Jump to content
Sign in to follow this  
krow36

Ny State 457B Plan--- How Do Teachers Take Advantage Of It?

Recommended Posts

I’m curious about how a great state 457b plan like NY's works for teachers. Does the school district have to formally accept the plan? Can the district refuse to participate? Does the plan cost the district? Is there a TPA involved?

I wondered just how inexpensive a complete portfolio could be using this plan.

Using the Vanguard Institutional Plus shares and the Int’l Equity Index Portfolio, I tried out an AA of 60/40 stocks/bonds, with US stocks 4/1 in 500 Index/Small Cap Index, and 20% of stocks in international. Rounding off a bit, it is: 40% 500 Index, 10% Small Cap Index, 10% Int’l Index, and 40% Total Bond Index

Vanguard Institutional Index Fund, Plus Shares (VIIIX) (500 Index), ER 0.02%
Vanguard Small Cap Index Fund, Institutional Plus Shares (VSCPX), ER 0.06%
International Equity Fund, Index Portfolio, (no ticker) ER 0.20%
Vanguard Total Bond Mkt Index Fund, Institutional Plus Shares (VBMPX), ER 0.05%
In this 40/10/10/40 asset allocation, the weighted average ER is 0.054%!
There’s a “participant fee” of $20/year. Also there's an asset-based fee of 0.045%/year on account balances more than $20,000 ($9 fee) and less than $200,000 ($90 fee).
Why wouldn’t any teacher in NY state use this 457b plan before considering a 403b plan? What am I missing?

Share this post


Link to post
Share on other sites

I’m curious about how a great state 457b plan like NY's works for teachers. Does the school district have to formally accept the plan? Can the district refuse to participate? Does the plan cost the district? Is there a TPA involved?

 

 

Krow36, based on my experience with my Virginia 457b plan, I've answered your questions assuming NY's State 457b would be similar
Does the school district have to formally accept the plan?-yes
Can the district refuse to participate?-yes
Does the plan cost the district?-no
Is there a TPA involved? -no
Tony

Share this post


Link to post
Share on other sites

Good Morning Ken,

Appreciate your comments on various topics. The entire history of DC plans with k-12 school districts is rife with too many choices, and there have been all the same, fixed or variable annuities! The temptation to mimic the annuity world with so many choices brings us back to having people frozen and intimidated. Scrolling down the Tier3 PCRA options gives me a headache. Interesting, if you take out all of those funds that charge .70% or more, a handful of options are left.

What is the matter with a "handful of funds?" Remember we are simply dealing with a tax deferred retirement plan offered by k-12 school districts that should be simple and easy to understand, not regurgitate Wall Street intimidating mania with too many high cost choices.

 

I think the OP Krow36 is on to something simple with the NY's 457b plan: easy to understand, low costs and covers all of the core asset classes that all portfolios should have.

If every school district had:

  1. Total stock market index,
  2. Total international stock market index
  3. and the total bond market index,

then IMO the entire k-12 four million educators would be much better off than they are currently.

 

Krow36 knows that those three funds have been recommended by one of the greatest non professional follower of John Bogle for almost 20 years, the now 90-something, Taylor Larimore. It's called Taylor's 3-Fund Portfolio.

 

Have a great day,

Steve

Share this post


Link to post
Share on other sites

 

 

I’m curious about how a great state 457b plan like NY's works for teachers. Does the school district have to formally accept the plan? Can the district refuse to participate? Does the plan cost the district? Is there a TPA involved?

I wondered just how inexpensive a complete portfolio could be using this plan.

Using the Vanguard Institutional Plus shares and the Int’l Equity Index Portfolio, I tried out an AA of 60/40 stocks/bonds, with US stocks 4/1 in 500 Index/Small Cap Index, and 20% of stocks in international. Rounding off a bit, it is: 40% 500 Index, 10% Small Cap Index, 10% Int’l Index, and 40% Total Bond Index

Vanguard Institutional Index Fund, Plus Shares (VIIIX) (500 Index), ER 0.02%
Why wouldn’t any teacher in NY state use this 457b plan before considering a 403b plan? What am I missing?

 

 


Exactly - some district's didn't accept the 457b plan (there should be pressure on the business office to do so) AND because of lack of education/fear of change and 403b advisor's (sales reps) advising against it, IMO.
The fudiciary's would probably advise teacher's to use this vehicle first and/or in addition to a 403b.

 

 

 

Why wouldn’t any teacher in NY state use this 457b plan before considering a 403b plan? What am I missing?

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

×
×
  • Create New...