Choosing an Investment
How Do I Choose An Investment?
Participation in the 403(b) program is voluntary and each employee is responsible for the selection one or more tax-deferred vendors at any given time. Considerable information about each vendor is available for each employer, please visit your employer's plan information page, linked from the "For Employee" button above or by clicking here. You may also want to consult with your own stock broker, tax advisor, financial consultant, or insurance agent. Neither your employer nor Carruth Compliance Consulting, Inc. can offer any investment advice or market investment products.
Before contacting companies, you should try to learn about some of the different investment opportunities available. Numerous books about money and investments are available in bookstores, from libraries, and on the internet, including the Wall Street Journal's "Guide to Understanding Money and Investing" and Consumer Reports investment ratings. Also available is Morningstar's "Variable Annuity Performance Report," which evaluates the underlying investments of many annuities and mutual funds. Additional useful web links may be reviewed by clicking here. Learning basic information will help you decide how to invest.
There are some levels of risk in any type of plan you chose. Generally, the more risk you take, the higher the potential return. Make your decision on which type of plan you want and how much risk you are willing to take.
Beware of investments with fees or loads that are excessive or hidden. Many investments have declining fees over time or charge only a low one-time fee each year. Avoid annuities that advertise a high rate of interest that is only good on the money invested initially. After the initial period at the high rate, the money may earn a lower rate. The U.S. Securities and Exchange Commission's Investors.gov website is an excellent resource for learning how investment products work and the fees associated with the product type:
Positive signs of a good product are ones that have flexible payout policies once you retire. Look for solid ratings for the investment company in A. M. Best, Standard & Poor's, and Moody's. Check to see how well a given investment has performed against the industry average for similar investments. A good company will be proud to show you their performances in these areas.
Before committing to any 403(b) investment, ask the following questions:
- What are my investment choices within the company?
- For annuities, how is the insurance company rated?
- How does this investment choice fit into my overall retirement-readiness picture in both the accumulation and distribution phase?
- Does the investment account being considered have any restrictions I should be aware of in terms of transaction availability (such as no loans or hardship distributions)?
- Will I be penalized for pulling my money out? Does that cost change over time?
- What annual fees will I pay for the account?
- What kind of continuing service can expect from my investment company and how may I access this service (phone, website, in-person)?
- How often will I (or should I) expect to receive account information or follow-up from my financial professions (where applicable)?
What If I Need Investment Advice? How Do I Choose An Advisor?
It's been said that some people spend more time on choosing an automobile to purchase than they do on selecting a financial advisor. If that observation has a ring of truth to it, it may be because people are familiar with the daily driving experience and the ease of deciding what they want. In contrast, financial management is a task that, for most people, involves decisions and considerations that they know little about. CCC strongly encourages participants to seek the advice of a qualified and trusted financial advisor and/or tax consultant concerning investment and distribution choices. To assist in the process of selecting a financial advisor, we offer a full page of additional information and helpful links on qualities to look for in an advisor and pitfalls best avoided, click here to learn more.
How Vendors Distribute Investment Products
Generally, Vendors offer access to their investment products in three different ways, via:
- In-house financial professionals,
- Independent financial professionals, and/or
- Directly to plan participants.
Please review the information below to learn more about these approaches and the vendors using these approaches to market products and provide service.
Vendors selling through In-House Financial Professionals.
The investment products offered by these Vendors are accessed through a financial professional. Typically to access an annuity or mutual fund from the these Vendors you would work with a financial professional that is an employee of the Vendor.
Below is a sampling of Vendors that use In-House Financial Professionals to market their products:
Vendors selling through Independent Financial Professionals.
The investment products offered by these Vendors are accessed through a financial professional. These Vendors typically do not sell through in-house employees but rely on independent financial professionals to market their annuities and/or mutual fund products. Independent financial professionals often have relationships and experience with multiple, but not all, Vendors.
Below is a sampling of Vendors that use Independent Financial Professionals to market their products:
Vendors Selling Directly to Plan Participants (Do-it-Yourself).
The investment products offered by these Vendors generally are accessed directly by plan participants. Typically, participants work directly with these Vendors and do not work through a financial professional. These Vendors primarily offer mutual fund products.
Below is a sampling of Vendors that sell products Directly to Participants (Do-it-Yourself):
Additional Information
- Our Employee FAQ page covers questions commonly asked by participants.
- Visit our Choosing an Investment page to learn more about the questions to ask when evaluating your choices, how various vendors market to and service participants, and the types of products offered by 403(b) vendors.
- Please visit our Useful Links page for additional helpful information on general investment topics.