Retirement

Fees matter

Retirement savings accounts such as the 403(b) and IRA are great ways for public school employees to set aside money for retirement.

However, fees charged by some plans can take a big bite out of your earnings. The illustration below compares the impact various fee scenarios can have on your savings over time. In addition, we've compiled a list of the most common fees that can affect your 403(b) and IRA returns.

Fees Matter graph    

Illustration assumes an annual contribution of $5,000 and an annual rate of return of 7% over a period of 30 years. This is for illustrative purposes only and not indicative of any investment. The assumed fees are:

  • Annuity: 1% annual insurance charge (mortality and expense plus administrative charges).
  • Loaded Mutual Fund Company: Commission-based mutual fund purchases reflected above start at 5.75%, reduced over time based on total account value, and an annual 12b-1 fee of 0.25%. These costs are assessed at the time of purchase when investing in a commission-based mutual fund company.
  • WEAC IRA: Annual administrative fee of 0.45% with an annual maximum of $600 for WEAC members and $750 for nonmembers. This illustration assumes fees for a WEAC member.
  • WEA TSA Trust: Annual administrative fee of 0.35% (with an annual maximum of $300). A minimum administrative fee of $25 will be assessed to inactive accounts. Inactive accounts are accounts with no contributions within a calendar year.

Mutual fund management fees apply. The 403(b) retirement plan is offered by the WEA TSA Trust. TSA program registered representatives are licensed through WEA Investment Services, Inc., member FINRA. The Trustee Custodian for the WEAC IRA accounts is Newport Trust Company. 

Disclaimer
The information provided is referencing investments in 403(b), Traditional IRA, or Roth IRA accounts and is for informational purposes only. It does not take into account your risk tolerance, time horizon, or investment objectives. Please note that annuities and mutual funds may assess contingent deferred charges on withdrawals that have not been on deposit for a set period of time described in its contract or prospectus. Your account will also be taxed and penalized on withdrawals prior to reaching age 59½. The taxation on the various listed accounts will vary and should be taken into consideration carefully when deciding on an account. Please consult your professional tax advisor prior to taking any withdrawal. The WEA TSA Trust, WEAC IRA, mutual funds, and annuities have varying degrees of risk and should be considered carefully prior to investing. This example assumes a 7% rate of return net of any other applicable fees such as mutual fund operating expenses. Investments in mutual funds and variable annuities are subject to investment risk and its principle is not guaranteed. Please review the prospectus carefully prior to investing.


Fees defined


The number one factor in determining your rate of return—after asset allocation—is cost. Fees eat into your bottom line, so to make the most of your invested dollar, you will want to minimize the fees you pay. Watch out for the following fees commonly charged to retirement savings and investment accounts.

Mortality and Expense (M&E) Fee

Mortality fees are paid to ensure that, after your death, your beneficiaries will not receive less than what was contributed to the account. An M&E fee is a charge levied by annuities to cover insurance-related costs.

Commissions (Loads)

A sales charge paid when an individual buys or sells an investment. Sales charges paid when an investment is purchased are called front-end loads. Sales charges paid when an investment is sold are called back-end loads. Look for no-load investment options to avoid this cost.

Management Fee

Also called the investment advisory fee, this represents the company’s cost for managing the money in the fund.

12b-1 Fee

This charge generally allows fund companies to compensate broker/dealers for selling their funds, with a payment to the representative who sold the fund. This fee is also used to cover the marketing and distribution costs of the investment.

Annual Contract Charge

A fee charged by a vendor for administrative expenses.

Custodial Fee

The charge for safekeeping or physically holding the securities in the account.

Surrender Charge (Withdrawal Charge)

This fee is charged as a penalty for withdrawing your money (even for transfers) before the required holding period is over. Holding periods can be 7, 10, or even 20 years. The penalty claims a percentage of your account, typically up to 7%, but it may be higher.

Wrap Account Fee

Charged by a personal financial advisor, this fee is expressed as a percentage of the client’s assets under management. It is in addition to the other fees listed.

More about WEA TSA Trust Fees
Learn about our low-cost IRA program

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Rollover

  • Salary Reduction Agreement
  • Beneficiary Change Request Form
  • Exchange/Transfer/Rollover Form
  • Address/Name Change Form