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LibraryLady

Where does Horace Mann deduct fees?

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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. 😀

 

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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.

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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. 

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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%. 🙄

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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.

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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.

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