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Steve3108

New - Need Help 403b

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My school district in PA offers these choices through the OMNI group and has these approved vendors.

1.  AMERIPRISE FINANCIAL SERVICES, INC.  2.  AXA EQUITABLE LIFE INSURANCE COMPANY  3.  KADES-MARGOLIS  4.  LINCOLN INVESTMENT  5.  OPPENHEIMER SHAREHOLDER SVCS  6.  SECURITY BENEFIT 

7.  VALIC  8.  VANGUARD FIDUCIARY TRUST CO.  9.  VOYA FINANCIAL (VRIAC)

Currently I have an account through Kades-Margolis, but when I signed up five years ago I didn't understand things.  I'm hit up with load charges in addition to annual fees. My return if lucky is around 2% because of all the fees.  Co-workers have been telling me to go to Vanguard. 

1.  What is the right choice? 

2. Does it make sense to move money out of Kades- Margolis? 

3. Can you explain in plain terms why a load fee is charged and the advantage to taking an account with a load fee.

Thanks for your help!

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This is easy to answer. Vanguard all the way!! I would do a target fund closest to your retirement date. Or a do it yourself might pick Vanguard Total Stock Market index, Total International Index  and Total Bond Index  fund. Maybe 50%, Total  25% International And 25%Bond . The younger you are the more you should tilt toward Stocks. As you get older you can increase your bonds.

 

With Vanguard as a choice I would move everything over and ditch Kades. Load funds are an extra fee you won't be paying at Vanguard. There is zero benefit to paying it.

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  1. Vanguard is the easy choice, I documented their plan here. If you eventually max out your IRA and your Vanguard 403b then you'll have to start looking at 457b plans, but that is probably an issue for another day.
  2. I don't know the fee structure of Kades-Margolis, but I can safely assume it is more expensive than Vanguard. So I'd be VERY surprised if it wasn't in your best interest to roll it over to Vanguard.
  3. A load is just a sales fee that goes to the marketers that sold you that product. It is not indicitive of a better product. In fact, the best products (total market index funds) do not have loads. I discuss this and other fundamental concepts in my Investing 101 page here.

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+1 for Vanguard. Mathematically it's the optimal way to go. The only drawback is that you don't get a person who'll hold your hand through making elections and changes, but you should be able to find your own information(especially if you've already found this forum.)

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Thanks!  
 

One other question.  I know I can stop contributing to Kades Margolis, but can I transfer the 403b money in K-M to Vanguard?  
My district is kinda giving me the run around about transferring the money. Claiming they are not sure if this can be done. I have also heard somewhere you can’t move money from a 403b to another 403b Is this true?  In live in PA. 
 

Thanks again for the great advise. 

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As long as the receiving 403b vendor is on your district’s list of approved vendors, then you can absolutely transfer money from another 403b into it.

Doing so is common, so I’m surprised by the reaction you got. 

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Ed is right. If both companies are under your 403b platform a transfer is more than allowed.  Some folks are just uninformed.You will need to get transfer papers from both companies. Fill them out perfectly and don't forget to sign. One small mistake can hold up the transfer for months. If the forms are confusing call them for clarifications. You may also have to fill out a paper from your third party administrator. I would contact them first with your intentions

 

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I was able to transfer an American Funds IRA and 403b into my Vanguard 403b. The district did have to sign off on the IRA transfer, but the plan allowed it.

The first institution I spoke with was Vanguard. They provided the forms that needed to be filled out. My American Funds broker didn't even realize I had transferred the money until he tried to set up a meeting with me and I told him I moved it =P

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Thanks again.  My district claims they were confused about what I meant when transferring funds.  They thought I meant outside of the vendor list.  All is good with the transfer.

Had another question.  I have looked into Vanguard and have my paperwork for transfer.  My only hesitation is I don't really know what I am doing as far as making selections.  I realize I can set up balanced portfolio in Vanguard based on recommendations.  However, my concern is the future.  How often do you check in with your stock options every month or six months?  Just let it ride until the economy starts to tank and then reevaluate?  My current 403b are they managing anything really? The current guy who set up my Kades-Margolis account 5 years ago has never reached out to me since. So I start to wonder who is looking at the account.

I just want make sure I can handle Vanguard selections and manage on my own.  Thoughts? 

Should I consider another vendor such as Valic where I have an advisor ( is he really going to do anything for me except I won't have load fees) or am I screwed on fees unless I go with Vanguard.

Thanks again for your time.

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Hey Steve, I think you'd benefit from reading my Investing 101 page here.

54 minutes ago, Steve3108 said:

My only hesitation is I don't really know what I am doing as far as making selections.

Your goal is to own the entire stock market (international and domestic), that gives you diversification.

Your goal is to own enough bonds so that when stocks crash, as they inevitably will, your portfolio doesn't drop to a level so low that you can't sleep or you do something foolish, that gives your protection from yourself.

Your goal is for your portfolio to have rock bottom costs, that gives you maximum returns.

To achieve those goals you have three options:

  1. Build a 3 fund portfolio (VTSAX, VTIAX, and VBTLX).
  2. Buy a target date fund (contains those same funds under the covers, but increases your bond holdings over time).
  3. Buy a life strategy fund (contains those same funds under the covers, but keeps the bond holdings constant over time).
54 minutes ago, Steve3108 said:

How often do you check in with your stock options every month or six months? 

Here are the rules:

  1. If you didn't spend your entire paycheck on living expenses, immediately invest the rest.
  2. When you make a new investment, buy the funds that move you back to your desired asset allocation.

Notice: Neither of these rules require you to know what the market is doing or what your funds are doing (hint: they're performing exactly in line with the market).

Bonus: If you went with a LifeStrategy or TargetDate fund then you don't even have to concern yourself with Rule #2 because the fund will do that for you!

Subtext: Give up the wildly incorrect belief that you can use past performance data or current events to predict the market. Stop it!

54 minutes ago, Steve3108 said:

Just let it ride until the economy starts to tank and then reevaluate?

See rule #1 above. Buy stock every paycheck, no exceptions.

54 minutes ago, Steve3108 said:

My current 403b are they managing anything really?

They're managing the fees they extract from you to fund their lifestyle.

Nobody can predict the market. Fund managers sell people on the notion that they can pick the best stocks. Advisors sell people on the notion that they can pick the best fund managers and pick the best time to switch back and forth between stocks and bonds. Nobody can predict the market.

54 minutes ago, Steve3108 said:

So I start to wonder who is looking at the account.

Nobody is looking after your account. The "advisor" really serves two purposes, to give you the illusion that somebody smart is protecting you and to give you somebody to blame when you lose money in the next bear market. Neither purpose leaves you with more money.

54 minutes ago, Steve3108 said:

I just want make sure I can handle Vanguard selections and manage on my own.  Thoughts? 

You can handle it. Own the entire market, own enough bonds so you don't do something foolish, and stick with your plan until you retire (no exceptions for market conditions or the latest BitCoin fad).

54 minutes ago, Steve3108 said:

Should I consider another vendor such as Valic where I have an advisor ( is he really going to do anything for me except I won't have load fees) or am I screwed on fees unless I go with Vanguard.

You should not use an advisor because of fees and their proclivity for market timing.

There are vendors other than Vanguard that offer really low fees (Fidelity for instance), but unless you go with a self-directed account (i.e. no advisor) then you're going to get killed on fees.

 

...in this post I've really only given you the conclusions, but I'm happy to give you the underlying data, logic, and philosophy behind these conclusions.

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Choosing a Vanguard target retirement fund would be ideal for you. It will be adjusted by V as needed to maintain its asset allocation. You can and should ignore the market’s ups and downs. Let the market’s LONG-TERM upward trend do its work! Local reps are salespersons with a conflict of interest. Do more reading on investing.

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3 hours ago, krow36 said:

Choosing a Vanguard target retirement fund would be ideal for you.

This is a no brainer . You'll come out just fine in this option. Unless you feel confident in your own abilities when it comes to investing and managing and diversifying and rebalancing, why not let Vanguard  experts do it for you?

Some folks don't like target funds and I can understand when the fees are high, But Vanguard target funds are made up of index funds and for only a few more cents you get internal management.  It's worth it and you are likely to come out much better long term than many   who manage, under manage or over manage their own  fund portfolio. This was proven mathematically and psychologically by academic studies. 

The best financial skill is getting the right combination of funds  at a reasonably low cost and then not messing with them. Also don't forget beyond fees complexity is not good. Simplicity for the investor is good. 

 

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