questions about investing... please help

[rain74]

Hi all. Wow, I am very inexperienced when it comes to investing, and reading through all these threads has really helped me to realize that I am making a lot of mistakes.

I guess I just need some suggestions on what to do with my investments. I am a public school teacher, so I have a 403(b) accnt through ING. Unfortunately, my school district only offers it's employees retirement plans through ING and Metlife, which I now know are not so great. So, one of my questions is am I stuck with either ING or Metlife? Is there anything else that I can do, or do I have to use them for my 403(b)? If I have to use them, should I contribute less to those funds, and invest elsewhere? If so, then what are my options other than a roth IRA?

My next question concerns my roth ira. I am in the process of setting one up with a representative at Metlife. We chose to go with American Funds, which I understand have been doing well, but the fees seem high. My question is, am I better off setting up my own roth online, or should I stick to with this rep? If I am better off setting up my own roth online, which company is the best to go with? I was looking at Fidelity and T.roweprice. Also, any fund recommendations would be great!

Please excuse my ignorance, but I am just beginning to educate myself, and a lot of these terms are still foreign to me. I think I still have a long ways to go. Thanks to anyone who can provide me with some feedback.

 

[brewer12345]

A great place to go for info on 403b plans is www.403bwise.com

If you haven't already committed to a Roth with Metlife, back away from them and go with VG or Fidelity (I like Schwab, too). Any of these will be drastically cheaper than an American Fund sold by a ML broker.

 

[FinanceDude]

A great place to go for info on 403b plans is www.403bwise.com

If you haven't already committed to a Roth with Metlife, back away from them and go with VG or Fidelity (I like Schwab, too). Any of these will be drastically cheaper than an American Fund sold by a ML broker.

Just a small aside..............MetLIfe guys aren't brokers................

 

[brewer12345]

Just a small aside..............MetLIfe guys aren't brokers................

No, they are whores, but I thought I'd be polite.

 

[azanon]

I also would tend to advise just having a personal Roth IRA on your own and avoiding the loads like you'd see with American funds, but then again (per a recent thread), American funds have been historically strong, even given the loads and management fees.

I personally prefer relatively low cost active management (1% or less) over index, but that's personal preference. Indexing is genuine buy-and-hold no matter how bad the market looks (think 2000-2002). I like that real person there who can make some adjustments (say, going to cash with a portion of the fund as a defensive move) within the confines of the respective mutual fund.

 

[yakers]

A lot of good advice here, 403bwise.com is a great site. My wife retired from teaching earlier this year and I am friends with some of the most knowledgeable 403b folks on the web. On the site they have a book; "Teach And Retire Rich" which I send to family & friends who are teachers, I recommend it to you. Of the load funds American Funds are OK, I still have one, had two others and they did well for me. I still would not recommend them over Vanguard or TIAA-CREF and maybe Fidelity & TR Price. But if my wife had American funds offered in her 403b we would have jumped for them over the miserable ones we had to choose from. You have to very closely study the terms of your 403b agreement. There are insurance fees, management fees and surrender fees lurking everywhere in these generally annuity structured products. My wife’s 403b through Nationwide Insurance had significant surrender fees such that it will be 1 ½ years after retiring before we can transfer her funds into a Vanguard IRA. Occasionally there are good 403b programs. And sometimes there are ways to back into a good deal. For instance one 403b offering was from a credit union into a regular account. Now this looks like a terrible investment but it had one big advantage, there were no surrender fees so after putting money into this fund the employee could move it via a 90-24 transfer to any company of their own choosing.

I like Roth IRAs because they are really tax free. They can be something of an emergency cash fund too. They are best if you have a long time to invest, taking advantage of the tax free growth, or if you expect a higher tax rate later in life. A good low fee fund from the above 4 sources can work. I like single funds like Target Retirement, Lifestyle, or balanced funds to start. Then add additional asset classes or types of investments once you have a core fund built up.

 

[mickeyd]

So, one of my questions is am I stuck with either ING or Metlife? Is there anything else that I can do, or do I have to use them for my 403(b)?

This is a common fallacy that many educators fall for and end up paying thousands of dollars worth of commissions and very high fees during their participation in a 403b.

Your school district can use any mutual fund or life insurance company in their 403b program. Yours is probably using the ones that dropped by and had a cup of coffee with the person at the district that makes the decision. This is the lazy easy way out IMHO.

Remember that this is your retirement plan and for anyone to ask you to accept such a limited high-cost option is criminal. It is up to you to visit with whoever makes the decisions at your school district (Benefits Manager? Human Resources?) and insist that they add more choices to the plan. I would make sure that one of the low-cost fund companies is included as a selection (Vanguard, Fidelity, USAA, TIAA-CREF, T.Rowe Price). Note : Metlife and ING will probably try to block this, so be prepared.

I once sold these plans to educators and I knew that it was all overpriced investment products that could be easily obtained from any of the above carriers at a much better price. I refused to sell to anyone that I knew. I quit after a year of being a whore for these high fee/high commission folks.

Do a little research on the websites and make a recommendation that would meet your needs. I use Vanguard (www.vanguard.com) for virtually all of my mutual fund investing, however my wife, a school librarian, prefers USAA (www.USAA.com).

I can not stress enough that it is Your Retirement Plan, not the school district's.

 

[mickeyd]

My question is, am I better off setting up my own roth online,

Definitely. It is very simple to set up a Roth @ Vanguard or other low-cost company. Stay away from Metlife as well as ING if you wish to have as much money as possible when you retire.

 

[rain74]

Thanks for all of your advice, everyone. My application to begin the roth ira is not complete yet, so I will just go ahead and let the Metlife agent know that I have changed my mind.

Brewer1234, thanks for the 403(b) link. Wow, what a wealth of information. Unfortunately, the site confirms what I was afraid of - that if my employer's super short vendor list does not include the investment companies that I am interested in, then I can't contribute pretax money to those accounts. I just can't believe that for such a huge school district, there are only two vendors on the district's "list." When I met up with my agent from Ing a few weeks ago, she made a comment that she thinks my school district has probably requested money from both ING and METLIFE to allow them to service our school district. I find that very interesting...

Thanks all.

 

[yakers]

I just can't believe that for such a huge school district, there are only two vendors on the district's "list."


When I met up with my agent from Ing a few weeks ago, she made a comment that she thinks my school district has probably requested money from both ING and METLIFE to allow them to service our school district.
Thanks all.

My wife worked for the Los Angeles USD, second largest in the US. They had over 100 choices in the 403b-ALL OF THEM BAD-because they all went through an insurance company annuity umbrella. If You are going to use a 403b, study the 90-24 transfers, maybe you can find a way to do these without a surrender fee.


Its worse than you think. Not only is the school district not interested, they will block any attempts to improve things. Companies who do the 403b will pick up certain administrative costs which might have to be borne by the school district--but the company will end up charging you for them with fees. The districts should be paying these so YOUR money goes into the actual account. And the fees are high. And its worse, the teachers unions are often part of the problem, at least in LAUSD, as they get paid to endorse the companies. Its technically legal although there is alawsuit against the NEA about this.

From what I read, there are a few decent 403b plans, but they are much the exception.

 

[mickeyd]

made a comment that she thinks my school district has probably requested money from both ING and METLIFE to allow them to service our school district.

If true, that would really make a jucy story on the 5 O'clock news as several federal and state laws would have been violated by all parties involved.

 

[rain74]

Yakers, I read up a little about the 90-24 transfer, but am not quite sure if I understand it. From what I've read, it looks like I would be able to do the transfer, but then will not be able to contribute pretax money to it, since the company I would transfer it to is not on my school district's vendor list. Is this correct? If someone knows a way around this, please share...

Mickeyd, I'm pretty sure money exchanged hands, but am not quite sure if I'm ready to go that route yet. I was thinking about calling the head of our benefits department and recommending that they give us more choices, and then dropping a sentence or two about my conversation with the ING rep.

 

[mickeyd]

I was thinking about calling the head of our benefits department and recommending that they give us more choices, and then dropping a sentence or two about my conversation with the ING rep.

Yes, that should work Duress is a wonderful invention.

 

[yakers]

I am not an expert on 90-24 transfers since I (well, my wife) never did one, but I know people who have. You can post specific questions to the 403bwise.com discussion board. AFAIK you first choose your regular 403b supplier and then you transfer the funds from them to a 403b supplier of your choice.

 

[nun]

Definitely. It is very simple to set up a Roth @ Vanguard or other low-cost company. Stay away from Metlife as well as ING if you wish to have as much money as possible when you retire.

I'm very much a Vanguard champion, but our 457 has only one provider and that's ING. I was initially wary of it, but the fees are quite low and there a few ok funds. There's a 0.12% annual management fee and I'm just sticking all my money into State Street S&P 500 Index fund with an annual fee of 0.02%. So total fees are 0.14%. This seems to be very good so why all the negativity wrt ING run retirement funds?

 

[heyyou]

Nun--Whoever set up your plan, was wise and considerate of the plan users. That is seldom the case. You are lucky. The same provider could be charging 10 times your fees at the next location. These are for-profit corporations providing services. There is no incentive for them to go cheap unless a potential customer demands the lowest bid from a dozen competitors.
My 401k plan had 60,000 participants. At the end of my career, I was paying a $2800 admin fee per year for them to handle 50 deposits a year with 8 fund choices. What would Vanguard charge? $10 a year for each mutual fund less than $10K.