Jump to content
LibraryLady

Where does Horace Mann deduct fees?

Recommended Posts

Haven't posted in awhile. Successfully got Aspire added to our district and people have asked for help signing up. One thing that is difficult is the fact that Aspire spells out clearly every fee that is charged, and places like Horace Mann do not. This makes my fellow teachers think they aren't getting such a good deal  because they aren't used to seeing fees. How does Horace Mann deduct their fees? I know they charge 1.25% M & E fee, but do they reduce total number of "units," reduce the unit price ??? Just trying to find where it shows up. Was hoping to just show the results are less, but honestly, a friend showed me her statement for the last quarter and it was slightly better than a Vanguard Target Date Fund. The fund was Fidelity Funds Manager 85%. It does state "The quarterly rate of return above is calculated prior to the deduction of any annual maintenance fee, charges due to early withdrawal or surrender, premium loads or market value adjustments, if applicable to your contract." Doing the math from beginning balance and ending balance does come out to the % they state, however. I realize that the period of time is only a small snaps and has no bearing on results over a long period of time. I was just surprised. Probably a waste of time trying to figure this out, but I would love to be able to explain this. 😀

 

Share this post


Link to post
Share on other sites

 

I can't comment exactly because I don't know everything about your portfolio or anyone else's. It's totally possible that a certain higher fee fund can outperform a lower fee/cost fund in the short term.  You would have to know how they calculate a certain return.But do you realize your fund is made up of different funds including bonds?  That it gets more conservative as you get closer to retirement?  It's for your protection.The Fidelity fund is made up of up  to 85% equity  and some bonds too so yes the more stocks the better performance in good times but lower performance in a down market. The Target Fund depending on your year you selected has varying allocations. You have to compare apples to apples. Your friend will lose more if things go south. Probably much more. Plus you are in Index funds which out perform active funds over time and that is a FACT. 

The truth is many of these companies hide their fees because fees matter and hurt long term performance which you can't accurately access short term.I would not chase performance or compare your performance with others. Keep investing where you are and long term you will outperform the higher fee funds.It's  complex and complicated on purpose to make things less clear. You need to trust Vanguard and avoid the comparisons. You are in a better place than your Horace Mann friend. Trust me we know what we say here. We don't just say it for the fun of it.

Share this post


Link to post
Share on other sites

Check the Horace Mann  fund prospectus booklet. By law they must state the total fees they charge for a certain fund. Read carefully. Then compare it to your Vanguard Fund. Did you use an advisor with Aspire? If you did than even with vanguard your fees may have been elevated. YOU MUST self direct your account into Vanguard to get the best fee and performance through ASPIRE and NOT use an advisor. As you can see its complicated:)

If horace mann is charging 1.25% M and E  fees  and others and the underlying Fidelity  85 Fund fee is 1.04% ( checked) than she is paying over 2% a year or more. And she won't ever figure it out. Also Fidelity 85 also has a 5.8 % load upfront fee. She may or not be paying that. 

Share this post


Link to post
Share on other sites

Thanks Tony. I was comparing the returns to the Vanguard Target Retirement 2055, and I was aware of the expenses so that's why I'm shocked at those returns. For all I know they deduct fees within the fund after the statement, who knows. As we all know, they are less than upfront. The hilarious thing is, the rep from Horace Mann has a little poster that says Expenses Matter that is hung in our faculty lounge. It starts over 1% as the low fee, and goes up to something like 3.5%. 🙄

Share this post


Link to post
Share on other sites

Over the past ten years or so your  Vanguard target fund 2055 had an annual  average return of 10.33% Actually the Fidelity 85 fund looks similar in allocation  and had a ten year return of 9.50 %.

These are the figures outside a retirement umbrella. With the additional fees the Fidelity fund would have performed lower. Vanguard would have been a little lower too because of Aspire fees but the fund itself only  has a 0.15% expense ratio so your fund probably did better.

I'd say you are doing well.

Share this post


Link to post
Share on other sites
On 9/8/2019 at 6:40 PM, LibraryLady said:

Expenses Matter that is hung in our faculty lounge. It starts over 1% as the low fee, and goes up to something like 3.5%. 🙄

Yes everyone is trying to get on the low expenses bandwagon because people have started to catch on to low fees . This is a huge quandary for folks who make their living on commissions. They know they can't match Vanguard so they use deceit /complexity /lack of details to get you to think they are low fee too.

I've got nothing against advisors. I had a nice  Edward Jones young lady actually ring my doorbell this morning . She asked me if I needed help with investments. I told her I invested with Vanguard exclusively on my own. Right there I  could see her salesperson trained wide smile collapse . I felt bad in a way as she seemed sincere in starting out in her career but as we know here that you have to look after yourself first and foremost. I'm sure she will be able to find plenty of folks who can use her services.  It's the  financial delivery system that needs to change. My main indigestion always came from what the annuity salespeople would tell  teachers in order to get them to sign up. It was so disingenuous.

Share this post


Link to post
Share on other sites
On 9/16/2019 at 1:58 PM, tony said:

Thank you Tony.  As I read your advice, I contacted Horace Mann.  I am a newbie and feel very intimidated, but have made it my new mission to learn.  Well, I found out that if you have under $10,000, Horace Mann charges a yearly maintenance fee of $25/year along with any account getting charged a 1.25% maintenance fee.  Then each fund or whatever it is called (Vanguard as an example) will have its own fee.  When I asked her where to find my fees on my quarterly statements, she said i would have to call in for better information because they don't put it on your quarterly statements!!!!  It is "built into the policy."  WoW!  So basically I found out how much I pay for each fund and the lowest is Fidelity at .35% and the highest is JP Morgan Ins Trust at .78%.  So I am paying over 2% which is criminal now that I am learning about fees!  Thank you for what you wrote because it made me do what I have been meaning to do for over a year!!!!

 

Share this post


Link to post
Share on other sites

Jane Doe

All of us appreciate it when we get feedback. Thank-You  Yup, they are lining their pockets at your expense. But it's all very legal.

You have to be careful.  We all do.Some of these companies have added big time names to their fund choices like "Vanguard" and "Fidelity "and "Index Funds." They use that as a ploy to draw you in. It all sounds good but what they don't tell you is glaring. You are paying much much more than if you purchased a Vanguard or Fidelity index fund on your own not associated with an insurance company.. When you invest with these insurance companies you are not only supporting your retirement but you are also paying the advisor and the insurance company and the underlying mutual fund LOL!!. In the end you end up paying too much for a Vanguard fund whose expense ratio is quite low and always honestly and transparently stated on their (Vanguard) webpage. Fees are actually taken out daily based on your balance.So the more you invest the more they get. Overtime  (years)you will give up a huge portion of your money to a company and advisor who often offer little additional value.   They prey on ignorance. Good for you for opening the pandora's box!!

 

 

 

Share this post


Link to post
Share on other sites
12 hours ago, tony said:

Jane Doe

All of us appreciate it when we get feedback. Thank-You  Yup, they are lining their pockets at your expense. But it's all very legal.

You have to be careful.  We all do.Some of these companies have added big time names to their fund choices like "Vanguard" and "Fidelity "and "Index Funds." They use that as a ploy to draw you in. It all sounds good but what they don't tell you is glaring. You are paying much much more than if you purchased a Vanguard or Fidelity index fund on your own not associated with an insurance company.. When you invest with these insurance companies you are not only supporting your retirement but you are also paying the advisor and the insurance company and the underlying mutual fund LOL!!. In the end you end up paying too much for a Vanguard fund whose expense ratio is quite low and always honestly and transparently stated on their (Vanguard) webpage. Fees are actually taken out daily based on your balance.So the more you invest the more they get. Overtime  (years)you will give up a huge portion of your money to a company and advisor who often offer little additional value.   They prey on ignorance. Good for you for opening the pandora's box!!

 

 

 

Quote

Hi again Tony!

Thank you for responding!!! 

I was hoping I could ask you for your opinion about using 403B's or 457's at my school.  I am close to (hopefully) retiring early, and I may be able to follow a tax hack I heard from millionaire educator (I think that is his name) and he puts all of his money into his 403B, 457, and HSA for the tax benefits.  He basically pays no federal tax and minimal state taxes.  Do you think the tax benefits of this method outweigh the fees of a company such as Horace Mann or VOYA (this is the new and only company we can invest in now).  I am able to invest almost all of my pay so I'm wondering if I should put all of my after tax money in index funds and not worry about the tax benefits or go for the tax benefits because they will outweigh the fees over the few years I have left?

And two last questions, when I retire as early as the end of this school year or perhaps as long as three years, should I withdrawal the Horace Mann money and put it in index funds?  And do they count as a retirement vehicle so I don't get charged.... I know I can't withdrawal the money now, but as soon as I am no longer tied to my school system, I can take it out with out a penalty if I put it immediately in some other form of retirement.  Would index funds qualify or do I have to put it in a IRA or some other retirement vehicle I'm not aware of?  I'm really looking for some advice.

Again I'm still a newbie, and I am immersing myself in every book I can get my hands on and every podcast available to make the right decisions, but it's all jumbling together, and I'm a bit scared.  I hope this makes sense and wasn't too wordy.  Thanks for ANY help, guidance, or suggestions.  This site is wonderful!!!

 

Share this post


Link to post
Share on other sites

1281021840_2019Q2AssetAllocation.thumb.JPG.e3113f26066f71af5dc92559e6163c1d.JPGHi Jane,

Above is my portfolio as a retired 72-year-old. It will be a bit overwhelming, but there is a lot of thinking and reading in constructing my retirement portfolio. 

Here is Millionaire Educator's website: https://www.millionaireeducator.com/ Ed is famous in our journey to get every educator educated in 403(b) and personal finance. It changes our life so much and we become better teachers as well. He was asked to be on the new documentary Playing with FIRE but couldn't because of his exotic and fun-filled lifestyle. Take a look at his portfolio. You can learn from us regular investors by what we do. But also, keep reading! 

You sound a little desperate and want to be perfect by not making mistakes. Slow down and take your time. 

Your question about tax benefits outweighing costs. Not sure what you read about Ed, but he will eventually have to pay taxes on his 457b, 403b. As I understand the HSA, it can only be used for health costs. We all have to pay the taxman or woman when we withdraw the money for retirement purposes. Anyway, it sounds like a sales pitch for selling you an expensive annuity. Taxes are significant, especially during retirement when my income is more than twice as high as when I was working as a teacher, and complying with the IRS's RMD (Required Minimum Distribution of tax-deferred IRAs at 70.5). 

We need to know more about your 403b plan in order to comment on what you can transfer to an index fund. Just off the top of my head is that you have to have an index fund in your plan to transfer it while you are working.

When you retire, then you can roll over all of our 403b, 457b into Vanguard. That's what I did when I retired 11 years ago. I have all of my money in vanguard and TIAA. 

Hope this helps,

Steve

Share this post


Link to post
Share on other sites

Jane Doe

I'm hesitant to give too much investment advice because every one's finances are different and personal. Certainly if you can invest your total paycheck, which most teachers can't do, I would definitely max out your 403b and 457 b accounts. The thing is you will still have to pay taxes eventually on that money when you decide to withdraw it. That maybe be good if your income will be lower in retirement than it is now. . Keep in mind you will have a pension plan and social security. In my state both of those are taxable and I don't know your marital status which might also influence your taxes paid.

Personally I would prefer to pay taxes now and not later. Does your 403b and 457b accounts have a Roth option? I would pursue that route personally but not everyone agrees with this approach. Starting when you hit 70 you will have to start paying taxes on your deferred accounts like it or not. It could be a nightmare. All those things have to be considered. If you go Roth you will pay taxes now  more incrementally but it will be tax free on withdrawal. I like that approach better if nothing else from a psychological level. i wish I had that option earlier in my career..

When you retire, i would immediately transfer all your accounts over to Vanguard and consolidate your accounts into some good funds. I like the Vanguard Life Strategy Funds. They come in different allocations and you can chose the one you think suits your needs. They are internally managed and are made up of Vanguard Index funds. They are low cost and very easy to manage and diversified.

I would prefer you stay away from Horace Mann.  Did an advisor recommend putting your whole paycheck in their funds? Be careful. It sounds like some commissioned sales person might have put that idea in your head. Not that it's necessarily a bad idea to do that because saving is never a bad idea. But I just don't know enough of your details to say this might be the way to go.

Do you and or your partner utilize and max out an IRA outside of your employment?

Can you tell us what other choice of investments you now have in your 457b 0r 403b? If you could list your options we might be able to get you to transfer your money NOW to a better option.

Personally I would suggest you slow down before jumping to quickly. Keep us informed and keep communicating and we might help you make the right decision.

 

Share this post


Link to post
Share on other sites

Just read Steve's comments. Sound like we are on the same page.

I think Voya might be a better option than Horace Mann. Once we have more details  of what other choices you have outside of and with Voya we might be able to help further.

Also if you are from the same school as Library lady,  Aspire would be a way to transfer all your money out of Horace Mann and into Vanguard. If you can do that I would definitely advising maxing your accounts. Then again you could also save in a taxable account and go directly to Vanguard on your own.  As you know, Taxable accounts and  403b and IRA accounts work differently but  having both helps diversify your options with taxes.

Share this post


Link to post
Share on other sites

Tony and Steve, thank you!!!!  You're both right, I do need to slow down.  It's partly my nature and also partly because I really do want out of teaching; love the kids but hate the disrespect and many other aspects.  So, I took the weekend to absorb what you both wrote back to me, and I really appreciate the time and knowledge you shared with me.

I did understand that the millionaire educator will have to pay taxes when he takes out the money, but because he pays so little in taxes now, I thought that sounded like a really good way to invest what I would have paid in taxes now, and let it grow over the next 10-20 years.  (I was thinking that compound interest effect would more than make up for paying taxes on it later.)  Plus, I believe I'll be at a lower tax bracket when I retire, especially since I won't make full retirement, and I'll only get a fraction of my pension.  I'll only get about 1/3 to 1/2 of my full pension depending upon if I take it at 50 or 56 even though I will have 24+ years in the pension system.  I can hear everyone saying it's only 6 years more years, hang in there!  But honestly, I'm not sure I'll make it to the end of this year.  It's really gotten bad and unfortunately it's had a cumulative effect on my desire to show up and do my best each day.  So, I better take some time to understand all that you've given me here!

Unfortunately, we only have VOYA now as a choice at my school.  There are no other options.  They have switched several times over the years from Fidelity to Horace Mann, to etc.  I'm also glad you mentioned Roth's inside of 403B.  I didn't even understand that existed.  My husband has a state job (Virginia) and his retirement in the hybrid system is so transparent and they do have a ROTH option.  I'm not sure if I do, though.

Tony, you wrote "Can you tell us what other choice of investments you now have in your 457b or 403b? If you could list your options we might be able to get you to transfer your money NOW to a better option."  I'm not sure if this is what you mean, but at Horace Mann, I have attached what I have and it's 50% invested in Fidelity, then 10%, 20%, and 20% down the row.

image.png.48a28616004d2a69eaa7896526e9c175.png

I picked these over 10 years ago when I really had no clue so you can be harsh if these are terrible picks.  This is with Horace Mann.  Can I transfer it all to VOYA (the company now serving Fauquier) without leaving my school system in the middle of a year?  I know I can't take it out to invest elsewhere.  I do know with VOYA they have a 2040 retirement choice with fairly low fees, but I don't know what VOYA themselves charge for managing a 403B or 457. 

Do 403B and 457 have the same fees or is one better than the other?  I will try to see what options I have at VOYA and find out their fees.  You have no idea how this is helping me to start finding things out instead of trying to figure it out all first.  Just contacting Horace Mann and talking with them has made some things more clear already and I wouldn't have done it had I not seen this post!!!  Thank you, Tony for that.  And Steve, thank you for sharing how you are invested.  That will take me some time to digest, but I'm so glad you both agree that when I can, I should transfer it to Vanguard.  That is what I have heard over and over again. 

I should probably stop writing now because I think I am rambling!  THANKS AGAIN SO MUCH!!!

 

 

 

Share this post


Link to post
Share on other sites
3 hours ago, JaneDoe said:

Unfortunately, we only have VOYA now as a choice at my school.  There are no other options.  They have switched several times over the years from Fidelity to Horace Mann, to etc.  I'm also glad you mentioned Roth's inside of 403B.  I didn't even understand that existed.  My husband has a state job (Virginia) and his retirement in the hybrid system is so transparent and they do have a ROTH option.  I'm not sure if I do, though.

Tony, you wrote "Can you tell us what other choice of investments you now have in your 457b or 403b? If you could list your options we might be able to get you to transfer your money NOW to a better option."  I'm not sure if this is what you mean, but at Horace Mann, I have attached what I have and it's 50% invested in Fidelity, then 10%, 20%, and 20% down the row.

image.png.48a28616004d2a69eaa7896526e9c175.png

I picked these over 10 years ago when I really had no clue so you can be harsh if these are terrible picks.  This is with Horace Mann. 

Your selections of US equity funds are diversified which is good although I don't think the JPMorgan fund is not necessary. I used 403bcompare to look up the Horace Mann fees: in order, the first 3 have expense ratios of 0.35%, 0.78% and 0.53%. The Dreyfus fund was not on their list. There's a admin fee of $25/yr and a 1.25% mortality and expense fee. There's a 5% surrender fee that lasts for 5 years. 

You need to know the VOYA fees before deciding to transfer your Horace Mann balance to VOYA. Are you still contributing to the HM 403b? The big question is whether the VOYA 403b allows you to use a custodial 403b(7) account that is mutual fund based, rather than a 403b annuity based plan? The custodial 403b(7) plan will not have an M&E fee or a surrender charge, although it's possible their mutual funds could have front-end or back-end loads (fees).

Because your district has a single vendor, they may (should) have bargained for a lower cost 403b plan from VOYA than the standard plan available to multivendor school districts. It should certainly include a custodial account choice. You will have to find out from VOYA what plans are offered and what the fees are. 

Like Tony and Steve, I'm a retired teacher, so I certainly understand your wish to retire. After you retire, you will be able to move your 403b accounts to a traditional IRA at Vanguard. Tony was able to get the low-cost VA state-run 457 added to his district's 457 vendor list. Both you and your husband should be able to contribute to it, rather than to a high-cost 403b.

Share this post


Link to post
Share on other sites

Hi krow36,

Thanks for responding.  I contacted my VOYA representative using your idea to find out if they custodial 403B and some other questions about fees.  I'm just waiting on a response at this time.  I am no longer contributing to the Horace Mann account and haven't for quite awhile,  but I really want to start dropping some significant money into a retirement account.  I had thought that a 403 and a 457 would be a good way to do it to lower my tax liability at this time, but perhaps, after reading everything that everyone is saying, it may not be my best option.

I agree with you about the JP Morgan fund.  Do I call HM and move it to Fidelity since it has the lowest fees if VOYA doesn't work out?  I've never done this.  I also wonder if you could explain the 5% surrender fee.  That money has been in there way over 5 years...is that what the surrender fee is.  I'm sorry to ask dumb questions, but there seems to be so much to know.  (Cringe)  I truly wish I had started my education about retiring 20 years ago!!!  I'd probably already be done and dusted. ha.  Thanks again.  This board is awesome!

PS - where is the site to look up fees.  You looked up Horace Mann and I'd love to use whatever you used to look up Voya myself.

PPS-My husband is contributing to a state run 457 through his hybrid VRS account and it's great, but I don't have a hybrid account.  I fall under the VRS plan 1 so I don't know how to contribute to a state run 457.  If you could tell me how to get information on this, I think that would be better than Voya or Horace Mann!!!   There's just so much you don't know you don't know!!!  HAHAHA!

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...

×
×
  • Create New...