403B Plans

Terry
Huge fan of yours, loved your book – a primer for my early retirement. Thank you!

I consult/assist a non-profit of 70 employees. Happened to review their 403B (they have $2M invested) and learned the overall expenses averaged 1.54%. An independent benefits administrator came back with 3 new choices, but only dropped the expenses to 1.4%. Further research came up with similar numbers. I expected better. On-line blogs show there is frustration in this area – too large a chunk of earnings are going to the sharks in the form of fees.

Do you have any suggestions for 403B plans that can offer better choices/lower fees and still have the Ts crossed and Is dotted so that these organizations do not expose themselves to costs and liabilities? Help!

Terry Says:  You’re right that this is a BIG problem for small employee retirement plans.  The big companies that offer far lower costs include Vanguard, Fidelity, T. Rowe Price, American Century.  But they are reluctant to handle plans with such a small level of deposits.  Still, that’s where you should start your search for a lower cost plan.  The number to call at Vanguard for retirement plan sponsors is 800-523-1188.

How smart of you to do this on behalf of employees.  Over the years those fees can really add up — to profits for the financial services companies, and costs for the individual in the plan.  You’ll enjoy reading this article by Dr. William Sharpe, on the Vanguard website detailing just how harmful those high costs can be to ultimate retirement income.  https://retirementplans.vanguard.com/VGApp/pe/EducationNewsCenter#al=false&st=Featured&sst=ALL&articleId=12081&smt=ALL&ps=0&tab=libraryTab&libView=AllTopics&po=10