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have to make a decision...
Old 12-02-2005, 05:10 PM   #1
Confused about dryer sheets
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Join Date: Dec 2005
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have to make a decision...

I work for the state of NJ. I am in what was/is a state run deferred comp. not match.

we were just informed that effective jan1, the deferred comp program is being run by Prudential...

the whole change was kind of sleazy. no real time to make decisions. effective Jan 1, all cont go to Pru.
no more money can be added to the original DC.

Pru is touting choice of what look to be Mutual funds with different levels of risk ? I know nothing about private investing, thats why I did the DC.

Is this change good, am I better off stopping the DC and finding another way to invest, like CD's.

I am very conservative and about 6 years from retirement.

I know this is not a lot of info. but any thoughts are appreciated, anything I should look out for etc.

PRU. is offering a service to help choose, but you have to agree to put all existing DC funds into their program.

what issues shouls/pitfalls should I be watching for ??

thanks ahead of time...
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Re: have to make a decision...
Old 12-02-2005, 09:20 PM   #2
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Re: have to make a decision...

I suggest you pose your question on the FundAlarm bb where better brains than I lurk and comment.* If you have a link to a website that lists their offerings that would be helpful.*

Surely there are other NJ State employees who have similar questions.

Duck bjorn.
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Re: have to make a decision...
Old 12-02-2005, 09:51 PM   #3
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Re: have to make a decision...

I don't fully understand the options, nor do I understand how the DC works for you.* Regarding the PRU choices, plenty of people here could give you good input if you will provide the fund names.* As always, you'll need to really check out the costs associated with the PRU option.
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Re: have to make a decision...
Old 12-03-2005, 05:58 PM   #4
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Re: have to make a decision...

Hey slj,

Do you mean this deferred comp plan

According to the 2004 Mercer Management Review, the expenses on the four funds [large cap stock, small cap stock, bond, MM] was around 0.02%. That is extremely low. See page 54.

Here is the Q&A for the PRU Plan. It has a link to the new 457 website. Click on "learn more" for the plan info.

Here are the returns and expenses for the old and new funds. Note that the old funds charge way more than the current 0.08% of the old funds, plus all of them have additional charges [like 12b-1 fees, separate account charges, etc.] tacked onto the underlying fund expenses. This is where Prudential makes their money!! See the pages of footnotes at the bottom [not a good sign ]

You can see the breakdowns of a lot the expenses in the Investment Profiles. You can see the breakdowns under the Performance section of each fund.

Personally, I don't think I'd move the money at all. And I'd seriously consider only investing in a couple of those funds - like the stable value fund [which you currently don't have in the NJ Def comp plan], Vanguard's Institutional Index [because of the low expense ratio], and the Wellesley income fund [because of the low expense ratio]. The stable value fund and the Wellesley income fund are very conservative and fairly conservative respectively.

As for forgoing the new def comp plan altogether, remember that after you leave service you can roll the def comp plan over into an IRA [at Vanguard for example], and avoid all those unecessary extra fees PRU is adding. Since NJ doesn't contribute to the def comp plan, you can max out a Roth IRA first, if you're under the income requirements, and then max out the def comp plan after. See Morningstar's IRA Calculator to see if you're eligible. Also remember the IRA catchup contributions for those over 50.

- Alec
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