June 18, 2010
How do I choose a company to use for my retirement plan?
coolman293472 asked:
I plan to open a 403(b) in August. I have been told that mutual funds are better (and cheaper) than annuities, and so that is what I want to put my money. (I don’t intend this question to be a mutual fund vs. annuity debate). My school district sponsors 20 retirement planning companies, and their websites don’t seem to distinguish the competition. Some companies include Fidelity, Primerica, Vanguard, Metro Life, Equitable, Putnam, etc. How do I choose which company is best for me whether or not I end up getting mutual funds or annuities?
I teach in Florida. We have the Florida Retirement System (FRS). My school district puts money into that, which I can choose either to be a pension (with benefits after 6 years of service) or an investment plan (with benefits after 1 year). I choose the investment plan because I don’t know if I will be in teaching in the long-run or if I will at least be in Florida for 6 years to get the pension benefit. According to everyone, the FRS will not be enough, so we have the option of opening up a 403(b) plan with one of these companies to supplement the FRS money. There is no matching in this 403(b).
I am 23 years old.
Kaitlynn
I plan to open a 403(b) in August. I have been told that mutual funds are better (and cheaper) than annuities, and so that is what I want to put my money. (I don’t intend this question to be a mutual fund vs. annuity debate). My school district sponsors 20 retirement planning companies, and their websites don’t seem to distinguish the competition. Some companies include Fidelity, Primerica, Vanguard, Metro Life, Equitable, Putnam, etc. How do I choose which company is best for me whether or not I end up getting mutual funds or annuities?
I teach in Florida. We have the Florida Retirement System (FRS). My school district puts money into that, which I can choose either to be a pension (with benefits after 6 years of service) or an investment plan (with benefits after 1 year). I choose the investment plan because I don’t know if I will be in teaching in the long-run or if I will at least be in Florida for 6 years to get the pension benefit. According to everyone, the FRS will not be enough, so we have the option of opening up a 403(b) plan with one of these companies to supplement the FRS money. There is no matching in this 403(b).
I am 23 years old.
Kaitlynn
Comments on How do I choose a company to use for my retirement plan?
Kristopher
I gather the school board is going to contribute to you investment plan??? You put in they put in. Ask if you can go outside the 20 companies??? Choose TRow Price–then you can invest in stock–mutual funds and money market or all three…
Next choice is Fidelity and in this mutual fund is about 60 selections. Magellan is the one your looking for
Fidelity Magellan I think you will be happy. Since you remain with your head in the sand.when it comes to investing your money. .
Adriana
Mutual funds are definitely the better way to go.
Of the list you gave, my two favorite companies are Fidelity and Vanguard. Vanguard has by far the lowest expenses, and Fidelity has pretty good expense rates, but a wider selection. You can’t go wrong with either of these two.
Also, to set your mind at ease a bit, study after study has shown that, in the mutual fund world, WHAT you invest in is not nearly as important as HOW you invest. As long as you’re starting early and making regular contributions (and increasing your contribution rate every time your income increases), you’ll be in great shape for retirement, regardless of which funds you choose.
I don’t know your age, but if you have 10+ years until retirement, you should be at least partially in stock funds (generally, the farther you are from retirement, the more aggressive you should be, within your comfort level).
I hope that helps!
Carmen
One of the problems with 403b plans is the incredible number of choices many offer. Extremely confusing and also I might add extremely costly to the participants. You are right in rejecting the annuity options. It would cost you plenty. Also you should reject the plans offered by insurance companies for the very same reason. One estimate that I read suggested that annuities cost you 500 basis points a year in return 1/2%. Insurance companies have a lot of hidden costs that you do not even know about. Figure them for 1/2% also.
That leaves mutual funds run by mutual fund companies. Fidelity, Vanguard, and T Rowe Price are three excellent choices. I do not see T Rowe Price on your list. they are excellent for 3 reasons. 1. they have a wide selection of funds to choose from including index funds (I do not know if you get to choose from all that they offer or not) 2. All three have relatively low expense ratios (very important especially for retirement accounts of long term duration. An extra 1/2% will net you a great deal at the end of 30 years.) 3. They all have an excellent long term track record of decent returns. Actually all have special target retirement date accounts that automatically adjust the fund holdings to a more conservative allocation as your approach retirement. A no brainer approach to investing for retirement. Oh! 4. They are all no load.
My advice. Choose one of those 3 for best results.
Here is a comparison to help you assuming investing in a 2035 Target Retirement account.
Vanguard: 3 yr return 12.61% expense ratio 0.21%
Fidelity: 3 yr return 13.01% expense ratio 0.81%
T Rowe Price 3 yr return 14.4% expense ratio 0.76%
3 years is not a long track record but these types of funds are relatively new so that is all that is available. Also past performance does not guarantee future performance, but I think that these are all good bets.
Kasey
i, too, am a teacher. most of the plans are sponsored by insurance companies…bad deal. however, since yoiu have vanguard good deal. they are the best! i have my 403b through vanguard and have been totaly satisfied the last 25 years. their expense ratio is only about 0.2%….those life insurance companies charge around 6%…horrible.
go with vanguard…set up the paperwork between you and vanguard and the district…then put your money into the sp 500 which seems to average 10% over the last 20 years.
you will be far ahead of the game in the long haul. most teachersstick with insurance company anuitiies becasue they are financially illiterate. also, your district cannot endorse one overthe other so it is up to you to do your ownresearch and figure out what is best…vanguard number one…fidelity number 2…t rowe price number 3…then the rest