My bank charges me a 1 to 1.44 % Expense Ratio

[Re3iRtH]

I realized this week that some individual, traditional IRA, and Roth IRA funds that I left untouched in my bank have what seem like pretty high expense ratios.

I was too busy growing my real estate portfolio to even look at these accounts, but I confess I only found out the term expense ratio (ER) after
finishing the Tony Robbins book Money: Master the Game like a month ago. I had to trudge through this book as I really have no interest in
mutual funds or retirement accounts.

The individual account had about $50K in a fund with a 1.18 ER. Sound high to you guys? I just transferred this to a simple Vanguard account.
The IRAs have tiny amounts in them, but the kicker is the Roth IRA fund is a 1.83 BR 1.44 AR expense ratio! Have I been ripped off for the last
10 years? What are your thoughts if I should simplify and move these to Vanguard as well? Cheers.

[YttriumNitrate]

Rather than listing off the financial products offered by traditional banks that should be avoided, it's easier to just list off those that are worthwhile: 1. A standard checking account*, 2. a safe deposit box, 3. a mortgage loan.
 
Investment products are not on that list, so yes, you are getting screwed and should move your IRA ASAP.

**Assumes funded with an amount A) high enough to avoid overdraft fees and B) low enough so that the losses from low interest are not severe.

[Re3iRtH]

Rather than listing off the financial products offered by traditional banks that should be avoided, it's easier to just list off those that are worthwhile: 1. A standard checking account, 2. a safe deposit box, 3. a mortgage loan.
 
Investment products are on that list, so yes, you are getting screwed and should move your IRA ASAP.

Haha. Got it. It's the federal/military bank, so I assume they wouldn't be screwing over our servicemembers. For example, their car insurance rates are some of the lowest in the nation.

[inline five]

USAA is high for me now. Been that way a few years. Might want to shop around.

[jlcnuke]

IF you're paying more than 0.25% in expenses on your investments, you're probably paying way too much. Most people aren't aware of the detriment of "compounding expenses" as that's not stressed nearly as much as "compounding interest" by the people who want to earn those expenses.... so don't beat yourself up. Be happy you've found out about the issue now and can move that money to better investment options instead of finding out 20 years from now when the fees would have cost you a lot more.

[paddedhat]

Rather than listing off the financial products offered by traditional banks that should be avoided, it's easier to just list off those that are worthwhile: 1. A standard checking account, 2. a safe deposit box, 3. a mortgage loan.
 
Investment products are on that list, so yes, you are getting screwed and should move your IRA ASAP.

Haha. Got it. It's the federal/military bank, so I assume they wouldn't be screwing over our servicemembers. For example, their car insurance rates are some of the lowest in the nation.

My father was an Army officer who thought that USAA was about the greatest bank and investment house on the planet. He passed away in 2012 of Lymphoma, a gift from significant Agent Orange exposure as a pilot in Vietnam. While settling his estate, I found that not only were his investments absurd for a retired guy on a fairly low income, but they had been churned and moved from account to account (while erasing beneficiary info.)  for reasons that apparently only benefited his broker. After his death, dealing with them was a nightmare, including battling them while they engaged in some really questionable holds on funds, as they argued about legal matters that they knew little of, and were not their concern. Overall a rough, and totally unnecessary experience, and totally opposite of my dealings with other banks and brokers in these matters.  They may have great car insurance, and be a pretty good place for a checking account,  but when it comes to investments there are much better options out there.

[Re3iRtH]

Rather than listing off the financial products offered by traditional banks that should be avoided, it's easier to just list off those that are worthwhile: 1. A standard checking account, 2. a safe deposit box, 3. a mortgage loan.
 
Investment products are on that list, so yes, you are getting screwed and should move your IRA ASAP.

Haha. Got it. It's the federal/military bank, so I assume they wouldn't be screwing over our servicemembers. For example, their car insurance rates are some of the lowest in the nation.

My father was an Army officer who though that USAA was about the greatest bank and investment house on the planet. He passed away in 2012 of Lymphoma, a gift from significant Agent Orange exposure as a pilot in Vietnam. While settling his estate, I found that not only were his investments absurd for a retired guy on a fairly low income, but they had been churned and moved from account to account (while erasing beneficiary info.)  for reasons that apparently only benefited his broker. After his death, dealing with them was a nightmare, including battling them while they engaged in some really questionable holds on funds, as they argued about legal matters that they knew little of, and were not their concern. Overall a rough, and totally unnecessary experience, and totally opposite of my dealings with other banks and brokers in these matters.  They may have great car insurance, and be a pretty good place for a checking account,  but when it comes to investments there are much better options out there.

Thank you for the story. Sorry to hear that.

I am moving all my investments with them to Vanguard. My position is mostly in real estate.. this little bit in mutual funds I consider it play money. On the phone yesterday tried to get me to stay with them so I listened, they provided no value.

[Nords]

The individual account had about $50K in a fund with a 1.18 ER. Sound high to you guys? I just transferred this to a simple Vanguard account.
The IRAs have tiny amounts in them, but the kicker is the Roth IRA fund is a 1.83 BR 1.44 AR expense ratio! Have I been ripped off for the last
10 years? What are your thoughts if I should simplify and move these to Vanguard as well? Cheers.

I won't defend USAA's pricing, but I can explain why it's the way it is.

You've been paying for consolidation, convenience, affinity trust, and the ability to get things done when you call from Afghanistan at 3AM San Antonio time.  (Vanguard and even Fidelity are particularly reluctant to deal with overseas calls like that.)  If you haven't needed those services, and you're able to manage your own investments, then you don't need to pay USAA to do it for you. 

Some USAA members find it very convenient to have insurance and investments (and other services like car/home buying assistance) under one big account.  For every story about USAA's screwed-up customer service (and there have been some epic stories) there's another story about service above & beyond anything that Wells Fargo or State Farm would offer.  Some members feel a level of loyalty that apparently they're willing to pay for.

USAA's individual business lines are also required to support themselves on their earnings.  Unlike Fidelity (soft dollars) and Vanguard (owned by individual shareholders), USAA won't subsidize the service or try to make it up on volume.  They either charge for the service or else they don't offer certain services (like business checking).
 

[Carless]

While that MER is high in comparison to index funds, for a mutual fund it's quite common - 3% is frequently seen in Canada.  You are getting 'service' for that money - active trading.  I happen to think it's not beneficial service, or anything worth paying for, but they are doing things and paying people to make decisions, hence the greater fees.

[Re3iRtH]

While that MER is high in comparison to index funds, for a mutual fund it's quite common - 3% is frequently seen in Canada.  You are getting 'service' for that money - active trading.  I happen to think it's not beneficial service, or anything worth paying for, but they are doing things and paying people to make decisions, hence the greater fees.

Really? I was under the impression that those were passive funds.

[ysette9]

I have been a member of USAA since I was a kid and have a bunch of their products. I have had a very positive experience with them overall but have to agree with others: investments is the big exception. They are expensive and I don't agree with their recommendations. The portfolios they have recommended for me are complex and expensive, unnecessarily so in my mind. Stick with Vanguard for investments and enjoy the good stuff USAA does have to offer.

[Carless]

While that MER is high in comparison to index funds, for a mutual fund it's quite common - 3% is frequently seen in Canada.  You are getting 'service' for that money - active trading.  I happen to think it's not beneficial service, or anything worth paying for, but they are doing things and paying people to make decisions, hence the greater fees.

Really? I was under the impression that those were passive funds.

It depends exactly what they were- even if you had an S&P 500 mutual fund, the manager would be permitted to do things like shift a portion of the investments into cash if they thought a downturn was coming.  If you miss out on some of a market upturn, oh well, too bad for you.  Of course, they're only required to reveal the actual content of the mutual fund a few times a year.  That's one of the many things that got me out of mutual funds, the inability to see exactly what was going on in real time.  With the  S&P 500 ETF, I know the contents exactly match what's on the tin.  Of course this may just apply to Canada...

[dude]

I used USAA to refi from a traditional home mortgage into a VA mortgage. It was a major hassle.  Their customer service SUCKED. Seriously. I stuck it out because I really wanted that VA mortgage (was consolidating a first and second mortgage with less then 20% equity), but as soon as the opportunity presented itself (i.e., rates went down again), I re-fi'ed again into a VA IRRL with another servicer and said good-bye to USAA.