CA School Employee 403b vs 457

403b Site Information

You can check your city or district info at:

    https://www.403bcompare.com/Default.aspx

Various Kinds of Fees Involved

• 1. Fees to open an account

  2. Custodial Fees

  3. Asset Management/Wrap Account Fees/Advisor fees.

  4. Expense Ratio/Load Funds

Fees to open an account

Some vendors charge a fees to open an account, which I think is unnecessary. Try to avoid paying.

Custodial Fees

This fees is normally related to maintain an account at the vendor. This normally ranges from a 20$ month to as high as $100+ or more depending on your balance. Some vendors will charge custodial fees as a percentage of your assets. I think it should be flat fees, may be upto $100 for the total account. But never pay any %age based custodial fees. Imagine that a 100K account will play $1000 month if the custodial fees is 1% !!

Asset Management/Wrap Account Fees/Advisor fees.

Some vendors charge a fees as %age of assets. Never pay a fees unless you want hand holding all the way. There is no guarantee or proof that this service actually ever benefits a customer. You are better off buying a no low load and a low expense ratio balanced/target fund. If the vendor is charging 1.5% in the wrap fees, and you have have 100K in the account for 10 yrs, it means you would have paid a total of $15000 to the vendor for not doing anything !

Expense Ratio/Load Funds

Expense Ratio (ER) is the cost of the mutual fund to manage itself. Its quotes in a %age and automatically deducted on a daily basis from the mutual fund value. If the ER of a fund is 1%, it means that it takes away 1% annually of the total assets of the mutual fund. The ER reduces your fund value as it grows bigger or smaller. The higher the ER, the lower your net return. One should aim for a very low ER funds in domestic markets (under .5%) and upto 1% in international markets. Vanguard funds are known for low ER index funds.

Load funds - some funds charges a %age to buy their fund. Say the load is 5%, so if you put $100 towards a fund, only $95 is invested on your behalf. The remaining $5 is pocketed by the fund management. Now you need to make atleast 5.26% just to break even and come back to your original $100. Unless the fund manager knows future of the stock market, I think one should never buy a load fund. There is always a better no load low fees alternative available.

Example of all the fees

An example is FTJ FundChoices .

Another vendor Security Benefits

457b Plan

Same two companies provide the 457b vendor services. Here is information about their wrap fees.

FTJ charges a 1.35% wrap/management  fee for all retail mutual fund accounts. Security Benefit charges a 1.25% wrap/Management fee. Its in their brochures. Please read carefully before making any decision.