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nashman50

Small District with a Few Choices

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Hi Everyone,

I'm really glad that I've found this forum.  I recently got hired full time at a school district where I've been half-time for three years now.  Of course, Now I want to invest in my 403b and we don't have many choices.  The consulting group is TSA and the vendors offered are:

  1. VALIC
  2. AXA Equitable Life
  3. Horace Mann
  4. Kades-Margolis
  5. Nationwide

Thanks for any advice that you may have on choosing one of these!

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Welcome to the forum nashman50! I don’t see any great choices on your vendor list.

  1. VALIC  Please read my comments on FITeacher’s thread, Friday (Oct 4) concerning VALIC. Depending on whether the VALIC Group Mutual Fund Product is available in your district, and what the Mgt/Wrap fee of 0%-1.0% is, this might be your best option. You will have to contact the VALIC rep to find out the Mgt/Wrap fee. Don’t sign anything!
  2. AXA Equitable Life. Should be avoided. Sells very expensive annuity products.
  3. Horace Mann. More expensive than VALIC’s GMFP. 1.25% fee + $25. It does have some excellent low-cost Vanguard funds.
  4. Kades-Margolis. Don’t know what they offer.
  5. Nationwide. Don’t know what they offer

The comments above are based on what those vendors offer in CA. K-12 403b plans are usually (but not always) the same as offered in other states. You should only be interested in mutual fund based plans, not annuity based plans. https://www.403bcompare.com/Vendors/Browse

In fact all the posts on FITeacher’s thread are relevant to your situation. Getting Aspire added to your district’s vendor list would be a great improvement!

What state are you in? Many states have excellent low-cost state-run 457 plans that are available to teachers. It's usually not difficult to add states plans to the vendor list. They can be used instead of or in addition to 403b plans.

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Thanks for the information.  I'm in PA.  What specifically should I be asking for when I call these companies for information?  Do they offer some kind of a "quick facts" sheet that makes it easier to compare?

It looks like PA has a deferred compensation plan:  http://sers.pa.gov/DeferredCompensationPlan.html  I can't seem to find if it is available for teachers, though.

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It looks like you are correct, the PA state 457 plan is for state employee retirement system (SERS) employees, not public school employees retirement system (PSERS) employees. Your district may not have a 457 vendor list, but most districts do. 

Unfortunately districts take no responsibility in helping employees select a 403b (or 457) vendor, other than maintaining a vendor list. You will have to go to each vendor’s local rep and ask questions. No, there is no fact sheet for easy comparison of vendors. You should keep in mind that the reps have a conflict of interest in that what is in your best interest (low fees) is not in their own personal best interest.

A first question should be to determine if the vendor has a mutual fund (MF) based (403(b)7) plans. AXA has only annuity based (403(b) accounts which are expensive insurance products. VALIC has both types of plans but you should only be interested in the custodial MF accounts. Horace Mann has only custodial MF accounts. If a vendor does not have custodial 403(b)7 accounts, I would not have further questions.

The second question of a vendor with custodial mutual fund 403b is, what are the fees? For VALIC, assuming the Group plan is available in your district, what is your district’s fee? We’ve seen a 0.6% group fee, and also slightly lower, but districts’ vary. For Horace Mann, 403bcompare says that they may reduce the 1.25% fee with certain groups. Ask about all their fees and get it in writing.

A third question would be to ask the vendor for a list of all the mutual funds in the plan, and their expense ratios (ERs). This is a fee that every mutual fund has, and can be 0.04% for a Vanguard fund and up to 1% or more for actively-managed mutual funds. Ideally your ERs should be <0.10%, although somewhat higher is acceptable (~0.30%?) if there’s no lower choice.

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Nashman 59. 

1 hour ago, nashman50 said:

 

 

1 hour ago, nashman50 said:

Thanks for the information.  I'm in PA.  What specifically should I be asking for when I call these companies for information?  Do they offer some kind of a "quick facts" sheet that makes it easier to compare?

 

Don't call any of them !!!! They will send out a salesman who will sign you up for possibly a bad plan not in your interest. Can you get Aspire added?   I realize this is probably all new to you but take a deep breath, slow down, and start reading the articles on this website before doing anything. Reading this forum  too. ask more questions. https://403bwise.org/education

In the meantime why not invest in an IRA with Vanguard. You can get started saving and not have to go through your employer. I would suggest a Vanguard Target Fund.

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What makes Aspire better than the rest?  Unfortunately, we just got a new business manager this year so I hope that he is in the groove with these kinds of things.  Thanks for all of your help, everyone.  I'm going to do some reading today when I get a chance and I'll chime back in with any questions that I have.

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Nashman50

You have a lot to learn. I don't mean that in a condescending manner. I was in your shoes once and as a result lost thousand of dollars to fees  investing in a menu of funds not much different than what have on your school list. You don't have good choices. They charge too much. I am trying to save you from this mistake. I say do nothing right now until you get your knowledge level up. Start by buying the book available on this website called Teach and Retire Rich. https://teachandretirerich.com. It's worth the cost.

Chances are you won't listen and instead will sign up with those companies . Your business manager probably knows squat about investments. Aspire is different because first of all, it is not an insurance product so it will have lower fees. Secondly it lets you link to Vanguard Index Funds at very low cost. They (Aspire)don't have surrender fees either. Your current choices are mostly High Cost Annuities pushed by commissioned salespeople. You can't trust them. I was lied to so many times by these folks. They will say anything to get a sale and tie you in. 

Please read the posts on his forum. You will start getting the jest of what we are saying.

If you are impatient to invest , open an IRA with Vanguard on your own. Just call Vanguard. You don't need your employer involvement.

In the meantime READ!!   You can figure this all out!! Start by investing in Vanguard Total Stock Market Index. You can have withdrawals made from your bank account and an IRA can give you a tax deduction too. Vanguard can help you with all of this. They are nice people who you can trust.

If you refuse to get wise, you will learn the hard way by giving away too much of your hard owned money to hidden fees and un needed fees. It will cost you years latter in a big way.

 

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Tony,

I don't feel that way at all.  In fact, you and this forum have opened my eyes to a lot.  I am a business teacher and am sorely lacking in investment knowledge.  I can calculate all of the ratios for something like this, but do you think they ever taught us what they actually mean or how to use them?  Of course not.  It is a shame that I will have an MBA in less than a year and I still don't feel any more prepared than I did before.

I am not an impatient person so I do not have a problem waiting.  People make mistakes when they get in a hurry and essentially ruin their futures.  I just ordered the book and I look forward to reading it.

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Nashman

I taught marketing/business/ personal finance for 30 years and still fell for these annuity creeps early. I also have a masters in Business. I'm retired now. I've finally learned  after 10 years of mistakes as a younger man that when it comes to investments YOU DON"T GET WHAT YOU PAY FOR. Actually, it's the opposite. The lesser the total fee the better your results over time  as long as you follow some basic rules of diversification. Take a look at Steve Schullo's post on his performance as an example. You are correct , Education is too abstract and doesn't teach you often how to apply that learning. Obviously you are a smart person. So slow down before you commit to the horrible products on your district list. You can do better.

Let's face facts, Americans are sorely deficient in investing knowledge. Things are starting to change. here in Virginia, a personal finance class is now required in high school for graduation. Its a start.

The problem with calculating ratios and fees , is math skills  alone do not always solve the problem but it  helps. The problem is finding the fees you are actually being charged. It's a sneaky sleazy lack of transparency. They may tell you are only paying 1% in fees but that's not always the whole story. in annuities you might end up paying 2-3-4% a year in  total fees based on your balance and never know it!!  In a 403b, a salesman does not have to act in your best interest. So they can sell you a product that's in their best interest .LOL!! Compare the fees in vanguard which are upfront and transparent and you will see the difference.

Lets us know your thoughts as you go on your investing learning journey. I am impressed that you want to do things the right way for yourself. So many teachers take the easy route and end up getting robbed . 

Another book I would recommend is this one. https://www.amazon.com/Little-Book-Common-Sense-Investing/dp/B077VYLVGP/ref=sr_1_2?crid=2TH54CAIWKCF1&keywords=the+little+book+of+common+sense+investing&qid=1570550051&s=books&sprefix=book+of+common+sense%2Caps%2C161&sr=1-2. John Bogle recently passed but he is one man who's knowledge you can trust.

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. It's available in softcover book. Look around you might find it fairly cheaper than Amazon. Teach and Retire rich is also cheaper online here than at Amazon. I think buying  a used copy  of Bogle's would be smart.

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I bought "Teach and Retire Rich" used on Amazon.  I highly recommend it also. I don't remember what I paid but it was fairly inexpensive.  As an extra special bonus the inside cover appears to have an authentic note and signature from Dan Otter dated 2008.  Does this greatly increase the value of the book?🙂

 

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2 hours ago, MNGopher said:

Does this greatly increase the value of the book?🙂

 

Mine got borrowed over and over again by cheapskate teachers who would'nt buy their own copy but who ironically were all investing in high fee annuities. I never got my copy back. But in between all the borrows  it looked like it went through hell a few times and maybe even  through a washing machine once. I'm not sure yours is a collector's item  because I think he signs all of them.

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14 hours ago, nashman50 said:

What makes Aspire better than the rest?  Unfortunately, we just got a new business manager this year so I hope that he is in the groove with these kinds of things.  Thanks for all of your help, everyone.  I'm going to do some reading today when I get a chance and I'll chime back in with any questions that I have.

If you can get Aspire added to your district's vendor list, that would be a better (much lower cost) option than either VALIC or Horace Mann. Aspire is better because the fees are much lower--only 0.14% is added to Vanguard's very low-cost index funds plus a $40/yr admin fee. If you choose to be self-directed (rather than have an advisor which adds 0.6%), you will have very low fees. Aspire would not cost the district any third party admin fees because they would come out of Aspire's $40 admin fee, so you would pay them rather than the district. That should remove a problem that the district might have with Vanguard or Fidelity who may not want to pay the TPA fees. The expensive vendors have no problem picking up the TPA fees for the district. 

Are you contributing to an IRA? That should come first because you can choose any provider and that should be one of the super low-cost ones like Vanguard, Fidelity or Schwab (who all have super low-cost index funds). You can contribute $6000 every year, either to a tax deductible traditional IRA, or to a Roth IRA (non-deductible but the contribution is tax-free when taken out). If you are in a low income tax bracket just starting out, the Roth IRA would make more sense.

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If you're going to go through the process of getting a vendor added to the list, and I highly encourage you to do that, then do not put effort into adding Aspire. Put all of your effort into adding Vanguard and Fidelity. Aspire is needlessly more expensive than both Vanguard and Fidelity.

I got OCPS (FL) to add both Vanguard and Fidelity to their list of vendors. I wrote about that in a few blog posts. I'd be more than happy to help you navigate the process.

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3 hours ago, EdLaFave said:

do not put effort into adding Aspire

Ed

Again you are being unrealistic and its annoying.  Your fee mantra gets old. If Vanguard and Fidelity were easy to add then  certainly that is all we would recommend.We are trying to break away from insurance products LOL any way we can. But Aspire is a reasonable choice in comparison to other choices these folks have. .By telling folks not to add Aspire you are discouraging them from a choice they may be able to add and that would be to their benefit and that adds reasonable cost/benefit . You are also contradicting our advice in a negative way.  Maybe I misunderstand  your posts . but it seems to me  are doing more damage than helping . In fact you are causing confusion. Please try and see the bigger picture in your responses. Try and be more holistic in your responses.

Just my two cents and I will not respond further.

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