The Staff Senate, Faculty Senate Council, and Department of Human Resources sponsored a forum to help faculty and staff better understand the new retirement funds recently added to Santa Clara University's Defined Contribution 401(a) and 403(b) retirement plans. These new funds include Fidelity Freedom Index funds and the new Vanguard funds made available as of July 2011.
- Sanjiv Das, SCU Finance Department
- Joseph Crowley, Independent financial consultant for SCU
- Hersh Shefrin, SCU Finance Department
- Dan Ostrov, SCU Mathematics and Computer Science Department
Times and Topics
0:00:00 Introduction, new funds, the main theme: lower fees
- Introduction by Frederick Smith.
- The new low fee (low cost) funds now available to SCU employees: Fidelity Freedom Index Funds and 19 Vanguard index funds.
0:04:53 Web resources, determining the impact of fees on your return
0:09:45 First audience question: average return
- What percent return is assumed for retirement accounts by financial companies?
- Is this realistic?
0:10:26 Stock losses
- How unusual is it to have a "lost decade" of no stock growth like we just had or negative stock growth?
- How fast does the stock market usually recover from a big loss?
0:12:25 Target Date Funds (like Fidelity Freedom Index Funds)
- Target Date Funds: advantages (esp. when you're young) and disadvantages (esp. keeping them after retirement).
- Composition of target date funds.
- Not worrying about getting your retirement date exactly right for these funds.
0:18:25 One-on-one help
- Mapping old expensive funds to the new low fee funds.
- Using Joe Crowley as a resource for individualized advice.
0:19:31 A choice at retirement: IRA or SCU funds
- When you retire, you have a choice: advantages and disadvantages of staying with SCU funds vs. switching your money to your own IRA.
0:21:45 Vanguard at SCU
- Would SCU bring in Vanguard as a third company (on top of TIAA-CREF and Fidelity)?
- Are index funds diversified?
- Does having all your money with one company like Fidelity or Vanguard mean you're not diversified?
0:25:49 Quantifying the fees
- What are the fees for the new Vanguard funds and Fidelity Freedom Index Funds?
- Vanguard's Social Choice fund.
- Should I buy an annuity?
- When does annuitizing my retirement payouts make any sense?
0:29:40 Stocks if you are not risk averse
- Should you be more in stocks during retirement if you have more money?
0:30:47 Automatic Rebalancing
- Why not be 100% in stocks if you're okay with risk?
- A useful option: automatic rebalancing.
- Can you automatically rebalance with multiple funds?
- Can your IRA outside of SCU be set up to automatically rebalance?
- The importance of psychological, not just financial, needs.
- Behavioral portfolio theory for planning for heirs.
0:35:46 New eras and randomness
- Are we in a new era for stocks that will be unlike past eras?
- Will we go to a more eastern, rather than western, based economy?
- The importance of understanding randomness in the stock market.
- Global stock diversification.
- Overrating and underrating history.
0:40:42 How to switch to the new funds
- You are giving away money if you stay in high fee funds.
- How to move into the new funds if you're currently with TIAA-CREF.
- How to move into the new funds if you're currently with Fidelity.
- Should you change your funds online or on the phone?
0:43:20 Lack of public information
- Why is information about Fidelity Freedom Index Funds so hard to find online?
0:43:59 Fees for holding cash
- Does Fidelity charge fees for just holding cash? (Note: the answer to this question is that Fidelity, at the time of this forum, charged 37 basis points for cash: that is .37% per year, which is almost twice the 19 basis points they charge for their Freedom Index Funds.)
0:46:19 TIAA-CREF customers
- If you use TIAA-CREF, what do these new changes mean for you?
0:47:04 One billion dollars in SCU employee money
- The difference in fees: in the neighborhood of $1 billion dollars for all SCU employees after 40 years.
0:47:37 Early trading fees
- If you set up annual or quarterly automatic rebalancing, can you be charged for trading too often?
0:48:27 Coming soon: an almost painless way to save for retirement.
- An "Automatic Retirement Fund Builder" is coming soon to SCU, which allows you to quickly build the amount you voluntarily set aside for retirement without ever seeing your paycheck go down.
- How the psychology of this plan works so effectively.
0:52:04 Summary: the main point of these new index funds.
- What you can and cannot control.
- Spending on lottery tickets!
- The importance of reconsidering your retirement funds occasionally.
- The significant advantages of index funds (passive investing) vs. active investing.
- The corrosive effect that active funds' trading has on performance.