Are You Saving in a 403B plan? If so, you really need to read this page!
Most people take for granted that contributing to their employer sponsored retirement savings plan is the optimal way for them to save toward retirement. The simple truth is this may not be the case! Read on to learn why.
All too often, the vendors in 403B plans impose excessive fees and expenses that are taken directly out of the participants’ accounts when due.
Here’s why you care about these fees – the money taken out of your account to pay these expenses is a dollar for dollar drag on the performance of your investments.
The fees and expenses imposed in your 403B plan can be classified as follows:
Most 403B plans offer a choice of investing via variable annuities or custodial accounts. For our purposes here, it’s not critical to know all the differences between these two. The key point is that variable annuities come with an extra layer of rather stiff expenses. Click here to see a breakdown of the expenses in a typical variable annuity.
Custodial accounts can be a much more cost effective option but not if you don’t avoid investments that charge hefty sales loads and ongoing sales fees!!
Click here to see a listing of mutual funds included in many 403B plans that impose various sales charges.
Every investment such as a mutual fund costs money to run and passes these costs along to the fund’s investors.
However, not all funds charge the same amount. Some funds charge less than others….way, way less. If you know what to look for and avoid you can save yourself 1.5% or more of your assets every year!!
Click here to see a listing of mutual funds included in some 403B plans that don’t impose sales charges (but charge varying annual operating expenses).
Moral of the Story
You want to make sure that you are getting good value for every dollar of investment expenses you pay. This is because every dollar you rescue from becoming an investment expense is one more dollar that stays in your 403B account growing and growing. Over time excess expenses can make tens of thousands of dollars of difference in your account value!
Isn’t it time you obtained objective advice from an independent financial adviser who doesn’t work for any of the vendors in your 403B plan and who is obligated to put your interests first?!
Fee-Only financial planner Kay Conheady, CFP® can help you with all of the following:
- Assessing your option to save via your 403B versus the potentially more cost effective alternatives
- Evaluating 403B plan vendors
- Selecting investments to create a diversified portfolio with a suitable asset allocation
Yes, you will pay for this advice but we at Apropos Financial Planning are confident we don’t charge any where near what we would be helping you save by avoiding the avoidable, and minimizing the unavoidable, expenses lurking in your 403B plan.
Don’t take our word for it!
Some one who has a stake in the 403B game, a public school math teacher in New Jersey named Bruce McNutt, has studied the topic of 403B plans extensively and has created a web site intended to make everything he has learned available to other 403B savers. His web site is here (warning, this site is a bit intense – Mr. McNutt is very passionate about this topic).
(Note: I don’t personally know Bruce McNutt and we are in no way affiliated with each other.)