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  1. Today
  2. 403(b) Choices

    Hi Krow36, Of course, you are not wrong. Nobody is wrong. You asked for feedback about the calculator. But so what if I think its too complicated because of the assumption that lurkers know ERs, front-end loads, and adviser fees. But that doesn't mean that you should stop inserting anything because of what I or anybody else said. I am certainly am not going to stop putting up more tables as I create them, and you should not stop putting up calculators. Two well-respected posters objected to the quarterly reports and the returns we made because it focused on short-term thinking (http://board.403bwise.com/topic/6795-q1-ytd-return/). I just think people need to understand how properly balanced full diversified low-cost portfolio work. It might help people not to get spooked when the market starts acting up like it had since the beginning of 2018. I am still going to keep posting the quarterly reports, the returns YTD, my costs and to show people that I have not changed a single investment just because the market is acting up. I have data going back 24 years because of the quarter by quarter returns which slowly turn into years and then decades. Look, we are all on the same mission, to get the attention of more of our public K12 colleagues to take another look at their hastily and aggressively sold commission laden plan: TSA or indexed annuity. Keep on posting krow36. You have improved the quality of the information on this forum big time. Steve
  3. EDIETEL It wasn't really 30 plus years of good choices. I was victim over and over again partly because of the lack of good choices and my inaccurate belief that maybe the next insurance company 403b investing option could be the better choice. Then I also invested too aggressively outside the 403b not really understanding the risk I was taking .I had to learn the hard way that the system was/is stacked against us and still is against most of you if you don't understand it.. Its fortunate that you guys have this site. I only discovered 403bwise about 10-12 years ago. In those years I was able to fix my portfolio and somewhat reform my school system's choices. If every educator and non profit employee would spend some time here we could truly reform the 403b mess but as Steve's book states we are dealing with powerful interests that are not going to give up their stranglehold without a fight . I can not begin to tell you the lies and half truths I was told by these peddlers.
  4. Would it be helpful to, perhaps, think about it this way: the cost of your trip will (almost certainly) be less than those crooked salespeople would have taken from you, had you not changed how you invest. In other words, had you stayed with them, they would have been taking a European vacation on your dime. It's time you reward yourself for years of good choices!!
  5. Well I can beat most of them but I am sure they are working on it:) Someday my way around them will be figured out and stopped.
  6. No problem. I am just glad some of you actually are interested in reading them. This one offers an interesting perspective. I had mentioned in previous posts that after 30 years plus of a savings mindset, I was having trouble spending my money now that I am retired. This article caught my attention. I need to plan that trip to Spain, Italy ,France, and Greece sooner rather than later . But it will be difficult for me to get use to the idea of spending what it has taken me 30 plus years to save and after dealing with all the obstacles and frustrations I had to fight along the way trying to keep my money in my pocket instead of giving it all away to high fee crooked salespeople and other financial institutions.A dilemma. Sorry, that second to last sentence is a run on.
  7. I love your hatred of paywalls :-) Thanks Tony!
  8. Dr. Statman is the Glenn Klimek professor of finance at Santa Clara University’s Leavey School of Business and the author of “Finance for Normal People: How Investors and Markets Behave. Imagine spending a lifetime acquiring habits that offer the promise of a longer, happier and more fulfilling life. Then imagine that to have that fulfilling life, you suddenly must abandon all those habits. Not easy, is it? But that’s what happens when people go from work to retirement, from saving money to spending it. Too often, the same personality traits that facilitate saving for retirement become impediments when it is time to spend that money. The mental tricks we employ while working become mental mistakes when we move into the next phase of our lives. The result isn’t merely a nuisance. It can lead to a much less satisfying retirement—one in which people spend too little money and spend it on the wrong things, as well as take on too much investment risk. It can greatly reduce the happiness of later life, a time when many people have the time and money (and wisdom) to enjoy their lives in a way they never could before. So, how can we recognize and conquer those old habits when they’re no longer working in our favor? Conscientiousness is a doubled-edged sword Who doesn’t want to be conscientious? Conscientious people are likely to say they don’t buy things on impulse, or spend too much money, or buy things they don’t really need. Conscientiousness is the personality trait most closely related to academic achievement, job performance, marital stability and longevity. Conscientious people accumulate more wealth than less conscientious people, even after accounting for differences in income, education and cognitive ability. JOURNAL REPORT Insights from The Experts Read more at WSJ.com/Encore MORE IN ENCORE: THE NEW RETIREMENT Where to Find Great Volunteer Vacations Is There Really a Retirement-Savings Crisis? You Always Wanted to Learn an Instrument. It’s Time. If You Ever Wanted to Retire in Italy This all sounds great. And it is—until it collides with retirement. Conscientiousness then threatens to keep people who have enough money to enjoy life from spending that money. As one man wrote in a blog about retirement saving and spending: “I bought in early to the idea of saving for retirement over consumption, perhaps without really thinking much about it. Along the way...I became frugal. Changing now would be traumatic for me.” The lesson here is as difficult as it is obvious: We should beware of crossing the line from frugality to miserliness. It’s all how you frame it The mental tools of framing and accounting help us accumulate savings during our working years. We frame money into distinct mental accounts of “capital” and “income,” and follow the rule of “spend income but don’t dip into capital.” We set automatic transfers from our income mental accounts (wages and salary) to capital mental accounts (401(k)s and the like). Yet these mental tools can backfire in retirement when it is time to spend. Think of a retired 65-year-old with a $1 million stock portfolio. He needs an annual $40,000 in addition to Social Security benefits to maintain his standard of living. Assume he earns $20,000 a year from a 2% dividend yield on his stocks, and $20,000 a year from a 2% increase in the value of his stocks. He can comfortably spend $40,000 a year during 30 years of life expectancy. But such spending requires crossing the boundary that separates income from capital mental accounts and dropping the rule against dipping into capital. Many retirees can’t cross that boundary. So they spend much less than they can afford to, or they attempt to increase income, which means greater risk. They may buy high-yield bonds—which have a higher default rate—or stocks promising high dividends—which are concentrated in particular industries, especially banking and utilities, raising risk by decreasing diversification. There are better ways to ensure prudent spending in retirement while allowing investors to maintain the psychological comfort of a wall between capital and income. One is by “managed payout” funds that pay a percentage of their value, such as an annual 4% “income,” in installments specified by investors. This “income,” in reality, is composed of a combination of dividends and capital. Another method involves required minimum distributions, or RMDs. These government-mandated withdrawals from defined-contribution retirement accounts start at age 70½. The annual RMD rate at age 70½ is 3.65%, increasing to 5.35% at age 80, 8.77% at age 90, and 15.87% at age 100. By absolving people of the responsibility for deciding when to cash in their savings, RMDs can serve as prescriptions for spending more than our mental barriers would otherwise allow. The pain of regret There’s another reason so many retirees find it difficult to draw on capital, however much they can afford to. It’s because spending capital—as opposed to income—increases the likelihood that they’ll suffer the searing pain of regret. Compare John, who buys a laptop computer for $1,399 with dividends received today from shares of his stock, with Jane, who buys the same laptop today with $1,399 in proceeds from the sale of shares of the same stock. Now suppose that the share price rises 3% tomorrow. Jane is much more likely to suffer the pain of regret because she chose to sell her shares. For John the company’s decision as to when to pay dividends was out of his hands. Of course, Jane would feel pride if the shares’ price fell by 3% tomorrow rather than rose, but the pain of regret that accompanies a 3% loss exceeds the joy of pride that accompanies a 3% gain. To get around this emotional block, retirees should find alternative ways to tap their capital—ways that won’t burden them with the potential pain of bad choices. They could, for instance, set up a strict schedule of investment sales, such as at the end of each month, removing the responsibility for choosing the right times for sales. Or they can use the managed-payout funds mentioned earlier. You’ll die sooner than you think People don’t judge their lifespans very well—a miscalculation that can leave them once again underspending in retirement. According to data from the Social Security Administration, a man reaching age 65 today can expect to live, on average, until age 84.3. A woman turning age 65 today can expect to live, on average, until age 86.6. About one out of every four 65-year-olds today will live past age 90, and one out of 10 will live past age 95. JOURNAL REPORT PODCAST Subscribe to the Journal Report podcast at wsj.com, on iTunes or Google Play Music. A study of people’s beliefs reveals, however, that while young people underestimate their longevity, older people overestimate it. For instance, 68-year-old men have a 71% chance of living to 78 but believe, on average, that they have an 82% chance of reaching that age. Such overestimation means that people also overestimate how much money they will need in retirement—and underestimate how much they can spend. I’m not suggesting people spend every penny they have by age 95. But most people have a lot more leeway to spend than they realize, and their misunderstanding of longevity only exacerbates their underspending. Don’t leave the best for last We have a tendency to put off spending for enjoyment, thinking both that it is financially prudent and that delaying will increase our gratification. That is wrong in both cases. Take a cruise when you are 70 if you wish, but don’t delay it. Evidence indicates a pronounced tendency for diminished consumption beyond age 70, even among those with ample financial resources. A household headed by an 80-year-old spends 43% less than a household headed by a 50-year-old. Older people suffer physical limitations that make them less capable of spending money. And for personal reasons, such as the death of a spouse, they are less inclined to spend. Spending isn’t just about the price We often get advice from family and friends to spend more while we can. Spend at fancy restaurants, they say. Go on a cruise. But the better advice is to identify what can bring us joy, even if it departs from what brought us benefits in the past. A couple I know never flew business class unless upgraded or paid with frequent-flier miles, because tickets cost as much as five times coach fare. That made sense when they were younger and trying to accumulate savings. But they hated traveling coach, especially as they got older. Eventually, they realized they could afford to fly business class for international trips. For them, that extra fare was worth much more than, say, going out 10 times for $100 meals at a pricey restaurant. In contrast, another couple recently bought a new car. They easily could have afforded a luxury car, but chose an ordinary one and donated the difference to a favorite charity. They saw the purchase of a luxury car as a kind of status-seeking they didn’t want. Instead, they derived expressive and emotional benefits from their donation. Similarly, for many people during their work years, some spending is motivated by social status—“keeping up with the Joneses.” When we’re saving for retirement, such comparisons make sense, because it pushes us to strive to get ahead. But that kind of comparison hangs on way too long into our retirement years. It only makes us spend too much, and on things that don’t give us true happiness. At this point, we shouldn’t be striving to make more, to achieve status. We should be striving to get the most joy out of what we already have accumulated. It is better to give with a warm hand than with a cold one Many people believe that the time to bequeath the majority of their estate is when they die. Part of it is out of fear of running out of money (often irrationally). Part of it is simply habit. But waiting deprives them of the joy of giving. PREVIOUSLY IN ENCORE Five Myths About Landing a Good Job Later in Life (November 2016) How to Use Tech to Connect to Grandchildren (November 2016) ‘I Used to Be So Cool. What Happened?’ (November 2016) Good Reads Before Downsizing (March 2016) It’s Time to Rethink the Bucket List Retirement (March 2016) The Healing Power of Forgiveness(March 2016) A father asked me for advice whether to forgive a substantial loan he and his wife made to their son for law-school tuition. He is at the beginning of his career and at the beginning of forming a family. They could easily forgive that loan without imposing hardship on themselves. It is money that would be going to their son in any event. Why, I asked, would they insist on having him pay it back now, when he probably needs it the most, and they could enjoy the act of giving it the most? Don’t try to beat the market A lot of people look ahead to retirement and think: I’ll have so much free time, I’ll finally be able to manage my investment portfolio and not pay somebody to do it. Resist that temptation. For one thing, trading by amateur investors is akin to baking by amateur bakers: You’ll never bake a good loaf, because you’ll be opening the oven door every few minutes. What’s more, investors are notoriously bad at evaluating the risk they are taking with their portfolios. That’s because they are still thinking the way they did when they were in the workforce. They don’t realize that the wealth of young people is mostly in “human capital”—the income they are likely to earn during their working years. Younger people can take more risk with their retirement savings because human capital will cushion their fall. The wealth of retired people, however, is mostly in retirement savings. They can’t afford much risk, because they have no human capital to fall back on. Placing part of their retirement savings into a well-diversified portfolio of broad-based mutual funds is prudent because such a portfolio isn’t likely to lose all its value. But placing all retirement savings into a venture, such as a retail store or new franchise, is less than prudent because all its value can be lost. As an old commercial advised, you don’t have time to earn it anymore. Buy an occasional lottery ticket instead. Dr. Statman is the Glenn Klimek professor of finance at Santa Clara University’s Leavey School of Business and the author of “Finance for Normal People: How Investors and Markets Behave.” Email: reports@wsj.com.
  9. Below. Its a long article with spaces and gaps in between. Make sure you read to the very bottom.
  10. Is this link working for anyone?
  11. The same mind-set and habits that work so well when people are building their nest egg can damage their quality of life—and their investments—in retirement. http://www.cetusnews.com/news/The-Mental-Mistakes-We-Make-With-Retirement-Spending.S1nOzov2f.html
  12. Yesterday
  13. 403(b) Choices

    My comments on the calculators were aimed at Kevin P and anyone else that hadn't played with the type that allows those kinds of inputs. I was addressing the lurkers, I guess. I was hoping that Steve, Tony, Kevin P and anyone else would give us feedback on it. Maybe I'm mistaken in thinking it's a very useful motivational tool? Maybe someone knows of a similar, better tool that has even more inputs for a more accurate prediction? Steve's table is great and directly applicable to those of us who are retired with our nest-egg that has to last. "My" calculator is directly applicable to those still working and contributing to a high-cost nest-egg. Or am I wrong?
  14. 403(b) Choices

    Hi krow, Not sure why you have to explain your calculator to me, and that your calculator does more than my table. Well, yes, of course, the calculator does more! I simply created my table as another way to display costs, which we all know is purposely opaque, vague, complicated, and understated by most financial advisers. Our readers need all of the displays possible because most people do not fully comprehend the damage to the final nest egg of costs over many years. As Taylor at Bogleheads has famously said for 20 years, "There are many roads to Dublin." Have a great day, Steve
  15. 403(b) Choices

    I did. Correct to 0.08% Well, I did state I was bad with math. Decimals put me in summer school and got me hit on the head a few times as kid going to catholic school run by ferocious nuns.
  16. 403(b) Choices

    Tony, I think you left out a zero!? Steve, your table is impressive, and I've used similar tables to get folks' attention on fees. It's simple and easy to understand but it's based on the fees of a given principal. It may not be applicable to younger investors with small balances. I really like the calculator I linked above because it shows the effect of fees over time. Not just any time, but time left to retirement! It takes in to consideration current balance, continuing contributions, ERs, front-end loads, advisor fees, etc. It should attract the attention of anyone still working and contributing to their retirement every pay period.
  17. Last week
  18. 403(b) Choices

    The chart is clear. How cleverly these folks are able to hide the damage they are doing to your portfolio so that unless you are an astute investor you may never know the damage is even being done! And, those high fees come out of your account regardless if the market is climbing or falling . I've known some pretty smart math teachers that didn't even have a clue. I had to point it out to them and I stink at math. To me, now, even .35% is too darn high. I average 0.8% expense ratio. It just makes me sick to think how the "caring" financial industry claims to be there to " help us reach our financial goals". In too many instances it all about lining their own pockets. How disingenuous and dishonest. I don't ever remember ever dealing with an advisor that totally disclosed their fees, how they are paid, and how expense ratios work. Not one. ' ; '
  19. 403(b) Choices

    There are many ways to show how devastating those high-cost funds can eat into your final nest egg. Below is a table I created that shows the HUGE differences in prices between a 1.95% vs. a low cost .35% on various sample portfolios. The differences in the table represent ONLY ONE YEAR! Over time these differences will be devastating.
  20. 403(b) Choices

    Kevin P, to help you and your wife get a longer term perspective on saving for retirement and the investment fees involved, I suggest you play around with this calculator. https://www.360financialliteracy.org/Calculators/403-b-Savings-Calculator3?fpath=197 First calculate the “Percent to contribute” by adding up the payroll deductions per year and divide that by “Annual salary”. If the loads on those funds average say 5%, you should subtract 5% from the “Percent to contribute” line. Her “Annual investment fee” will be the average expense ratio which looks like around 1% plus the advisor fee of 1.25%, for a total of around 2.25%! Then do the calculation with no loads, and an "Annual investment fee" of 0.1% or 0.2% which is the ER of Vanguard index funds. The difference in results should help motivate you and her to get into a lower cost 403b plan. You can use the same calculator on your SEP IRA.
  21. Unfortunately, even the fiduciary fee-only financial advisers can be expensive too, IF they charge 1.0% or more AUM, or an outrageous 5.0% retainer on small portfolios in the $100,000 range. Back in the days, it used to be fee-only and hourly, but in order for the financial advisers manage a business, they embraced the AUM which is actually more profitable than the commissions. I wonder why the insurance industry fights those new fiduciary standards when they could make more money, in my opinion. I wish for the days, if there was such a thing, that fiduciary financial advisers charge $300 - $500 per hour when you need them, like any other profession. I just paid $485 to file my state and federal taxes. Why can the personal finance advice industry offer a similar service? It seemed to start out that way but now has evolved to the AUM. I know its more complicated than a CPA's job with taxes or accounting. FA have to use an external custodian such as Ameritrade to place their clients' money in order to manage portfolios under their care. BTW I think .50 or .75% AUM is reasonable and 1.25% is outrageous, again, in my opinion.
  22. “The term ‘financial adviser’ is so used and misused that it means almost nothing". So its important to know what you are getting. The folks selling insurance products and high cost mutual funds are not the real financial advisors so please don't be confused. https://www.nytimes.com/2018/04/20/smarter-living/why-you-should-hire-a-financial-planner.html?recid=13WmAZ9OnOVe3yk38JNpVrvWGud&sl_l=1&sl_rec=editorial&contentCollection=smarter-living&mData=articles%5B%5D%3Dhttps%3A%2F%2Fwww.nytimes.com%2F2018%2F04%2F20%2Fsmarter-living%2Fwhy-you-should-hire-a-financial-planner.html%3Frecid%3D13WmAZ9OnOVe3yk38JNpVrvWGud%26sl_l%3D1%26sl_rec%3Deditorial%26articles%5B%5D%3Dhttps%3A%2F%2Fwww.nytimes.com%2F2018%2F04%2F19%2Fbooks%2Freview%2F11-new-books-we-recommend-this-week.html%3Frecid%3D13WmAZ9OnOVe3yk38JNpVrvWGud%26sl_rec%3Deditorial&hp&action=click&pgtype=Homepage&clickSource=story-heading&module=smarterLiving-promo-region&region=smarterLiving-promo-region&WT.nav=smarterLiving-promo-region
  23. 403(b) Choices

    Those expense ratios plus loads too ? unbelievable.
  24. 403(b) Choices

    Thanks Steve, it’s great to be able to contribute to the cause! I’ve looked up the expense ratios of the funds and added them to Tony’s good work. LGLAX-Lord Abbott Growth Leaders Fund Class A Large cap growth, ER 0.95%, LOAD 5.75% FDBAX-Federated Bond Fund Class A Shares Corporate Bond, ER 0.86%, LOAD 4.5% GFAFX-Growth Fund Of America Class F-1 Large Cap Growth, ER 0.70%, NO LOAD FKINX-Franklin Income Fund-Large Cap Growth - Bond Allocation, ER 0.62%, LOAD 4.25% STIAX-Federated Strategic Income fund-Large Cap Stock -Bond Allocation, ER 0.97%, LOAD 4.5% PGSGX- JPMorgan Small Cap -Small Cap Fund, ER 1.32%, LOAD 5.25% 0SGIX-JPMORGAN Mid Cap Growth -Mid Cap, ER 1.24%, LOAD 5.25% SAMCX-Saratoga Moderately Aggressive Balanced Fund-Large Mid cap -Small Cap, ER 1.24%, LOAD 5.25%% PSOAX-JPMORGAN SMALL CAP VALUE FUND-Small Cap, ER 1.24%, LOAD 5.25%% FBTAX-Fidelity Biotechnology Fund-Large-Mid-Small Cap, ER 1.25%, LOAD 5.75% You are at a disadvantage in trying to improve your wife’s 403b. First of all, it’s her account, and it’s up to her to make decisions on it. Maybe you can do some of the necessary investigation for her? I know from first-hand experience that teachers don’t have much extra time or energy for what she needs to do. This advisor has loaded up her 403b with very expensive load funds and then on top of that is charging her 1.25%. That adds up to over 2% in annual fees not to mention a load of about 5% on average. This is a huge drag on on value over time of her account. She needs to get out of the advisor relationship and into a 403b plan that allows her to invest in no-load, low-cost, diversified index funds. She can contact a Lincoln Investment office and find out what Lincoln plans are possible for her. The Participant Directed plan would be outstanding, but Lincoln Investment’s other mutual fund based 403b plans could be much lower cost than what she has now.
  25. choosing a 403b plan

    Thats my thought exactly.
  26. choosing a 403b plan

    It looks like your district is offering a “25% retirement incentive” to their employees who qualify for it. This is sometimes referred to as a “golden handshake”. The union and the superintendent have set up a 457 plan that can receive that 25% as well as cashed out sick leave. Otherwise the retirees would have to pay income tax on these moneys. Ouch! It could be a 457 plan available to all employees, although I think it’s more likely one set up for just this one purpose. The justification for encouraging employees to retire is to reduce the number of the most expensive employees, replacing them with young inexpensive employees. My district didn’t offer an incentive, just lowered the number of years employment required to retire to 15, and the minimum age to 50. The offer only existed for a year. I took it and went sailing! You should ask your union about the NY state 457 plan! It’s outrageous that it’s not available to all district employees!
  27. Thanks Tony! and so did 9 other people thought it was a good review too. I like reviewing books, especially those books that are self-published and or emphasizing the qualitative POV rather than the quantitative. Your Money or Your Life was not self-published FYI.
  28. 403(b) Choices

    I agree with Tony. You, krow36 have been a huge addition (and badly needed) to our tiny community. 4,000,000 highly educated educators at all levels of the public k12 education world and the same few people come here (and a few have spouses in education) and try to reform the horrific 403b world. Talk about an esoteric topic!
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