“There is no cheaper place to put it”

During the September 4th 2019 NYC Deferred Comp Board meeting (7:30 to 7:58 mark), the Director of the NYC Deferred Compensation Plan stated that “there is no cheaper place to put it” when discussing how retirees have the ability to leave their retirement money in the plan.  The Director also stated “there is no IRA that is better”.  As readers of this blog know, there are other cost effective custodians available for retirees other than the NYC Deferred Comp plan.  The NYC Deferred Comp plan is not the cheapest “IRA”.    The following is a quick example comparing the fees of the NYC Deferred Comp 2025 fund with the Vanguard Target Retirement 2025 fund using a $300,000 account balance.

NYCDCP 2025 Fund vs. Vanguard 2025 Fund ($300,000)

Item

NYCDCP 2025 Fund

Vanguard 2025

Annual administrative fee*

$60 $0
Investment management fee $540

$390

Asset based fee

$120

$0

Total fees

$720

$390

*Over the past few years, the NYC Deferred Comp plan has waived the $20 quarterly fee in the fourth quarter.  The annual administrative fee is $80 when the fourth quarter fee is not waived.

Clearly, the NYC Deferred Comp is not the cheapest.  Actually, in this example the NYC Deferred Comp 2025 Fund is 85% more expensive than the Vanguard 2025 Fund.

5 replies
  1. Jim B
    Jim B says:

    Pete,
    The $720 in fees is an ANNUAL FEE each member of DCP is charged?
    What about those of us in MULTIPLE FUNDS; I assume its just one fee?

  2. Mark D.
    Mark D. says:

    Not to mention you get updated fund information monthly from Vanguard (or Fidelity, Schwab, etc.). The last time the performance data and expense ratios were updated on the DCP website was March 2019.

  3. laura w
    laura w says:

    I am sick of the fees and the wait time to do anything with the money while its in DCP. They are as slow as they can be. I have been thinking about transferring my NYC DCP 457 into a fidelity IRA. My questions is if i am still living in New York when I’m 59.5 is my IRA, city and state tax exempt like the 457? I read the first 20000 is not taxed with a work related IRA so would my transferred money be the same ? Thanks Great article

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