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jcarlson8282

403b Vendor list Questions

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I currently have Ameriprise and have just started to do a lot of reading and realized that I am paying too much in fees. How difficult is it for layman that has no experience with finances to set up and run a 403b with Aspire on his own? Right now I am paying 1.35% plus $30 a year for RAVA 5 Advantage variable annuity and for an advisor that I haven't seen or heard from in 5 years. I've seen a 5.93% growth in that time. (Is that decent? Seems low for the past 5 years)

I would like to go on my own, but I don't want to screw up and have it cost me more than fee that I am currently paying. From what I've read it seems like Aspire is my best option from my Vendor list. I asked around a little about adding Vanguard or Fidelity, but I was told it is difficult because they can only have 11 vendors on the list. (Not sure why 11). Here is our district's list of 403b vendors: Any advice, tips, or information would be greatly appreciated. 

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jcarlson8282, welcome to the forum! Yes, an Ameriprise variable annuity is expensive, and your return of 5.83% over the last 5 years is pathetic. I glanced at the prospectus and it's hard to estimate your fees without knowing exactly what you signed up for.

Aspire is the best 403b vendor (and only ow-cost one) on your district's list and I think you should transfer your Ameriprise balance there. It is not difficult to set up an account with Aspire. We recommend you choose Vanguard for the vendor within Aspire. A very diversified, low-cost portfolio can be made using just 3 mutual funds: Total Stock Market Index, Total International Stock Market Index and Total Bond Market Index. Or you can use one of Vanguard’s Target Retirement Index funds. You can avoid the extra expense of an advisor by writing “self-directed” in the space for the advisor’s name. You don't need an advisor for such a simple, straight-forward asset allocation.

Aspire FAQ:  https://www.aspireonline.com/resources/faqs

Aspire K-12 403b: https://www.aspireonline.com/plan-types/403(b)-plan/k-12

 

Ameriprise RAVA 5 Advantage variable annuity prospectus:

https://www.riversource.com/content/files/6720.pdf

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Hello JCarlson.  As Krow points out, that variable annuity is an undesirable product, so you definitely want to make a switch.  (There may be surrender fee issues that complicate the question of rolling your money over: I recommend getting started contributing to a better plan now, then figuring out how to handle the Ameriprise assets once the new account is established).

Here's the good news: you have a clear first choice, the Minnesota Deferred Compensation Plan.  This should be easy to navigate (you can always ask here if you are wondering about fund options) and it will be lower cost than the commercial 403b plans.  It is a 457b plan rather than a 403b, but for practical purposes they are the same.  Don't worry about Aspire, just sign up for the state plan now. You are fortunate to work in a state with such a plan. 

FYI, I looked at the plan brochure, it appears they charge one-tenth of one percent per year administrative fee, capped at $125 (i.e., once your account reaches $125,000, you pay no additional fee for the assets above 125k) and the fund offerings are good and ultra low cost: you are getting "institutional" pricing on the funds (including Vanguard index funds).  

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I agree with Whyme that the MN state 457 plan is excellent and that you should consider contributing to it. However, you cannot transfer your Ameriprise 403b balance into the 457 plan. You can only transfer it into another 403b plan that is on your district’s 403b vendor list. Aspire is your only good 403b vendor. It’s a bit more expensive than the MN 457 plan, but the difference in 0.10% (MN 457) and 0.15% (Aspire 403b) in the asset based fees is not that significant in my opinion. It's $5 per $10,000, so for smaller balances it's not a game changer in my opinion. If you can afford to contribute to only one plan, then choose the 457 and just use Aspire to hold your Ameriprise balance. If you can max the 457, then also contributing to the 403b is a good idea.

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Thanks, Krow, for pointing out that one can't roll funds from a 403b into a 457 plan. 

I also want to emphasize that JCarlson should get clear on the surrender charges and the schedule by which those are calculated before "surrendering" the variable annuity to put the balance in Aspire.  It could be a situation in which the value of the annuity is greater if one were to wait for a few months before transferring.

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Wow! After doing many hours of research and trying to find knowledgable fellow teachers in the district that can help, a simple post to this forum and a few replies later, I have more information in one spot and an easy to follow plan to get myself on the right track for retirement. I plan on sharing this information with as many teachers as possible! I am going to get my 403b rolled over to a self directed Aspire account (I am free of surrender charges), as well as, setup a 457 to continue the low fee investing. I can't thank you guys enough!!!!!

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You are welcome, and please send your colleagues to the 403bwise.com forum! It makes our day when we can help teachers move from high-cost 403b annuity products to low-cost index mutual funds in a 403b custodial account. Please let us know how it goes.

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Welcome to the forum jcarlson8282.  I teach just down the road from you in Monticello.  We added Vanguard and Fidelity to our approved vendor list about 5 or 6 years ago, in case you want to mention that to your administrators.  In the meanwhile Aspire is a good option.

 

 

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I decided to go the 457 route since it had the least fees, but now could use a little help deciding on which funds. I was planning on going with the Vanguard Total stock market as my main fund, but the MN 457 doesn't offer it. I am debating on just doing the Target Retirement 2045 fund (which is State Street Funds) or picking and choosing a variety of Vanguard funds (small, mid, large, international, and bonds)? Or even going with Aspire and paying the extra 5 basis points to have access to Vanguard Total Stock Market Fund? Any advice would again be greatly appreciated!

Investment Performance Report.pdf

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VG’s Total Stock Market Index and VG’s 500 Index funds have a very similar rate of return over time. The latter has 80% of the TSM funds and many think either will do. VG’s Institutional Index fund is VG’s super low-cost class of the VG 500 Index fund, both tracking the S&P 500 Index.

I would consider:

Vanguard Balanced Index Institutional, ER 0.06%, stock/bond ratio is 60/40, which is automatically rebalanced.

Or something like this which does have to be rebalanced??

55% Vanguard Institutional Index Fund, ER 0.02%

25% Vanguard Total International Stock Index Fund, ER 0.07%

20% Vanguard Total Bond Market Index Fund, ER 0.03%

Or just go with the Target Retirement Fund 2045 that you mentioned, which is rebalanced to become more conservative as you age? I think I’d be tempted to go with either the Balanced Index or a Target retirement fund.

The administration fee of 0.10% is added to each fund’s ER. Still an excellent 457 plan! 

https://www.msrs.state.mn.us/documents/10179/37994/Fee+Disclosure+Document/e1e0bbf3-75c2-4e86-917d-1ae47b9675a2

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Amen to Krow36's comments.  The performance difference over time of the total market vs. the SP 500 is not significant.  If you really feel you are missing something, you could add a dollop of the Vanguard midcap fund, which will add a bit of diversification (but probably won't make a big difference in your ultimate result).  Avoid the higher fee T Rowe Price small cap, I'm surprised Minnesota put that in there instead of Vanguard's small cap fund. The individual Vanguard funds will give you the most control and rock-bottom cost, but it appears those target date funds have a very reasonable expense ratio of about .10%,  so if the set-and-forget simplicity of the Target Date fund appeals to you, I think that would be a fine option as well.

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I agree with whyme that a single target date fund with an ER of 0.10% is a very good option. Sorry that the link to the fee schedule didn't work. It's fixed now.

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