Cut 403(b) Expenses So That You Keep More of YOUR Money
By Frank Cirullo
In the 25 years I have been in the financial consulting business
one thing has remained true--clients want to CUT expenses
everywhere they can!
And why not! After all, extra expenses come out of your pocket
which means that it really is YOUR money!
Today you'll learn a terrific way to dramatically slash your
403(b) plan's expenses so that you can keep more of your
hard earned money.
Before we begin, let me assure you that cutting expenses
in your 403(b) plan is both practical and necessary. It seems that
everyone is discussing cutting these costs. In fact, Congress is
holding hearings on what to do about the myriad of very expensive
retirement plans that vendors are selling to plan sponsors.
Facts are facts; and the fact is that most plans are far too expensive.
So let's look at some very specific and practical ways in which you
can actually slash your plan's expenses--beginning today.
Cost Cutting Idea #1 - Know your numbers.
The first step is to know what your current expenses are and to
consider the possibility that your plan may be too expensive to keep.
I know changing plans may sound like too much effort, but let me
encourage you to stay motivated by thinking about the huge savings
you'll get by cutting your plan's expenses. The savings can be huge;
more than enough to offset any time or effort you make today.
Cost Cutting Idea #2 - Stop paying for advice you don't need!
Paying for advice is another big expense; especially, if you've been
sold an expensive plan to begin with.
Are you still paying someone to advise you not to slash your plan's
expenses? Why would you do that? Any advisor worth his or her
salt will want what is in your best interest, and saving money is
definitely in your best interest, isn't it?
Make sure the advice you receive is in your best interest.
Cost Cutting Idea #3 - Beware the high cost of "free."
Watch out for the myriad of bells and whistles that vendors provide
"free." If you look just below the surface you will quickly see that
"free" comes with a considerable cost!
For example, financial calculators will waste your time and not
provide any real value at all. The reason is simple. First, they
cannot predict which asset-classes will outperform going forward.
Second, they cannot predict how much you will earn on your
investments. They simply can't predict the future!
But take heart, because you can do a great job of planning your
own investments without using financial calculators and without
using the financial planning software that may only confuse you
more.
Always keep it simple.
Cost Cutting Idea #4 - Make basic but profound changes.
Very simply, ask your employer to use a diversified mix of low cost
index funds instead of those high cost funds that are in your plan.
Did you know that two of the biggest and most respected mutual
fund companies in world only charge 0.07%, per year for index
funds? Imagine slashing your costs that low. It could mean
thousands, or more, to your bottom line each year!
Another idea: For growth you can use a large-cap blend, mid-cap
blend, small-cap blend, and foreign large cap fund that invest in
equities (stocks). And for fixed income you can use a Treasury
money market fund, short-term Treasury bond fund, intermediate
Treasury bond fund, and a long term Treasury bond fund.
(A long term Treasury fund is optional, because it has more
risk but also more reward.)
That's all you need for a well diversified mix of investments!
Cost Cutting Idea #5 - Stop trying to beat the market.
Let me ask you this. Can you hit a moving target blindfolded?
Here is what I'm talking about. Many people are trying to beat
the market (hit a moving target) blindfolded. They are blindfolded
because no one can predict which asset classes will outperform
the others going forward. They are just guessing where the
target is. That's why they miss the mark.
Instead, why not invest in a diversified mix of low cost index funds
so that you can match the market's performance? That way you'll
have more money for retirement and beat the picks of most experts.
Did you know it's a myth that you can predict the future by studying
past performance?
No one has ever done it!
Cost Cutting Idea #6 - Choose your advisor carefully.
Many expert's like to pretend they know which asset classes will
outperform all of the others, because they want to sell you their
asset-allocation models, or their asset-allocation fund,
target-date fund, lifecycle fund, lifestyle fund, or balanced fund.
If you trust their advice, you, too, will probably fail to beat the
market. So why would you experiment with your hard-earned
money when you can easily match the market's performance
with low cost index funds?
And check this out - If you fail to beat the market, your investment
expenses will be higher than if you just buy low cost index funds
that are designed to match the market's performance!
What's more, your opportunity cost (failure to match the market)
will be greater than you can imagine! An opportunity cost is
measured by your actual return on investment (ROI) compared to
how much you would have earned by using low cost index funds.
But wait...there's more.
Ask for the expert's long term track record over 5, 10, 20, and 30
years. If you ask for a track record, you may find that not one
exoert has ever picked a mix of managed funds, or asset-allocation,
target-date, lifecycle, lifestyle, or balanced funds that beat a
diversified mix of low cost index funds. Not one!
Please, never allow an expert to play a guessing game with
your money!
The fact is, if you try to beat the market with managed funds,
and/or asset-allocation, target-date, lifecycle, lifestyle, or
balanced funds, and you fail, it will cost you a small fortune!
You'll have a huge opportunity cost. And you'll have wasted
precious time trying to beat the market!
The bottom line here is simple, yet powerful. You can lower
expenses beginning today by taking the simple steps outlined
above. And I can guarantee this, use these ideas today and you
will be happy you did both today and for years to come!
Frank Cirullo is a twenty-five year financial veteran who teaches
students how to have more money; more time; less stress.
Easy!
For free lessons, visit his Web sites for his students at:
First Capital Management
16776 Bernardo Center Drive, Suite 203
San Diego, CA 92128
1-858-487-1339
