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rhollowood

Another 403B Gone Wrong Song...

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I started a 403b in late 2001 with Ameriprise in a variable annuity product - Riversource Retirement Advisor 5 Advantage. I'm closing in on 15 years in this thing and have known for some time that I needed to make a change but wasn't finding information on what to do. The district I work for seems to be absolutely infested with insurance salespeople masquerading as financial advisors.

 

I went in to see the "advisor" at Ameriprise once to attempt to get out of the variable annuity and get directly invested in mutual funds. I got brushed off with a change to the underlying investments that I think were mostly meaningless...I really don't know. It appears to be insurance products wrapped up in other insurance products. I'm sure it's been expensive (can't tell) and hasn't brought nearly the returns I should have seen (also can't tell) over the 13 and a half years or so I've contributed to it. If someone does know if I have been getting hosed here (or not) I'd appreciate the input.

 

I stopped contributions to the 403b in 2014 in favor of going fully toward a Roth IRA with Vanguard recognizing that both my wife and I will have a pension benefit of up to 75% of our final salary, all taxable. But with the income we're earning the $11,000 a year ($5,500 each) we can contribute to the Roth(s) isn't even 10% of our income.

 

I'd like to start making new contributions to a 403(b) if can figure out how to get into one where I can be invested much more directly in a portfolio of stocks and bonds with low expenses. I'd also like to free myself of the current Ameriprise annuity and move the money there so it can grow. The Ameriprise annuity has total purchase payments of $66,182.90 and a cash value of $116,331.43. The current amount available without a surrender charge is $93,770.98.

 

The district vendors can be found here: http://www.tsacg.com/individual/plan-sponsor/nevada/clark-county-school-district/

 

The list is too long to post. The advantage of the huge district is I'd expect some of you will be able to spot some real winners, point out those who are a must to avoid, and give some sage advice on whether it's a fool's errand to try to undo the current annuity. 457 plans are also available through the district so that could be an answer. I can't discern the difference between 403 and 457 currently.

 

I'm not totally opposed to speaking with an advisor that would be acting in my interest. I've gotten the impression that it's hard to find one that really knows the ins and outs of the 403/457 investments. I've been (mostly) D-I-Y my investing for the 15 years. I've gottent to $190,000 over that time. But I'd also like to probably quadruple that number in the next 15. I expect that's going to take (at least) getting more knowledgeable myself OR getting professional help.

 

I'd like to attempt to get full income replacement for retirement meaning we'd need to cover 25% of an unknown final figure (75% of average of highest three years of pay). I figure it might be $800,000 or more to do that. Bottom line, I'd like to get the current 403b money working better for us - maybe moving it to a new provider / getting free of the annuity and getting it into a mutual fund investment instead, start contributing more to that new 403b

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Rhollowood

 

Welcome

 

There are some good non insurance options in both your 403b and 457b accounts. Aspire, Fidelity, or TIAA -Cref would all be worth looking into . You should dump Ameriprise and transfer into one of the above . Aspire will allow you to pick the funds you want like Vanguard Index Funds, the other two have their own specific funds. Fidelity's Spartan Index funds would be a great option.if you have been following the forum posts, your topic comes up often and much can be gained by reading them. I would initiate a transfer of the $93,000 immediately and the rest as it becomes available without charge. Chances are you will be able to cut your expenses significantly by transferring to one of the above mentioned.

 

I started my saving with American Express before it became Ameriprise any years ago. They were my first bad experience. High fees and a less than honest, very manipulating advisor. If you want to reach your investment goal as stated, you would be wise to invest with Aspire, Fidelity, or TIAA. Becuase of much lower fees and better funds, your money should grow better toward your goals.

 

Please keep posting questions and we will help you out. In the meantime please read some of the posts that address similar issues. Also, this website itself has lots of written information about investing which will help you better understand the process.

 

Good luck and welcome aboard!!

 

Tony

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Welcome to the forum, rhollowood!

You are lucky to have several good choices on your provider list. Fidelity and TIAA are mutual fund companies that you can use directly. ASPire and PlanMember are aggregators/third party administrators that your district allows to choose different mutual fund and annuity companies. They add a fee to the basic expense ratio of the MF companies, usually about 0.15% to 0.20%. If you didn’t have Fidelity and TIAA to choose from, ASPire and PlanMember would be a reasonable choice and a good way to avoid the annuity mess.

Fidelity is a huge mutual fund company which has a line of very low fee funds. They are called Spartan Index funds and are very competitive with Vanguard’s index funds. https://www.fidelity.com/mutual-funds/fidelity-funds/why-index-funds
A great source of information on individual 403b plans is www.403bcompare.com. If you check out the “Vender” list, then Fidelity and TIAA/CREF, you’ll see the funds offered and their expense ratios and annual admin. fees.

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Yes, welcome rhollowood,

 

There isn't anything more to add to what the savvy Tony and krow36 have already pointed. You now know the direction you need to take, Fidelity Investments or Tiaa Cref. I have used both of these great companies in the past because Vanguard my ultimate choice was not available. Choose a diversified portfolio such as the Total Stock Market Index, Total International Stock market index, and some type of Total Bond market index, and you are all set. Its that simple. In Fidelity Investments, look for their Spartan Funds as krow36 has pointed out, very inexpensive. In TIAA, look for the Equity Index fund for domestic stocks, and their International funds (I forgot their exact names). For bonds funds, look for Intermediate term bonds and set up the allocation of these three choices based on your age. If you are 50 years old, you can use the 50% stocks/50% bonds allocation. But if you don't need the money for retirement, you can take more risk and increase the stock side so it might look something like this, 70% stock / 30% bond. It is very important to have bonds in your portfolio, it helps with excess volatility as you are getting older and need to preserve what you have.

 

For professional help, be careful who you hire. As you probably know to stay the heck away from insurance agents and brokers, and anybody who sells commissioned base products!

 

There is another way. I have always recommended either interviewing a fiduciary adviser from National Association of Personal Financial Advisers or Garrett Planning Network. But I think you can be a DIYer. The AUM assets under management charged by most advisers can be expensive. While these advisers never charge commissions and are bound to look after your best interests, we should never pay more than .50% AUM. Look for a long discussion on this if you need to here: http://board.403bwise.com/index.php?showtopic=5751 People have to be confident enough to insist on just paying their hourly rate, but you have to do more work on your part and that is what you are doing now, getting great information about setting up a great plan from here.

 

Have a great day,

Let us know how you are doing.

Steve

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Hello rhollowood,

 

I recently asked some of the same questions as you and am currently in the process of switching from a variable annuity with AXA to Fidelity. AXA doesn't make it easy. I'm going to post my experience once it's all finalized. The Fidelity customer representatives have been fantastic.

 

Continue to visit this forum. Everyone has been extremely helpful.

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Rhollowood

 

Welcome

 

There are some good non insurance options in both your 403b and 457b accounts. Aspire, Fidelity, or TIAA -Cref would all be worth looking into . You should dump Ameriprise and transfer into one of the above . Aspire will allow you to pick the funds you want like Vanguard Index Funds, the other two have their own specific funds. Fidelity's Spartan Index funds would be a great option.if you have been following the forum posts, your topic comes up often and much can be gained by reading them. I would initiate a transfer of the $93,000 immediately and the rest as it becomes available without charge. Chances are you will be able to cut your expenses significantly by transferring to one of the above mentioned.

 

I started my saving with American Express before it became Ameriprise any years ago. They were my first bad experience. High fees and a less than honest, very manipulating advisor. If you want to reach your investment goal as stated, you would be wise to invest with Aspire, Fidelity, or TIAA. Becuase of much lower fees and better funds, your money should grow better toward your goals.

 

Please keep posting questions and we will help you out. In the meantime please read some of the posts that address similar issues. Also, this website itself has lots of written information about investing which will help you better understand the process.

 

Good luck and welcome aboard!!

 

Tony

Very good advice.

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Hello rhollowood,

 

I recently asked some of the same questions as you and am currently in the process of switching from a variable annuity with AXA to Fidelity. AXA doesn't make it easy. I'm going to post my experience once it's all finalized. The Fidelity customer representatives have been fantastic.

 

Continue to visit this forum. Everyone has been extremely helpful.

Yes, please post that! Was Fidelity already an option or did you need to request it?

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Ok...so Fidelity or TIAA CREF probably. No reason to go the ASPire route since I have good choices and it seems like ASPire is what people do when they only have that as a workaround to get better funds. So I guess my next question is: can I take the $93,000 that's available without surrender charge and move it from a variable annuity investment to a mutual fund investment. Or do I just end up with a better annuity when I land elsewhere? I've heard over and over how great TIAA is but the Teacher's INSURANCE and ANNUITY part has concerned me. Anecdotally I've heard that annuity is a four letter work with the exception of an immediate payout annuity. So, as I navigate the next steps of choosing Fidelity or TIAA I'm wanting to know what to expect. I talked to Fidelity once a couple of years ago and got unsure of whether it would solve my problems and gave up not wanting to just get into another mess.

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Years ago, I was also concerned about the annuity in TIAA. But TIAA is categorically separate from all other annuities by the standard insurance carriers. TIAA annuities have no commissions or surrender fees (There is one which offers a higher interest rate, but don't remember the name). TIAA annuities act just like mutual funds. I used TIAA for the last 6 years of my working and than transferred everything to Vanguard after termination. They are one of the good guys.

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So I guess my next question is: can I take the $93,000 that's available without surrender charge and move it from a variable annuity investment to a mutual fund investment.

yes

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Ok...so Fidelity or TIAA CREF probably. No reason to go the ASPire route since I have good choices and it seems like ASPire is what people do when they only have that as a workaround to get better funds. So I guess my next question is: can I take the $93,000 that's available without surrender charge and move it from a variable annuity investment to a mutual fund investment. Or do I just end up with a better annuity when I land elsewhere? I've heard over and over how great TIAA is but the Teacher's INSURANCE and ANNUITY part has concerned me. Anecdotally I've heard that annuity is a four letter work with the exception of an immediate payout annuity. So, as I navigate the next steps of choosing Fidelity or TIAA I'm wanting to know what to expect. I talked to Fidelity once a couple of years ago and got unsure of whether it would solve my problems and gave up not wanting to just get into another mess.

 

Yes, no reason to go with ASPire or PlanMember.

I agree with Steve that TIAA is a totally different type of annuity seller and if you used them you would not get ripped off. On the other hand their mutual funds usually have significantly higher expense ratios than those of Vanguard or of Fidelity's Spartan Index funds. If I had to choose between TIAA and Fidelity, I would certainly choose Fidelity. In fact I had my 403b with Fidelity before consolidating to Vanguard.

 

You said in your OP: "The current amount available without a surrender charge is $93,770.98." If you know this to be the case, then I would call up Fidelity (their # is on your provider list) and start the process. You will be enrolling in a mutual fund 403b, not an annuity 403b. There will be no hidden fees or surrender fees with Fidelity's Spartan funds. I suggest you use only Fidelity's Spartan Index funds, which have very low ERs. Fidelity also sells many very specialized managed (non-index) funds that are very expensive.

 

It may take a few weeks or even longer for Fidelity to move the 93k to your new account from Ameriprise. If I were you, after setting up the account I would have your contributions going there. I'd check with your district office on how to get that started.

 

I think you are very, very fortunate to have Fidelity for your 403b provider!

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As an added note. Ameriprise may very well drag its heels implementing the transfer. Back in the day, it took me 6 months to get my money transferred and after my investigation the problem was discovered to be on American Express's side. Things may have changed hopefully. Also don't be surprised if you if get a call from your advisor pleading you to reconsider and asking you why you are transferring. When I told him why he told me I was making a huge mistake trying to go it alone without his advice. What a joke.

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Here’s a respected website discussing Fidelity Spartan Index funds:

Fidelity funds have 2 classes—Investor class for balances under 10k and Advantage class with a lower expense ratio for balances over 10k . According to www.403bcompare, the Fidelity allows 403b contributors to use Advantage class from the first contribution. In any case, once your 93k arrives, you would be in Advantage class funds.
I suggest you consider a simple, well diversified, very low cost 3 fund portfolio:
Spartan Total Mkt Index, FSTVS, ER 0.07% for the US stock mkt
Spartan Total US Bond Index, FSITX, ER 0.17%
and either
Spartan Global Ex US Index, FSGDX, ER 0.12% or
Spartan International Index, FSIVX, ER 0.12%
Have you decided on your asset allocation, the ratio of stocks to bonds? What about the percent of stocks you want in international stocks? Do you have other accounts for retirement—IRAs or taxable? You should consider all your retirement accounts together—you don’t have to duplicate funds in each account.
krow36

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