That giant sucking sound is Vanguard

[Chuckanut]

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.

 

[FUEGO]

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.

 

[audreyh1]

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.

 

[ERD50]

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).

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.

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

 

[harley]

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.

 

[mickeyd]

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.

 

[littleb]

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

 

[UpAnchor]

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.

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.