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Wesley Daunis

403b and 457 help

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When I began contributing to my 403b years ago, I did so after speaking to and getting advise from the Valic sales rep that was available on location.  I was never informed that I had options in vendors, or that I even had the ability to contribute to a deferred compensation 457b plan.  I now know better because of ChooseFI.  Based on my research, the options that my district provides are not great.  My questions for you:

1). Which vendors would be my best options for both my 403b and 457b?  List attached (403b compare does not list most of these options on their website)

2). If I did not have the money to maximize my contributions to both, which do you recommend I contribute to (based on fees and expense ratios)?  Further, should I contribute to both and split the difference or focus on just one plan?

3) Anything I need to know before making the switch from one vendor to another?

Thank you in advance for your help and direction.  I am new to all of this and look forward to learning from such a knowledgeable group.

 

Screen Shot 2020-09-28 at 4.38.56 PM.png

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17 hours ago, Wesley Daunis said:

Which vendors would be my best options for both my 403b and 457b?  List attached (403b compare does not list most of these options on their website)

Your best choices are in your 403b plan. You can self-direct through Security Benefit into  NEA Direct  Invest (you will need to pull the application from the Security Benefit website). From there you can pick the Vanguard Funds Available. You can also go with Aspire and self direct into Vanguard or Fidelity index funds. Direct Invest is cheapest but If you go into a Vanguard Index fund  or Target fund Aspire is a decent choice too and you have more choices to chose from. Here is The Direct Invest link:https://www.securitybenefit.com/individuals/product/nea-directinvest. Here is the Aspire link https://www.aspireonline.com/plan-types/403(b)-plan  You can of course call Aspire and tell them what you want to do and  they will help.

 

These are your best options but you must do this on your own and not utilize an advisor. If you use an advisor your cost goes up and you might be led to more expensive options. A common tactic. I notice Aspire is  associated with Raymond James , beware. You must be careful. Stick to Vanguard Index Funds , Fidelity Index Funds, or a Vanguard Target fund and no contact with an advisor.

 

17 hours ago, Wesley Daunis said:

If I did not have the money to maximize my contributions to both, which do you recommend I contribute to (based on fees and expense ratios)?  Further, should I contribute to both and split the difference or focus on just one plan?

Obviously, unless I am missing something your 457b should be avoided completely. If you max out your 403b you can put additional monies in an IRA or taxable account If you pick low cost options in your IRA or taxable accounts. Low costs and diversification plus saving  consistently is the key to success.

 

17 hours ago, Wesley Daunis said:

Anything I need to know before making the switch from one vendor to another?

 

It's easy, you will need the transfer papers. Fill them out. Write self -direct/No Advisor on your application if you go Aspire and pick your funds. If you go NEA self direct its automatically advisor free . Beware that you may have surrender fees if you transfer but usually its worth taking the hit and moving on to better choices.

We can guide you further if needed.  What ever  you do stay the heck away from insurance companies selling investments. You will pay much more and be treated dishonestly by advisors.

Regards,

Tony

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On 9/28/2020 at 4:09 PM, tony said:

I did notice your Security Benefit info  above  has blank info. Why?

I notice the same thing.  If the blank means you have to engage them directly without the "benefit" of a sales representative, that could be a good sign! 

Tony has identified the better options on the 403b list.  His insistence that you avoid an "advisor" is right on.  

Depending on your income and the amount you are able to contribute, you might also want to consider a Traditional IRA or ROTH IRA at a place like Vanguard.  These have annual contribution limits much lower than the 403b and income limits above which contributions are not permitted if you have an employer retirement account (higher for the ROTH eligibility, that's the more likely option if you are well along in your career).  Such accounts could serve as a good supplement to the 403b; you should definitely look into the options there as they apply to your situation.   You can get lower fees and a better selection of funds (and avoid that gauntlet of sales reps who are not working in your interest) in those non-employer accounts.  It's a ridiculous situation that puts teachers and other 403b workers at a disadvantage, but that's the reality.

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On 9/28/2020 at 6:02 PM, Wesley Daunis said:

1). Which vendors would be my best options for both my 403b and 457b?  List attached (403b compare does not list most of these options on their website)

You may want to read my Investing 101 page if you need to get up to speed.

The best 403b plan you have available to you is Security Benefit's NEA DirectInvest, which I documented here. You can build a fully diversified portfolio with rock bottom fees. This is an elite plan. Aspire is your second best 403b plan, but it isn't worth discussing because it adds on a non-trivial 0.15% fee that Security Benefit's NEA DirectInvest does not charge.

I'm not sure about your 457b vendors, but I'm not optimistic. You didn't say what state you're in, some states (like NY) have great 457b plans you can gain access to.

On 9/28/2020 at 6:02 PM, Wesley Daunis said:

2). If I did not have the money to maximize my contributions to both, which do you recommend I contribute to (based on fees and expense ratios)?  Further, should I contribute to both and split the difference or focus on just one plan?

You didn't say how much you're contributing.

If you're contributing less than or equal to the IRA maximum then I wouldn't bother with the 403b/457b and I'd open up an IRA at a place like Vanguard and Fidelity and fund that instead.

If you're contributing less than or equal to the 403b/457b/401k maximum then I'd consider maxing out the 403b because once you hit 50k, they drop the annual $35 fee. If that isn't particularly appealing then I'd max the IRA first and put the rest in the 403b. (all of this is assuming your 457b isn't great).

If you're contributing less than or equal to the 403b/457b/401k and IRA maximum then I'd max both.

If you're contributing even more then I'd max the IRA, 403b, and put the rest in the best 457b plan (assuming it isn't egregiously bad).

If you're contributing more than the max for all three then put the rest in a taxable account.

If sure would be easier to answer if I knew how much you were contributing. 

On 9/28/2020 at 6:02 PM, Wesley Daunis said:

3) Anything I need to know before making the switch from one vendor to another?

Valic probably charges surrender fees. The annual fees associated with your Valic account are probably high enough that its worth paying the surrender fees. Again, you'll have to dig into the numbers

 

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He joined on Monday left his post and questions and never came back. 

Over the last 20 years, I have seen this happen many times here and cannot figure out what people are thinking. 

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