Mandatory pension funds: What are your thoughts?

Laura Reed27 · 2006-06-14T13:56:23+00:00

Hey everyone. It’s my first time posting here, and I’m honestly not sure if someone else has already asked what’s been weighing on my mind, but here goes: I’ve…

ironsurfer10 Active Member

104 messages
joined Dec 2007

#161 · Feb 1, 2008

Actually, that’s not quite right. If someone leaves the workforce outside of the federal system after they've met all the requirements for retirement under our laws, they are entitled to receive their payouts from the second tier of the pension system.

And if someone passes away before reaching retirement age, those funds are passed down to their children through survivor benefits. If there aren't any children, the money goes to their legal next of kin.

Nicholas Murphy70 Member

10 messages
joined Aug 2007

#162 · Feb 3, 2008

Never really looked into this before... but that was some useful info.🙂
thx

ironsurfer10 Active Member

104 messages
joined Dec 2007

#163 · Feb 5, 2008

not getting any foreign exchange here 😉

ironsurfer10 Active Member

104 messages
joined Dec 2007

#164 · Feb 5, 2008

Here’s the latest update on those "returns" through January 31, 2008

Vanguard: -3.08
BlackRock: -3.73
Bank of America: -4.18
JPMorgan Chase: -4.06

mirex: -3.64

Kimberly Nguyen Regular

543 messages
joined Jul 2009

#165 · Feb 6, 2008

Take a look at my 😁
this covers the period from January 1st to February 4th, 2008.

Vanguard ..... 02/04 USD 149.2680 0.24 -2.78
Allstate ...02/04 USD 147.3640 0.18 -4.18
Goldman Sachs .......... 02/04 USD 149.6568 0.21 -3.87
BlackRock .................... 02/04 USD 142.3764 0.20 -3.62

ironsurfer10 Active Member

104 messages
joined Dec 2007

#166 · Feb 6, 2008

🙏
I really have to hand it to you for digging up all this info!😍

Ronald Allen Active Member

160 messages
joined Oct 2010

#167 · Feb 6, 2008

Honestly, what do you guys think? Is there any chance JPMorgan Chase pulls off the highest returns again this year? I know they say you can't judge a book by its cover, but a whole year is a long time, and those early results from January might not mean a damn thing in the long run... 🤷

Ronald Allen Active Member

160 messages
joined Oct 2010

#168 · Feb 6, 2008

...Total tangent here...

By the way, I left you the bill on American Express...

...Anyway, back to business...

I’ve been at Vanguard for six full years now. Honestly, the pay isn't even that bad. But I just don't get the people who quit their jobs and then immediately show up at the bank asking if they can withdraw their funds from Vanguard... 😕
Like, did nobody tell them how that works? Or are they just playing dumb... 😕

bluehawk3 Member

25 messages
joined Feb 2011

#169 · Feb 7, 2008

I’m feeling a bit torn between Vanguard and Allstate. On one hand, Vanguard seems to have much lower fees, but then again, Allstate keeps bragging about their higher returns...

What do you guys think I should go with?

Ronald Allen Active Member

160 messages
joined Oct 2010

#170 · Feb 7, 2008

What kind of fees are we even looking at for an OMF, if there even are any...? 🤷
I mean, I know mutual funds have their fees, but for an OMF... 🤷
Anyway, first thing you should probably do—assuming you’ve actually started contributing through work—is check your total returns so far. Once you have that, it’s easy enough to figure out if it makes more sense to go with a fund that has lower fees versus one where you're putting in more contributions but paying higher fees too...

ironsurfer10 Active Member

104 messages
joined Dec 2007

#171 · Feb 7, 2008

Ronald Allen said:Honestly, what do you guys think? Is there any chance JPMorgan Chase pulls off the highest returns again this year? I know they say you can't judge a book by its cover, but a whole year is a long time, and those early results from January might not mean a damn thing in the long run... 🤷

There’s really no way to be certain. It all comes down to how risky their investments were last year. From what I understand, about 50% of the portfolio has to stay in bonds, and those have dropped by about 2.5%. Then you have 20% in stocks, which are also down around 14%. So, it really depends on their specific allocation. You can check the SEC website or similar financial news outlets; they usually have the investment structure listed somewhere.

Ronald Allen said:Honestly, what do you guys think? Is there any chance JPMorgan Chase pulls off the highest returns again this year? I know they say you can't judge a book by its cover, but a whole year is a long time, and those early results from January might not mean a damn thing in the long run... 🤷

I get at least 50 calls like that a day. Part of it is just pure ignorance on their part, and part of it is because some of our customer service reps aren't properly trained to explain things clearly.

Ronald Allen said:What kind of fees are we even looking at for an OMF, if there even are any...? 🤷
I mean, I know mutual funds have their fees, but for an OMF... 🤷
Anyway, first thing you should probably do—assuming you’ve actually started contributing through work—is check your total returns so far. Once you have that, it’s easy enough to figure out if it makes more sense to go with a fund that has lower fees versus one where you're putting in more contributions but paying higher fees too...

The entry fee is charged every month alongside your employer's contribution, and for the retirement fund, it's 0.6% monthly. Other funds carry a fee of 0.8% per month. If your contributions are small, it’s a negligible amount—it's not a big deal if you're looking at something like $1667 $100 gross salary $0.00. However, if you have a very high salary, like some of our members here, it makes more sense to pick a fund with lower fees.

Ronald Allen Active Member

160 messages
joined Oct 2010

#172 · Feb 7, 2008

Thanks for the heads up, I honestly had no clue about this one... 👍

Kimberly Nguyen Regular

543 messages
joined Jul 2009

#173 · Feb 7, 2008

BlackRock
Look, it’s pretty simple math: any cut to these management fees translates directly into bigger retirement checks for our policyholders down the road. Because of that, the firm decided to set the entry fee for the BlackRock Fund lower than the absolute maximum of 0.8% allowed under federal law. So, instead, the entry fee for this BlackRock Fund sits at 0.6% of every contribution made.

BlackRock
For the first two years you're in, the BlackRock Fund hits its members with a 0.7% fee, but then they scale it back by an extra 0.05% every year for the following four years.

Goldman Sachs
The upfront fee charged by the pension provider is:
0.8% of every single contribution made by members

I can't even find the info on Bank of America 😕

Ronald Allen Active Member

160 messages
joined Oct 2010

#174 · Feb 7, 2008

What would it even mean if, despite all those heavy fees, Goldman Sachs has actually performed pretty well over the last two years? I mean, looking at it, even with the highest management costs, the people invested there seem to be seeing the biggest returns...

Dennis Ruiz5 Newcomer

2 messages
joined Mar 2008

#175 · Mar 28, 2008

Hi everyone,

I’ve been following this discussion quite closely, but I’m still struggling to wrap my head around one specific point.

Someone is actually suggesting I move my holdings from Wells Fargo (share count $49) over to Goldman Sachs (share count $47). Their logic? It would bump up my total number of shares—plus, I can apparently switch once every three years without paying a fee.
The idea is that after those three years, I should scout out another fund manager with a lower share price and jump ship again—just to keep inflating my share count.

(I totally get where my advisor is coming from—he gets a commission for the move. That doesn't bother me, provided I'm actually coming out ahead. If he's giving solid advice, he deserves his cut—it's not coming out of my pocket. 🙂 )

The whole strategy seems to rely on the assumption (if I'm reading this right) that all these funds will perform roughly the same anyway—since their values usually stay within a tight 3-4% range over any five or six-year stretch. Essentially, I'd just be playing the relative differences between them to eke out small gains in my share count.

While the math seems sound on paper, I can't help but wonder if there's a catch! 😕 What are your thoughts?

Best regards,

Nicholas Turner Active Member

125 messages
joined Oct 2010

#176 · Mar 28, 2008

The price per share multiplied by the number of shares always equals the same total value—they’re just reciprocals of one another. Both funds launched at the exact same time. At Raiffeisen, one share is $49, whereas at AZ it’s $47—which essentially means AZ hasn't performed as well, making its individual shares "cheaper." Personally, between that and the damn attempts to manipulate the market, I wouldn't dream of switching over to AZ.

Ronald Allen Active Member

160 messages
joined Oct 2010

#177 · Mar 28, 2008

Dennis Ruiz5 said:Hi everyone,

I’ve been following this discussion quite closely, but I’m still struggling to wrap my head around one specific point.

Someone is actually suggesting I move my holdings from Wells Fargo (share count $49) over to Goldman Sachs (share count $47). Their logic? It would bump up my total number of shares—plus, I can apparently switch once every three years without paying a fee.
The idea is that after those three years, I should scout out another fund manager with a lower share price and jump ship again—just to keep inflating my share count.

(I totally get where my advisor is coming from—he gets a commission for the move. That doesn't bother me, provided I'm actually coming out ahead. If he's giving solid advice, he deserves his cut—it's not coming out of my pocket. 🙂 )

The whole strategy seems to rely on the assumption (if I'm reading this right) that all these funds will perform roughly the same anyway—since their values usually stay within a tight 3-4% range over any five or six-year stretch. Essentially, I'd just be playing the relative differences between them to eke out small gains in my share count.

While the math seems sound on paper, I can't help but wonder if there's a catch! 😕 What are your thoughts?

Best regards,

Yeah, sure, but all you're doing is inflating your share count. You think you're "growing" by jumping between funds, but I guess the real question is how long that actually works? And which fund are you even going to land in eventually to make all that hopping worth it? Maybe by the time you decide to move, the price per share in a decent mutual fund will be so high that you'll end up losing everything you thought you "gained" by playing musical chairs. I mean, why bother with all that extra work? Just stick to one. If you really hate it after a few years, then look for something better. Jumping around like that... I don't know, you probably won't get anything out of it. ☕

ironsurfer10 Active Member

104 messages
joined Dec 2007

#178 · Mar 29, 2008

Here is my take on this...

The reality is that you’ll end up with more shares if you invest through the Bill & Melinda Gates Foundation compared to an ETF, simply because the share price is lower there. For example, if you put in $33 and the price at the Bill & Melinda Gates Foundation is $0.33, you’d walk away with 100 shares. But if you put $33 into an ETF where the share price is 2, you’d only get 50 shares, right?
Now, since the Bill & Melinda Gates Foundation has always had a lower share price than the ETF, let’s say that after a while, the value of the Bill & Melinda Gates Foundation shares rises to 1.25, while the ETF price hits 3. In my scenario, you’d have $42 from the foundation, whereas you’d have 150 from the ETF—even though you technically own more shares with the foundation.
That being said, I should probably warn you about the risk of switching to the Bill & Melinda Gates Foundation right now: you could face a massive loss. You might find yourself with less cash after a month than what you originally put in! A lower share price doesn't necessarily mean a better deal; often, it just means the fund is underperforming. Analysts are actually predicting that 2008 will be a rough year for them. Because of that, I wouldn't personally recommend making the switch just yet.

Of course, it’s your money and you can do whatever you want, but please just give it some serious thought first!

Ronald Allen Active Member

160 messages
joined Oct 2010

#179 · Mar 30, 2008

Ever wonder why the stats from December 31, 2007, looked the way they did regarding people jumping from one firm to another? I mean, look at this:

JPMorgan Chase . . . . . -14,629
American Express . . . . . . . . . . -20,265
Bank of America . . . . . . . . . . . -5,008
Goldman Sachs . . . . +39,902

Yeah, I'm talking about total client numbers here...

Or maybe you've wondered why the annualized returns for these firms since their inception—as of January 31, 2008—looked like this:

Mirex. . . . . . . . . . 6.80%
Bank of America . . . . . . 6.97%
American Express . . . . . . . . . 6.31%
JPMorgan Chase . . . . 7.15%
Goldman Sachs . . . . 7.21%

Obviously, the data comes from FINRA as of Jan 31, 2008.

ironsurfer10 Active Member

104 messages
joined Dec 2007

#180 · Mar 31, 2008

Ronald Allen said:Ever wonder why the stats from December 31, 2007, looked the way they did regarding people jumping from one firm to another? I mean, look at this:

JPMorgan Chase . . . . . -14,629
American Express . . . . . . . . . . -20,265
Bank of America . . . . . . . . . . . -5,008
Goldman Sachs . . . . +39,902

Yeah, I'm talking about total client numbers here...

Or maybe you've wondered why the annualized returns for these firms since their inception—as of January 31, 2008—looked like this:

Mirex. . . . . . . . . . 6.80%
Bank of America . . . . . . 6.97%
American Express . . . . . . . . . 6.31%
JPMorgan Chase . . . . 7.15%
Goldman Sachs . . . . 7.21%

Obviously, the data comes from FINRA as of Jan 31, 2008.

Well, yeah, I know why... it's pretty obvious! The advisors over at Erste are just incredibly pushy and relentless. I've never had an advisor from AZ, PBZ, or Romfo stop me in the street, but those Erste guys practically grab you by the sleeve on every single corner!😲

Mandatory pension funds: What are your thoughts?

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