Help me get a better company for my 403B!!

[aceyou]

Hello everyone, let's get right to it: 

Background info:
My wife and I are teachers (32 an 31 years old).  Until the last year we knew nothing about investing and did either nothing or poor things with it. 

In October I decided that I must change that and started 403 contributions (I'd like to start 457 contributions too and plan too).  I picked a company because I knew a guy who worked there.  He works for The Legend Group.  I now believe this was a very, very poor choice because of their fees.  I've attached a document that compares the 6 companies that my school allows me two work with. 

I believe Midwest Capital is the company I should be working with, but don't want to screw this up again and have to make another change.  They appear to offer the lowest fees and they offer Vangaurd.  So, if you are willing and have expertise in this area, here are some questions I have:

1.  Do you agree that Midwest Capital is the best company based on the attached files.
2.  I have a meeting with Midwest and Plan Member Services (who also offers vanguard) on Wednesday, what specific questions should I be asking them.  Also, based on the attached files, is there another company that looks worth having a meeting with before I make a decision?
3.  Are there other considerations that I am not thinking about because I'm just not smart enough?  If so, fill me in:)

Thanks so much!

[MDM]

Either Midwest Capital or Valic, depending on the specific funds Valic offers and those funds' costs.

Good job looking into the details!

[BarkyardBQ]

MWC. Haven't heard great things about Valic... but MDM knows his stuff.

PlanMember Services was not a good option in my list, I think they charged extra to invest in Vanguard Funds.

[aceyou]

Appreciate the input guys.  Any specific questions I oughta ask when I meet Midwest and Plan Member services tomorrow outside of their costs and offerings (which I can already kind figure out from the things I've already looked up)? 

I'm heavily leaning towards Midwest Capital right now.  I've also heard that VALIC is pretty expensive, but MDM has me thinking I need to look into it a little more. 

Thanks again.

[MDM]

Based on the linked documents, Valic's account management fees are lower than Midwest's - but you should check the individual fund fees to calculate your overall cost and decide on that basis.

[BarkyardBQ]

Ask them specifically what funds are available and if there are additional fees for choosing Vanguard funds.

[a1smith]

Another question to ask MWC - is the 0.38% fee listed (4th column) only apply if you choose their Managed Mutual Fund Portfolios and/or Investment Advisory Services?  It seems like you shouldn't be charged that fee if you choose one of the two self-directed mutual fund options.

[aceyou]

Based on the linked documents, Valic's account management fees are lower than Midwest's - but you should check the individual fund fees to calculate your overall cost and decide on that basis.

Ok MDM, You are starting to get me thinking I need to look into Valic more carefully.  Help me do what you suggested. 

When you say "check the individual fund fees", can you (or anyone who can help here) give me steps to do this...where to go, what to look for, etc.

[Lski'stash]

Fellow Michigan teacher here. I have been looking into many of these documents as well trying to figure out who to go with. I concluded that valic was best for myself, as they have vanguard funds and have the lowest fees. They also have an account type that doesn't require an advisor to manage, which I was very interested in when looking at their website (which I found to be the most helpful of all the websites checked out). I'm hoping to be able to just run a vanguard target date fund through them with either a 403b or 457. Personally, the 457 plan looks much more attractive to me as there is no penalty for taking funds out early as long as your not with your employer anymore.

I currently have my 403b through AXA. The only reason I started one in the first place was because a very nice guy came to my classroom and introduced himself. Being that I hadn't really thought about money at all at that point, I was more than happy to start one through AXA at the time. Since I have found this magical website and forum though and started actually learning about how to manage my finances properly, I have found out that my expense ratio is 1.13%! Yikes! The account also has its earnings in the 4% range, which seems very low to me, even though it's placed in the aggressive assets allocation

So, one, thank you for posting this! Two, any advice on how to move the funds over would be much appreciated. I'm not looking forward to this 'breakup' of sorts.

[MDM]

Ok MDM, You are starting to get me thinking I need to look into Valic more carefully.  Help me do what you suggested. 

When you say "check the individual fund fees", can you (or anyone who can help here) give me steps to do this...where to go, what to look for, etc.

On one of the pdf documents under Valic it says you can "choose from 85 No-Load mutual funds."  You'll have to find that list of 85 (call Valic? call MRIC? instructions on another document you can access? ...?).  There should be a description of any loads, fees, etc. for each fund on that list.

[MDM]

any advice on how to move the funds over would be much appreciated. I'm not looking forward to this 'breakup' of sorts.

You might call the company to which you want to transfer the funds.  Ask them if they will do it for you, and if so what fees (if any) are involved.

Don't know what restrictions (if any) are imposed in by Michigan for this situation.  If this were a personal, taxable, account the receiving company is usually happy to do this for you for free.

[Lski'stash]

Update: called valic. They were more than happy to set up an account, and had the paperwork sent over to me for signatures. They told me that they should be able to transfer my AXA funds over once the account setup is complete. Took all of fifteen minutes so far. They just asked point blank what funds I wanted to put the money in, so that was easy. Will post later when it's complete.

Thanks! And I hope you and your wife find a great place for your funds as well. I'm seriously stunned about the lack of knowhow on this document or about 403b's and 457's in general in the teaching community here. the. Then again, many of the things I hear and see after reading this blog stun me in general anyway now.

[Vilgan]

403bs are like the wild west as far as what people are allowed to do and get away with. In a 401k, companies have a fiduciary responsibility to make sure their employees don't pay excess fees. While there are still bad experiences, its nothing like what I've seen in the 403b world. My mom, for example, was lied to multiple times with statements like "this is free because the school district pays us, we don't make anything off of your investments" while simultaneously being enrolled into funds with a 5% load and ERs over 2%.

I feel like teachers focus on their pension as their primary retirement vehicle and there isn't a lot of money in 403bs, so the companies that do get in there have very little oversight and get away with highway robbery. Expecting people who are throwing their life energy into teaching others about what they know to be able to wade through the muck and deception to find reasonable options is unfair and a situation that no other group has to deal with. One of my long term goals is to start a non profit aimed at fixing this situation and helping teachers invest intelligently without needing to expend a lot of time and energy becoming individually savvy about investments.

Its been years and did not overly threaten my mother's ability to retire, but I'm still extremely bitter about the dishonesty and the blaise approach of the school district that did nothing to protect the teachers from extortionate fees and loads.

[Lski'stash]

Well, Michigan has done away with the pension system for newer teachers, so I hope more light will be shed in this area in the near future. Michigan switched over to 457s for all new teachers run through the state a couple years ago.

I think, due to these circumstances, a nonprofit like that would be a much needed help here!

[MDM]

Update: called valic. They were more than happy to set up an account, and had the paperwork sent over to me for signatures. They told me that they should be able to transfer my AXA funds over once the account setup is complete. Took all of fifteen minutes so far. They just asked point blank what funds I wanted to put the money in, so that was easy. Will post later when it's complete.

Thanks! And I hope you and your wife find a great place for your funds as well. I'm seriously stunned about the lack of knowhow on this document or about 403b's and 457's in general in the teaching community here. the. Then again, many of the things I hear and see after reading this blog stun me in general anyway now.

Just checking.  Did all go well?  Do you actually get Vanguard's (or Fidelity Spartan's, etc.) funds with no extra fee on top of Vanguard's (or Fidelity Spartan's, etc.) own?  That would be amazingly good for a 403b....

[Lski'stash]

Update: called valic. They were more than happy to set up an account, and had the paperwork sent over to me for signatures. They told me that they should be able to transfer my AXA funds over once the account setup is complete. Took all of fifteen minutes so far. They just asked point blank what funds I wanted to put the money in, so that was easy. Will post later when it's complete.

Thanks! And I hope you and your wife find a great place for your funds as well. I'm seriously stunned about the lack of knowhow on this document or about 403b's and 457's in general in the teaching community here. the. Then again, many of the things I hear and see after reading this blog stun me in general anyway now.

Just checking.  Did all go well?  Do you actually get Vanguard's (or Fidelity Spartan's, etc.) funds with no extra fee on top of Vanguard's (or Fidelity Spartan's, etc.) own?  That would be amazingly good for a 403b....

I am switched over to valic now. They do charge for "custodial fees," but no added fees on top of what vanguard takes because I set it up for an online account with no advisor. You can see the fees here for valic and the rest:

http://www.mriconsortium.org/downloads/report_cards/2q_2015_fees_and_expenses_report_card_20150902_070117_1.pdf

They do have limited options, I signed up for vanguards "lifestrategy growth" fund, which was the most aggressive of the choices offered. Overall it was a good experience. The woman I signed up with was pretty impressed with me...she said that only a quarter of teachers even sign up for a 403b, much less know to switch for lower fees and the right funds...

[MDM]

I am switched over to valic now. They do charge for "custodial fees," but no added fees on top of what vanguard takes because I set it up for an online account with no advisor. You can see the fees here for valic and the rest:

http://www.mriconsortium.org/downloads/report_cards/2q_2015_fees_and_expenses_report_card_20150902_070117_1.pdf

They do have limited options, I signed up for vanguards "lifestrategy growth" fund, which was the most aggressive of the choices offered. Overall it was a good experience. The woman I signed up with was pretty impressed with me...she said that only a quarter of teachers even sign up for a 403b, much less know to switch for lower fees and the right funds...

Good for you!

The pdf you linked makes it appear that Valic's "top row" (the "GPS Porfolio Advisor") has no fees at all.  But in https://www.valic.com/guided-portfolio-services_3240_422988.html there is a $25/yr fee. 

Is that $25 the "custodial fee" you noted, or are there other/different fees?  In other words, do you pay $25/yr plus Vanguard's standard fund fees and that's all?

ETA: Also found https://my.valic.com/DocumentServices/RetrieveDocument.aspx?appid=6%2BYJhXaPAz5%2Fh7d2pjs9Lw%3D%3D&fid=4198, which if applicable to your situation tends to confirm the $25 - but still interested in your perspective.

Also did more exploration of the MRIC website, but couldn't find the "limited options [including]...vanguards 'lifestrategy growth' fund" you mentioned.  Is there a public link to those, or do you have to meet with an advisor (e.g., http://www.mriconsortium.org/enroll/enrollment-details/) to see the options?

In short, our local school district's plans seem inferior to what you have, and the more information that can be shown to the board and administration the better.  Thanks for whatever you can provide to the questions above (and any other thoughts).

[Lski'stash]

I am switched over to valic now. They do charge for "custodial fees," but no added fees on top of what vanguard takes because I set it up for an online account with no advisor. You can see the fees here for valic and the rest:

http://www.mriconsortium.org/downloads/report_cards/2q_2015_fees_and_expenses_report_card_20150902_070117_1.pdf

They do have limited options, I signed up for vanguards "lifestrategy growth" fund, which was the most aggressive of the choices offered. Overall it was a good experience. The woman I signed up with was pretty impressed with me...she said that only a quarter of teachers even sign up for a 403b, much less know to switch for lower fees and the right funds...

Good for you!

The pdf you linked makes it appear that Valic's "top row" (the "GPS Porfolio Advisor") has no fees at all.  But in https://www.valic.com/guided-portfolio-services_3240_422988.html there is a $25/yr fee. 

Is that $25 the "custodial fee" you noted, or are there other/different fees?  In other words, do you pay $25/yr plus Vanguard's standard fund fees and that's all?

ETA: Also found https://my.valic.com/DocumentServices/RetrieveDocument.aspx?appid=6%2BYJhXaPAz5%2Fh7d2pjs9Lw%3D%3D&fid=4198, which if applicable to your situation tends to confirm the $25 - but still interested in your perspective.

Also did more exploration of the MRIC website, but couldn't find the "limited options [including]...vanguards 'lifestrategy growth' fund" you mentioned.  Is there a public link to those, or do you have to meet with an advisor (e.g., http://www.mriconsortium.org/enroll/enrollment-details/) to see the options?

In short, our local school district's plans seem inferior to what you have, and the more information that can be shown to the board and administration the better.  Thanks for whatever you can provide to the questions above (and any other thoughts).

Just remembered this post! That's right. After re-looking it up, I think the report card is out of date now. I pay $25 for the general fee from Valic, plus $20 and .17% that Vanguard takes (pic below of the fund overview). The fund is made up of 56% of the Vanguard total stock market index fund, 24% of their international stock index fund, 16% the bond market index fund, and 4% from the international bond index fund.

I did have to end up setting this up myself. The lady I went through screwed up the 457 and opened a 403b, and I found out later that no matter what, if you go through a person, even just to tell them what to do, they will take .6%. I had to call and fix that all (bleccckk!). The annuities also charge .75%, and every person I talk to automatically assumes I want one. It's annoying.

[MDM]

Just remembered this post! That's right. After re-looking it up, I think the report card is out of date now. I pay $25 for the general fee from Valic, plus $20 and .17% that Vanguard takes (pic below of the fund overview). The fund is made up of 56% of the Vanguard total stock market index fund, 24% of their international stock index fund, 16% the bond market index fund, and 4% from the international bond index fund.

I did have to end up setting this up myself. The lady I went through screwed up the 457 and opened a 403b, and I found out later that no matter what, if you go through a person, even just to tell them what to do, they will take .6%. I had to call and fix that all (bleccckk!). The annuities also charge .75%, and every person I talk to automatically assumes I want one. It's annoying.

Excellent - thank you!

And once your account balance gets to $10K, the $20 fee goes away.  It will be interesting to see if the local school district has the same deal with Valic.  It is not a member of MRIC.

Just FYI, the underlying fund composition has changed somewhat.  See https://personal.vanguard.com/us/funds/snapshot?FundId=0122&FundIntExt=INT.

[mizchief]

Thank you for this thread.  I am going through the same analysis with this 403(b) and this is super informative about exactly what I need to examine.

I'd also like to commend you for doing this in your 30's!  I'm 59, have been with VALIC for 15 years and just now discovered that I am in an annuity (Portfolio Director) that has a 1.64% fee!   I thought I was in a mutual fund account; the fees were never obvious!  The compounded loss over all these years is really large---wish I'd figured this out some years ago! 

An additional thing we need to examine is if there are restrictions getting the money out of the account.  I'm having trouble finding that information.  In my case there may be a 5% surrender fee for funds that are left for a certain period (7 years?) So be sure to check that out. 

I've also found that none of my fellow employees around me understand the fees and where their investments are! 

[Lski'stash]

Thank you for this thread.  I am going through the same analysis with this 403(b) and this is super informative about exactly what I need to examine.

I'd also like to commend you for doing this in your 30's!  I'm 59, have been with VALIC for 15 years and just now discovered that I am in an annuity (Portfolio Director) that has a 1.64% fee!   I thought I was in a mutual fund account; the fees were never obvious!  The compounded loss over all these years is really large---wish I'd figured this out some years ago! 

An additional thing we need to examine is if there are restrictions getting the money out of the account.  I'm having trouble finding that information.  In my case there may be a 5% surrender fee for funds that are left for a certain period (7 years?) So be sure to check that out. 

I've also found that none of my fellow employees around me understand the fees and where their investments are!

Glad this helped! Going through this when literally no one around you knows anything can be quite a challenge.

The surrender fees apply if you take the money out of the account earlier than 7 years for some reason. I had this also with my old 403b company (AXA) when I checked about moving the money over into my new account.

[Lski'stash]

Just remembered this post! That's right. After re-looking it up, I think the report card is out of date now. I pay $25 for the general fee from Valic, plus $20 and .17% that Vanguard takes (pic below of the fund overview). The fund is made up of 56% of the Vanguard total stock market index fund, 24% of their international stock index fund, 16% the bond market index fund, and 4% from the international bond index fund.

I did have to end up setting this up myself. The lady I went through screwed up the 457 and opened a 403b, and I found out later that no matter what, if you go through a person, even just to tell them what to do, they will take .6%. I had to call and fix that all (bleccckk!). The annuities also charge .75%, and every person I talk to automatically assumes I want one. It's annoying.

Excellent - thank you!

And once your account balance gets to $10K, the $20 fee goes away.  It will be interesting to see if the local school district has the same deal with Valic.  It is not a member of MRIC.

Just FYI, the underlying fund composition has changed somewhat.  See https://personal.vanguard.com/us/funds/snapshot?FundId=0122&FundIntExt=INT.

Thanks for the update!

[Lski'stash]

I am switched over to valic now. They do charge for "custodial fees," but no added fees on top of what vanguard takes because I set it up for an online account with no advisor. You can see the fees here for valic and the rest:

http://www.mriconsortium.org/downloads/report_cards/2q_2015_fees_and_expenses_report_card_20150902_070117_1.pdf

They do have limited options, I signed up for vanguards "lifestrategy growth" fund, which was the most aggressive of the choices offered. Overall it was a good experience. The woman I signed up with was pretty impressed with me...she said that only a quarter of teachers even sign up for a 403b, much less know to switch for lower fees and the right funds...

Good for you!

The pdf you linked makes it appear that Valic's "top row" (the "GPS Porfolio Advisor") has no fees at all.  But in https://www.valic.com/guided-portfolio-services_3240_422988.html there is a $25/yr fee. 

Is that $25 the "custodial fee" you noted, or are there other/different fees?  In other words, do you pay $25/yr plus Vanguard's standard fund fees and that's all?

ETA: Also found https://my.valic.com/DocumentServices/RetrieveDocument.aspx?appid=6%2BYJhXaPAz5%2Fh7d2pjs9Lw%3D%3D&fid=4198, which if applicable to your situation tends to confirm the $25 - but still interested in your perspective.

Also did more exploration of the MRIC website, but couldn't find the "limited options [including]...vanguards 'lifestrategy growth' fund" you mentioned.  Is there a public link to those, or do you have to meet with an advisor (e.g., http://www.mriconsortium.org/enroll/enrollment-details/) to see the options?

In short, our local school district's plans seem inferior to what you have, and the more information that can be shown to the board and administration the better.  Thanks for whatever you can provide to the questions above (and any other thoughts).

Just remembered this post! That's right. After re-looking it up, I think the report card is out of date now. I pay $25 for the general fee from Valic, plus $20 and .17% that Vanguard takes (pic below of the fund overview). The fund is made up of 56% of the Vanguard total stock market index fund, 24% of their international stock index fund, 16% the bond market index fund, and 4% from the international bond index fund.

I did have to end up setting this up myself. The lady I went through screwed up the 457 and opened a 403b, and I found out later that no matter what, if you go through a person, even just to tell them what to do, they will take .6%. I had to call and fix that all (bleccckk!). The annuities also charge .75%, and every person I talk to automatically assumes I want one. It's annoying.

IMPORTANT UPDATE: I was duped!

So, I figured out why everyone I talk to at Valic automatically starts talking about annuities with me, even when I say I don't want one. It's because that's all I can get through them with my school!!! Someone FINALLY explained this to me on the phone the other day. Schools choose to do either an annuity or mutual funds through certain companies, and mine only does annuities through Valic. And I have an expense ratio of 1.42% with it, which the lady actually flat-out lied to me about...

Lesson from this: IF you can get mutual funds ONLY through Valic over the phone for a 457, they are still the cheapest. But since I cannot, I am switching over to Midwest Capital, which for some reason unknown to me, can only do mutual funds through my school and cannot do annuities.

And so I have been in chats with Midwest Capital to switch yet again, this time for good. They charge an annual rate of .38% plus whatever Vanguard charges for the fund.

I think, once the account is set, that I am just going to move all of my funds from Valic and AXA over to it, in spite of the surrender fees. I'm just done with people not being honest with me. 

[MDM]

Lesson from this: IF you can get mutual funds ONLY through Valic over the phone for a 457, they are still the cheapest. But since I cannot, I am switching over to Midwest Capital, which for some reason unknown to me, can only do mutual funds through my school and cannot do annuities.

And so I have been in chats with Midwest Capital to switch yet again, this time for good. They charge an annual rate of .38% plus whatever Vanguard charges for the fund.

I think, once the account is set, that I am just going to move all of my funds from Valic and AXA over to it, in spite of the surrender fees. I'm just done with people not being honest with me.

Don't blame you a bit.  That is truly poor of MRIC not to make things abundantly clear.  Thanks on behalf of everyone who learns from this.