Who is looking out for the BEST INTERESTS of the RWJBarnabas Medical Community?
PART 2 – Analyzing The Investment Options a Financial Salesperson has Chosen For YOU
(DO IT YOURSELF OPTIONS) if you missed read PART 1
NOT ALL RETIREMENT PLANS ARE EQUAL
My assessment of the WJBarnabas Health Retirement Savings Plan is that this plan best serves the person/firm that sold this plan than to its participants.
The reason that for me making this claim is that the underlying investment options available are NOT IN THE BEST INTEREST of plan participants, due to the fact that the investment options available are BAD in terms of hidden fees/costs.
Wall Street = your retirement plan sponsor, DOES NOT HAVE YOUR BEST INTEREST! That’s a fact. They are not a FIDUCIARY who is legally obligated to act in your BEST INTEREST. Therefore the investment options available to you are ‘SUITABLE’ and littered with HIGH COST INVESTMENT OPTIONS (WALL STREET WINS)
You could be losing hundreds of thousands of dollars in hidden fees in your retirement accounts. Over time, these fees add up and can dramatically reduce your lifetime savings.
Are paying a higher fees for better performance. NO!!!
The higher the fees, the worse funds perform, according to a study by Morningstar. And that held true across asset classes. Intuitively it makes sense: The higher the fees, the bigger the hurdle the fund must overcome to outperform its competitors.
When choosing a fund, don’t look at past performance, focus on the costs.
Once you are sure the fund’s strategy aligns with your investment goals, risk tolerance, time horizon and overall asset mix, make sure you understand the fees being charged. Don’t you want more of your hard-earned money staying with you, rather than lining a someone else’s pockets?
Funds that are passively managed charge lower management fees. This is because they track a basket of stocks. Vanguard and Dimensional Fund families have low internal expense ratios. The more expensive actively managed funds have a person or team of people attempting to pick the best investments. Despite the higher fees, they are not always successful at beating their benchmarks.
So now to the details of your: DO IT YOURSELF OPTIONS with recommended changes:
THE GOOD
Your plan offers 4 Fidelity Funds that are excellent in terms of their cost structure. You could create a low-cost, diversified fund with these 4 investment options.
Fidelity® 500 Index Fund (FXAIX)
EXPENSE RATIO 0.015%
Fidelity® Extended Market Index Fund (FSMAX)
EXPENSE RATIO 0.036%
Fidelity® Global ex U.S. Index Fund (FSGGX)
EXPENSE RATIO 0.056%
Fidelity® U.S. Bond Index Fund (FXNAX)
EXPENSE RATIO 0.025%
Recommended
I would like to see 1 additional International Bond Fund to create a Globally Diversified, Low-Cost Portfolio.
Fidelity International Bond Index Fund (FBIIX)
EXPENSE RATIO 0.06%
MY SUGGESTION IS TO REPLACE ALL THE HIGH COST INVESTMENT OPTIONS & REPLACE WITH LOW COST
(NOTE: that my alternatives are not exact replacements but represent the underlying objective of the investments suggested to be replaced)
Personal Finance Is Not Rocket Science, BUT You Better Understand It Clearly
“Do not allow the tyranny of compounding costs to overwhelm the magic of compounding returns.”
Current – American Beacon Small Cap Value Fund R6 (AASRX)
EXPENSE RATIO 0.80%
Recommended – Vanguard Small-Cap Value Index Fund Admiral Shares
EXPENSE RATIO 0.07%
COST SAVINGS = 0.73% GUARANTEED RATE OF RETURN via LOWERING INVETMENT EXPENSES
Current – American Funds EuroPacific Growth Fund® Class R-6 (RERGX)
EXPENSE RATIO 0.46%
Recommended – Vanguard Total International Stock Index Fund Admiral Shares (VTIAX)
EXPENSE RATIO 0.11%
COST SAVINGS = 0.35% GUARANTEED RATE OF RETURN via LOWERING INVETMENT EXPENSES
Current – Columbia Dividend Income Fund Institutional 3 Class (CDDYX)
EXPENSE RATIO 0.58%
Recommended – Vanguard High Dividend Yield Index Fund Admiral Shares (VHYAX)
EXPENSE RATIO 0.08%
COST SAVINGS = 0.5% GUARANTEED RATE OF RETURN via LOWERING INVETMENT EXPENSES
Current – Invesco Small Cap Growth Fund Class R6 (GTSFX)
EXPENSE RATIO 0.71%
Recommended – Vanguard Small-Cap Growth Index Fund Admiral Shares (VSGAX)
EXPENSE RATIO 0.07%
COST SAVINGS = 0.64% GUARANTEED RATE OF RETURN via LOWERING INVETMENT EXPENSES
Current – Metropolitan West Total Return Bond Fund Plan Class (MWTSX)
EXPENSE RATIO 0.37%
Recommended – Vanguard Intermediate-Term Bond Index Fund Admiral Shares (VBILX)
EXPENSE RATIO 0.07%
COST SAVINGS = 0.30% GUARANTEED RATE OF RETURN via LOWERING INVETMENT EXPENSES
Current – Morgan Stanley Institutional Fund, Inc. Growth Portfolio Class IS (MGRPX)
EXPENSE RATIO 0.5%
Recommended – Vanguard Russell 1000 Growth Index Fund Institutional Shares (VRGWX)
EXPENSE RATIO 0.07%
COST SAVINGS = 0.43% GUARANTEED RATE OF RETURN via LOWERING INVETMENT EXPENSES
Current – PIMCO Income Fund Institutional Class (PIMIX)
EXPENSE RATIO 1.05%
Recommended – Vanguard High-Yield Corporate Fund Investor Shares (VWEHX)
EXPENSE RATIO 0.23%
COST SAVINGS = 0.82% GUARANTEED RATE OF RETURN via LOWERING INVETMENT EXPENSES
My question for the RWJBarnabas Healthcare Community: Who inside your organization is helping you make smart investment choices with your retirement savings/options?
Do they agree with my findings?
MATH IS A UNIVERSAL TRUTH
The hidden costs of mutual fund investing are greater than most investors recognize. I urge you to learn about these costs in your portfolio.
The numeric details aren’t important, but recognizing their existence, magnitude, and consequence is. In the short term these costs may appear reasonable, but over the long run they become very damaging to your returns.
My years on Wall Street have proven to me that financial salespeople are merely motivated by quotas, product sales and commission-based income, and are a danger to your financial well-being.
Shore Financial Planning was founded because the financial-advising industry is broken. I believe that my service should be completely in your best interest, not mine!
I take pride in protecting people from financial predators and helping them make smart financial decisions. I provide peace of mind through conflict-free, value-added financial & tax advice.