403/457 Provider Choices

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
umfan11244
Posts: 17
Joined: Sat Feb 09, 2019 11:06 am
Location: Georgia

403/457 Provider Choices

Post by umfan11244 » Mon Feb 11, 2019 1:51 pm

My wife and I are looking at our potential choices considering she's getting ready to pursue a promotion. The companies we have to choose from are as follows:

VALIC
Great American
TIAA CREF
Ameriprise
Lincoln Financial

I'm in the process of reviewing the ER's and, so far, have seen some numbers around 1-1.9, which seems excessive. That leaves me with two questions.

1) what kind of ER should I expect on an employer plan like this?
2) what are your thoughts of the companies I listed?

Thanks in advance.

onourway
Posts: 1586
Joined: Thu Dec 08, 2016 3:39 pm

Re: 403/457 Provider Choices

Post by onourway » Mon Feb 11, 2019 1:55 pm

All of these companies rates will be dependent on what has been negotiated by your wife's employer. They can range anywhere from very low to very high.

Of those listed, the only name in generally good standing here is TIAA, which is the direction I would look first, however even they sometimes have plans with very high expenses, and occasionally I have heard of people having access to relatively cheap Vanguard index funds through some of the other companies.

You will need to review the plan documents carefully to see what exactly you have available.

User avatar
ruralavalon
Posts: 14708
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: 403/457 Provider Choices

Post by ruralavalon » Mon Feb 11, 2019 2:05 pm

Welcome to the forum :) .

umfan11244 wrote:
Mon Feb 11, 2019 1:51 pm
My wife and I are looking at our potential choices considering she's getting ready to pursue a promotion. The companies we have to choose from are as follows:

VALIC
Great American
TIAA CREF
Ameriprise
Lincoln Financial

I'm in the process of reviewing the ER's and, so far, have seen some numbers around 1-1.9, which seems excessive. That leaves me with two questions.

1) what kind of ER should I expect on an employer plan like this?
2) what are your thoughts of the companies I listed?

Thanks in advance.
There is no real short cut, she needs to look in detail at each provider.

In general by reputation TIAA-CREF may be the better choice. And I have sometimes seen VALIC plans which are okay. In general plans from insurance companies are usually awful. She needs to look at the details for each provider.

For U.S. stock funds hope for expense ratios under 0.30%, for bond funds hope for expense ratios under 0.50%, and for international stock funds hope for expense ratios under 0.65%.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Topic Author
umfan11244
Posts: 17
Joined: Sat Feb 09, 2019 11:06 am
Location: Georgia

Re: 403/457 Provider Choices

Post by umfan11244 » Mon Feb 11, 2019 2:10 pm

ruralavalon wrote:
Mon Feb 11, 2019 2:05 pm
Welcome to the forum :) .

There is no real short cut, she needs to look in detail at each provider.

In general by reputation TIAA-CREF may be the better choice. And I have sometimes seen VALIC plans which are okay. In general plans from insurance companies are usually awful. She needs to look at the details for each provider.

For U.S. stock funds hope for expense ratios under 0.30%, for bond funds hope for expense ratios under 0.50%, and for international stock funds hope for expense ratios under 0.65%.
Thanks, I could all but assume TIAA would be the best of the group. I've reviewed VALIC's ER's and they're all north of 1%, so I've already rule them out. I wonder at what point the ER's being so high would start to diminish the value of the 457 in the first place. :?

User avatar
ruralavalon
Posts: 14708
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: 403/457 Provider Choices

Post by ruralavalon » Mon Feb 11, 2019 2:25 pm

umfan11244 wrote:
Mon Feb 11, 2019 2:10 pm
ruralavalon wrote:
Mon Feb 11, 2019 2:05 pm
Welcome to the forum :) .

There is no real short cut, she needs to look in detail at each provider.

In general by reputation TIAA-CREF may be the better choice. And I have sometimes seen VALIC plans which are okay. In general plans from insurance companies are usually awful. She needs to look at the details for each provider.

For U.S. stock funds hope for expense ratios under 0.30%, for bond funds hope for expense ratios under 0.50%, and for international stock funds hope for expense ratios under 0.65%.
Thanks, I could all but assume TIAA would be the best of the group. I've reviewed VALIC's ER's and they're all north of 1%, so I've already rule them out. I wonder at what point the ER's being so high would start to diminish the value of the 457 in the first place. :?
"So high" to make the plan NOT useful depends on your tax bracket, and on how long she might be in the plan. If only a short time then expense ratios matter less, since on leaving the employer she can rollover to an IRA at a low cost provider like Vanguard or Fidelity. Please see the wiki article "401k, the section on "expensive or mediocre choices".

What are you finding for expense ratios at TIAA-CREF?

What are you finding for expense ratios at Ameriprise?
Last edited by ruralavalon on Mon Feb 11, 2019 2:36 pm, edited 1 time in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Topic Author
umfan11244
Posts: 17
Joined: Sat Feb 09, 2019 11:06 am
Location: Georgia

Re: 403/457 Provider Choices

Post by umfan11244 » Mon Feb 11, 2019 2:36 pm

ruralavalon wrote:
Mon Feb 11, 2019 2:25 pm
"So high" to make the plan NOT useful depends on how long she might be in the plan. If only a short time then expense ratios matter less, since on leaving the employer she can rollover to an IRA at a low cost provider like Vanguard or Fidelity.

What are you finding for expense ratios at TIAA-CREF?

What are you finding for expense ratios at Ameriprise?
I just started this process yesterday, so the only ones I've received so far are VALIC. I'll post info as it becomes available. She's 28 and plans on teaching until 53 in the same school system, so she'd be contributing to the plan for another 25 years or so.

The Wizard
Posts: 12905
Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

Re: 403/457 Provider Choices

Post by The Wizard » Mon Feb 11, 2019 3:01 pm

I would pick TIAA (they dropped the -CREF a year ago).
Would be good to know what funds they are offering and what expense tier: R1, R2, or R3...
Attempted new signature...

User avatar
Clever_Username
Posts: 1172
Joined: Sun Jul 15, 2012 12:24 am
Location: Southern California

Re: 403/457 Provider Choices

Post by Clever_Username » Mon Feb 11, 2019 3:35 pm

umfan11244 wrote:
Mon Feb 11, 2019 2:10 pm
I wonder at what point the ER's being so high would start to diminish the value of the 457 in the first place. :?
Depends how long she plans to stay employed with that provider.

With a 403(b) (or 401(k)), the question is a lot easier, because the obvious thing to do upon separation from employment with a retirement plan with bad fund choices is to either roll to a rollover IRA or to the next employer plan.

But one of the advantages of the 457 is being able to withdraw from it before 59.5 without penalty, provided separation (and it might depend on plan specifics). But that advantage is lost if the 457 is rolled to an IRA. So... I think for the 457 it depends on how long until the year she turns 59.5 (after which, might as well roll it over to an IRA as the withdraw rules become the same).
"What was true then is true now. Have a plan. Stick to it." -- XXXX, _Layer Cake_ | | I survived my first downturn and all I got was this signature line.

Topic Author
umfan11244
Posts: 17
Joined: Sat Feb 09, 2019 11:06 am
Location: Georgia

Re: 403/457 Provider Choices

Post by umfan11244 » Mon Feb 11, 2019 4:56 pm

Image

This is what TIAA is offering. I didn't even copy any of the lifecycle funds as they're all over 1% ER.

I exchanged several emails with Amerprise. They kept sending me literature, but after my 3rd request for a fund listing with ER's, they stopped replying. I'm going to assume that means the numbers aren't good.
Last edited by umfan11244 on Mon Feb 11, 2019 5:02 pm, edited 1 time in total.

krow36
Posts: 2080
Joined: Fri Jan 30, 2015 6:05 pm
Location: WA

Re: 403/457 Provider Choices

Post by krow36 » Mon Feb 11, 2019 5:02 pm

Is there an additional administration fee?

Topic Author
umfan11244
Posts: 17
Joined: Sat Feb 09, 2019 11:06 am
Location: Georgia

Re: 403/457 Provider Choices

Post by umfan11244 » Mon Feb 11, 2019 5:05 pm

There is not. The plan "Bookkeeping" fee is covered by the employer. Other than that, there are only fees if you get upgraded adviser services, which I would not.

The Wizard
Posts: 12905
Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

Re: 403/457 Provider Choices

Post by The Wizard » Mon Feb 11, 2019 5:11 pm

umfan11244 wrote:
Mon Feb 11, 2019 4:56 pm
Image

This is what TIAA is offering. I didn't even copy any of the lifecycle funds as they're all over 1% ER...
I'm guessing they also offer TIAA Traditional and TREA.

The R1 class is higher expense ratios, unfortunately, for smaller organizations...
Attempted new signature...

Topic Author
umfan11244
Posts: 17
Joined: Sat Feb 09, 2019 11:06 am
Location: Georgia

Re: 403/457 Provider Choices

Post by umfan11244 » Mon Feb 11, 2019 5:17 pm

The Wizard wrote:
Mon Feb 11, 2019 5:11 pm

I'm guessing they also offer TIAA Traditional and TREA.

The R1 class is higher expense ratios, unfortunately, for smaller organizations...
I'm not seeing either of those as an investment option. You're correct, in Georgia, individual school systems are left to find 403/457's on their own. In our case, we only have 12 schools in the entire district. Upon looking at it, I'm not terribly turned off by the .5-.6 ER's on some of these. The promotion would be worth $20-30k before taxes, so it would be absolutely crucial that we increase tax deferred savings, and I'm completely out of options regarding my employer.

krow36
Posts: 2080
Joined: Fri Jan 30, 2015 6:05 pm
Location: WA

Re: 403/457 Provider Choices

Post by krow36 » Mon Feb 11, 2019 5:19 pm

I think TIAA will be your lowest cost 403b provider. The other insurance companies are no doubt selling annuity based 403b plans, or possibly very high-cost custodial accounts. I would use the Equity Index Account and the Bond Market Account. Perhaps you could put any desired international stock in your or your wife's other accounts?

TIAA has a long history in providing pension and 403b plans to the higher education market. They are considered to be a much more responsible provider than the usual K-12 403b annuity plan provider.

Topic Author
umfan11244
Posts: 17
Joined: Sat Feb 09, 2019 11:06 am
Location: Georgia

Re: 403/457 Provider Choices

Post by umfan11244 » Mon Feb 11, 2019 5:22 pm

I was thinking along the same lines, I really appreciate the advice. One more question - am I really going to see a difference in the 403 vs. 457? I know we can withdraw the 457 penalty-free if she departs prior to 59 1/2, whereas we cannot with the 403. Is there any other difference I'm missing that could impact my decision between the two? TIAA offers both.

onourway
Posts: 1586
Joined: Thu Dec 08, 2016 3:39 pm

Re: 403/457 Provider Choices

Post by onourway » Mon Feb 11, 2019 5:27 pm

I would have no problem using those TIAA options at that cost. You could do a lot worse.

See this article comparing 403b and 457 plans. https://www.whitecoatinvestor.com/shoul ... your-457b/

Topic Author
umfan11244
Posts: 17
Joined: Sat Feb 09, 2019 11:06 am
Location: Georgia

Re: 403/457 Provider Choices

Post by umfan11244 » Mon Feb 11, 2019 5:41 pm

Good article, really appreciate it. This would be a governmental 457, so looks like it's a pretty good deal from that perspective.

krow36
Posts: 2080
Joined: Fri Jan 30, 2015 6:05 pm
Location: WA

Re: 403/457 Provider Choices

Post by krow36 » Mon Feb 11, 2019 5:48 pm

onourway wrote:
Mon Feb 11, 2019 5:27 pm
See this article comparing 403b and 457 plans. https://www.whitecoatinvestor.com/shoul ... your-457b/
The WCI article is mostly about the problems that non-governmental 457 plans have. The 457 plans of public school districts offer are governmental 457 plans.

Other than the distribution advantage of 457 plans that you mentioned, I don't think there is any significant advantage to a 457 over a 403b plan, assuming the funds and fees are the same. The over 50 catchup is the same. Both plans have an additional catchup available after 15 yrs (403b) or 3 yrs prior to "retirement age". Unless both plans were being maxed, I don't think the additional catchups are relevant. I guess you realize that both plans can be maxed for a total contributions of 38k?

Topic Author
umfan11244
Posts: 17
Joined: Sat Feb 09, 2019 11:06 am
Location: Georgia

Re: 403/457 Provider Choices

Post by umfan11244 » Mon Feb 11, 2019 6:34 pm

krow36 wrote:
Mon Feb 11, 2019 5:48 pm
I guess you realize that both plans can be maxed for a total contributions of 38k?
I do. While it's not ruled out for the future, our current plan is to contribute the $19k if she receives the promotion. We are trying to avoid exceeding the income limits for contributing to Roth IRA's, which would then require us to use a backdoor approach. We're currently about $15k away from the threshold.

User avatar
Duckie
Posts: 6294
Joined: Thu Mar 08, 2007 2:55 pm

Re: 403/457 Provider Choices

Post by Duckie » Mon Feb 11, 2019 6:59 pm

umfan11244 wrote:This is what TIAA is offering. I didn't even copy any of the lifecycle funds as they're all over 1% ER.
If going with TIAA I would choose CREF Equity Index for US stocks and CREF Bond Market for US bonds. I'd get the international stocks somewhere else.

lakpr
Posts: 572
Joined: Fri Mar 18, 2011 9:59 am

Re: 403/457 Provider Choices

Post by lakpr » Mon Feb 11, 2019 7:03 pm

I see Lincoln in there, in NJ, at lieast, they offer Vanguard funds through their Self Directed Brokerage Option. They do charge $30 per quarter per participant for the privilege though. So if you do max out the 403b amount of $19k per year, this fee is just an additional 0.1% overhead to the expense ratios of underlying Vanguard funds.

Please check it out!

Edit: Deleted, never mind, see krow36 response below
Last edited by lakpr on Mon Feb 11, 2019 7:24 pm, edited 2 times in total.

krow36
Posts: 2080
Joined: Fri Jan 30, 2015 6:05 pm
Location: WA

Re: 403/457 Provider Choices

Post by krow36 » Mon Feb 11, 2019 7:19 pm

lakpr wrote:
Mon Feb 11, 2019 7:03 pm
I see Lincoln in there, in NJ, at least, they offer Vanguard funds through their Self Directed Brokerage Option. They do charge $30 per quarter per participant for the privilege though. So if you do max out the 403b amount of $19k per year, this fee is just an additional 0.1% overhead to the expense ratios of underlying Vanguard funds.
Lincoln Investment has the low-cost Participant Directed Platform for NJ K-12 districts that you are referring to. These are custodial accounts. Unfortunately, the OP has Lincoln Financial which is an insurance company that offers high-cost annuity-based 403b plans. :(

lakpr
Posts: 572
Joined: Fri Mar 18, 2011 9:59 am

Re: 403/457 Provider Choices

Post by lakpr » Mon Feb 11, 2019 7:23 pm

krow36,

Bummer, thought they were the same firm. Sorry for getting my/ OP’s hopes up.

Nevertheless, I think it is worth exploring whether the OP has any chance at a self directed brokerage option through any if the providers.

Topic Author
umfan11244
Posts: 17
Joined: Sat Feb 09, 2019 11:06 am
Location: Georgia

Re: 403/457 Provider Choices

Post by umfan11244 » Mon Feb 11, 2019 7:41 pm

Thanks to all of you for the feedback. After receiving the rates and talking to my wife, we’re going forward with TIAA. We’re only contributing $100 per check initially until the prospective promotion comes. This will give us a good period to gain comfort with the service. We went 85% equities 15% bonds.

krow36
Posts: 2080
Joined: Fri Jan 30, 2015 6:05 pm
Location: WA

Re: 403/457 Provider Choices

Post by krow36 » Mon Feb 11, 2019 7:44 pm

Sounds good to me! Good luck.

User avatar
ruralavalon
Posts: 14708
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: 403/457 Provider Choices

Post by ruralavalon » Tue Feb 12, 2019 8:00 am

umfan11244 wrote:
Mon Feb 11, 2019 7:41 pm
Thanks to all of you for the feedback. After receiving the rates and talking to my wife, we’re going forward with TIAA. We’re only contributing $100 per check initially until the prospective promotion comes. This will give us a good period to gain comfort with the service. We went 85% equities 15% bonds.
Best of luck on the promotion.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

hammerme
Posts: 4
Joined: Mon Aug 08, 2016 10:11 am

Re: 403/457 Provider Choices

Post by hammerme » Tue Feb 12, 2019 9:10 am

Hello. I've been using TIAA for 25 years as I teach in a university that uses TIAA as the primary provider of retirement savings. If you desire to have international as part of your 85% stock allocation, you should consider using TIAA Stock account, which has a 70/30 split of US and International equities. It's been around since 1952 and provides an easy one stop shop for buying the world's basket of stocks. The only question might be if you desire to use a 70/30 split between US and International equities. The TIAA Stock account is slightly more expensive than the Equity Index offering (.58 vs .51). TIAA also offers a Global Equities account that is split more along the lines of a world stock index fund (55% US, 45% international). Hope this helps. All the best and good luck.

fposte
Posts: 1343
Joined: Mon Sep 02, 2013 1:32 pm

Re: 403/457 Provider Choices

Post by fposte » Tue Feb 12, 2019 10:23 am

umfan11244 wrote:
Mon Feb 11, 2019 6:34 pm
krow36 wrote:
Mon Feb 11, 2019 5:48 pm
I guess you realize that both plans can be maxed for a total contributions of 38k?
I do. While it's not ruled out for the future, our current plan is to contribute the $19k if she receives the promotion. We are trying to avoid exceeding the income limits for contributing to Roth IRA's, which would then require us to use a backdoor approach. We're currently about $15k away from the threshold.
The backdoor Roth is a click of a couple of buttons if you don't have any other pretax IRAs, so I wouldn't stretch myself just to avoid it. However, contributing to another pretax account is a great way to lower your taxable income, so if that's your goal, it might be worth going past the $19k.

Post Reply