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Amelia

Help with strategy, post-403B annuity plan

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Hello all. I could use some advice on charting a new course. After reading the main site and the threads on this forum, I realized I've been sinking money for the last five years into a variable annuity with Modern Woodmen. I called my district's benefits office this afternoon to stop my automatic pre-tax deductions. The change won't go through until my first paycheck of the new school year in August, so I have a few weeks to make some decisions before the Modern Woodmen rep starts calling me. 

I know one option is to transfer the funds to a custodial plan with a different vendor. The other approved vendors are: AIG/Valic, Ameriprise, American Funds, Aspire, AXA, Foresters, Great American, MetLife, Reliastar, Security Benefit, and Voya. Neither the district's website nor the third party administrator's site offers any details on plans, instead corraling employees to contact financial advisors. I tried searching the Aspire website directly for my district's plan but was again directed to contact either a financial advisor or the plan sponsor. It's stunning how intentionally obscure this whole process is made! Anyway, I sent the district benefits counselor I talked to earlier a follow-up email, asking for details about Aspire specifically. 

I also have an IRA with Fidelity that is invested in a target date fund: Fidelity Freedom 2045 (FFFGX). Unfortunately, I haven't contributed to it since rolling it over from a QDRO a few years back. Moving forward, this will definitely be my funding priority, although I still won't be able to max out for the foreseeable future. 

So considering I already have the Fidelity IRA, does anyone have suggestions for how best to use my 403B funds? 

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Amelia, welcome to the forum. Aspire is can be self-directed, without using an advisor. Just write "I wish to self-direct" in the space for the advisor's name on the application form. Have you checked out Aspire's FAQ? There's good information there. Have you found the application form? You'll also need to fill out a Salary Reduction form from your district's Third Party Administrator (TPA). You can use either Fidelity or Vanguard funds with an Aspire 403b. 

 

 

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Amelia

Glad you found this website. You are on the right track. Transfer your annuity. Don't wait. Aspire will let you tap into a Vanguard Target Fund or a Vanguard Life Strategy fund which are managed for you and /or diversified and balanced for you so you will not have to do much except save in it. They are index fund based and low cost. It's a good way to go. Krow explained how to go about it.

You also have an option through Security Benefit called NEA direct invest. You would use no advisor. The paper work is found on the Security Benefit website. They offer enough Vanguard funds for you to create a low cost   basic index fund portfolio. Just don't let anyone from Security Benefit  slyly lead you back into the wrong funds because Security Benefit has plenty of high fee options that you will want to avoid at all costs.. We have written so much about Aspire and NEA invest that if you do a basic search on this forum  on these topics you should get lots of info.

If you have surrender fees because of transferring , don't let that stop you, pay them and go on with the transfer.

In terms of your IRA, Your Fidelity Fund is too expensive. I would transfer it over to a Vanguard Target Fund equivalent, which would save you on costs quite significantly.It's an easy and quick process..

Also check if you qualify for your state 457b plan. If you do let us know about it as that may be a possible option if offered to teachers.

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14 hours ago, Amelia said:

It's stunning how intentionally obscure this whole process is made

Yea it's obscure and it's intentional by these annuity companies but it's also unconscionable that districts don't lift a finger to help their teachers make the best decisions for themselves. I've said this before I know but, it bears repeating. Often this happens because districts themselves are financially illiterate  so they have no capability to see the damage so many of these  insurance and higher fee plans are causing.

Every district should train someone who can transmit good financial information to their employees and the districts should also eliminate the huge confusing vendor lists and automatically  default enroll all new employees in a  very low fee target fund with options to adjust one year later.  Those current folks offering help are  often incompetent and often defer workers to financial advisors who won't give it to you straight. Streamlining the offerings to a few good choices like Vanguard, NEA Direct Invest (doubtful this would ever be offered without also offering an array of bad Security Benefit offerings unfortunately), Aspire,  and Fidelity.

School districts are currently overwhelmed with other priorities but this could be a topic you could discuss with your district at some point. In the meantime, take care of yourself by moving your money to Aspire and self directing  into a low cost index fund portfolio with Vanguard or Fidelity.

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Fidelity has a low-cost target retirement fund that is index-based called Fidelity Freedom Index Fund that is available for her Roth IRA. Amelia's current Freedom fund uses actively-managed funds to make up the Freedom fund. 

Amelia, Security Benefit's NEA Direct Invest is certainly the lowest cost 403b option she has. I didn't mention it because its service has been reported as sometimes unhelpful. However, if you are willing to be persistent and keep at it, with our help if you need it, you can get a very low-cost 403b using just 3 Vanguard Admiral class funds. If you Google the plan name, you will find a number of threads from several forums including this one.

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On 7/23/2020 at 1:21 AM, Amelia said:

approved vendors are: AIG/Valic, Ameriprise, American Funds, Aspire, AXA, Foresters, Great American, MetLife, Reliastar, Security Benefit, and Voya.

Security Benefit's NEA DirectInvest is clearly your best plan. I documented the fees and how to build a fully diversified portfolio with the funds they offer, check that out here

On 7/23/2020 at 1:21 AM, Amelia said:

asking for details about Aspire specifically

Although Aspire is a plan worth using for those without better options, you clearly have better options. I documented the Aspire plan here.

On 7/23/2020 at 1:21 AM, Amelia said:

I also have an IRA with Fidelity that is invested in a target date fund: Fidelity Freedom 2045 (FFFGX)

That is an actively managed fund that charges 0.75% per year, which is expensive. You can get the index variant of the 2045 target date fund for 0.12% per year, which is an 84% reduction in fees.

Alternatively you could use the following three funds to build an equivalent portfolio and pay even less in fees:

  1. FZROX (total domestic stock) = 0.00% fee per year
  2. FZILX (total international stock) = 0.00% fee per year
  3. FXNAX (us bonds) = 0.025% fee per year
On 7/23/2020 at 1:21 AM, Amelia said:

Moving forward, this will definitely be my funding priority, although I still won't be able to max out for the foreseeable future. 

In IRA has a $6,000 yearly contribution limit, $7,000 if you're 50 or above. Depending on what funds you buy in your IRA it'll be cheaper than the funds you buy in Security Benefit's NEA DirectInvest so putting all of your money into the IRA could make sense. On the other hand, Security Benefit's NEA DirectInvest waives their annual $35 fee if you exceed $50,000. Just a few minor details to be aware of.

On 7/23/2020 at 1:21 AM, Amelia said:

does anyone have suggestions for how best to use my 403B funds? 

I'd recommend you read the Investing 101 page I wrote here. Then I'd recommend you:

  1. Identify your desired asset allocation.
  2. Rollover your expensive 403b into the lowest cost vendor available to you (Security Benefit's NEA DirectInvest).
  3. Buy the funds in the cheapest possible way across all of your accounts such that together they meet your desired asset allocation.
  4. Stick to your plan and invest every spare dollar the moment it becomes available regardless of any other factors (particularly whether the market is up, down, or sideways).
On 7/23/2020 at 9:46 AM, tony said:

check if you qualify for your state 457b plan

I agree with this in general. However, I'd put this at the bottom of your priority list because:

  1. You presumably don't have money in a bad 457b at you current employer.
  2. You need to get the money out of your high fee 403b to a low cost 403b.
  3. You're not even maxing your IRA so you're a long way from needing another 19k in tax-advantaged investment space.
On 7/23/2020 at 2:18 PM, tony said:

Often this happens because districts themselves are financially illiterate

Yup, incompetence and ignorance are more frequently the culprits compared to malevolence.

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11 hours ago, EdLaFave said:

That is an actively managed fund that charges 0.75% per year, which is expensive. You can get the index variant of the 2045 target date fund for 0.12% per year, which is an 84% reduction in fees.

Alternatively you could use the following three funds to build an equivalent portfolio and pay even less in fees:

  1. FZROX (total domestic stock) = 0.00% fee per year
  2. FZILX (total international stock) = 0.00% fee per year
  3. FXNAX (us bonds) = 0.025% fee per year
On 7/23/2020 at 1:21 AM, Amelia said:

I think its always good to tell posters that it makes sense having all their investments within the same fund family regardless of what  investment vehicle they are in (403b, 457b, IRA) etc whenever possible for better management's sake instead of scattered. I know some people think that is not smart but if they are good solid companies that are not going anywhere like FIDELITY OR VANGUARD keeping investments all together under one umbrella makes sense and keeps management simpler. I realize that is not always possible these days in retirement accounts with all the scattered choices . Accounts with a self directing option however helps make that possible.

 

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