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Best 403b provider?
Old 11-06-2012, 09:54 AM   #1
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Best 403b provider?

Greetings!
My place of employment currently gave us an updated list of the 403b providers we have to choose from. I was hoping I could get some info on who the best provider is from the list. I have looked a lot of info up online, but it just seems a bit overwhelming to me Here are the 6 on the list:
1) Ameriprise Financial
2) Horace Mann Life Ins. Co.
3) Kades-Margolis Corp
4) Lincoln Investment Planning
5) Security Benefit
6) Symetra Life Insurance Company
I have read that you should avoid insurance companies when picking a 403b provider, so I'm assuming numbers 2 and 6 are out. I also am aware that each of them charge fees and some are more than others, but I have yet to contact any of them to see how much their fees are. Well other than Kades-Margolis saying something about a 5.25% fee on something, which seems incredibly high to me.
Any info anyone can provide on the list would be greatly appreciated If additional info helps, I'm 32, don't want kids, will be married, and hope to retire as soon as I can (so any extra info on how much I should be contributing to what types of funds or what not would be awesome).
I appreciate any and all help/input! I just want to make sure I pick the best provider so it doesn't come back to bite me later!
~Kristy
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Old 11-06-2012, 10:02 AM   #2
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Is "none of the above" an option?
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Old 11-06-2012, 06:53 PM   #3
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Sorry to be blunt, but those are some pretty awful options. I'd pick whichever had the lowest expense ratios on funds and no load sales charge up front.
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Old 11-07-2012, 09:42 AM   #4
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Ask your administrator why Fidelity and Vanguard are not options.

It's a shame that low cost options are not provided in so many of these 403Bs. We are fortunate that at least Fidelity is available through DW's 403B. It looks like Fidelity is available to DD, but they bury it and seem to steer you to the high cost places.

Makes me wonder if someone is not getting some form of kick-back from these high fee providers.

-ERD50
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Old 11-07-2012, 09:51 AM   #5
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Originally Posted by ERD50 View Post
Makes me wonder if someone is not getting some form of kick-back from these high fee providers.
+1

Even my supposedly omnipotent teacher's union was never able to get us low cost options on our 403b accounts.
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Old 11-07-2012, 09:55 AM   #6
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Probably because the low cost providers don't offer a kickback on fees the same level of services as those listed by the OP.
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Old 11-07-2012, 11:05 AM   #7
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+1

Even my supposedly omnipotent teacher's union was never able to get us low cost options on our 403b accounts.
'Never able' to get them? Or maybe 'never able to resist the kickbacks'? Of course, I have no evidence that there are kickbacks, so I won't make the accusation, it's just a question. But I'm open to any another explanation, keeping Occam's Razor in mind.

-ERD50
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Old 11-07-2012, 11:24 AM   #8
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'Never able' to get them? Or maybe 'never able to resist the kickbacks'? Of course, I have no evidence that there are kickbacks, so I won't make the accusation, it's just a question. But I'm open to any another explanation, keeping Occam's Razor in mind.

-ERD50
The choices are bad, I was expecting at least TIAA-CREF to be in there. There are not terrible, they have lots of funds with 0.5% expense ratios in the 401a plan I have with them. I asked why they were higher than my 403b fees over at Vanguard and they gave me some garbage about reporting and admin costs. Still I can live with 0.5% and I'll be rolling over to a Vanguard IRA when I retire.
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Old 11-07-2012, 12:29 PM   #9
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'Never able' to get them? Or maybe 'never able to resist the kickbacks'? Of course, I have no evidence that there are kickbacks, so I won't make the accusation, it's just a question. But I'm open to any another explanation, keeping Occam's Razor in mind.

-ERD50
The official reason is that firms such as Vanguard and Fidelity will not sign the paper that makes them legally responsible in case a person invests, losses money and decides to sue somebody. What the school districts don't want is somebody putting all their 403b money into a a sector fund that invests only in Venezuelan Beaver Cheese futures, they lose it all, and then sue the district.

Obviously, big corporations get around this problem all the time. Why my former omnipotent teacher's union could not do the same on a state wide level is a mystery to me. Perhaps, some legal issues that can't be circumvented? Indifference? A few palms crossed with silver? Who knows? I don't.
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Old 11-07-2012, 12:46 PM   #10
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The official reason is that firms such as Vanguard and Fidelity will not sign the paper that makes them legally responsible in case a person invests, losses money and decides to sue somebody. What the school districts don't want is somebody putting all their 403b money into a a sector fund that invests only in Venezuelan Beaver Cheese futures, they lose it all, and then sue the district. ...
Hmmmm, not sure that adds up - DW (an IL municipal employee, working for school district, not a teacher) has her 403B with Fidelity.

If she loses money, she will blame me! Hah, I just used her account as part of our 'fixed income' asset allocation. Nice and stable - she's happy, I'm happy, we're all happy

-ERD50
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Old 11-07-2012, 02:20 PM   #11
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Originally Posted by kritty007 View Post
Greetings!
My place of employment currently gave us an updated list of the 403b providers we have to choose from. I was hoping I could get some info on who the best provider is from the list. I have looked a lot of info up online, but it just seems a bit overwhelming to me Here are the 6 on the list:
1) Ameriprise Financial
2) Horace Mann Life Ins. Co.
3) Kades-Margolis Corp
4) Lincoln Investment Planning
5) Security Benefit
6) Symetra Life Insurance Company

~Kristy
Choose the one with the lowest fees and get on your employer to give you better options. Suggest Vanguard, Fidelity and TIAA-CREF.
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Old 11-12-2012, 08:52 AM   #12
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ugh Should I just not use any of the 403b providers and do a 401k or something instead? The district also said they were looking into adding Roth 403b's- would that be something else to consider? Thanks for the input!
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Old 11-12-2012, 09:42 AM   #13
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ugh Should I just not use any of the 403b providers and do a 401k or something instead? The district also said they were looking into adding Roth 403b's- would that be something else to consider? Thanks for the input!
A 401k is the equivalent of a 403b, but for a private company. You won't be able to get one if your employer offers a 403b. So do the 403b, but find the least expensive option and be vocal about the crappy options you're being offered.
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RE:
Old 11-14-2012, 08:15 AM   #14
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RE:

So far I have talked to 2 of the providers. One said they have a 5.25% transaction fee and a $15/year record keeping fee. The other said this:

"Hope you are well! We can offer you the traditional fee structure with A and C shares, or an asset management program with alternative pricing. A shares carry an upfront charge of between 5-5.75% depending on the fund. C shares have no upfront cost, but have a back end charge of 1% and carry higher internal fees (again, internal fees depend on which fund family we use).

I prefer using the asset management pricing structure. This is the cheapest way for you to invest your money, allowing you to get the most out of every dollar. The only charge associated with the asset management program is a 0.9% annual management fee. Essentially this breaks down to 90 cents for every $100 in your account (as opposed to A shares which could cost you nearly $6 for every $100 invested). There are no transaction or processing fees with the asset management program, just the 0.9% annual fee."

Does the 2nd paragraph sound like a good thing? I know everyone keeps saying all my options are crummy, but I'm trying to at least pick the lesser of the evils. Thanks for the help!
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Old 11-14-2012, 08:29 AM   #15
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Is the 0.9% everything, or is that a 'management fee' on top of the expense fees of the funds you choose?

While 0.9% is not great, it's not so terrible either.

I assume that the 5% upfront fees also incur an annual fee on the funds? If there really are no annual fees at all (I doubt it), or they are far lower than .9%, you need to calculate a break-even.

Then take your calculations, and compare with a Vanguard or Fidelity Target retirement fund, and show that to HR.

-ERD50
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Old 11-15-2012, 06:26 PM   #16
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My questions for you:

How much do you plan to invest each year?
Is there a match from your employer.

If the first answer is $500/month or less - you're in the self directed IRA range, and should run away from these offerings and do your own IRA.
UNLESS
Your employer has a match. Which is free money. That helps offset the horrible fees.

I had to do the analysis on this for my husbands 401k offerings (which are equally horrid.)

With the match, and the tax advantage- we decided to go with his crappy 401k... but will role the money out immediately when he retires in less than 2 years.
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Old 11-17-2012, 10:07 AM   #17
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What ERD said--find out whether .9% is total fee or a management fee on top of other fees. If the former, I'd go that route, but I'm suspicious that there are other fees. In any case, all things being equal, select the one that charges the least fees.

I'm lucky to have Fidelity (and Vanguard) as a 403b option, although apparently not many take that route. Fidelity had more choices and my wife's 401k was very constrained in choices, so I picked Fidelity over Vanguard and cherry-picked the one or two good funds in her 401k.
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Old 09-03-2014, 12:32 PM   #18
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Quote:
Originally Posted by kritty007 View Post
So far I have talked to 2 of the providers. One said they have a 5.25% transaction fee and a $15/year record keeping fee. The other said this:

"Hope you are well! We can offer you the traditional fee structure with A and C shares, or an asset management program with alternative pricing. A shares carry an upfront charge of between 5-5.75% depending on the fund. C shares have no upfront cost, but have a back end charge of 1% and carry higher internal fees (again, internal fees depend on which fund family we use).

I prefer using the asset management pricing structure. This is the cheapest way for you to invest your money, allowing you to get the most out of every dollar. The only charge associated with the asset management program is a 0.9% annual management fee. Essentially this breaks down to 90 cents for every $100 in your account (as opposed to A shares which could cost you nearly $6 for every $100 invested). There are no transaction or processing fees with the asset management program, just the 0.9% annual fee."

Does the 2nd paragraph sound like a good thing? I know everyone keeps saying all my options are crummy, but I'm trying to at least pick the lesser of the evils. Thanks for the help!
I realize this is an old thread but for those reading this and thinking that a flat fee of .9% every year is going to be a good deal, you have to ask yourself how many years you plan on being in this plan. If the answer is more than 10 years then this is a bad choice - a better option would be to just pay the load fee, which actually is only charged once and goes down over time as your funds are built up. If you plan to stay in the funds for a long time frame then the "A" shares are your least expensive option.

Of course avoiding load fees and finding no-load funds is always your best option.
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Old 09-03-2014, 03:00 PM   #19
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The reply from the provider sounds like an old, bad joke to me....front end fees or back end fees, Class A vs Class C etc in a 403b...how can financial firms get away with these things anymore. There must be some sweetheart deal between them and the employer. Employees have lost defined benefit pensions and now get these awful savings options....they need to demand decent retirement savings accounts.
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Old 10-17-2014, 10:09 PM   #20
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Long time lurker, first time poster...

I see this is an old thread, but it is discussing something I was doing some research on and since it was recently bumped, I figured I'd just tag on. I'll post my situation here and see if anyone has any words of wisdom for a newbie to all things investing.

I work at an establishment that offers both a 403b plan and a 457 plan. If we contribute 3% to a 403b plan, the establishment will contribute 2%. The only 2 vendors that we are offered for either plan are Lincoln Financial and Valic.

Any suggestions on what direction I should go or what you would do in this situation would be greatly appreciated!
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