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Dan's Blog

In Praise of 403bcompare.com 🙌

December 1, 2020

I praise the 403bwise Facebook Group a lot. It's an amazing community of educators and financial literacy advocates helping one another navigate the maze that is saving for retirement. A post there this weekend reminded me of another amazing tool: 403bcompare.com. This is a database of 403(b) fee and vendor information for products offered to California public school districs and community colleges. Run by CalSTRS, the state teachers pension agency, the beauty of the resource is that it can be used by virtually anyone in any state. What do I mean? Chance are that the 403(b) vendor available to say a teacher in Ohio, is one of the 53 vendors on 403bcompare. This weekend a teacher wanted to fee information on products sold by American United Life (AUL). 

How to Use 403bcompare.com (to look up AUL)

  • Start by Browsing Vendors
  • Next click Product List
  • Choose product. In this case it's Patriot
  • Note: An "Average Expense Ratio" meter will be displayed. But here's where 403bcompare could add a little more explanation. For the Patriot product, the meter indicates an average expense ratio of 0.93%. High for sure, but not horrible. The problem is this only accounts for the average expense of the 31 mutual fund options (which range from 0.24% to 1.87%).

Misleading

Don't Forget the Other Fees!

Administrative Fee, Loan Fee AND Mortality and Expense

 

Investment Options 

Now We Are Talking Horrible

In order to get the total cost of American United Life's Patriot product you need to add the 1.25% Mortality & Expense charge to the investment option chosen. Even if the lowest cost mutual fund was used (State Street Equity 500 Index at 0.24%) the annual cost would be 1.49% for an S&P 500 fund. Yikes. Now imagine choosing the Neuberger Berman Small Cap Growth fund at 1.87%. That will get you a total cost of 3.12%. Double yikes!!

Surrender Charge

To add insult to financial injury the American United Life's Patriot product has an 8 year surrender charge window. 

Thanks to 403bcompare.com I was able to relay this information to the 403bwise Facebook Group poster in minutes. If you want to have your faith in humanity restored, check out the fees charged by CalSTRS Pension 2, Fidelity and Vanguard. Your search begins here

Stay wise and well.