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403 B Option American Funds Through Horace Mann Or Vanguard

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Hello everyone,

 

This is my first post. I just wanted some more input on a 403b decision I need to make. I can either choose a 403b/roth 403b option with horace mann who is offer earring all American funds A class shares and they go by the loaded schedule plus MER fees. Or as long as I have enough teachers to join, I should be able to add Vanguard according to our school's treasurer. After talking with the HM rep today and actually seeing that their is a front end load fee, it looks like a no brainier to me to choose Vanguard. I would appreciate any and all help in this matter. Thank you.

 

Greg

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Hello

 

If you really can get Vanguard directly then by all means its a no brainer. At all costs stay away from Horace Mann. another insurance, commission based parasite that offers no additional value. American funds have loads and then you will pay Horace Mann too. You will pay a bunch in fees. Terrible idea.

 

I wonder though if you can really get Vanguard. Check to make sure there is not an intermediary involved. Once Vanguard has tacked on fees it could not be a good deal either.Most of us can no longer get Vanguard directly since the new regs kicked in.

 

The bottom line go with the lowest fees ands stay away from insurance companies. Its really that simple.

 

Tony

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Tony

 

Thanks for the reply. I had the same concern as you about getting VG but when I contacted them on the phone the rep told me we could use them and then i was emailed the forms that our treasurer needed to fill out to get them in our plan. My only concern would be what you said about the new regulations I am not sure if it has to do with a certain number of employees in the plan, the total amount of money that would be invested in the plan per year, or you need to have $1,000,000 in plan assets. When I contacted Fidelity and Tiaa-cref, they both told me this information. Thus our district did not meet their qualifications. When I talked to the VG rep, he did not mention this to me, so we will see. I think I am going to contact VG again on Monday to double check if my district can use them. Please keep the feedback coming, it is appreciated.

 

Greg

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Our employer now has Vanguard it which seems to working and we are glad to have another choice other than an insurance company. What are the new regs and what do you mean by intermediary? Hopefully we got a deal here.

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First be aware that the rep on the phone might not have all the facts. Don't mean to scare you .

 

Our schools sytem used to have direct access to Vanguard which meant we were just like a retail customer-able to chose just about any vanguard fund we wanted at the same cost they charge their retail customers (non-retirement accounts) It was the ideal situation for your 403b.

 

Everything was fine until the the new regs came along. Suddenly Vanguard would not sign a document and the school systems needed a third party administrator to handle everything. This killed our direct relationship with Vanguard.

 

As of late we can get some vanguard (very limited) through ASpire but they take on administratiive costs. If you go through their advisors you coulds end up paying 1% for a fund that normaly you could by for .12 %. A huge difference. While through ASpire you can self direct your account to any vanguard account you wish, you will pay more for it. Thats what I mean by Intermediary.

 

Just be aware it may not be as smooth a process as the rep might have led you to believe unless everything aligns perfectly for you and Vanguard

or a third part adminisrator doesn't throw a wrench in the works.

 

Keep us up to date please.

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Incidently,

 

I don't think Vanguard had steep enrollment requirements like Creff or Fidelity. For us it was 12 employees sign up for it and we were good to go.

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Tony,

 

I do see what you are saying about the new regs and having an intermediary. I appreciate the knowledge. It was also a concern of mine as well talking to the VG rep wondering if the information he was giving was 100% accurate. Even though they are a quality company with quality staff, the rep may not have given me all the facts knowing my school's situation. That is why I am going to call back on Monday to double check this information. As for our school, my treasurer told me as long as we had at least 5 employees wanting a new vendor like VG, she said it was OK to use them on our part. As for VG, the rep did not give me a certain number of employees that had to be signed up or a certain amount of money that needed to be available to invest. So, I am optimistically hoping I can get this to go through. So, we shall see on Monday. I will keep everyone posted. I know it is a Holiday weekend, but I thought I would have more input from other 403b wise members. The more information for me the better. Unless everyone agrees with Tony (which I respect every word you are giving), which I have said earlier, I really was leaning towards VG anyway. I did some more research last night on the VG vs AF through HM choice. All of my research has pointed to VG. One of the only reasons I looked at American Funds through Horace Mann was the fact that they offered a Roth 403b option. However, it is tough to stomach knowing that I will have a front end load everytime I put money in the AF choice. For example, if I am investing $100 per pay I will have a front end load or 5.75% on this amount up to $25,000 then it goes down to 5.00%-Yippee!:) So, I will actually only be investing $94.25 every pay instead of the full $100 plus AF have a higher MER. I can not bring myself to do this just for a Roth 403 b option. Any other thoughts. Thanks again.

 

Greg

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You could always utilize the regular roth option outside of retirement with your first 6,500 and then invest in the 403b after that. If you are married both partners could put that amount in a roth. Do roth first then do the 403b. Ther egular Roth is totally in your hands as to who you invest with.

 

Its good to have taxable, sheltered, and post tax investments like the roth in your savings. Gives you even more options.

 

You are on the right track though. I wish more folks would "get it". You are asking all the right questions.

 

Good Luck

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As far as I understand it, we do everything directly with vanguard and the only downside is we can't get Admiral shares. We have a third party company that disperses the funds into the 403bs but they do not get money from the employees.

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Tony,

 

If you were replying to me and not Greenwich3 on the first reply, thanks again for the advise it is greatly appreciated for sure. I have been maxing out my regular Roth IRA starting around 27 yrs old. For me, I do have my regular Roth IRA funds in VG. I am currently contributing the $5500 max for me until I am 50 when i can then contribute $6500 per year. I was just figuring when it comes time to retire at 35 years of service I will have a regular retirement plan through our STRS which is a tax deferred plan and when I retire, it will become taxable income. I figured the regular Roth IRA will be tax free income in retirement. So, I was hoping the 403b option I could use it as a Roth 403b, since I will be paying taxes on my regular retirement plan. I do not want to have to pay taxes again even though in retirement I will more than likely be in a lower tax bracket. I just like the fact of letting my money grow tax free and withdrawn tax free, even though I know it is taxable income instead of tax deferred. I have talked to VG on a number of occasions and they told me they have no plans on offering a Roth 403b plan. I believe the answer they gave me was because of the costs associated with it, so I did not go into discussions of why with VG. So, if I can get VG in our 403b plan I will be happy because it is low cost and by far more cost effective than any other plan we have even though they do not offer the Roth 403b. I am trying to get the younger teachers to start investing for retirement, so I feel it is my obligation to get the best option available for everyone involved, so we can maximize the money we do invest. I know at the age of some of our younger teaches, I would have appreciated someone to do this for me and help me along. Which in my case, I had no one to so me the ropes. I had to do it through the school of hard Knox. Sorry for the long response, I just wanted to explain my situation in a little more detail. Thank you.

 

Greg

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Gtag

 

Never apologize about writing errors to me because I am the king of typos around here.Looks like you are on the right track. I know how you feel about trying to educate the younger ones. I tried too but I found the more advice I gave them the more they turned their back on me. Some folks just think if you are not in a suit and tie and giving them free pizza, pens , and calendars then you must not know much. . So I keep my advice to myself now and realize understanding investments is a gradual process .

 

I really think from reading your post that you pretty much got things going in the right direction. Please stick around and contribute to this board.

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Tony,

 

Thanks I appreciate it. It is extremely ironic and funny you mention that about the younger teachers. In an earlier post, I told you that I met with a Horace Mann rep yesterday and it was a follow up meeting that he did with our entire teaching staff about 1-2 months ago. In between that first and second meeting with him, I talked to some of the younger and middle of the road teachers like myself to find out if they were interested in going in a different direction because I thought we could get a better vendor. I had about 7-10 teachers said they were very interested or basically to put them down as in. So yesterday through the course of conversation with the HM rep, he told me there were a couple of teachers that signed on with him in the past week. It just so happens that one of those names was of a younger teacher who said they were in with our group. When I heard that, I felt on the inside I was stunned and upset. Maybe you can identify with this. Trust me, I do not claim to be a self-proclaimed financial guru far from it. However, I feel that I try to really research, constantly try to learn and find out the correct information so it would financially benefit me and any other person I would share this knowledge with. I was as honest as possible with these teachers and told them the only interest i had in this was to get the best vendor for us (me included) and so they could start an investing program to have something more for them when they retire. So after reading your latest post to me, I almost felt like you were at our meeting yesterday listening in and trying to save me from some disappointment and frustration. I feel the same way now because I was not in a suit giving a presentation probably created by the main branch company and giving away prizes. It makes you feel because of this that I know nothing. I also talked to another young teacher before we left break and told him I would let him know what vendor we would be pursuing and told him I was meeting with the HM rep this week. He then preceded to tell me that he was meeting with him next week when we get back from break. He told me he scheduled this on the day the rep met with the staff. I hope this is true. It will be interesting to see if this teacher signs on with the rep. They were nice people, however as we both know, they are salespeople trying to make a living and deep down not concerned if they can maximize their financial investments. It seems like the old saying is true, ' Nice guys finish last.' Sorry about the rant and 5 page paper:). As like you, I will see how this situation plays out. If they are persuaded by the rep, I will stay the course for myself and only help the ones that seek it. I will let you know how it turns out. Thank you.

 

Greg

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Greg

 

I just think your average teacher just doesn't want to think that much about what to do or spend too much time researching so they take the easy way out and trust "Horace Mann" . Afterall, how can a company with a name like that be bad?

 

I made my share of mistakes but I finally got wise and smarter by reading. I never had anyone leading me in the right direction until I ran into this site many years ago. Here (403bwise) I started reading Steve Schullo's posts, Joel's posts and Dan Otter's book. Bogleheads website is also a very education site.

 

Have a great Easter!!

 

Tony

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