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Guaranteed 3% return vs 2% ER funds in pretax accounts

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  • legobikes
    replied
    I mean, I'm not going to threaten them with a lawsuit I have no intention of bringing. At this point I and one other physician are the most vocal opponents of the current plan. They are in the process of switching. In the meantime, I decided that instead of my usual 50/25/25 with US stocks/Intl stocks/bonds, I'd take 25 from US stocks and throw it in to the general account, so its a quarter in each category. I'll balance it out with the backdoor Roth.

     

    Is the next option in taxable I bonds?

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  • jacoavlu
    replied
    with such a high fee plan with poor investment options I would seriously consider printing out every news article I could about employers being sued for having such poor plans for their employees, and start mailing them anonymously to the higher ups every day

    it's probably just ignorance and indifference and not outright fraud but it's still inexcusable

    even if @jeffgoldblum is correct (was the employer posted somewhere that I missed?) an $80 or $100 fee could be passed on to participants directly without offering a smorgasbord of bad high fee fund choices

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  • jeffgoldblum
    replied
    This doesn't address your question, but just wanted to point out some things about your fees. I don't think they're exorbitant. Looks like most of those funds are probably paying about 50bps in revenue share, plus the 50bps wrap charge you pointed out. The problem is your plan's average account balance - based on latest 5500 filing, roughly $16k. Providers will set their revenue requirement based on number of participants (447 per 403b 5500). For a small plan like this, you're probably looking at $80-$100 per participant for recordkeeping, administration, and custody. So, based on $7.3mm in assets, works out to  49bps-61bps. Most firms like EJ are probably charging another 25bps-50bps for advisory services for sub $10mm plans. Obviously there's a wide spectrum in terms of services provided (just investment advisory vs true plan consulting and participant education), but you get the idea. So, if your plan were to go out to bid, I don't think the fees would be wildly different compared to Hartford/Massmutual. You could definitely save some by getting away from EJ and moving to an advisor that focuses on retirement plans.

    For what it's worth, I do sales for a fairly large recordkeeper. Your 403b plan would be priced at 44bps (mostly flat fee though) based on $7.3mm and 447 participants. The addition of the 457 would drop that some but don't have info on it. We're typically in the bottom half in terms of price. A lot of plan sponsors with smaller account balances like yours will pick up some of the fees, reducing the asset based charges. Too bad that's not the case here. Lastly, I've sold 0 plans through EJ advisors in the past 5 years. They're not exactly known as retirement plan specialists...

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  • Faithful Steward
    replied
    This is a pretty lousy plan. If your employer is not immediately open to making improvements, I think you'd have an excellent shot at filing a complaint with the Department of Labor for a violation of fiduciary duty. You could sue for your lost gains due to excessive fees.

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  • jhwkr542
    replied
    You'll have to balance across all accounts but unfortunately i think you'll need to invest in some of those funds to meet your desired AA.

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  • jhwkr542
    replied
    VTSAX YTD 20.41% as of 7/31

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  • legobikes
    replied




    Hopefully a spouse has some tax advantaged space.  But even this year, 20% growth – 2% in fees still crushes the 3% guaranteed. You may have to use one of these awful accounts.
    Click to expand...


    No other tax-advantaged space. I'd rather have a SAHS than another source of income though.

    Who's seeing 20% growth?

     

    I guess to counteract it I can put all of this year's backdoor IRA in SWTSX?

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  • SerrateAndDominate
    replied
    Everything made sense when I read EJ was involved

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  • Hank
    replied


    This is the stuff of lawsuits. If you can stomach it and could land another job, lawyering up is definitely an option. Seeing what other cases have won, I think these fees would be hard to defend when benchmarked with other plans of similar size.
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    It should be criminal to offer the 5.25% front loaded A shares instead of institutional shares.

    Normally I don't presume malfeasance where simple incompetence would suffice.  However, with those poor investment options and excessive expenses...

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  • jhwkr542
    replied
    I would use the guaranteed account for your fixed income and try to get a taxable account as large as possible. Hopefully a spouse has some tax advantaged space.  But even this year, 20% growth - 2% in fees still crushes the 3% guaranteed. You may have to use one of these awful accounts.

    The other factor is that changing the funds is only part of the problem.  The account fee is completely unreasonable. So is Hartford's additional fee. This is the stuff of lawsuits. If you can stomach it and could land another job, lawyering up is definitely an option. Seeing what other cases have won, I think these fees would be hard to defend when benchmarked with other plans of similar size.

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  • legobikes
    replied
    Does silence mean assent?

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  • Peds
    replied
    ???

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  • legobikes
    replied
    I am not 100% sure of the frontloads. The trouble is the broker (Edward Jones) does not know anything.

    From the 408b2:

     

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  • Peds
    replied
    Are you sure you pay the loads? Sometimes they are waived in plans.

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  • legobikes
    replied
    They all have an additional 0.5% ER when purchased through our plan. For example, here are the 403b options with expenses:

     

     

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