Wife is a teacher and has a 457 account with tcgservices which I guess the school district uses. She is putting away $300 a check into as a roth contribution but damn the monthly fees on this thing are crazy. She is getting hit with about $158 a month in fees which doesent seem right. What can we do to do better here? Should we shut this down and transfer it into a roth IRA and just contribute there?

Jack Pearson said:

---

Wife is a teacher and has a 457 account with tcgservices which I guess the school district uses. She is putting away $300 a check into as a roth contribution but damn the monthly fees on this thing are crazy. She is getting hit with about $158 a month in fees which doesent seem right. What can we do to do better here? Should we shut this down and transfer it into a roth IRA and just contribute there?

---

That doesn't sound right. Is that some sort of management fee for the funds she is invested in (still sounds ridiculous) or some administrative fees for the account?

Its admin fees on the account.


This is what they told me when I questioned it. She has ~200K in this account

There are asset based fees that combined are a total of 0.77% per year on the value of the account. This 0.77% is divided by 12 to take out a monthly portion.

In addition, there is a flat $22 yearly TCG fee and $1.20 yearly ESC Coordinator fee (0.10 a month) for a total of $23.20 which is taken out monthly. Therefore you will see a $1.93 line item fee each month.

NOTE: When the account balance is over $150,000, the amount above that is charged 0.25% less as well. Meaning the first $150,000 is charged 0.77% and any amount above that is being charged a fee at 0.52% (annually)

Jack Pearson said:

---

Its admin fees on the account.


This is what they told me when I questioned it. She has ~200K in this account

There are asset based fees that combined are a total of 0.77% per year on the value of the account. This 0.77% is divided by 12 to take out a monthly portion.

In addition, there is a flat $22 yearly TCG fee and $1.20 yearly ESC Coordinator fee (0.10 a month) for a total of $23.20 which is taken out monthly. Therefore you will see a $1.93 line item fee each month.

NOTE: When the account balance is over $150,000, the amount above that is charged 0.25% less as well. Meaning the first $150,000 is charged 0.77% and any amount above that is being charged a fee at 0.52% (annually)

---

There probably isn't enough information here to determine if this is worth seeking alternatives.

.52% isn't the most egregious fee if that is all inclusive. Does it include the underlying investments or is it a separate advisory fee? Is there any other value being delivered other than just being able to participate in the 457 Plan? Usually the benefit of a 457 is that you can double up the amount you can defer when it paired with another retirement plan, like a 403b. It is the additional tax deferral that MAY be worth paying a little extra for.

Keep in mind though, that tax deferral really only works to your favor if you think that you'll pay lower taxes later on the withdrawals.

Does your wife also have a 403b plan at her school? If there is a plan and it open architecture, you likely can use Vanguard, Fidelity, etc as your investment provider.

She does not have a 403b. At some point the district had a money pension plan that got converted to a 457b so she has just kept contributing to it.

As far as I know the there is no advisory or anything with this account, they are just skimming $155 a month out for having the plan.

Jack Pearson said:

---

She does not have a 403b. At some point the district had a money pension plan that got converted to a 457b so she has just kept contributing to it.

As far as I know the there is no advisory or anything with this account, they are just skimming $155 a month out for having the plan.

---

If your wife is getting any sort of matching contribution from the school, that would be another reason to stay put.

If she isn't getting matching and the plan will let her rollover the balance to an IRA while she is still an active employee, you likely could reduce the fees or at least get more for what you are paying (i.e. financial planning, investment advice, etc).

You said she is contributing $300 per check. If that is a bi-monthly check, then she is contributing @ $7800 to this plan. IRA contribution limits are $6500 this year (+$1000 if > 50), so she could likely contribute a similar amount to an IRA. However, it won't be deductible if you Modified Adjusted Gross Income is > $136k. A Roth could be a consideration, in that case, but that is limited if your MAGI is > $228k.

I hope that helps. Good luck.

I guess what I am thinking is, why not just roll this account to a account she contributes her $300 a check herself instead of payroll. She has been contributing it after tax anyway into roth holdings.

There is no matching from the school.

Income is an issue, is there no backdoor way to sweep these type of contributions into a roth IRA?

Jack Pearson said:

---

I guess what I am thinking is, why not just roll this account to a account she contributes her $300 a check herself instead of payroll. She has been contributing it after tax anyway into roth holdings.

There is no matching from the school.

Income is an issue, is there no backdoor way to sweep these type of contributions into a roth IRA?

---

Rolling it over to an IRA, if the plan allows while she is active, would definitely allow you to save on the fees at places like Vanguard, Fidelity, Schwab, etc. Alternatively, for what you are paying, you likely can find and advisor that would be able to provide comprehensive planning and advice.

If your income is too high, you also lose the pre-tax treatment of contributions, although that may not be as negative as it sounds depending on your current and anticipated future tax bracket.

Regarding the Back Door Roth IRA, that door likely is shut if you rollover her pre-tax money into an IRA due to the "Pro-Rata" tax treatment of conversions.