My 457b plan is getting turned upside down.....

[04SE]

I work for a governmental body (obviously, I have a 457b) and received a letter in the mail tonight from the investment board that oversees it. (read; accepts kickbacks and bribes to direct our money to specific funds.... They recently 'reorganized' certain investment options into trusts to offer us lower fees; translation, someones brother is now collecting $$$$ as a result in fees, just lower fees)

The $$$ is held by the investment company T. Rowe Price. Our investment choices are HORRIBLE through this plan.

The letter states (paraphrasing) that too much of the money invested in the 457b funds (BY US AS EMPLOYEES!!!) is allocated into small cap funds and they are going to reallocate our money for us based on what they want us invested in, the T. Rowe Price Target Date funds.

If we don't agree with this we are required 'affirmatively advise' T. Rowe Price as to are chosen investment strategy (funds) before 4/24/15 or they will proceed with reallocating OUR MONEY in OUR ACCOUNTS.

Sorry, rant over, continue on.

 

[HerrStig]

They're playing "three walnut shells and a pea" with your retorement money.

 

[hattaresguy]

Why not just start your own and roth IRA 401k?

 

[Mr Nice]

04SE,

Are you a state or city employee ?

 

[Michael_P]

401K Private industry
403B Not for profit, some govt
457 Government employees

Based on how the entity you work for files SEC / IRS depends on what plan you can participate.

 

[04SE]

Originally Posted By: LT4 Vette
04SE,

Are you a state or city employee ?



State.

 

[Bladecutter]

I hate to ask, but don't you have the ability to log into your retirement fund, and readjust the allocations yourself?

Also, this happens pretty much every year with my wife's 401k, and every other year with my 401k. I just look at the performance of the new funds, in comparison to the current funds, and then make adjustments if needed.

BC.

 

[bradepb]

This happens all the time. You just have to reallocate yourself. My 401k is with a large international union and held by Morgan Stanley. They typically change things around a bit every few years. If they never made any changes that would be concerning to me.

 

[eljefino]

Does your employer pay the maintenance fees? I'd be tempted to put a few % in that and let them muck with it, and do an IRA of my own that I control. Diversification and all that.

My wife has a retirement all full of hippie dippy fair trade funds and I just put a bunch into Vanguard Energy.

We figure diversification of opinion has its place.

 

[surfstar]

LOL

Here is the take from an [index] investing board:
http://www.bogleheads.org/forum/viewtopic.php?f=10&t=157991

This IS NOT how to choose funds and is sarcasm:
"Which fund has the best 3-year return?

I was always amused when looking at aggregate money flows in a 401(k) plan that I was associated with. Money always went to the fund with the best past 3-year performance."

The reason 29% of the assets ended up in Small Caps, was performance chasing. "Hey look how great this did recently, I want in that".

A target-date retirement fund is one of the best options for 90% of investors, and 99.9% of those who don't have a clue. The 457 Committee is actually doing a favor for the long-term preservation of people's retirement funds.

Oh, and what are your ER (expense ratios) by the way? That's how to determine how good your plan is. If you have low (

 

[Mr Nice]

Yep, some funds have crazy high fees which is almost criminal.

 

[04SE]

Originally Posted By: Bladecutter
I hate to ask, but don't you have the ability to log into your retirement fund, and readjust the allocations yourself?

Also, this happens pretty much every year with my wife's 401k, and every other year with my 401k. I just look at the performance of the new funds, in comparison to the current funds, and then make adjustments if needed.

BC.


Yes, I have the ability to control 100% of my investment choice and can change it anytime at my leisure. That isn't the issue here. The issue is that the governing body is directing monetary funds to T. Rowe Target date funds to increase T. Rowe Price's take from this whole plan. The past 2-3 years they have been reorganizing and changing things to best suit the fund managing bodies, not us as employees. I can't discuss the whole topic without violating board rules on politics, even though I would be stating factual things.

Originally Posted By: eljefino
Does your employer pay the maintenance fees? I'd be tempted to put a few % in that and let them muck with it, and do an IRA of my own that I control. Diversification and all that.

My wife has a retirement all full of hippie dippy fair trade funds and I just put a bunch into Vanguard Energy.

We figure diversification of opinion has its place.


We pay $7.50 per quarter in maintenance fees. I am now looking into my options with Vanguard for either an IRA or Roth IRA.


EDIT:

For those interested, here is the main deferred comp fund list:

http://www2.illinois.gov/cms/Employees/b...scriptions.aspx

 

[surfstar]

If you only pay $50/yr fees, and there are no other fees tacked on (the ER is 0.59 or 59 basis points on the target date funds), that is not too bad of a plan.

For comparison, my plan adds 45 bp to existing ERs for the admin fees. So my lowest priced index funds total 0.95 ER. That's not great. There are worse plans and better, so I have to make do.

I do recommend a Vanguard Roth/IRA, as their fund fees are super, super low.