NJ Teacher Lost with 403bs

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Prez8383
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NJ Teacher Lost with 403bs

Post by Prez8383 » Tue Jun 06, 2017 8:20 pm

Hi all, when I was hired fresh out of college to teach I signed up for a 403b. It was with Lincoln Investments who the district had in to speak with us. I signed away a measly $50 a paycheck and never thought about it again.

11 years later I am starting to think about it....I did some digging through my paperwork about found out the following:

-I put in roughly $11,000 thus far and the "current value" is $15,197.
-I seem to be enrolled in Franklin Founding Funds Allocation Fund (FFALX).
-In the past year I have paid roughly $170 in fees (Premier Fee-Renewal and Annual Custodial Fee).

My question is this...Is $170 excessive for fees? Is my ROI where it should be? I know nothing about 403b's and I have no one to blame but myself. Basically, aside from not contributing enough is there anything else I should be doing? If I am getting ripped off, can I move my 403b somewhere else?

anonenigma
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Re: NJ Teacher Lost with 403bs

Post by anonenigma » Tue Jun 06, 2017 10:29 pm


MNGopher
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Re: NJ Teacher Lost with 403bs

Post by MNGopher » Tue Jun 06, 2017 10:51 pm

I believe you are in a variable annuity within your 403B. Not a good investment. Look at your list of 403B providers that your district allows. Usually there is more then one choice. If there is more choices, list them here, and we can help you find better options than Lincoln.

JFanni
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Re: NJ Teacher Lost with 403bs

Post by JFanni » Tue Jun 06, 2017 11:28 pm

Most choices are annuities with terrible expense ratios. Just tried to do research for GF and basically they all are terrible. The best provider offered mutual funds but you had to dig threw volumes of paperwork to see which funds were offered and what share class was offered. Talked to the representative and explained exactly what I wanted (Low ER Index Funds) and he tried to push front load Funds. Told Him I would get back to him and just decided to open a ROTH at schwab since she could only afford ~220 a paycheck which works out good cause that is right around the $5500 a year max for Roth. Just going to stick with that for a while and when she can afford more I will have to figure something out.

If you do decide to go with a 403b just read thru the paperwork. ALL THE PAPERWORK. It is tedious but they do lay out all the fees (and there will be multiple layers of fees). You just have to read all the fine print. Good Luck

krow36
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Re: NJ Teacher Lost with 403bs

Post by krow36 » Wed Jun 07, 2017 12:24 am

I don't think there is any reason to think that the OP has an annuity based 403b. Lincoln Investment is a mutual fund based 403b provider. There is also a Lincoln life insurance company that sells annuity based 403b plans.

The Lincoln Investment Solutions Premier Management/Wrap fee is 1.25% as of this year. Last year it was 0.9%. The Administration fee is $15/Q or $60/yr this year. Last year it was $35/yr. Your FFALX has an expense ratio of 1.0%. You are actually paying more than $170.
Last year’s average balance of about $15,000 X .009 = $135
Admin fee $35

In addition FFALX has an expense ratio of 1.0%, so on average last year your were paying $120/yr due to the ER.
In addition, FFALX has a 5.75% load and it’s possible you paid that fee on any purchases you made last year. If you bought $2000 of FFALX, you paid a load of $115. However the load may have been waived with your Premier account? I don't know. If you did pay the load, it means that you paid $2000 but was credited with a purchase of $1885. The load is like a sales tax.

So YES, your fees were excessive! NJ teachers in districts that have Lincoln Investment on the 403b provider list are able to use a very low cost Lincoln plan called Solutions Participant Direct Platform. Please read over this thread: viewtopic.php?f=1&t=175295

This plan allows the use of low-cost Vanguard Admiral class funds, ER from 0.05% to about 0.15%, with an annual Admin fee of $60. That’s it, no other fees, no loads, no wrap fee! This is apparently due to an arrangement with the NJEA (NJ Education Assoc.). Once you’ve established this account, you will be able to move your present Lincoln account into it. :happy

CFM300
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Re: NJ Teacher Lost with 403bs

Post by CFM300 » Wed Jun 07, 2017 12:43 am

Yes, $170 in fees on $15,000 invested is excessive. You will have to dig to determine what other options are available in your 403(b). It will likely require a bit of work on your part.

Depending on your options, you might choose to stop contributing to your 403(b) and instead contribute to an IRA. You're only contributing $1,000 per year (on average) to your 403(b). If you invested in an IRA, you could choose the company and the funds and thus control the costs.

songman52
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Re: NJ Teacher Lost with 403bs

Post by songman52 » Wed Jun 07, 2017 8:49 am

+1 on CFM300's reply. If you can't find a suitable 403b, consider contributing to an IRA on your own. If your employer doesn't contribute any match (which I think would be rare if they did) then there shouldn't be any downside to the IRA route at your current level of contributions. You probably wouldn't have payroll deduction for the IRA, but that should be a minor inconvenience.

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friar1610
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Re: NJ Teacher Lost with 403bs

Post by friar1610 » Wed Jun 07, 2017 12:41 pm

This is probably a bit off-topic. I've posted in the past that it really annoys me that young military troops are so often taken advantage of, by "financial advisors", among other hucksters. A related peeve is how many school districts limit their 403B plans to those that are a lot better for the plan providers than they are for the teachers. Like the military, teachers are modestly paid for very important work - it's a shame their districts don't do a better job of scoping out the better, low-cost plans such as those from VG, Fido and TIAA-CREF. End of editorial comment.
Friar1610

krow36
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Re: NJ Teacher Lost with 403bs

Post by krow36 » Wed Jun 07, 2017 2:11 pm

It's ironic that the OP, because (s)he is teaching in NJ and has Lincoln Investment on his district's provider list, is able to make use of a very low-cost 403b plan through Lincoln. It is lower cost than Vanguard's own 403b plan which uses Individual class shares. Lincoln's Participant Direct Platform allows use of Vanguard's Admiral class funds. I think Lincoln started this option a year or 2 ago. This DIY option does require calling a regional office, not a local rep, and getting the application form via email.

Prez8383, let us know if you need help selecting a fund(s). Your present fund is a target retirement fund that includes US and international stock funds, and also bond funds.

Prez8383
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Re: NJ Teacher Lost with 403bs

Post by Prez8383 » Wed Jun 07, 2017 4:24 pm

krow36 wrote:It's ironic that the OP, because (s)he is teaching in NJ and has Lincoln Investment on his district's provider list, is able to make use of a very low-cost 403b plan through Lincoln. It is lower cost than Vanguard's own 403b plan which uses Individual class shares. Lincoln's Participant Direct Platform allows use of Vanguard's Admiral class funds. I think Lincoln started this option a year or 2 ago. This DIY option does require calling a regional office, not a local rep, and getting the application form via email.

Prez8383, let us know if you need help selecting a fund(s). Your present fund is a target retirement fund that includes US and international stock funds, and also bond funds.
Thanks Krow36. So moving forward...do I "cancel" my original Lincoln 403b. If so, what happens to that money? Does it just roll into this account. I work on calling the regional office (not even sure how to find out where to call) and get started on that application. Thanks for the knowledge all!

krow36
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Re: NJ Teacher Lost with 403bs

Post by krow36 » Wed Jun 07, 2017 7:10 pm

The nearest large city should have a Lincoln Investment office. You want to get above the rep level---the sales people that come to your school or want you to come to their office.

Yes you should stop contributing to your present 403b. Ask your HR office how to stop contributions. That account can just sit there for the time being. It will continue to grow if the markets grow. Don't worry about it. You will soon be able to move that money to a low-cost account.

The first step is to get that application form from the "regional" Lincoln Investment office. They will email you the ability to download the PDF of the application form. I think they want this option restricted to NJ K-12 teacher so the application form is not on the internet.

Once you have the application form, study it because it's the only source of info on this option. I have a copy of the form and can help you with it if needed. Once your application is accepted and you have the new account, you'll need to check with your district's Third Party Administrator and/or your HR office to get your salary reduction paperwork set up. You don't have to contribute a lot, but at least something.

After that, you should call up the regional office again and find out how to move the money in your present Premier 403b account to the new account. This whole process will take some weeks, so you need to be patient and take it step by step. In the mean time you can be learning some basic stuff about investing which we can help you with.
Last edited by krow36 on Thu Jun 08, 2017 12:42 am, edited 1 time in total.

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grabiner
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Re: NJ Teacher Lost with 403bs

Post by grabiner » Wed Jun 07, 2017 8:43 pm

songman52 wrote:+1 on CFM300's reply. If you can't find a suitable 403b, consider contributing to an IRA on your own. If your employer doesn't contribute any match (which I think would be rare if they did) then there shouldn't be any downside to the IRA route at your current level of contributions. You probably wouldn't have payroll deduction for the IRA, but that should be a minor inconvenience.
In NJ, consider a Roth IRA even if the traditional IRA would be deductible; NJ does not allow state tax deductions on traditional IRAs. (Likewise, you might consider a Roth 403(b) if your plan offers it; NJ does not allow state tax deductions on traditional 403(b) plans.)
David Grabiner

LK2012
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Re: NJ Teacher Lost with 403bs

Post by LK2012 » Wed Jun 07, 2017 9:18 pm

grabiner wrote: In NJ, consider a Roth IRA even if the traditional IRA would be deductible; NJ does not allow state tax deductions on traditional IRAs. (Likewise, you might consider a Roth 403(b) if your plan offers it; NJ does not allow state tax deductions on traditional 403(b) plans.)
Great point, and it can really slip past you that this is the case! One of the many ways that NJ nails you with taxes.

krow36
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Re: NJ Teacher Lost with 403bs

Post by krow36 » Thu Jun 08, 2017 12:29 am

grabiner wrote: In NJ, consider a Roth IRA even if the traditional IRA would be deductible; NJ does not allow state tax deductions on traditional IRAs. (Likewise, you might consider a Roth 403(b) if your plan offers it; NJ does not allow state tax deductions on traditional 403(b) plans.)
grabiner, how does that work? If NJ state income tax is paid on traditional IRA and 403b contributions, do those accounts then have basis that is not subject to NJ income tax when distributed? But the gains would be taxable at distribution (as with any state income tax)? If it’s assumed the NJ taxpayer remains in NJ during distribution, does the federal tax deduction make traditional contributions in NJ worthwhile? Maybe in higher tax brackets?

Would moving to another state with a state income tax would result in double state taxation? That be avoided by moving to a state with no state income tax wouldn't it?

krow36
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Re: NJ Teacher Lost with 403bs

Post by krow36 » Thu Jun 08, 2017 1:24 am

Prez8383, are you also contributing to an IRA, either traditional or Roth? If so, who is the vendor and what funds are you using? Please include their ticker and expense ratio.

You have contributed about 11k in 11 years to your 403b. Are you now able to increase your retirement contributions? As other posters have mentioned, contributing to an IRA up to 5.5k/ yr has an advantage over a 403b because you can pick a low-cost provider such as Vanguard, Fidelity or Schwab. If you are able to contribute more than 5.5k/yr to your retirement accounts, then you should use a 403b account in addition.

In your case, you have 17k in a 403b and you need to find a low-cost home for that money, whether you contribute further to your 403b or not.

Often teachers contribute to a Roth IRA first and then contribute to their 403b if they are able to. Are you married? If so your spouse, even if not employed, can contribute to an IRA based on your income.

I didn’t ask you before because it is very likely that the excellent DIY Lincoln option is available to you. But can you list all the 403b providers on your district’s list? You can usually find the list on your district’s website—try googling “(your district) 403b plan”. If that doesn’t work, call the HR office.

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CyclingDuo
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Re: NJ Teacher Lost with 403bs

Post by CyclingDuo » Thu Jun 08, 2017 9:05 am

krow36 wrote:It's ironic that the OP, because (s)he is teaching in NJ and has Lincoln Investment on his district's provider list, is able to make use of a very low-cost 403b plan through Lincoln. It is lower cost than Vanguard's own 403b plan which uses Individual class shares. Lincoln's Participant Direct Platform allows use of Vanguard's Admiral class funds. I think Lincoln started this option a year or 2 ago. This DIY option does require calling a regional office, not a local rep, and getting the application form via email.

Prez8383, let us know if you need help selecting a fund(s). Your present fund is a target retirement fund that includes US and international stock funds, and also bond funds.
Great suggestion and keen advice!

OP - we would suggest doing this ASAP. What's been, has been. Forget about it. Use the opportunity to move to the lower cost Vanguard Admiral funds provided in the Lincoln Direct Platform. Luckily, you've only been investing $50 a month. Under the new plan, we would suggest - if you can - boosting your contributions.

To get the three fund portfolio, here is what we use in the TIAA 403b that we have:

Vanguard 500 Index Fund Admiral 40% (ER .05)
Vanguard Extended Market Index Fund Admiral 15% (ER .09)
Vanguard Total International Stock Index Fund Admiral 15% (ER .12)
Vanguard Total Bond Market Index Fund Admiral 30% (ER .06)

To get the three fund portfolio, here is what we use in the VALIC 403b that we have (ER fee includes the administrative wrap fee):

Vanguard Institutional Index Fund 40% (ER .22)
Vanguard Total International Stock Index Fund Admiral 20% (ER .30)
Vanguard Total Bond Market Index Fund Admiral 40% (ER .25)

I'm sure that you will have similar funds available.

krow36
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Re: NJ Teacher Lost with 403bs

Post by krow36 » Thu Jun 08, 2017 11:23 am

On April 17, jebjebitz listed the Vanguard funds available from Lincoln in the thread on this DIY option:
viewtopic.php?f=1&t=175295
They are also found on the Lincoln Investment homepage under "Prospectuses".

OP can use a 3 fund portfolio as suggested above using the Total funds (TSM, TISM and TBM) which are all available. The simplest would be to use a Target Date Retirement fund that has his/her desired asset allocation which are also available. The TD fund can be exchanged for the 3 or 4 fund portfolio later if desired, after OP has done some reading on the subject. :happy

BeaglesAreFun
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Re: NJ Teacher Lost with 403bs

Post by BeaglesAreFun » Wed Sep 06, 2017 8:50 pm

Hello NJ Teacher. I was a NJ teacher, now retired, and I also had Lincoln Investments for my 403b. I know you posted a few months ago, but I figured I'd give my 2 cents' worth...! Sorry that it's a l-o-n-g post....grab a cup of coffee or something…. :beer

All is not lost for you, and you're better off in Lincoln than some other companies.

From what you wrote, you paid fees of about 1.2%, roughly based on your final balance, vs. ~0.15% in a Vanguard index fund. Yes, those are higher fees than VG (Vanguard), but is the problem with your total account balance here really the fees? Or is it that you need to be allocated differently to get a better return, and also increase your contributions?

Don't stop investing. Invest more, and smarter, and since you pay the fees, make your rep work for you! Take the initiative and contact them, to show them that you care about and are watching your money, and that you want to change what you are currently doing.

I am not promoting Lincoln, nor am I defending fees, but while I paid them, I honestly believe that I did get some value from my Lincoln rep over the years. I’ll probably get criticism about what I’m saying here, because fees are sacrilege, but remember, we have to work with the 403b plans we have in reality. The new Self-Directed plan was not an option until recently. The option that’s worse than paying fees is to not take advantage of the 403b opportunity at all !

I started with Lincoln in 2001, when I changed school districts, and I retired in 2016. I started with a rep who wasn’t too good, and contacted the regional manager for Lincoln, and got a better one, who I have had ever since, and who is great!

Are the fees at Lincoln higher than a VG (Vanguard) index fund? Yes.

But, that doesn't mean you shouldn't have a 403b. And, in retrospect, paying the fees and having my nest egg is still better than the alternative, which is not to have done it at all. I'm shocked at how many teachers don't take advantage of the 403b -- they count on the pension. I don't think it will always be here in its current form. You’re younger – hope for, but don’t count on, the pension. That’s my attitude about Social Security, too.

The way Lincoln is structured now, yes the fees are higher than an index fund. Ask your rep to explain the fees -- they changed as of January, 2017. You also are ENTITLED to meet with your rep at least once per year to review your goals, risk tolerance, contributions, account performance, etc. Most teachers don't do that! The rep will meet at your school (after school , don’t do it during school), or at your home or their office, and even over the summer. You can also contact them by phone or email, if you can’t meet or if you just have questions. This is the rep’s job.

For me, during the school year, and even over the summer, I was so busy with school and family things, and I never got sleep, and the last thing I wanted or had time to do was to worry about where/how to invest my money. It was also good to talk with my rep, especially when there were downturns or life events that might have made me stop investing. I met with my rep once per year for a big review, where we had printouts of my accounts and balances, their performance, and how the market was doing. We set my investments at first to Aggressive, then as I got toward retirement, Moderately Aggressive. Changes were made occasionally from different funds, but the overall objective remained the same. My rep could also do projections of future balances, based on different % returns and different levels of risk. There was no way that I was researching all of this, especially during the school year, but my rep did!

For you -- INCREASE your contribution every year. You CAN do more than $50 per pay, especially because it is pre-tax money, and as a teacher, you will eventually get higher on the salary guide. (So a $50 contribution roughly costs you a ~$40 reduction in your paycheck, because of the pre-tax benefit of not paying ~$10 in taxes). I started small, then eventually I was doing $400 per pay ($8000/year). I wish I had done more -- the current salary contribution limit for 403b plans is $18,000 per year! Put more money in the 403b!
Let me tell you about my Lincoln savings. I did some things right, some wrong :oops:
In my 15 years with Lincoln, I contributed about $120,000 total from salary, a previous 403b rollover, and my sick day payout at retirement, which I put into the 403b instead of taking it as income and paying taxes on it. I also weathered the 2001 and 2008 market downturns. In fact, after the 2008 crash, I had my annual meeting with my rep, and decided to INCREASE my contributions after the downturn. Unfortunately, most of my contributions were later in my career, as I got higher on the salary guide. Put money in when you’re younger – time is your friend. My Lincoln nest egg is currently worth about $220,000. (I also have other personal investments outside of Lincoln--emergency fund, IRA, Roth-- with Vanguard. And I paid extra on my monthly mortgage payments, so my house will be paid off soon, in 22 years instead of 30 years. My goal was to have no mortgage in retirement. Yay :happy .)

Did I pay 403b fees? Yes. Are they higher than Vanguard? Yes. But I don’t consider my 403b a mistake. I got a good return, I got good advice from my rep, and it was done automatically so I didn’t have to think about it during the school year. I have a Roth IRA with VG, but I couldn’t remember to contribute each month. Even if I did my Roth in a disciplined way, the contribution limit is about $5500/year, while the 403b contribution limit is $18,000 per year, pre-tax.

Another thing with 403b plans -- you can take a loan against them and pay it back (without penalty), though I wouldn't recommend it. You can’t borrow from a Roth or regular IRA. But it’s good to know that if you were truly in a desperate situation, you can borrow from your 403b.

Also, when the market tanked in 2008, it was tempting to cut my investing. Talking to my rep helped. Heck, we hire coaches and counselors for sports, exercise, dieting, and other life things. I had a good rep and that did help me to stay focused and not quit. Yes, I paid fees, but I did get value from my rep.

Can you do the "self-directed" version of Lincoln? Yes. But then you need to research the funds, make adjustments, etc., and keep yourself going. You can certainly go that way. That’s a new program and was not available until recently. I didn’t hear of it until after I retired, so it wasn’t an option for me. If it had been available years ago, I probably would have done it.

So, if you’re still in the regular Lincoln plan, meet with your advisor and discuss how to improve your return on investment. Make them work for you!
Or, do the Self-Directed option, and make your decisions and changes without your rep.
Whichever course you take, definitely INCREASE your contributions each year, especially as you get higher on the salary guide and in a higher tax bracket. You won’t miss the money being deducted from your pay.

Also, WHEN this high stock market crashes, don’t stop investing. If anything, put more in, or just keep with your plan. Don’t let downturns discourage you if you have a 25-30 year time frame. The down market won’t last forever, anymore than this high market will. Yes, I’m bracing for a “correction” soon!

Best of luck to you in your teaching career. It is a hard job.

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CyclingDuo
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Re: NJ Teacher Lost with 403bs

Post by CyclingDuo » Thu Sep 07, 2017 8:12 am

BeaglesAreFun wrote:
Wed Sep 06, 2017 8:50 pm
Hello NJ Teacher. I was a NJ teacher, now retired, and I also had Lincoln Investments for my 403b. I know you posted a few months ago, but I figured I'd give my 2 cents' worth...! Sorry that it's a l-o-n-g post....grab a cup of coffee or something…. :beer

All is not lost for you, and you're better off in Lincoln than some other companies.

From what you wrote, you paid fees of about 1.2%, roughly based on your final balance, vs. ~0.15% in a Vanguard index fund. Yes, those are higher fees than VG (Vanguard), but is the problem with your total account balance here really the fees? Or is it that you need to be allocated differently to get a better return, and also increase your contributions?

Don't stop investing. Invest more, and smarter, and since you pay the fees, make your rep work for you! Take the initiative and contact them, to show them that you care about and are watching your money, and that you want to change what you are currently doing.

I am not promoting Lincoln, nor am I defending fees, but while I paid them, I honestly believe that I did get some value from my Lincoln rep over the years. I’ll probably get criticism about what I’m saying here, because fees are sacrilege, but remember, we have to work with the 403b plans we have in reality. The new Self-Directed plan was not an option until recently. The option that’s worse than paying fees is to not take advantage of the 403b opportunity at all !

I started with Lincoln in 2001, when I changed school districts, and I retired in 2016. I started with a rep who wasn’t too good, and contacted the regional manager for Lincoln, and got a better one, who I have had ever since, and who is great!

Are the fees at Lincoln higher than a VG (Vanguard) index fund? Yes.

But, that doesn't mean you shouldn't have a 403b. And, in retrospect, paying the fees and having my nest egg is still better than the alternative, which is not to have done it at all. I'm shocked at how many teachers don't take advantage of the 403b -- they count on the pension. I don't think it will always be here in its current form. You’re younger – hope for, but don’t count on, the pension. That’s my attitude about Social Security, too.

The way Lincoln is structured now, yes the fees are higher than an index fund. Ask your rep to explain the fees -- they changed as of January, 2017. You also are ENTITLED to meet with your rep at least once per year to review your goals, risk tolerance, contributions, account performance, etc. Most teachers don't do that! The rep will meet at your school (after school , don’t do it during school), or at your home or their office, and even over the summer. You can also contact them by phone or email, if you can’t meet or if you just have questions. This is the rep’s job.

For me, during the school year, and even over the summer, I was so busy with school and family things, and I never got sleep, and the last thing I wanted or had time to do was to worry about where/how to invest my money. It was also good to talk with my rep, especially when there were downturns or life events that might have made me stop investing. I met with my rep once per year for a big review, where we had printouts of my accounts and balances, their performance, and how the market was doing. We set my investments at first to Aggressive, then as I got toward retirement, Moderately Aggressive. Changes were made occasionally from different funds, but the overall objective remained the same. My rep could also do projections of future balances, based on different % returns and different levels of risk. There was no way that I was researching all of this, especially during the school year, but my rep did!

For you -- INCREASE your contribution every year. You CAN do more than $50 per pay, especially because it is pre-tax money, and as a teacher, you will eventually get higher on the salary guide. (So a $50 contribution roughly costs you a ~$40 reduction in your paycheck, because of the pre-tax benefit of not paying ~$10 in taxes). I started small, then eventually I was doing $400 per pay ($8000/year). I wish I had done more -- the current salary contribution limit for 403b plans is $18,000 per year! Put more money in the 403b!
Let me tell you about my Lincoln savings. I did some things right, some wrong :oops:
In my 15 years with Lincoln, I contributed about $120,000 total from salary, a previous 403b rollover, and my sick day payout at retirement, which I put into the 403b instead of taking it as income and paying taxes on it. I also weathered the 2001 and 2008 market downturns. In fact, after the 2008 crash, I had my annual meeting with my rep, and decided to INCREASE my contributions after the downturn. Unfortunately, most of my contributions were later in my career, as I got higher on the salary guide. Put money in when you’re younger – time is your friend. My Lincoln nest egg is currently worth about $220,000. (I also have other personal investments outside of Lincoln--emergency fund, IRA, Roth-- with Vanguard. And I paid extra on my monthly mortgage payments, so my house will be paid off soon, in 22 years instead of 30 years. My goal was to have no mortgage in retirement. Yay :happy .)

Did I pay 403b fees? Yes. Are they higher than Vanguard? Yes. But I don’t consider my 403b a mistake. I got a good return, I got good advice from my rep, and it was done automatically so I didn’t have to think about it during the school year. I have a Roth IRA with VG, but I couldn’t remember to contribute each month. Even if I did my Roth in a disciplined way, the contribution limit is about $5500/year, while the 403b contribution limit is $18,000 per year, pre-tax.

Another thing with 403b plans -- you can take a loan against them and pay it back (without penalty), though I wouldn't recommend it. You can’t borrow from a Roth or regular IRA. But it’s good to know that if you were truly in a desperate situation, you can borrow from your 403b.

Also, when the market tanked in 2008, it was tempting to cut my investing. Talking to my rep helped. Heck, we hire coaches and counselors for sports, exercise, dieting, and other life things. I had a good rep and that did help me to stay focused and not quit. Yes, I paid fees, but I did get value from my rep.

Can you do the "self-directed" version of Lincoln? Yes. But then you need to research the funds, make adjustments, etc., and keep yourself going. You can certainly go that way. That’s a new program and was not available until recently. I didn’t hear of it until after I retired, so it wasn’t an option for me. If it had been available years ago, I probably would have done it.

So, if you’re still in the regular Lincoln plan, meet with your advisor and discuss how to improve your return on investment. Make them work for you!
Or, do the Self-Directed option, and make your decisions and changes without your rep.
Whichever course you take, definitely INCREASE your contributions each year, especially as you get higher on the salary guide and in a higher tax bracket. You won’t miss the money being deducted from your pay.

Also, WHEN this high stock market crashes, don’t stop investing. If anything, put more in, or just keep with your plan. Don’t let downturns discourage you if you have a 25-30 year time frame. The down market won’t last forever, anymore than this high market will. Yes, I’m bracing for a “correction” soon!

Best of luck to you in your teaching career. It is a hard job.
Bogleheads are here to help and give the most solid advice that can be given based on historical performance, taxes, contributions, asset allocation, how to DIY, ER fees, etc... . Nothing wrong with your personal account of Lincoln, but let's seriously look at the numbers and what those ER and administrative wrap fees do to your investments over time including the monthly contributions.

Some of the best work done and available on the internet can be found here with regard to ER fees:

http://www.retireearlyhomepage.com/twopercentrule.html

ImageER Fees Do Matter!

The OP needs to pay attention (as we all do) to the higher cost fees and how much that robs one's returns over time.

From the author of that blog article:

Of course, the idea that "fees don't matter" and "paying a load is a good deal" is completely untrue. As a matter of fact, if you can hold on to most of the 2% per year or so that the average mutual fund and financial advisor skim from their clients annually, you'll only need to save about half as much money for retirement.

If you look at the data above in the pictured chart and compare the 10 years, 20 years, 40 years, and 60 years wealth accumulation based on the underlying ER fees, I think we would all take the top line of that chart! Obviously, we could fill in the gaps between the low cost, no AUM and the highest cost with AUM to plug in a person's individual ER/AUM fee they are paying. However, the idea is clearly presented in the chart of what higher cost fees and AUM can cost over the decades.

It's nice that you have had a personal connection to your appointed financial advisor from Lincoln (most plans will hook you up with one), and you did receive some sort of personal "value" from that. The question everyone needs to ask is - are the extra ER fees worth it compared to lower cost plans if lower cost options are available through your employment, or become available? My plan is under TIAA and was for many years in a target fund from TIAA. Yes, we get a personal rep as well. As soon as our plan added the low cost Vanguard Admiral Funds - I switched which lowered my ER fees from .77% down to .05% - .12%. I sure wish those low cost funds were available in our TIAA plan where I work a decade ago, but they were not. So here's to every 403b plan continuing to move forward and offer the lower cost options. Sounds like the OP has the option to get in lower cost funds.

I think we are all in agreement that the OP get things shifted around ASAP into the lower cost funds, and increase contributions to take advantage of the power of time and compounding (with the lower cost options) for the next decade or two or more.

bsteiner
Posts: 2930
Joined: Sat Oct 20, 2012 9:39 pm
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Re: NJ Teacher Lost with 403bs

Post by bsteiner » Thu Sep 07, 2017 8:26 am

krow36 wrote:
Thu Jun 08, 2017 12:29 am
... how does that work? If NJ state income tax is paid on traditional IRA and 403b contributions, do those accounts then have basis that is not subject to NJ income tax when distributed? But the gains would be taxable at distribution (as with any state income tax)? ...

Would moving to another state with a state income tax would result in double state taxation? That be avoided by moving to a state with no state income tax wouldn't it?
Correct. It's similar to the Federal tax treatment if you make a nondeductible contribution to a traditional IRA.

BeaglesAreFun
Posts: 3
Joined: Tue Sep 05, 2017 8:32 pm

Re: NJ Teacher Lost with 403bs

Post by BeaglesAreFun » Thu Sep 07, 2017 4:52 pm

bsteiner wrote:
Thu Sep 07, 2017 8:26 am
krow36 wrote:
Thu Jun 08, 2017 12:29 am
... how does that work? If NJ state income tax is paid on traditional IRA and 403b contributions, do those accounts then have basis that is not subject to NJ income tax when distributed? But the gains would be taxable at distribution (as with any state income tax)? ...

Would moving to another state with a state income tax would result in double state taxation? That be avoided by moving to a state with no state income tax wouldn't it?
Correct. It's similar to the Federal tax treatment if you make a nondeductible contribution to a traditional IRA.
Actually -- there's good news on this in New Jersey! (yes, "good news" and "New Jersey" in the same sentence!)
NJ is phasing in a retirement income tax break. https://www.forbes.com/sites/ashleaebel ... 0eb8dc9446

By 2020, up to $100,000 married / $75,000 single of retirement income will be excluded from NJ state tax. (Above that, you lose the break, though).

BeaglesAreFun
Posts: 3
Joined: Tue Sep 05, 2017 8:32 pm

Re: NJ Teacher Lost with 403bs

Post by BeaglesAreFun » Thu Sep 07, 2017 5:41 pm

CyclingDuo wrote:
Thu Sep 07, 2017 8:12 am

Bogleheads are here to help and give the most solid advice that can be given based on historical performance, taxes, contributions, asset allocation, how to DIY, ER fees, etc... . Nothing wrong with your personal account of Lincoln, but let's seriously look at the numbers and what those ER and administrative wrap fees do to your investments over time including the monthly contributions.

Some of the best work done and available on the internet can be found here with regard to ER fees:

http://www.retireearlyhomepage.com/twopercentrule.html

ImageER Fees Do Matter!

The OP needs to pay attention (as we all do) to the higher cost fees and how much that robs one's returns over time.

From the author of that blog article:

Of course, the idea that "fees don't matter" and "paying a load is a good deal" is completely untrue. As a matter of fact, if you can hold on to most of the 2% per year or so that the average mutual fund and financial advisor skim from their clients annually, you'll only need to save about half as much money for retirement.

If you look at the data above in the pictured chart and compare the 10 years, 20 years, 40 years, and 60 years wealth accumulation based on the underlying ER fees, I think we would all take the top line of that chart! Obviously, we could fill in the gaps between the low cost, no AUM and the highest cost with AUM to plug in a person's individual ER/AUM fee they are paying. However, the idea is clearly presented in the chart of what higher cost fees and AUM can cost over the decades.

It's nice that you have had a personal connection to your appointed financial advisor from Lincoln (most plans will hook you up with one), and you did receive some sort of personal "value" from that. The question everyone needs to ask is - are the extra ER fees worth it compared to lower cost plans if lower cost options are available through your employment, or become available? My plan is under TIAA and was for many years in a target fund from TIAA. Yes, we get a personal rep as well. As soon as our plan added the low cost Vanguard Admiral Funds - I switched which lowered my ER fees from .77% down to .05% - .12%. I sure wish those low cost funds were available in our TIAA plan where I work a decade ago, but they were not. So here's to every 403b plan continuing to move forward and offer the lower cost options. Sounds like the OP has the option to get in lower cost funds.

I think we are all in agreement that the OP get things shifted around ASAP into the lower cost funds, and increase contributions to take advantage of the power of time and compounding (with the lower cost options) for the next decade or two or more.
I agree with what you say, and have read the same, over the years. Article after article says the same thing about fees, and I know it. I've been with VG and that’s their mantra. I've even had this discussion with my Lincoln rep!!

But, lower fees have not always been an option for people in 403b plans. My choice was to work with what options I had (all had high fees, compared to my VG funds), or not do a 403b at all. My point in my post was that if I was paying the fees, I was getting my rep to work for me as much as I could, and that there is some value there, and, that even with mistakes, I still got a decent amount of savings and things can turn out OK. Good, not perfect.
Also, for the OP, the problem with his/her account balance wasn’t really the fees at this point in time (~1.2%), but the asset allocation/return, and not increasing their contributions. Yes, the fees will be a problem, over time and with a larger balance.

I just find that sometimes, people chanting on about not paying high fees are making other people feel dumb because they do. I know you didn’t say “dumb”…it’s just an attitude I sense in some articles I’ve read. I know people who have real fears when it comes to trying to manage or figure out money, and would rather have someone help them in these decisions. There's also the time factor – a lot of my colleagues said the same as me – they don’t have time (or the interest) to research funds or adjust their allocations, etc. on their own.
I think that people who write these articles forget these things – they see it as ‘fees are always bad, just get an index fund’, when there might be real reasons that other people who are not as financially or numerically savvy as they, might not think in their same terms. So, even with charts and analyses of compounded returns waved in their faces, there are still people who, if they had a choice, would choose to pay a fee and have an advisor.

My brother-in-law, for his 401k, chose the fixed-% return fund. He had no tolerance for stock market risk, even though every article will say that over the long term, he’d do better with stocks. He’s not dumb. He just chose what he could live with, and got a lesser, but guaranteed, return (though the matching contribution helped!)

I think that people need to understand their choices in 403b (if any) –pay fees and have an advisor of sorts, or DIY (Do It Yourself), if it is available. And even with DIY, there’s no guarantee that a person will choose or allocate well. Like anything else, home repairs, exercise plans, financial planning, etc. some people will choose the DIY method, and others will hire someone to help them.

The problem with 403b plans is that mostly, people don’t have much choice about fees, the money paid in fees loses its compounding power, and people don’t always pay attention to (or understand) the fees they are paying.

CedarWaxWing
Posts: 354
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Re: NJ Teacher Lost with 403bs

Post by CedarWaxWing » Thu Sep 07, 2017 6:35 pm

krow36 wrote:
Wed Jun 07, 2017 12:24 am
I don't think there is any reason to think that the OP has an annuity based 403b. Lincoln Investment is a mutual fund based 403b provider. There is also a Lincoln life insurance company that sells annuity based 403b plans.

The Lincoln Investment Solutions Premier Management/Wrap fee is 1.25% as of this year. Last year it was 0.9%. The Administration fee is $15/Q or $60/yr this year. Last year it was $35/yr. Your FFALX has an expense ratio of 1.0%. You are actually paying more than $170.
Last year’s average balance of about $15,000 X .009 = $135
Admin fee $35

In addition FFALX has an expense ratio of 1.0%, so on average last year your were paying $120/yr due to the ER.
In addition, FFALX has a 5.75% load and it’s possible you paid that fee on any purchases you made last year. If you bought $2000 of FFALX, you paid a load of $115. However the load may have been waived with your Premier account? I don't know. If you did pay the load, it means that you paid $2000 but was credited with a purchase of $1885. The load is like a sales tax.

So YES, your fees were excessive! NJ teachers in districts that have Lincoln Investment on the 403b provider list are able to use a very low cost Lincoln plan called Solutions Participant Direct Platform. Please read over this thread: viewtopic.php?f=1&t=175295

This plan allows the use of low-cost Vanguard Admiral class funds, ER from 0.05% to about 0.15%, with an annual Admin fee of $60. That’s it, no other fees, no loads, no wrap fee! This is apparently due to an arrangement with the NJEA (NJ Education Assoc.). Once you’ve established this account, you will be able to move your present Lincoln account into it. :happy
http://analysisreport.morningstar.com/f ... ture=en-US
http://analysisreport.morningstar.com/f ... ture=en-US

5.75 sales load, in the 797th percentile performance over the last 10 years, and similar ytd. Not surprising.

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CyclingDuo
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Re: NJ Teacher Lost with 403bs

Post by CyclingDuo » Fri Sep 08, 2017 8:34 am

BeaglesAreFun wrote:
Thu Sep 07, 2017 5:41 pm
CyclingDuo wrote:
Thu Sep 07, 2017 8:12 am

Bogleheads are here to help and give the most solid advice that can be given based on historical performance, taxes, contributions, asset allocation, how to DIY, ER fees, etc... . Nothing wrong with your personal account of Lincoln, but let's seriously look at the numbers and what those ER and administrative wrap fees do to your investments over time including the monthly contributions.

Some of the best work done and available on the internet can be found here with regard to ER fees:

http://www.retireearlyhomepage.com/twopercentrule.html

ImageER Fees Do Matter!

The OP needs to pay attention (as we all do) to the higher cost fees and how much that robs one's returns over time.

From the author of that blog article:

Of course, the idea that "fees don't matter" and "paying a load is a good deal" is completely untrue. As a matter of fact, if you can hold on to most of the 2% per year or so that the average mutual fund and financial advisor skim from their clients annually, you'll only need to save about half as much money for retirement.

If you look at the data above in the pictured chart and compare the 10 years, 20 years, 40 years, and 60 years wealth accumulation based on the underlying ER fees, I think we would all take the top line of that chart! Obviously, we could fill in the gaps between the low cost, no AUM and the highest cost with AUM to plug in a person's individual ER/AUM fee they are paying. However, the idea is clearly presented in the chart of what higher cost fees and AUM can cost over the decades.

It's nice that you have had a personal connection to your appointed financial advisor from Lincoln (most plans will hook you up with one), and you did receive some sort of personal "value" from that. The question everyone needs to ask is - are the extra ER fees worth it compared to lower cost plans if lower cost options are available through your employment, or become available? My plan is under TIAA and was for many years in a target fund from TIAA. Yes, we get a personal rep as well. As soon as our plan added the low cost Vanguard Admiral Funds - I switched which lowered my ER fees from .77% down to .05% - .12%. I sure wish those low cost funds were available in our TIAA plan where I work a decade ago, but they were not. So here's to every 403b plan continuing to move forward and offer the lower cost options. Sounds like the OP has the option to get in lower cost funds.

I think we are all in agreement that the OP get things shifted around ASAP into the lower cost funds, and increase contributions to take advantage of the power of time and compounding (with the lower cost options) for the next decade or two or more.
I agree with what you say, and have read the same, over the years. Article after article says the same thing about fees, and I know it. I've been with VG and that’s their mantra. I've even had this discussion with my Lincoln rep!!

That's good you have mentioned it to your rep. Continue to do so and encourage others you know to do so. It took several of us mentioning to our TIAA rep(s), as well as our school's HR time and time again with phone calls, emails, and face to face to alter our plan's fund choices to include some more lower cost options. End result - action works! In the case of a 403b - employees are the customer. Yes, as hundreds of threads have pointed out when it comes to 403b plans (and 401k plans), many times those in charge of negotiating the contracts with the providers may or may not be as savvy as the employees would like. Or the organizations may be too small - be it employees or assets under management - to have much bargaining power. Yet, things have improved since the early 80's when it comes to mutual funds, expenses, and at this point in time in 2017 low cost index funds are no longer a secret.

But, lower fees have not always been an option for people in 403b plans. My choice was to work with what options I had (all had high fees, compared to my VG funds), or not do a 403b at all. My point in my post was that if I was paying the fees, I was getting my rep to work for me as much as I could, and that there is some value there, and, that even with mistakes, I still got a decent amount of savings and things can turn out OK. Good, not perfect.
Also, for the OP, the problem with his/her account balance wasn’t really the fees at this point in time (~1.2%), but the asset allocation/return, and not increasing their contributions. Yes, the fees will be a problem, over time and with a larger balance.

Actually, the OP is paying much more than 1.2%. The underlying fund FFALX (which is a target fund comprised of 3 separate funds) has an ER of 1%. The 1.1-1.2% on top of which is the wrap fee/custodial/administrative fee for the plan is reality. That puts the OP's expense ratio at 2.1-2.2%. krow36 brought up the issue that the OP may also have paid a load charge of 5.75% for the FFALX fund. If that was the case (as we don't have confirmation if the OP paid that or the employer), then we are now at a possible expense of 7.85% - 7.95%. For the sake of discussion, I was going with the 2.1-2.2% figure when I posted an excellent link to one of the most respected forum members who has provided a lot of great information over the years to all of us.

I just find that sometimes, people chanting on about not paying high fees are making other people feel dumb because they do. I know you didn’t say “dumb”…it’s just an attitude I sense in some articles I’ve read. I know people who have real fears when it comes to trying to manage or figure out money, and would rather have someone help them in these decisions. There's also the time factor – a lot of my colleagues said the same as me – they don’t have time (or the interest) to research funds or adjust their allocations, etc. on their own.
I think that people who write these articles forget these things – they see it as ‘fees are always bad, just get an index fund’, when there might be real reasons that other people who are not as financially or numerically savvy as they, might not think in their same terms. So, even with charts and analyses of compounded returns waved in their faces, there are still people who, if they had a choice, would choose to pay a fee and have an advisor.

I did not use or intend anything in my post to be regarded as centering around anyone being "dumb". We've all oft heard the proverb "Physician, heal thyself!". When it comes to saving money for retirement in 403b/457/IRA's we could apply the same to educators and say "Educator, educate thyself!". This thread has been an excellent example of education to help the OP. That is why this site exists - to help conquer people's fears with concrete, solid advice. Points that have been brought up in this thread include directing the OP to lower cost options through what is available at Lincoln, investing in an IRA in a less cost expensive environment outside of the 403b, making the changes now to capture better performance going forward, etc. In no case was anyone in this thread being sanctimonious with their suggestions.

Your point of fears, and those choosing to pay a fee to have an advisor is a separate subject than what the OP raised. Most Bogleheads will agree that if one has a fear, or a need for help, then the price for an advisor may be worthwhile. BH's will then go on to point out the various levels and costs available for AUM ranging from a fee only advisor, to a full time 1% per year advisor, to the low cost option available at Vanguard, to a robo-advisor, to the "free" advice available if your plan provides that through the plan at one's work, and on and on.

BH's will also point out that without much fear or fuss required at all, a simple three fund portfolio can be set up DIY (using not only Vanguard funds, but other companies' funds as well). Taylor Larimore has become a shining example of the simplicity and lack of fuss/time required. https://www.bogleheads.org/wiki/Taylor_Larimore

The 3 Fund Portfolio that Taylor uses and advocates is nearly a set it and forget it option that doesn't require time involvement, savvy, or anything that would detract from one's personal daily life/routine. You mention that a lot of colleagues don't have the time to research the funds, or make AA adjustments on their own. I'm not buying that "time" argument with the information that is available in today's world about investing. I would venture to guess that some of these same colleagues might spend a lot more time on picking a cellular plan, or purchasing a car, or trying to pick a contractor to install their carpet, or where to eat out on a Friday night than is required to choose a target fund, or simple 2 to 3 fund portfolio. Articles, blogs, forums abound to help those who seek it. Again, I do not read into the articles any sanctimonious tone - so I am not sure where you are concluding that. I understand the issue with colleagues who may or may not be "in the know". In frank discussions with fellow professors that I work with last year, if I even mentioned ER (expense ratio), I usually got blank stares as well as comments that they didn't even know they existed. These are highly educated, critical thinkers who have all been decorated with awards over the years for their disciplines and teaching. Yes, I did inform them that our TIAA plan now included the low cost Admiral shares from Fidelity. Other colleagues were well aware of the change we had in our TIAA plan, and made the switch as soon as the funds became available. So I know that the issue exists and am not trying to ignore that it is a real issue.

However, in the case of the OP who posted on this forum - the OP is seeking advice and getting it to take on any of those fears or confusion that may exist. The OP is being provided with excellent advice to make choices. Waving a chart and a link about what the cost of paying 2% fees (or more) does to a portfolio over time was a decision I made because I felt it was very prudent within this particular discussion for the OP to see, and discern the information.


My brother-in-law, for his 401k, chose the fixed-% return fund. He had no tolerance for stock market risk, even though every article will say that over the long term, he’d do better with stocks. He’s not dumb. He just chose what he could live with, and got a lesser, but guaranteed, return (though the matching contribution helped!)

That's risk tolerance, which is a separate discussion than the OP raised.

I think that people need to understand their choices in 403b (if any) –pay fees and have an advisor of sorts, or DIY (Do It Yourself), if it is available. And even with DIY, there’s no guarantee that a person will choose or allocate well. Like anything else, home repairs, exercise plans, financial planning, etc. some people will choose the DIY method, and others will hire someone to help them.

That's pretty much the only choice - DIY or AUM. Yes, you might get excellent results under either choice, or you might get poor results under either choice. Under the DIY choice, this thread is full of BH's that jumped in to provide information for the OP to get better results - perhaps even excellent results - with some tweaks to their current 403b investment in the FFALX target fund.

The problem with 403b plans is that mostly, people don’t have much choice about fees, the money paid in fees loses its compounding power, and people don’t always pay attention to (or understand) the fees they are paying.

Yes, that applies to 403b, 457, and 401k plans. Investors/employees who continue to ask for better options have seen things improve in recent years. We have a hope that it continues to improve, but there are a lot of pieces to the equation (HR negotiator, size of organization, bids from various insurance companies, employees demanding lower-cost options, insurance companies not wanting to give up their profits, and on and on). For those who have poor 403b/401k plans with high cost choices and feel "stuck", then once the company match has been met, investing outside in IRA's and or a self-directed IRA, and or a low cost tax deferred variable annuity (Vanguard and Fidelity offer these where the fees may be lower than high cost 403b/401k plans), and or taxable are all options.

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Mel Lindauer
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Re: NJ Teacher Lost with 403bs

Post by Mel Lindauer » Fri Sep 08, 2017 2:43 pm

CyclingDuo wrote:
Fri Sep 08, 2017 8:34 am
BeaglesAreFun wrote:
Thu Sep 07, 2017 5:41 pm
CyclingDuo wrote:
Thu Sep 07, 2017 8:12 am

Bogleheads are here to help and give the most solid advice that can be given based on historical performance, taxes, contributions, asset allocation, how to DIY, ER fees, etc... . Nothing wrong with your personal account of Lincoln, but let's seriously look at the numbers and what those ER and administrative wrap fees do to your investments over time including the monthly contributions.

Some of the best work done and available on the internet can be found here with regard to ER fees:

http://www.retireearlyhomepage.com/twopercentrule.html

ImageER Fees Do Matter!

The OP needs to pay attention (as we all do) to the higher cost fees and how much that robs one's returns over time.

From the author of that blog article:

Of course, the idea that "fees don't matter" and "paying a load is a good deal" is completely untrue. As a matter of fact, if you can hold on to most of the 2% per year or so that the average mutual fund and financial advisor skim from their clients annually, you'll only need to save about half as much money for retirement.

If you look at the data above in the pictured chart and compare the 10 years, 20 years, 40 years, and 60 years wealth accumulation based on the underlying ER fees, I think we would all take the top line of that chart! Obviously, we could fill in the gaps between the low cost, no AUM and the highest cost with AUM to plug in a person's individual ER/AUM fee they are paying. However, the idea is clearly presented in the chart of what higher cost fees and AUM can cost over the decades.

It's nice that you have had a personal connection to your appointed financial advisor from Lincoln (most plans will hook you up with one), and you did receive some sort of personal "value" from that. The question everyone needs to ask is - are the extra ER fees worth it compared to lower cost plans if lower cost options are available through your employment, or become available? My plan is under TIAA and was for many years in a target fund from TIAA. Yes, we get a personal rep as well. As soon as our plan added the low cost Vanguard Admiral Funds - I switched which lowered my ER fees from .77% down to .05% - .12%. I sure wish those low cost funds were available in our TIAA plan where I work a decade ago, but they were not. So here's to every 403b plan continuing to move forward and offer the lower cost options. Sounds like the OP has the option to get in lower cost funds.

I think we are all in agreement that the OP get things shifted around ASAP into the lower cost funds, and increase contributions to take advantage of the power of time and compounding (with the lower cost options) for the next decade or two or more.
I agree with what you say, and have read the same, over the years. Article after article says the same thing about fees, and I know it. I've been with VG and that’s their mantra. I've even had this discussion with my Lincoln rep!!

That's good you have mentioned it to your rep. Continue to do so and encourage others you know to do so. It took several of us mentioning to our TIAA rep(s), as well as our school's HR time and time again with phone calls, emails, and face to face to alter our plan's fund choices to include some more lower cost options. End result - action works! In the case of a 403b - employees are the customer. Yes, as hundreds of threads have pointed out when it comes to 403b plans (and 401k plans), many times those in charge of negotiating the contracts with the providers may or may not be as savvy as the employees would like. Or the organizations may be too small - be it employees or assets under management - to have much bargaining power. Yet, things have improved since the early 80's when it comes to mutual funds, expenses, and at this point in time in 2017 low cost index funds are no longer a secret.

But, lower fees have not always been an option for people in 403b plans. My choice was to work with what options I had (all had high fees, compared to my VG funds), or not do a 403b at all. My point in my post was that if I was paying the fees, I was getting my rep to work for me as much as I could, and that there is some value there, and, that even with mistakes, I still got a decent amount of savings and things can turn out OK. Good, not perfect.
Also, for the OP, the problem with his/her account balance wasn’t really the fees at this point in time (~1.2%), but the asset allocation/return, and not increasing their contributions. Yes, the fees will be a problem, over time and with a larger balance.

Actually, the OP is paying much more than 1.2%. The underlying fund FFALX (which is a target fund comprised of 3 separate funds) has an ER of 1%. The 1.1-1.2% on top of which is the wrap fee/custodial/administrative fee for the plan is reality. That puts the OP's expense ratio at 2.1-2.2%. krow36 brought up the issue that the OP may also have paid a load charge of 5.75% for the FFALX fund. If that was the case (as we don't have confirmation if the OP paid that or the employer), then we are now at a possible expense of 7.85% - 7.95%. For the sake of discussion, I was going with the 2.1-2.2% figure when I posted an excellent link to one of the most respected forum members who has provided a lot of great information over the years to all of us.

I just find that sometimes, people chanting on about not paying high fees are making other people feel dumb because they do. I know you didn’t say “dumb”…it’s just an attitude I sense in some articles I’ve read. I know people who have real fears when it comes to trying to manage or figure out money, and would rather have someone help them in these decisions. There's also the time factor – a lot of my colleagues said the same as me – they don’t have time (or the interest) to research funds or adjust their allocations, etc. on their own.
I think that people who write these articles forget these things – they see it as ‘fees are always bad, just get an index fund’, when there might be real reasons that other people who are not as financially or numerically savvy as they, might not think in their same terms. So, even with charts and analyses of compounded returns waved in their faces, there are still people who, if they had a choice, would choose to pay a fee and have an advisor.

I did not use or intend anything in my post to be regarded as centering around anyone being "dumb". We've all oft heard the proverb "Physician, heal thyself!". When it comes to saving money for retirement in 403b/457/IRA's we could apply the same to educators and say "Educator, educate thyself!". This thread has been an excellent example of education to help the OP. That is why this site exists - to help conquer people's fears with concrete, solid advice. Points that have been brought up in this thread include directing the OP to lower cost options through what is available at Lincoln, investing in an IRA in a less cost expensive environment outside of the 403b, making the changes now to capture better performance going forward, etc. In no case was anyone in this thread being sanctimonious with their suggestions.

Your point of fears, and those choosing to pay a fee to have an advisor is a separate subject than what the OP raised. Most Bogleheads will agree that if one has a fear, or a need for help, then the price for an advisor may be worthwhile. BH's will then go on to point out the various levels and costs available for AUM ranging from a fee only advisor, to a full time 1% per year advisor, to the low cost option available at Vanguard, to a robo-advisor, to the "free" advice available if your plan provides that through the plan at one's work, and on and on.

BH's will also point out that without much fear or fuss required at all, a simple three fund portfolio can be set up DIY (using not only Vanguard funds, but other companies' funds as well). Taylor Larimore has become a shining example of the simplicity and lack of fuss/time required. https://www.bogleheads.org/wiki/Taylor_Larimore

The 3 Fund Portfolio that Taylor uses and advocates is nearly a set it and forget it option that doesn't require time involvement, savvy, or anything that would detract from one's personal daily life/routine. You mention that a lot of colleagues don't have the time to research the funds, or make AA adjustments on their own. I'm not buying that "time" argument with the information that is available in today's world about investing. I would venture to guess that some of these same colleagues might spend a lot more time on picking a cellular plan, or purchasing a car, or trying to pick a contractor to install their carpet, or where to eat out on a Friday night than is required to choose a target fund, or simple 2 to 3 fund portfolio. Articles, blogs, forums abound to help those who seek it. Again, I do not read into the articles any sanctimonious tone - so I am not sure where you are concluding that. I understand the issue with colleagues who may or may not be "in the know". In frank discussions with fellow professors that I work with last year, if I even mentioned ER (expense ratio), I usually got blank stares as well as comments that they didn't even know they existed. These are highly educated, critical thinkers who have all been decorated with awards over the years for their disciplines and teaching. Yes, I did inform them that our TIAA plan now included the low cost Admiral shares from Fidelity. Other colleagues were well aware of the change we had in our TIAA plan, and made the switch as soon as the funds became available. So I know that the issue exists and am not trying to ignore that it is a real issue.

However, in the case of the OP who posted on this forum - the OP is seeking advice and getting it to take on any of those fears or confusion that may exist. The OP is being provided with excellent advice to make choices. Waving a chart and a link about what the cost of paying 2% fees (or more) does to a portfolio over time was a decision I made because I felt it was very prudent within this particular discussion for the OP to see, and discern the information.


My brother-in-law, for his 401k, chose the fixed-% return fund. He had no tolerance for stock market risk, even though every article will say that over the long term, he’d do better with stocks. He’s not dumb. He just chose what he could live with, and got a lesser, but guaranteed, return (though the matching contribution helped!)

That's risk tolerance, which is a separate discussion than the OP raised.

I think that people need to understand their choices in 403b (if any) –pay fees and have an advisor of sorts, or DIY (Do It Yourself), if it is available. And even with DIY, there’s no guarantee that a person will choose or allocate well. Like anything else, home repairs, exercise plans, financial planning, etc. some people will choose the DIY method, and others will hire someone to help them.

That's pretty much the only choice - DIY or AUM. Yes, you might get excellent results under either choice, or you might get poor results under either choice. Under the DIY choice, this thread is full of BH's that jumped in to provide information for the OP to get better results - perhaps even excellent results - with some tweaks to their current 403b investment in the FFALX target fund.

The problem with 403b plans is that mostly, people don’t have much choice about fees, the money paid in fees loses its compounding power, and people don’t always pay attention to (or understand) the fees they are paying.

Yes, that applies to 403b, 457, and 401k plans. Investors/employees who continue to ask for better options have seen things improve in recent years. We have a hope that it continues to improve, but there are a lot of pieces to the equation (HR negotiator, size of organization, bids from various insurance companies, employees demanding lower-cost options, insurance companies not wanting to give up their profits, and on and on). For those who have poor 403b/401k plans with high cost choices and feel "stuck", then once the company match has been met, investing outside in IRA's and or a self-directed IRA, and or a low cost tax deferred variable annuity (Vanguard and Fidelity offer these where the fees may be lower than high cost 403b/401k plans), and or taxable are all options.
Outstanding point-by-point explanation, CyclingDuo, of why this is a poor choice when better low-cost options are available. And the fact that the OP is here on this forum, asking for unbiased help, indicates that he/she is willing to learn and to explore self-directed lower-cost options that should result in much higher long-term results.

Costs matter and there's no defending high costs when other options are available.
Best Regards - Mel | | Semper Fi

A440
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Location: NJ

Re: NJ Teacher Lost with 403bs

Post by A440 » Sat Sep 09, 2017 5:36 am

krow36 wrote:
Wed Jun 07, 2017 12:24 am

So YES, your fees were excessive! NJ teachers in districts that have Lincoln Investment on the 403b provider list are able to use a very low cost Lincoln plan called Solutions Participant Direct Platform. Please read over this thread: viewtopic.php?f=1&t=175295

This plan allows the use of low-cost Vanguard Admiral class funds, ER from 0.05% to about 0.15%, with an annual Admin fee of $60. That’s it, no other fees, no loads, no wrap fee! This is apparently due to an arrangement with the NJEA (NJ Education Assoc.). Once you’ve established this account, you will be able to move your present Lincoln account into it. :happy
I teach in NJ and use the Participant Directed Platform. I pay $8.75 per quarter ($35/year) for the plan + the expense ratio of the Vanguard fund. It's a great plan for the DIY person. You may need to contact your local Lincoln Investment office, as the rep that visits the school makes $0 from the plan. You can get fund recommendations on this forum.

IMHO, choosing a fund or two for your 403(b)(7) is much easier than keeping track of which of your students have an IEP, 504 plan, food allergies/health concerns, meeting your PDP goals, providing differentiated learning for both Tier 3 and struggling learners, following your district's latest evaluation and technology platforms, responding to emails/phone calls during your prep, and learning how to live on less take home pay than a few years ago because of Chapter 78. :shock:
Last edited by A440 on Sat Sep 09, 2017 7:10 am, edited 1 time in total.

jerryk68
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Re: NJ Teacher Lost with 403bs

Post by jerryk68 » Sat Sep 09, 2017 7:04 am

Why do the unions allow "financial advisors" in the teacher's lounge when my car purchase advisor or any other advisor is not allowed in the school? It must be the "free" cookies?

https://www.forbes.com/forbes/2005/0425/100.html

Determined
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Re: NJ Teacher Lost with 403bs

Post by Determined » Sat Sep 09, 2017 7:50 am

I just want to see this was been one of the most personally informative threads I have read since I started six months ago. The honest discussion about the goal of low fees and the reality of options particularly for teachers is terrific. It makes me wonder why we are required to meet with a American Fidelity rep every September. I check in, tell them I am set and leave.

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CyclingDuo
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Re: NJ Teacher Lost with 403bs

Post by CyclingDuo » Sat Sep 09, 2017 11:30 am

jerryk68 wrote:
Sat Sep 09, 2017 7:04 am
Why do the unions allow "financial advisors" in the teacher's lounge when my car purchase advisor or any other advisor is not allowed in the school? It must be the "free" cookies?

https://www.forbes.com/forbes/2005/0425/100.html
Yup. Points out pieces of the puzzle that those who have access to 403b plans need to fight (unions, negotiators, salesmen, etc...), and be aware of so they can make better choices.

From the article:

Teacher Michael Cangelosi wandered into the faculty lounge of his grade school in Derwood, Md. at lunchtime one day nine years ago, and a well-dressed man on the sofa beckoned to him with a plate of cookies and an offer of free advice.

The adviser was a salesman for AIG Valic, the largest vendor of retirement savings plans for teachers. He later whipped out colorful charts illustrating how Cangelosi, then in his mid-20s and with only a few thousand dollars saved, could avoid a trip to the poorhouse by setting up a tax-deferred teachers’ retirement plan. A brochure, listing some mutual funds, touted no initial sales commissions and fees as low as $3.75 a quarter.

Sold:In the next eight years Cangelosi put $14,200 into his retirement plan. Belatedly, last summer he addressed the question of whether he was doing as he hoped. By the time he bailed out and paid a $500 kill fee, he ended up with all of $13,655–$550 less than what he had invested over all those years. Why? One big reason was that he had been paying fees of 2% a year, two to three times the rate charged by big mutual funds. This during a time when a low-cost S&P Index fund would have returned 95%.


...and...

Teachers’ advocates recently sponsored legislation in California aimed at forcing school districts to cap 403(b) fees. Insurers lobbied hard against them. Fliers anonymously appeared at schools comparing the proposal to limit high-cost choices to Hitler and the Holocaust. Web sites with addresses similar to 403bwise.com popped up to transport visitors to pro-insurer alternatives.

:shock: Wow with regard to the propaganda using NAZI techniques!

I'd say when the colorful charts are "whipped out", a nice long bullwhip hanging on the wall in the teacher's lounge should be standard equipment to sweeten and stir any of the salesmen's coffee that happen to visit with those slick brochures and promises. 8-) (Notice I didn't advocate it as a reason for teachers to carry firearms in case they get robbed at school.... :D )

Several of these articles as well as many posts in various threads have mentioned there is little to no education provided to teachers with regard to the retirement plan options. That makes perfect sense considering the data from the most recent College Payoff study (available here: https://www2.ed.gov/policy/highered/reg ... payoff.pdf) when it mentions that there is little to no personal finance taught in the classroom in the US.

Budgeting and personal finance is unfortunately not taught in the US Public High Schools like it is in many other countries. Only 4 states require a stand-alone personal finance course in high school, and 13 other states require money management instruction as part of some other class.

I think we would be in line to assume the same goes for students in college.

I actually include a personal finance session the first week in all of my college classes even though it has nothing to do with the subject matter I teach, but I want students to be put at ease with regard to their student loans and the stress they feel about financing their college educations. So I cover that as well as budgeting and saving after they graduate, and instill data to add to their knowledge of lifetime earnings they will receive with their degrees. I may have to up my game and do a Saturday morning workshop for all those students during their senior year who are going directly into teaching to discuss 403b plans (and slick salesmen) they are about to face...

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CyclingDuo
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Re: NJ Teacher Lost with 403bs

Post by CyclingDuo » Sun Sep 10, 2017 10:52 am

Mel Lindauer wrote:
Fri Sep 08, 2017 2:43 pm
Costs matter and there's no defending high costs when other options are available.
Well stated.

In just another reminder to back that up, and one many of us have been following the past 10 years...

Warren Buffet took on the high cost vs low cost debate with a $1M bet in 2007. He is about to officially win his bet with the fund manager he wagered against.

http://nypost.com/2017/09/09/warren-buf ... ecade-ago/

Warren Buffett made a $1 million bet at end of 2007 with hedge fund manager Ted Seides of Protégé Partners. Buffett wagered that a low-cost S&P 500 index fund would perform better than a group of Protégé’s hedge funds.

The problem for Seides is his five funds through the middle of this year have been only able to gain 2.2 percent a year since 2008, compared with more than 7 percent a year for the S&P 500 — a huge difference.

That means Seides’ $1 million hedge fund investments have only earned $220,000 in the same period that Buffett’s low-fee investment gained $854,000.

Indeed, Seides, in a sentiment that sounds as though he is now using the Buffett playbook, wrote that “the higher the price an investor pays for an asset, the less he should expect to earn.”


It's no wonder that the words chosen this year for both the annual shareholder letter and at Berkshire Hathaway's Shareholder Meeting in Omaha to honor Jack Bogle (who was in attendance) rang so true: "If a statue is ever erected to honor the person who has done the most for American investors, the hands-down choice should be Jack Bogle." Jack Bogle is the founder of Vanguard, which popularized the concept of low-cost index fund investing. Over the past several decades, his products have helped millions of investors achieve better investment returns than they otherwise would have. Again, the lesson: avoid high fees.

Armed with information now, the OP has some excellent clear cut options to move forward and make up for the previous decade. I imagine any prospective job applicant - including those in the teaching field - should absolutely include a search for information for all of their prospective job applications when seeking a job to see what the district/state offers with regard to benefits (health insurance, pension, voluntary 403b, SS or no SS, 457, etc...). The value of those compared to the salary itself is a critical component to their financial well being in their career.

Mel - you know that we submitted a pertinent question to this thread with regard to Vanguard and 403b plans for educators in hopes it gets asked at the Fall Boglehead Conference shindig. It is especially pertinent to a situation such as BeaglesAreFun mentioned if a teacher or staff member in education faces one of those higher cost, limited options 403b plans.

This is what we submitted on the Q&A with Jack Bogle...

Here's our question:

Jack, many of us at Bogleheads.org are teachers or educators here in the United States. The 403b plans we are offered by insurance companies have rather high administrative wrap fees charged by the insurance companies that administer them over and beyond the underlying fund ER fees. To quote an article entitled "How to Fix a Retirement Plan at a School or Nonprofit" written by Ron Lieber and Tara Siegel Bernard on November 4th, 2016 in the New York Times, they said "school districts often want plan providers to pay the cost of administering the programs, something Vanguard refuses to do but insurance companies are happy to take on."

Do you see Vanguard ever being able to step up to the plate and administer K-12 and Higher Education 403b plans with costs that undercut the current competition to help get these costs down for America's educators?

Thank you.

CyclingDuo


As mentioned above, it has been nice to see the inclusion of some low cost Vanguard funds in the plans where we both work in recent years (TIAA, VALIC, VOYA, Mass Mutual, Horace Mann). If that is a result of Vanguard itself working with these insurance companies who administer and offer the 403b plans - kudos to Vanguard for that move. I hope it continues to improve for many others who have limited, higher cost options.

tim1999
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Re: NJ Teacher Lost with 403bs

Post by tim1999 » Sun Sep 10, 2017 11:26 am

I have to admit the first couple of times I saw this thread title I thought it was about a teacher from NJ who lost 403 pounds of body weight.

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