

 

 

You must read on your own and absorb all this info on your own at your own pace. Investing is simple but so much disinformation /information out there you may never figure out the truth.

 

So here I go again: Do the Aspire platform. Pick the Vanguard Target Retirement for your planned retirement date and be done with it . Thats my final advice. I would think Steve, and Big Red would agree with this advice. (I hope)

 

 

Tony

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Brandnew

 

I bet your hiding under the bed after reading all these posts.

 

 

Do you see what the problem with investing is? Here we are throwing all this information at you and you are probably wondering what you should do. On top of that you have got all these salespeople drooling for your money.

 

 

You must read on your own and absorb all this info on your own at your own pace. Investing is simple but so much disinformation /information out there you may never figure out the truth.

 

So here I go again: Do the Aspire platform. Pick the Vanguard Target Retirement for your planned retirement date and be done with it . Thats my final advice. I would think Steve, and Big Red would agree with this advice. (I hope)

 

 

Tony

 

 

Agree with the Target retirement fund.

Later, Brandnew, give yourself 5 years to learn to invest, not bad to be a 28 year old to know what I finally learned at 55. You will be fine.

 

We are so happy that a brand new teacher came here and asked the important questions. It gets lonely around here, with the millions of teachers hardly anybody posts questions like you did Brandnew. Do you realise that it takes a lot of courage to do that? Others who are afraid or timid about asking these questions, you have helped them tremendously.

Have a great weekend and a great summer,

Steve

PS as a retired teacher, I now have reoccurring dreams of going back to work, YIKES! and not prepared or late to work and did not call the sub unit.

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Steve

 

As sharp and intelligent as you are It would not suprise if yes you did go back to work in some capiticity. In the meantime keep posting!!

 

 

Tony

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Not bad at 28 but he(brand new) stated he was 23-even better!!

 

 

WHEN he (or she) gets to 28 and be financially literate (five years from now), he or she will be in the "cat bird seat!"

Have a great weekend,

Steve

 

PS Tony; we will be in Philly at the Boglehead's reunion in the middle of October. Send me a pm if we have a chance to meet.

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