Help choosing a 403(b) vendor

DBReed

I'm getting ready to set up a 403(b) plan with my employer, but I have no idea which vendor I should choose or even how I'm supposed to set up an account. What are some basic ground rules I need to know, and what should I be looking for when I'm choosing where to save my money?

EggyToast

Do you have the option to choose Vanguard? I really like them -- their fees are some of the most favorable and they have good options and a smart team of investors. My 403(b) was with them, just using the "Target 2045" plan, and I was happy with it.

a5ehren

Typically your choices are restricted by your employer. Who do you have to choose from? The account setup should be handled by your employer after you elect to enroll in the program.

DBReed

Here's the list of vendors I can choose from:

-American Century
-American Funds Capital Guardian Trust
-Fidelity Investments
-Franklin Templeton
-Great American Life Insurance
-Mass Financial Service Insurance
-TD Ameritrade
-Security Benefit Life Insurance Company
-The Vanguard Group

Are these all pretty much the same?

a5ehren

DBReed wrote:

Here's the list of vendors I can choose from:

-American Century
-American Funds Capital Guardian Trust
-Fidelity Investments
-Franklin Templeton
-Great American Life Insurance
-Mass Financial Service Insurance
-TD Ameritrade
-Security Benefit Life Insurance Company
-The Vanguard Group

Are these all pretty much the same?

Nope. They all charge different amounts of money to store your money, typically for similar results.

Go with Vanguard, and choose the latest Target Retirement fund they have. They're the cheapest, which means you get to keep more of your money.

DBReed

All right, thanks for the advice!

Maguano

i'd reread the fees on the target date fund though... typically those types have funds have higher fees as opposed to an index fund...

Hypatia

You probably want to think about what you'll want to do in the future as well. I mean, if the only think you'll want to invest in is a 403b, then all you really need to look at is the fees that are related to that.

If you think that in the future you might want to trade stocks, do money market stuff, set up an account for a spouse or kid, etc., then you'll want to also take a look at what fees are associated with those things in each company to compare. That isn't to say that one might not have way better customer service than another (I've only dealt with one of those), but once you invest with one company, you'll probably stick with them for all the other investment type things you'll want to do so it's worth trying to think ahead on it.

a5ehren

Maguano wrote:

i'd reread the fees on the target date fund though... typically those types have funds have higher fees as opposed to an index fund...

That is true, but it is also less to think about.

You probably want to think about what you'll want to do in the future as well. I mean, if the only think you'll want to invest in is a 403b, then all you really need to look at is the fees that are related to that.

If you think that in the future you might want to trade stocks, do money market stuff, set up an account for a spouse or kid, etc., then you'll want to also take a look at what fees are associated with those things in each company to compare. That isn't to say that one might not have way better customer service than another (I've only dealt with one of those), but once you invest with one company, you'll probably stick with them for all the other investment type things you'll want to do so it's worth trying to think ahead on it.

I don't know what Vanguard charges for their brokerage accounts (I don't have the time/knowledge to trade individual stocks), but I don't think they have any account maintenance fees for mutual funds if you receive electronic statements or have more than $10K in your account.

DBReed

I haven't thought about other things like money markets. Can any of you recommend some good reading material so I can educate myself about this stuff? I know next to nothing about any of this.

tyrannus

http://www.investopedia.com/ is usually pretty great for reading about anything financial.

zepherin

You should also decide how much risk your willing to take. Vanguard is a good choice, lots of funds usually low fees, however not all of their funds are the same so you still have to choose wisely. FIdelity has some decent funds too, Franklin Templeton has one or two funds worth looking into, TD Ameritrade is largely shit. I have no idea about the others

A few words though.

UNDER NO CIRCUMSTANCES SHOULD YOU BUY A MUTUAL FUND WITH A SALES LOAD!
Capitalized because I am yelling it at my screen. So fucking check that, even with Vanguard. NO SALES LOAD!

Base risk on age. The rule of thumb is to subtract 100 from your age and put that percentage into a mix of stocks. I'm 30 so if I follow that rule of thumb I'd put %70 in a mix of stocks, however I am risk adverse by nature, and I have a fairly secure pension so I do %50 in stocks (half international, half high yield domestic) and %50 bonds (1/3rd mutual, 1/3rd commercial, 1/3rd tbills). Don't drop it all into one fund, spread it out, and put some in a foreign fund too just to hedge against country risk.

DBReed

What exactly is a sales load and why is it bad?

zepherin

DBReed wrote:

What exactly is a sales load and why is it bad?

A sales load is essentially an amount of money that the brokerage takes as a commission to sell the fund. A front end sales load means that the commission is taken up front a back end sales load means it is taken when the fund is sold.