Teaching the younger generation about money/finances?

[JohnH]

My nephew’s wife former employer was in some Edward Jones 401k plan. Well it charged a $10 fee per month.

When she quit there they spent over a year coming up with excuses why she couldn’t transfer it to Fidelity. All to keep scamming their $10/mo out of her measly $1000 of so she’d saved.

On the bright side… my dad moved all of its assets out of EJ after this behavior. It was finally enough to convince Mom they are an unethical, dishonest company, no matter how “nice” their local rep was.

Some day I’ll go to Everence’s annual meeting and give them a piece of my mind for selling high retirement funds.

[mike]

I don't think Ramsey owns either an insurance brokerage or an investment firm.

Runs a shady service which refers "clients" under the Ramsey brand:

https://www.ramseysolutions.com/insuran ... sualty-pro

(I guess this technically isn't a brokerage.)

Same thing for "investments":

https://www.ramseysolutions.com/retirem ... estor-pros

In either case, clients would spend a lot less just directly going to statefarm.com or progressive.com and shopping around, or getting their own Fidelity, Vanguard etc account instead of getting talked into high load mutual funds, expensive insurance they don't need, life insurance and so forth.

Edit:

Does directly sell term life.

https://www.ramseysolutions.com/insuran ... -insurance

Ramsey also promotes an 8% withdrawal rate from retirement savings which most experts (and historical back-casting) suggests is WAY too high. People who do sophisticated Monte Carlo analysis (testing of thousands of historical scenarios) suggest that 4% is closer to the mark. Which means that people who follow his advice during any period of down-markets are likely to run out of money. And, alternatively, not save enough to begin with.

I don't know anything about his advice for withdrawing from retirement savings. There are various things he advises people to do that I don't follow myself, including not using credit cards, having life insurance, and other things.

However, I think that almost ANY plan is better than the plan many people have for their finances - which is none at all. I think many people who follow the Ramsey plan are successful financially. But you certainly can be successful by using many other plans, or by simply following the plan of living as frugally as you can.

[Ken]

My nephew’s wife former employer was in some Edward Jones 401k plan. Well it charged a $10 fee per month.

When she quit there they spent over a year coming up with excuses why she couldn’t transfer it to Fidelity. All to keep scamming their $10/mo out of her measly $1000 of so she’d saved.

On the bright side… my dad moved all of its assets out of EJ after this behavior. It was finally enough to convince Mom they are an unethical, dishonest company, no matter how “nice” their local rep was.

Some day I’ll go to Everence’s annual meeting and give them a piece of my mind for selling high retirement funds.

They are just a middle man and there is no reason to deal with them at all.

Do you pay some middle man a fee to manage your checking and savings accounts with your bank? I hope not.

[R7ehr]

My nephew’s wife former employer was in some Edward Jones 401k plan. Well it charged a $10 fee per month.

When she quit there they spent over a year coming up with excuses why she couldn’t transfer it to Fidelity. All to keep scamming their $10/mo out of her measly $1000 of so she’d saved.

On the bright side… my dad moved all of its assets out of EJ after this behavior. It was finally enough to convince Mom they are an unethical, dishonest company, no matter how “nice” their local rep was.

Some day I’ll go to Everence’s annual meeting and give them a piece of my mind for selling high retirement funds.

They are just a middle man and there is no reason to deal with them at all.

Do you pay some middle man a fee to manage your checking and savings accounts with your bank? I hope not.

Is Edward Jones more of a middle man than say, Fidelity, Vanguard, or Schwab, or whatever?

[the-real-steve]

Since we've basically derailed now, what is the difference between my employer's 401(k) and me setting up an IRA? Kinda confused there....

[Ken]

My nephew’s wife former employer was in some Edward Jones 401k plan. Well it charged a $10 fee per month.

When she quit there they spent over a year coming up with excuses why she couldn’t transfer it to Fidelity. All to keep scamming their $10/mo out of her measly $1000 of so she’d saved.

On the bright side… my dad moved all of its assets out of EJ after this behavior. It was finally enough to convince Mom they are an unethical, dishonest company, no matter how “nice” their local rep was.

Some day I’ll go to Everence’s annual meeting and give them a piece of my mind for selling high retirement funds.

They are just a middle man and there is no reason to deal with them at all.

Do you pay some middle man a fee to manage your checking and savings accounts with your bank? I hope not.

Is Edward Jones more of a middle man than say, Fidelity, Vanguard, or Schwab, or whatever?

Yes, Fidelity and Vanguard are mutual fund companies that manage their own low cost and no-fee funds. And they also do very low-cost 401(k) plans.

Edward Jones is a middle man operation that has commissioned sales people who put you into mutual funds from other companies and for their trouble they will extract both a sales commission when they buy the fund for you, and then an annual "management fee" for managing your money that is on top of any fees built into the mutual funds themselves.

So for example, if you are with Vanguard you can invest in their Total Stock Market Index Fund (VTSAX) that has a total management fee of 0.04% and there is zero sales fees to buy it. In other words, if you invest $100,000 you would pay $40 a year in fees to Vanguard.

By contrast if you walk into Edward Jones and want to invest $100,000 in stock mutual funds they will first of all steer you away from index funds and put you into something like the American Funds Growth Portfolio (RGWBX) which has management fees of about 1.4% charged by American Funds and on top of that Edward Jones will charge you a management fee of 1.35% for managing your money and a platform fee of 0.05% just to use their web site and platform. And on top of that, Edward Jones will pocket load fees of up to 5.75% (sales commissions) when they buy the American Funds for you in the first place. So, your $100,000 investment in American Funds with Edward Jones will cost you:

• ~5% load (sales fee) to buy the fund so that is $5,000 into your Edward Jones broker's pocket up front leaving you with $95,000 in your investment account
• Annual fees of 1.40% to Edward Jones and 1.40% to American Funds or 2.8% per year which is $2,800 per year

Would you rather pay no up-front costs and $40 per year to invest $100,000 with Fidelity or Vanguard? Or would you rather pay $5000 up front and $2,800 in fees per year to make the same investment with Edward Jones?

Math question: If you invest for 18 years with Edward Jones at 2.8% annual fees, what percentage of your money will Edward Jones have taken from you in the form of fees over those 35 years? Hint: Multiply 2.8% x 18.

[Ken]

Since we've basically derailed now, what is the difference between my employer's 401(k) and me setting up an IRA? Kinda confused there....

401(k) is through your employer and an IRA is something you do on your own. In terms of taxes and fees they are basically the same thing. You can do traditional or Roth accounts either way.

The difference is that a 401(k) plan has a much higher annual contribution limit $23,500 for the employee and up to $70,000 for the combined contribution of the employee and employer if your employer does a match or profit sharing. There are also no income caps so very highly paid employees can fully participate in 401(k) plans.

By contrast an IRA has an annual contribution limit of $7,000 and there are income caps for taking the tax deduction.

NOTE: You can generally only do one or the other. If you are in a 401(k) plan you usually can't also do an IRA or Roth. Or at least you can't make tax deductible contributions to an IRA. You can still make after-tax contributions to an IRA in most cases and also do Roth rollovers so there are some back door loopholes.

[the-real-steve]

That is kinda what I gathered. If an employer offers a match on contributions, that should be a no-brainer.

[Ken]

That is kinda what I gathered. If an employer offers a match on contributions, that should be a no-brainer.

Exactly. The only time that may not be the case is if your employer has you in a really high-fee 401(k) plan with bad investment options because you are locked into that plan for as long as you are with that employer. If the 401(k) plan is really bad and the match is not very generous you might be better off just going it alone and even just saving in regular taxable investment accounts. Or alternatively just contributing enough to the 401(k) to trigger the match and then investing the rest elsewhere. But that is only going to be true if your 401(k) plan is really really bad.

[JohnH]

That is kinda what I gathered. If an employer offers a match on contributions, that should be a no-brainer.

Exactly. The only time that may not be the case is if your employer has you in a really high-fee 401(k) plan with bad investment options because you are locked into that plan for as long as you are with that employer. If the 401(k) plan is really bad and the match is not very generous you might be better off just going it alone and even just saving in regular taxable investment accounts. Or alternatively just contributing enough to the 401(k) to trigger the match and then investing the rest elsewhere. But that is only going to be true if your 401(k) plan is really really bad.

At a lot of small Mennonite businesses that is unfortunately the case. Really really bad plans.