Help me choose a 403B/457 provider

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Stanczyk
Posts: 165
Joined: Thu Aug 16, 2018 12:56 pm

Help me choose a 403B/457 provider

Post by Stanczyk »

Hello everyone,

My spouse is in the middle of a job change and has the following choice of 403B/457 providers. A Vanguard 403B is an obvious choice, but their custodian charges a small ($5) monthly fee on top of Vanguard's expense rations. Given that $60/year is not much and that Vanguard's fees are really small, this is a good deal.

However, just to double check, I would like your feedback on whether or not other options strike you as possibly better? American funds or Fidelity? Or perhaps, one of the 457 options? (I doubt we will be able to max both 403B and 457. So, it is one or the other.)

403(b)
AIG Retirement Services (VALIC)
American Funds
Ameriprise Financial
Equitable
Fidelity Investments
Global Atlantic (issued by Commonwealth)
Horace Mann Insurance Company
Invesco OppenheimerFunds
Lincoln National Life Insurance Company
Metropolitan Life Insurance Company
Midland National Life
Security Benefit Group
Thrivent Financial
TIAA-CREF
USAA Insurance Company
USAA Mutual Funds
Vanguard Investments
VOYA Financial
Waddell & Reed, Inc.

457(b)
AIG Retirement Services (VALIC)
Texas Saver
TIAA-CREF
VOYA Financial
Pandemic Bangs
Posts: 375
Joined: Sat Dec 26, 2020 3:49 pm

Re: Help me choose a 403B/457 provider

Post by Pandemic Bangs »

If she has all those choices through her employer, it is important to know what the investment options are in each. One of my former employers had many of those as "legacy" custodians that were sunsetted (is that a verb?) over excessive fees, etc. I have had good luck with Fidelity plans and I am active in one of my employers' committees that oversees this; however, her employer could have been bribed incentivized to include only higher-fee actively-managed Fidelity offerings. TIAA is also hit or miss.

What is in the VG and Fido 403b?

The 457b custodians look weak so I would fill that second. TIAA is the best of the bunch, I think, but they are not super low-fee anymore. DS recently had VOYA and that did not sound great but, again, it depends upon what they offer you and what the plan/wrap fee is.
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Doctor Rhythm
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Re: Help me choose a 403B/457 provider

Post by Doctor Rhythm »

I’d go with Vanguard or Fidelity for the 403b. You might shave a few ER basis points and the monthly fee if you go with Fidelity, but make sure either of them offer the funds you want. I’m guessing they won’t include their full lineup for these plans.

TIAA would be my default choice for the 457 (though I don’t know anything about Texas Savers). Again, check out the specific funds offered.
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Stanczyk
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Re: Help me choose a 403B/457 provider

Post by Stanczyk »

The Vanguard 403b features all of the main index funds at crazy low prices (VTSAX and the like) as well funds like Windsor and Wellington.
I am unable to see Fidelity's choices - I suppose I will call them on Monday. Honestly, it looks like what will differentiate the two is the $60/year maintenance fee that Vanguard's custodian charges. Do you think that is negligible enough to go with Vanguard?
Doctor Rhythm
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Re: Help me choose a 403B/457 provider

Post by Doctor Rhythm »

Stanczyk wrote: Fri Jan 22, 2021 10:18 pm The Vanguard 403b features all of the main index funds at crazy low prices (VTSAX and the like) as well funds like Windsor and Wellington.
I am unable to see Fidelity's choices - I suppose I will call them on Monday. Honestly, it looks like what will differentiate the two is the $60/year maintenance fee that Vanguard's custodian charges. Do you think that is negligible enough to go with Vanguard?
Fidelity’s major index funds often have slightly lower ER than Vanguard (I have accounts with both), so they may save you a bit more than just the custodian charge. In the big scheme of things, it’s a negligible difference, so go with whichever one you like more.
Pandemic Bangs
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Re: Help me choose a 403B/457 provider

Post by Pandemic Bangs »

Stanczyk wrote: Fri Jan 22, 2021 10:18 pm Honestly, it looks like what will differentiate the two is the $60/year maintenance fee that Vanguard's custodian charges. Do you think that is negligible enough to go with Vanguard?
Depends on how much money you keep there. Easy enough to do the math. If it's a 2% assessment for you, then no. If you will fill it every year and the fees are lower than Fidelity's corresponding offerings, then probably yes.

Many employers waive the plan fee for smaller balances (i.e., newer employees). Check with HR.
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lakpr
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Re: Help me choose a 403B/457 provider

Post by lakpr »

$60 per year is really an effective 0.3% front end load on annual contributions. It is low enough to not dissuade one from investing, but I would definitely go with Fidelity
crefwatch
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Re: Help me choose a 403B/457 provider

Post by crefwatch »

I'm astounded that you could possibly have a choice of that many providers. Are they also the Custodians, or are you referring to a menu of investments that offers more than one of those companies at the same time? Remember that a menu is most unlikely to include every fund at any company, including Fidelity and Vanguard. The main reason for that is the Fiduciary Duty of your employer to (coercively) prevent you from making a bad decision that can be blamed on them!

I've worked for a dozen not-for-profits, and I never got the choice of more than one retirement provider, if there was a retirement plan at all (I mean, going back to 1974. They are more prevalent now.) There are several predatory insurance companies on your list, but I don't have the authority to name them. But as noted just above, consider the actual investment option menu, not just the name of the ... Custodian(?), as well as the total costs, including monthly and annual fees that are fixed, not part of the ER of each investment option.

I agree that Fidelity or Vanguard is likely to be your best option. I don't agree that Fidelity is likely to give you the lowest ERs. You have to look at what is ACTUALLY available in the plan - not what Fidelity advertises on TV and in magazines for open-market after-tax accounts.

Now is also the time to learn whether your company offers Roth versions of the plans, and what their rules are for rolling the funds to another provider, either while working for them, after separation, or for retirement. Historically, 403b plans have often had onerous, paternalistic, hidden restrictions on these actions. (I mean to distinguish between black and white rules, and typical foot-dragging from Custodians who don't want to lose Assets Under Management.)

You can companre 403b and 457 here, although the site does I think, make money from referrals:
https://403bwise.org/
FishAllDay
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Re: Help me choose a 403B/457 provider

Post by FishAllDay »

You really have to look at the details. Some of my 403B goes to Vanguard Total Stock Index (VSMPX, ER = 0.02%), through VALIC/AIG. My 457 goes to Vanguard Total International Index (VTSNX, ER = 0.08%), through Fidelity.
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ruralavalon
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Re: Help me choose a 403B/457 provider

Post by ruralavalon »

You really have to look at the fund and fee details for each provider, there may be some surprises.

I would definitely look at:
Fidelity Investments;
TIAA-CREF; and
Vanguard Investments.

Expense ratio differences of a couple hundredths of a percent are probably unimportant. Differences in indexes used, tracking error, securities lending policies, etc. are probably more significant.
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