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Old 12-03-2015, 03:26 PM   #21
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She was offered a selection of 403b providers, mostly insurance company
based, and all featured high cost managed funds.
She needs to complain to the benefits manager or HR chief that the selection sucks. It is HER retirement fund not the school district's. She has a right to demand a Plan that suits her low cost demands.
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Old 12-03-2015, 03:39 PM   #22
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Originally Posted by mpeirce View Post
403(b)s offered by school districts are notoriously bad.
That would be the understatement of the day!

I understand the trouble started with legislation (quite a few years ago now and heavily supported by the "high cost providers") that called for 403b providers to be able to provide face-to-face access to "advisers." The idea was to provide beneficial advise to employees in understanding retirement goals, selecting funds, etc. and keep them from making financial mistakes.

In reality the legislation did two things:

(1) It kept low cost providers that don't have lots of local offices and bag draggers from qualifying.

(2) The "face-to-face" contact didn't, in most cases, provide any worthwhile advise or education to the employees. Rather, it just exposed them to commission compensated sales people.

I recall from many years ago, DW's school district had an "information day" where bag draggers from insurance companies and similar came in and gave presentations on their oh-so-fine companies and themselves and asking the teachers to sign up with them. I went with DW. It was like sitting there trying to make a choice between the Edward Jones bag dragger and the Ameriprise bag dragger. Sooooo painful!

She went with ING. The bag dragger came to our home to steal every penny we had get her started with deductions and chosing funds one evening. It turned out, he wasn't too bad a guy in that when I explained she would not ever, not once, not ever, never pay a penny of load, he did dig through things with us and DW wound up with some no load equity funds and some interest bearing accounts that were C+ performers in the long run.

Still, when I compared her 403b situation to my 401k situation with MegaCorp, it was night and day. I got a decent match + profit sharing + ESOP added to my 401k by my employer and a satisfactory selection of very low cost index funds. She got no match and the opportunity to arm wrestle with a bag dragger over buying loaded funds, etc.

She's been retired a long time. Things might have changed. I don't think so. Maybe a current teacher can comment?
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Old 12-03-2015, 03:51 PM   #23
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She needs to complain to the benefits manager or HR chief that the selection sucks. It is HER retirement fund not the school district's. She has a right to demand a Plan that suits her low cost demands.
The rules and regs make it tough. It's been a long time since I went through all this, but providers were mandated to have to provide a level of face-to-face presence that many low cost providers did want to do.

The district finance guy claimed all providers that met the requirements were allowed in. But the requirements gave an advantage to insurance companies and commission salespeople based companies like Ameriprise and Jones. The same folks who backed the legislation.

I hope this has changed. DW has been retired 14 yrs and we moved her into a rollover IRA immediately. Since then, I have been relieved to not have to worry about it and haven't. Just a past nightmare.
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Old 12-03-2015, 04:06 PM   #24
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Originally Posted by youbet View Post
That would be the understatement of the day!

I understand the trouble started with legislation (quite a few years ago now and heavily supported by the "high cost providers") that called for 403b providers to be able to provide face-to-face access to "advisers." The idea was to provide beneficial advise to employees in understanding retirement goals, selecting funds, etc. and keep them from making financial mistakes.

In reality the legislation did two things:

(1) It kept low cost providers that don't have lots of local offices and bag draggers from qualifying.

(2) The "face-to-face" contact didn't, in most cases, provide any worthwhile advise or education to the employees. Rather, it just exposed them to commission compensated sales people.
If it makes you feel any better, many government employers and private companies (including my former employer) offered a limited choice of chronically horrible high ER funds.

The once a year 'face to face' meetings with advisors were completely useless - undoubtedly designed to confuse employees to make them think they needed to pay them for more advice. I overheard many of them directed at my employees.

Our in-company 401k committee (all people I knew very well) was made up of two very senior execs (who undoubtedly used big name full retail brokers all their lives) and four HR employees who knew absolutely nothing whatsoever about investing. They changed 401k administrators 4 times in 15 years. Of course the HR department fielded all 401k questions and when I'd ask them a relatively simply question (like 'why don't we have any index funds?' - almost all of our choices were actively mangled), they always had to 'get back to me.' I could almost see the initial German Shepard look from 500 miles away...

IOW, the horror stories still cut across all.
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Old 12-03-2015, 04:11 PM   #25
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I think Walmart is getting into healthcare. Health Care For $4: Are You Ready For Walmart To Be Your Doctor?
IIRC, one of the Rx by mail outfits is going to offer their own version of that generic drug that has been in the news because the only supplier was bought out and the price raised to some astronomical level. Aha! Here it is:

Express Scripts offers low-cost alternative to Turing drug | Fox News

To get back on topic, the entire investment scene has been over complicated as far as most people are concerned. I've been running a SS for my simple, lazy guy portfolio - 35% Total US stocks, 15% Total Int. Stocks, 25% Total US Bonds, and 25% Vanguard Wellesly. You can do worse.
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Old 12-03-2015, 04:23 PM   #26
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When I was working our 403b options were all very high cost funds offered by insurance companies and costly brokerage houses. My supposedly omnipotent teacher's union would scream and shout if the yearly raise was not enough, but was silent as tens of thousands of retirement dollars were transferred to these high cost outfits. The only people who tried to raise the issue were a few business teachers in HS, and some math teachers. They failed.

Thankfully, one day while sitting in the teacher's lunch room, I found a small, non-descript flyer advising us that we could now take advantage of a state sponsored DCP plan. While there was no match such as offered by MegaCorp for 401k plans, the investment options were varied, included index funds, and had very low fees. Some even lower than Vanguard. Needless to say I jumped on this.

For some reason this option was never publicized very well.
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Old 12-03-2015, 06:08 PM   #27
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I think Walmart is getting into healthcare. Health Care For $4: Are You Ready For Walmart To Be Your Doctor?
We've been using Target Clinic for almost everything lately. Travel immunizations and flu shots for a family of 5, all covered as preventative care (but if they weren't, still way cheaper at Target than the family doc). You fill out your data on their iPad and it saves it from visit to visit. Very quick, hardly ever a wait. We've spent way more time talking to the Nurse Practitioner than we ever do to our doc.

So yeah, I'm ready for Walmart to be my doctor. It'll save me the trip to Target. Buy some tires, motor oil, socks, groceries, a leaf blower, and get medical care all under one roof.
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Old 12-03-2015, 07:14 PM   #28
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If you add in the effect that Vanguard has had on other places like Fidelity, who have had to lower fees to compete, then it is more than just the assets at Vanguard that are sucking fees out of the system.

-ERD50
This is a really great point. Fidelity has a whole set of "advantage class" index funds with ERs in the range of 0.05% to 0.1%.

And then there are all the low cost ETFs available from several companies.
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Old 12-04-2015, 10:04 AM   #29
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403(b)s offered by school districts are notoriously bad. Very high fees with often shady operators. ...
This sure seems to be generally true, but fortunately DW's district does offer Fidelity as one choice in her 403B (in a sea of annuity type companies). I think Fido charges single digit fee each quarter, something small like that. I could choose any Fido fund as I recall. DW works in the office as a municipal worker in a school, not a teacher. I assume it's the same plan across all, but I do not know.

DD is a teacher (diff district, still in IL), and she was also steered towards the annuities in her 403B. But Fidelity is also offered there, I don't know if there are restrictions to particular funds, or what the fees are. I need to pin her down on this over the Christmas break, she's been avoiding it (but finally did start working on her Masters).


Quote:
One family member in administration is convinced that their district treasurer is getting some sort of kickbacks, because he just won't change the plan they have from a high fee company.
It does make you wonder, doesn't it? Same thing in small companies (and maybe some large ones?). This is being offered as a benefit to the employee, but the fees are outrageous, and selections poor. I think partially it's just salesmanship (salespersonship?). Just like the posts we get here from people who went with Ameriprise or AG Edwards, etc. The sales person gives a good story, makes it easy, and they fall for it.

My MegaCorp handled this well (401K's, not 403B), better than I could have ever expected. A decent, but small choice of funds (so it's not overwhelming and full of overlap). They self administered (at least for a while, or farmed it out, but still seemed to have tight oversight/control). Anyhow, good selection of the basics, and very low expense ratios. Essentially, they seemed like in-house index funds. The only reason I moved my money out to a rollover IRA was so I could do some option plays.

Quote:
My observation (around here at least) is that the financial folks most districts can attract are fairly clueless. If they were better, they get a much better paying job elsewhere. (Sadly, also true for school tech people - I was helping our local district with some stuff and any one who was competent was quickly snapped up by local business that paid much better).
I guess I don't know who actually makes the decisions? Is it some financial person in the district, or the board in general? Whatever it is, they seem to be mostly pretty screwed up. But I bet that their 'customers' (the employees) are looking for something 'safe', don't know about fees/ERs, and are drawn to the annuity pitch. So that's what they get.

-ERD50
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Old 12-04-2015, 11:53 AM   #30
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DD's 401(k) had such bad options in it I ended up suggesting she only save whatever it takes to get the match, and save the difference in an after tax account. She's done pretty well with it, but it's sure a lot harder to pay yourself first when you see the money than when it disappears before it hits your paycheck. I did find a fairly low cost S&P 500 index fund in there. but I think the fees were still around .5%. Ridiculous.
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Old 12-04-2015, 03:57 PM   #31
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20 years ago or so DW worked for a medical outfit that offered a 403(b) Plan but it was so bad (costly) that she never enrolled in it and just maxed out her IRA. Many of the workers that were there at the time thought that it was a wonderful "benefit". I asked a few of them if they realized how much they were paying for this plan...crickets.
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Old 12-04-2015, 04:15 PM   #32
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Thanks for the article.


I forwarded it to a friend who I am trying to convert to Vanguard. She is listening to her wealthy friends who all recommend a "Financial Advisor" that will tell her the best places to invest the money. ugghhh
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Old 12-04-2015, 07:50 PM   #33
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A lot of 401Ks are catching up. DW's firm now has a bunch of Vanguard funds in their offerings plus some popular managed funds.

I think that's true although many still have quite a ways to go. And I've discovered the fact that just because a plan includes Fido or Vanguard funds in their offerings doesn't mean they'll be those with low ER's or that the plan won't add on their own premium for selecting outside of their "core offerings" (which, of course, often feature their own 1%+ ER's.) In fact, DW's workplace 401k - while comprised solely of Fido funds - has only one fund with an ER of less than 70 bpts. So of course she uses that one to get the match. Once she retires in 2.5 yrs, we'll roll that over to Spartan index funds, still at Fido, but at an acceptable ongoing cost.

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DD's 401(k) had such bad options in it I ended up suggesting she only save whatever it takes to get the match, and save the difference in an after tax account.

Exactly, which DW did as I related above. And I've done the same thing for the last several years at my own workplace 401k (Nationwide). I get the match, which is invested in Wellesley at 71 bpts, and I rollover the accumulated balance from time to time to my Vanguard IRA via in-service distributions (I'm over 59.5). There, it goes right back into Wellesley Admiral but this time at 18 bpts.
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