Ken-Ton 403b Retirement Options

This post aims to be a resource for Ken-Ton teachers to use to help them select the 403b provider and the difference between the available options. Please take your time to review this post and make sure you and your colleagues are using the best possible option – with the understanding that the best option for you may be different than your colleague’s, depending on everyone’s individual circumstances.

As a Ken-Ton teacher, you have access to a retirement plan known as a 403b with a 50% match from the school up to $250 (steps 1-10) or $500 (steps 11-21). So this means you have to contribute at least $500 a year (steps 1-10) or $1,000 a year (steps 11-21) to receive the full match from Ken-Ton.

A 403b is very similar to the more popular private-sector retirement plan known as a 401k except for one big difference, CHOICE.

Now, this choice can be a good thing or a bad thing. In the private sector, when you get a job and want to save for your retirement, you use the one option the employer has selected. This is not the case for Ken-Ton UFSD, as they don’t have just one option but instead offer 18 different ones. Great! Choices! However, the district does not offer any guidance on the various options meaning you have to figure out which of those you should use.

Here are the most popular 403b options in the district in alphabetical order:

• AIG (Valic)
• Aspire
• Equitable (AXA)
• Invesco Oppenheimer
• MetLife
• NY Life
• Orion (FTJ – L&M)
• Primerica
• Sgroi Financial
• The Legend Group
• Voya

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This can be overwhelming for anyone who doesn’t have any experience with retirement planning. Most of us will go to a friend or co-worker and ask them who they use. However, this is like comparing apples to oranges. Your financial situation and life circumstances are different than your co-worker’s. So how do you know the difference between the companies and which one is the best option for you? If you’re at this crossroads, I hope to help you break down this long list of options into different groups based on what they offer.

Investment providers come in four basic types:

1. Insurance Companies
2. Mutual Fund Families
3. Independent Financial Professionals
4. Do it Yourself

Insurance Companies

• AIG (Valic)
• Equitable (AXA)
• MetLife
• NY Life
• Primerica
• VOYA

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These insurance companies primarily offer variable annuities¹ to their clients. While annuities offer tax deferral, investing in one as part of a 403b account receives no tax advantage. Under these circumstances, consider purchasing an annuity only if it makes sense due to the annuity’s other features.

Variable annuities typically cost between 2% and 4% per year and often come with surrender periods lasting from 5 to 12 years. On a $100,000 deposit, this would range from $2,000 to $4,000 a year in annual expenses that is also locked up for 5 to 12 years. Investments within a variable annuity are typically limited to 20 to 50 options to select from.

While variable annuities may be a valid option for some investors, they can be expensive, have surrender charges, and lack investment options available. Variable annuities are generally the most expensive options for your 403b.

Mutual Fund Companies

• Invesco Oppenheimer

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A mutual fund² is an investment that pools your money together with other investors to purchase shares of a collection of stocks, bonds, or other securities, referred to as a portfolio that might be difficult to recreate on your own.

Mutual funds may come with an upfront commission of about 5.75% and an annual cost of about 1.25%.  On a $100,000 deposit, this would be $5,750 paid out in upfront commissions and the remaining $94,350 being deposited into your account with $1,180 in annual expenses. Inside of a mutual fund company, there are usually 20 to 100 investment options to select from.

These companies hire financial professionals that primarily distribute their own company’s mutual funds, so their recommendations are often limited to these companies.

Independents

• Aspire
• Orion (FTJ – L&M)
• Sgroi Financial
• The Legend Group

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These companies have independent financial professionals who are not captive to a financial company to offer teachers the most investment options. For example, most can offer variable annuities or mutual funds.

The costs for these professionals range between 1% and 2% of assets. On a $100,000 deposit this would range from $1,000 to $2,000 in annual expenses. These companies usually have the most freedom and flexibility as most have 1,000+ investment options to select from.

Because a certain list of investment products does not bind them, they can generally offer whatever investment is best for you.

Do It Yourself

• Aspire

Aspire has a do-it-yourself option, so if you do not want to work with a financial professional, this is a great option for you.

The cost is only 0.15%. On a $100,000 deposit, this would be $150 in annual expenses. In addition, you get access to 1,000+ investment options such as Vanguard.

What else to look for in a Financial Planner?

• One that holds the specific credential of a CERTIFIED FINANCIAL PLANNER™ professional
• One that will sign a Fiduciary Pledge – This means they agree to put your needs ahead of their own financial interests
• Works with other teachers in your district
• Transparent about all costs

“I’ve found a few financial professionals and companies I like; What do I do next?”

The next step is to meet with the financial professionals from these companies – and make sure to meet with more than one.

Look these reps in the eye and get a good feel for them. It’s important to note that this person will be investing thousands of dollars of your money, so take as much time as you need to make this decision.

Ask them to put together an investment portfolio for how they would invest your money and outline how much this would cost.

If you’re still not sure, email me for more unbiased guidance and support.

Good luck!