Is Edward Jones for suckers?

[Raswan]

I'm 34, got out of grad school a couple years ago, and work as a part-time college professor. My wife is the primary breadwinner and has always had a retirement plan, which we've pumped money into for years. Rest of our income has just gone into the bank. However, I'm making enough now that it's time to start a separate retirement account for me.

I'm not a finance guy, and while I know in principal how most retirement accounts work I've little sense of the best route to take here to get started. Start my own vanguard account and go that way? Hire Edward Jones for awhile at least until I'm more comfortable with everything? See if I can go all-in on the small TIAA-cref account my university offers (and then deal with it if I end up not working there anymore)?

I have no problem sitting down with someone and saying "Look here, I'm a smart guy but I've little sense of all my available options and I'd rather not waste potential gains on the first five years of retirement savings by picking a sub-par route."

I just don't know who that person is.

Save me ATOT. Take me to school.

 

[momeNt]

What kind of net worth are you dealing with? +/- 250? 500k? 1m?

 

[dasherHampton]

I wish I could help you on EJ. I don't know anything about them.

If you do meet with them make sure you get a detailed accounting of their fees. A family friend of ours went from HS teaching to EJ and made great money with them. I guess that's good and bad. My dad did not invest with him.

 

[Raswan]

What kind of net worth are you dealing with? +/- 250? 500k? 1m?

Total net worth, including wife's retirement? ~$75k. Just bought a house and paid off wife's graduate student loans last year. Only debt is $5k on a car and ~$35k on my student loans. Yearly household income pretax was ~$92k last year. No kids. Debt-to-income ratio is right around 24% if I did that math correctly right before we bought the house in August last year.

 

[Raswan]

I wish I could help you on EJ. I don't know anything about them.

If you do meet with them make sure you get a detailed accounting of their fees. A family friend of ours went from HS teaching to EJ and made great money with them. I guess that's good and bad. My dad did not invest with him.

Thanks for the input. Good to know.

 

[zinfamous]

Start with the TIAA account that your university offers ( I've had these, and currently use it as my primary) and at the very least meet your minimum that they will match. Take a look at the funds they offer and pick those with the lowest fees, most stable. I stick with total stock market index funds, which are generally tied to the lowest possible fees to be competitive with Vanguard. If you can't afford your max annual contributions to your TIAA 403b (Assuming that's what your University calls it--essentially the same as a 401k), then there isn't much reason to open your own trIRA in Vanguard. ...but you can, if you want. no real reason not to. I do that, but I'm also a bit ridiculous. Do they offer other companies, like Fidelity or Vanguard? You could always choose whichever one you prefer. I'd personally go with Vanguard, but all offer comparable low-fee funds. With your sponsored 401/403s, you have access to the lowest fee funds without minimum investment restrictions.

However, opening a separate Roth IRA with Vanguard does make sense, because it's a great way to earn some non-taxable interest on your investment that you can start claiming, without restrictions, within a couple of years. I like to think of it as a savings account on speed.

 

[Raswan]

Start with the TIAA account that your university offers ( I've had these, and currently use it as my primary) and at the very least meet your minimum that they will match. Take a look at the funds they offer and pick those with the lowest fees, most stable. I stick with total stock market index funds, which are generally tied to the lowest possible fees to be competitive with Vanguard. If you can't afford your max annual contributions to your TIAA 403b (Assuming that's what your University calls it--essentially the same as a 401k), then there isn't much reason to open your own trIRA in Vanguard. ...but you can, if you want. no real reason not to. I do that, but I'm also a bit ridiculous. Do they offer other companies, like Fidelity or Vanguard? You could always choose whichever one you prefer. I'd personally go with Vanguard, but all offer comparable low-fee funds. With your sponsored 401/403s, you have access to the lowest fee funds without minimum investment restrictions.

However, opening a separate Roth IRA with Vanguard does make sense, because it's a great way to earn some non-taxable interest on your investment that you can start claiming, without restrictions, within a couple of years. I like to think of it as a savings account on speed.

Thanks for the info. I teach ten credits a year at the university that offers one, and I do the max-match thing, but it's small, like a hundred bucks a month. Didn't know if a) I'm allowed to just make this my primary and jack up my contribution--I may not always be able to teach part-time there and don't really want the hassle of switching retirement over, and b) If this is my best bet to maximize my returns.

My primary anxiety comes from the fact that I'm starting retirement savings ten years after my peer group (a sacrifice I was obviously willing to make), and I'd like to get to make the retirement goals at 40 years old, 55 years old, etc., as deliberately and quickly as possible.

 

[zinfamous]

I would just max it out now, whatever you can afford, for however long you are working with that University. The account will be with you forever, and you can always roll it over into a personal IRA when you are no longer employed with them--this is what I have done with previous university accounts, but I also have 2 that are currently active where I work. All of my money is in a Vanguard tr IRA (including all rollovers from previous employers), a separate Vanguard brokerage account (basically my general high-interest, low-tax savings account: 100% VTSAX), and my two TIAA accounts from the University: 1 is the standard 403 with typical $18.5k annual maximum, and the separate is an optional one that I opted to take instead of the state Pension: this account is 100% funded by the University @ 7% and requires no match from me, which is cool.

Some Universities, depending on the contract, might set investment minimums for your account to remain active after you retire/leave, otherwise they will just cut you a check, which is taxed at the early withdrawal rate, if you do not roll it over into another 401/IRA before that time (this happened to me recently, because I didn't know what was going on, wasn't paying attention, and really didn't care....but I figured out this stuff less than a year later and remain bitter about losing that 15%, lol....but it wasn't a huge balance, because the University had changed contracts and so it was a new account, opened shortly before I left)

 

[DietDrThunder]

My personal preference is to do what zinfamous suggests. Edward Jones' fees will typically eat you alive and come in the form of commissions paid by the mutual funds they invest your money in. An example like your situation, if you invest $75,000 with them, they may put that money in a mutual fund that charges a 5% front-end load (e.g. sales charge or commission). So, you will only have $71,250 that actually gets invested because the mutual fund company takes the 5% off the top and sends some, or all, of it to Edward Jones. Many of these funds also charge trailing commissions, which means the adviser continues to get paid while you hold the fund.

 

[Raswan]

My personal preference is to do what zinfamous suggests. Edward Jones' fees will typically eat you alive and come in the form of commissions paid by the mutual funds they invest your money in. An example like your situation, if you invest $75,000 with them, they may put that money in a mutual fund that charges a 5% front-end load (e.g. sales charge or commission). So, you will only have $71,250 that actually gets invested because the mutual fund company takes the 5% off the top and sends some, or all, of it to Edward Jones. Many of these funds also charge trailing commissions, which means the adviser continues to get paid while you hold the fund.

Much appreciated--I know a zillion people go the schwab/EJ route because it must work for them, but this is good to know. I assumed my university plan would at least be in the top percentiles for "we won't overtly screw you over," but more info is better.

 

[Chess]

I moved my 401k from my old company profit sharing to Edward Jones... I paid about 1600 roughly last year in admin fees etc, but I made about 19k. to me I will pay someone 1500 a year to make 19k... Pretty much a no brainer.. I dont have time to sit down and pick and choose and really day trade. I have mine in a pretty solid return...

I use fidelity for my other 401k at my current employer.

My EJ FA is a pretty straight shooter, he went to the same highschool as me, but at the same time, he told me if I wanted to do stock market do not go through him because of how much EJ charges to do a trade. He didn't have to tell me that, but the again most people aren't like him and wouldnt tell you all of that up front. Thats just my .02

 

[Raswan]

I would just max it out now, whatever you can afford, for however long you are working with that University. The account will be with you forever, and you can always roll it over into a personal IRA when you are no longer employed with them--this is what I have done with previous university accounts, but I also have 2 that are currently active where I work.

Some Universities, depending on the contract, might set investment minimums for your account to remain active after you retire/leave, otherwise they will just cut you a check, which is taxed at the early withdrawal rate, if you do not roll it over into another 401/IRA before that time (this happened to me recently, because I didn't know what was going on, wasn't paying attention, and really didn't care....but I figured out this stuff less than a year later and remain bitter about losing that 15%, lol....but it wasn't a huge balance, because the University had changed contracts and so it was a new account, opened shortly before I left)

Thanks for this and for sharing the situation. So worst-case scenario teh account just sits where it is, but if I'm proactive I can forestall any losses. Any idea off hte top of your head if that max amount is going to be tied to federal contribution limits or my employment designation (i.e. part-time, full)? Totally ok if not, I'll add it to my list of questions for HR.

 

[zinfamous]

By the way, if you feel you are starting too late and want to make your goals quicker, there is no better, dependable way than to invest 100% into total stock market index funds, like VTSAX.

 

[Raswan]

I moved my 401k from my old company profit sharing to Edward Jones... I paid about 1600 roughly last year in admin fees etc, but I made about 19k. to me I will pay someone 1500 a year to make 19k... Pretty much a no brainer.. I dont have time to sit down and pick and choose and really day trade. I have mine in a pretty solid return...

I use fidelity for my other 401k at my current employer.

My EJ FA is a pretty straight shooter, he went to the same highschool as me, but at the same time, he told me if I wanted to do stock market do not go through him because of how much EJ charges to do a trade. He didn't have to tell me that, but the again most people aren't like him and wouldnt tell you all of that up front. Thats just my .02

Much appreciated man. ideally, I'd like (starting off at least) not to be a guy with 3 accounts and my wife with another 2 accounts and have to audit everything at the end of every year in order to make sure everything is copacetic. I get that finding a good FA can negate a lot of the worry, and unfortunately we don't know anyone in town here since we've just moved. I won't take them off the list though, just in case that ends up being the best route. I, too, have no trouble paying a little more every year for the no-hassle situation. Only so many thinking hours in the day after all.

 

[Raswan]

By the way, if you feel you are starting too late and want to make your goals quicker, there is no better, dependable way than to invest 100% into total stock market index funds, like VTSAX.

Good to know, thanks. That's going to be maxed out at the $18,500 yearly, right (assuming no other 401k contributions)? And I can just open this up as an individual human being and tie it to my account for monthly withdrawal?

 

[zinfamous]

Thanks for this and for sharing the situation. So worst-case scenario teh account just sits where it is, but if I'm proactive I can forestall any losses. Any idea off hte top of your head if that max amount is going to be tied to federal contribution limits or my employment designation (i.e. part-time, full)? Totally ok if not, I'll add it to my list of questions for HR.

You're better off asking HR because I understand that they can have different policies from institute to institute. This current position, I wanted to start part-time for the first couple of months, and I was paid so, but I was allowed full benefits, which I found strange. Could possibly be because of my title? I don't know, really.

I wouldn't worry about losing money, as you can always re-balance and futz with your investments within an IRA/401 without any penalties or limits. The general limit would be your max annual allowable. If you can afford it, with 2 incomes, some like to front-load their contributions for the year. Basically set up your pay to dump all of it into the retirement account until it is maxed, then receive your pay without contributions for the rest of the year. Or just do whatever works best for you: $100 per month, $200, whatever.

If you are looking to hit the gas because you feel as though you started late, you basically want to aim at hitting around 30-40% of your yearly income now. ....it may sound crazy, but it's easier than you think if you are willing to look at your monthly expenses and start reducing your spending and converting that into money instead of waste.

 

[zinfamous]

Good to know, thanks. That's going to be maxed out at the $18,500 yearly, right (assuming no other 401k contributions)? And I can just open this up as an individual human being and tie it to my account for monthly withdrawal?

So, it depends. 401k max annual is $18.5k; Personal IRA is $5.5k per year. The idea is to max your 401k first (so, your are limited by the funds and companies that your employer offers). If you have room after that, then you can dump more into a tr IRA for the same pre-tax benefits, and/or a Roth IRA (also $5.5k max per year) for its post-tax benefits. You have to make your contribution requests through HR, and you will only max your contributions if you ask them to.

 

[dasherHampton]

I moved my 401k from my old company profit sharing to Edward Jones... I paid about 1600 roughly last year in admin fees etc, but I made about 19k. to me I will pay someone 1500 a year to make 19k... Pretty much a no brainer.. I dont have time to sit down and pick and choose and really day trade. I have mine in a pretty solid return..

Again, I don't know these chain brokerages but you're paying around 8.5% on your gain.

Doesn't that strike you as high?

 

[Raswan]

You're better off asking HR because I understand that they can have different policies from institute to institute. This current position, I wanted to start part-time for the first couple of months, and I was paid so, but I was allowed full benefits, which I found strange. Could possibly be because of my title? I don't know, really.

I wouldn't worry about losing money, as you can always re-balance and futz with your investments within an IRA/401 without any penalties or limits. The general limit would be your max annual allowable. If you can afford it, with 2 incomes, some like to front-load their contributions for the year. Basically set up your pay to dump all of it into the retirement account until it is maxed, then receive your pay without contributions for the rest of the year. Or just do whatever works best for you: $100 per month, $200, whatever.

If you are looking to hit the gas because you feel as though you started late, you basically want to aim at hitting around 30-40% of your yearly income now. ....it may sound crazy, but it's easier than you think if you are willing to look at your monthly expenses and start reducing your spending and converting that into money instead of waste.

That 30-40% number is kind of what I've been trying to find. 2 incomes, no kids, yearly income of $90k. Figured it would be easier to find that it has been, but thanks for it. I understand these are all kind of flexible numbers, but I like to have a sense of them when sitting down to figure out what that means monthly. So thanks.

Right, I do know about the yearly 18.5/5.5k max, but as with most of this stuff I don't know whether that VTSAX fund you mention is one or the other or can count for either or both...

 

[zinfamous]

Again, I don't know these chain brokerages but you're paying around 8.5% on your gain.

Doesn't that strike you as high?

It is extremely high, but if the difference in his rate of gain is +9% higher than other funds with <1% fees, then it is a no-brainer. ...I imagine this is a very rare situation for those that want little active participation in their funds, but there are justifiable reasons to pay such "extortionate" fees.

 

[Chess]

If you are talking about taking 401k out of your paycheck now, just sit down and look at everything available for you. I do that now, and I have mine almost at 33% stocks, MF, and bonds....

 

[DietDrThunder]

Again, I don't know these chain brokerages but you're paying around 8.5% on your gain.

Doesn't that strike you as high?

That is my feeling as well. You'd be better off going to a fee only adviser and not letting anyone control your investments. Visiting with a fee only adviser annually will get you much better results and not cost you 8.5% of your investments.

 

[zinfamous]

That 30-40% number is kind of what I've been trying to find. 2 incomes, no kids, yearly income of $90k. Figured it would be easier to find that it has been, but thanks for it. I understand these are all kind of flexible numbers, but I like to have a sense of them when sitting down to figure out what that means monthly. So thanks.

Right, I do know about the yearly 18.5/5.5k max, but as with most of this stuff I don't know whether that VTSAX fund you mention is one or the other or can count for either or both...

Ah,

So VTSAX is one of the more popular Index funds from Vanguard. It is typically only available in their personal brokerage accounts. However, if your University offers Vanguard as an option, you may be able to purchase VTSAX through that account, or more likely you have an option for an "Institutional" total stock market Index--which has an even lower fee: 0.03 or 0.02%, and no minimum for that fee (Admiral Funds class minimum investment--the 0.04% fee--in personal accounts is $10k).

however, TIAA offers similar total __x__ market funds, as does Fidelity and others with very low fees. I just go throught the list of funds, look for those at <0.5%, total "something market" fund, and dump my money there.

 

[Chess]

Much appreciated man. ideally, I'd like (starting off at least) not to be a guy with 3 accounts and my wife with another 2 accounts and have to audit everything at the end of every year in order to make sure everything is copacetic. I get that finding a good FA can negate a lot of the worry, and unfortunately we don't know anyone in town here since we've just moved. I won't take them off the list though, just in case that ends up being the best route. I, too, have no trouble paying a little more every year for the no-hassle situation. Only so many thinking hours in the day after all.

I was reading your orginial comment wrong.. I moved all of my money from ING to EJ when I left the company in 2012. I use Fidelity now for all my pre-tax 401k. I dont have a true opinion of them, as I follow most of my own things.

Now with the EJ account, I firmly will stick to what I am saying..

 

[Chess]

Again, I don't know these chain brokerages but you're paying around 8.5% on your gain.

Doesn't that strike you as high?

strikes me as high, of course, but when the market is good of course you are going to make good cash.... The 40 dollar admin fee and 1,5xx is what was taken.

We will see if it changes this year. if i was losing cash every month/year I would pull my money quickly out of them, and go with Navy Federal, or a credit union along that lines.