Really dumb financial question

Discussion in 'Teacher Time Out' started by John Lee, May 20, 2018.

  1. John Lee

    John Lee Groupie

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    May 20, 2018

    Does the company you set up your 403b through your district, make that much of a difference? I'm with one company, but I've recently read things about that type of company that make it less desirable (more fees) than others. But if I inquire with another company, I'm sure they will just tell me what every other one of the many companies that offer 403b plans will tell me (i.e. That they are the best, etc.). I imagaine that all are reputable (on the district's approved list), and I'm considering starting with a new company, but wondering whether it all doesn't make too much difference, as long as I'm putting money away.
     
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  3. MsAbeja

    MsAbeja Companion

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    May 20, 2018

    Oh it definitely matters! If you're investing in a tax sheltered annuity through an insurance company like Axa, you're probably paying way too much in fees.

    I wouldn't blindly trust the vendors in your district's approved list. If your district is anything like mine, they do very little to vet the companies.

    If you find that you've chosen to invest through an insurance company, I recommend that you look into switching to an investment firm instead. The money that you'll lose in penalties for switching will be recouped in the form of lower fees over time.

    https://financeforteachers.com/should-i-change-my-403b/

    https://mobile.nytimes.com/2016/10/27/your-money/403-b-retirement-plans-teachers-brokers-fees.html
     
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  4. MsAbeja

    MsAbeja Companion

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  5. John Lee

    John Lee Groupie

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    May 20, 2018

    Could I simply stop contributing to that one, to move to another while just letting the amount I've put into that fund do its thing?

    Mine is American Fidelity, which is probably very similar to AXA. I'm just getting into knowing more, but this is the genesis of my question: both are insurance companies, and I read how these types of companies are replete with fees.

    When I signed up for it, I just thought that they were well vetted and "approved", as in a preferred option for us. What I'm realizing is that that person is simply a salesperson. It is all quite confusing, but at this point, there are just a few realizations ive come to:

    1) want to max out this type of contribution ($18k/year, which won't be easy)
    2) look to switch to another, as soon as I can somehow sift through the choices
    3) consider any other options that would be preferable (403b seems standard way for teachers, but any others I need to consider?)

    Thanks for the response!
     
  6. John Lee

    John Lee Groupie

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    May 20, 2018

    It is weird that more teachers are with AXA than any other company. Is this strictly out of ignorance like me, or is there some other benefit I'm not considering?
     
  7. MsAbeja

    MsAbeja Companion

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    I think they're just persistent salesmen at Axa, and teachers are busy and stressed and tend to go with whatever presents itself. I certainly don't think most teachers go with axa sue to the benefits.
     
  8. Zelda~*

    Zelda~* Devotee

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    May 20, 2018

    I've never heard of Axa. Mine's through MetLife, and I'm pretty happy with them.
     
  9. readingrules12

    readingrules12 Aficionado

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    I'd try to get the exact facts. How much exactly are the fees in numbers and percents. You are right they will say their company is the best with lowest fees. Make sure you see the actual numbers. As other posters have said, yes it can make a big difference. Some companies have fees that are more than double than another company's fees. That can add up to a whole lot of money in the long run.
     
  10. creativemonster

    creativemonster Comrade

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    May 20, 2018

    Man, this stuff is scary and complicated to me and I changed companies about a year ago and my new company is listed as one of the examples of stay away from ...grrr...I feel stupid and helpless and hoping over the summer I can figure some of this out but feeling like I need to take a class in this stuff and I have under a decade until I hope to retire. But honestly my district limits who I can set up with...why do they do that? John Lee, thank you for starting this thread.
     
  11. John Lee

    John Lee Groupie

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    May 22, 2018

    FYI, I'm feeling much the same way about not knowing much about it all. I recently consulted with some sort of district approved advisor guy, who referred to a list of approved 403b vendors. I felt this was a good first step for me. I am going to switch over, just looking to carve out a little time where I can better understand what I need to, and then properly vet my next vendor. Let's see if we can (all) help each other.
     
  12. Been There

    Been There Habitué

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    According to what I've read, insurance and investment companies have long viewed teachers as a target market - workshops for those in the industry portray teachers as prime candidates with a consistent income and limited time to research their best options. Aggressive companies often focus their marketing strategy on school districts - they contract with districts to give presentations (and candy) at every school during staff meetings, entice teachers to listen to their sales pitch with morning donuts and free lunch with sandwiches, chips and sodas. Would you buy life insurance or an annuity from a salesman that provided free lunch for your entire staff? As others have mentioned, hidden fees and balloon payments make it well worth their time and expense. I always regarded them as foxes in a hen house! Stay away from any company that is even remotely associated with your district which may well receive a kickback or some other incentive.
     
    Last edited: May 22, 2018
  13. John Lee

    John Lee Groupie

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    May 26, 2018

    What is hard to know is who to listen to, who to believe. I recently had a chat with some sort of district approved financial counselor, I thought it would be a good thing. Soon during the hour long talk, he advised me about Index universal life insurance, or cash value life insurance... it dawned on me, that this was just another one of the aforementioned fox in the henhouse type deals.

    At this point, the only things I've come to understand on my own is that money needs to be saved somewhere. "Small" fees AND compounding are BIG deals over time. For me, the key is to find simplicity. In terms of 403b providers, I'm only considering companies now that are not part of an overall investment company. These types of combination services (i.e. insurance + investment companies) have fees that singular service companies (i.e. just investment) don't have. So I'm going to dump American Fidelity for my 403b needs, and look for one without insurance on the end of their name.
     

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