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krow36

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  1. krow36

    Illinois Teachers to Get Low Cost Option

    Darn, I see I've made a mistake in my post above when I referred to "defined compensation plans". I meant "defined contribution plans". I'll correct it. It's all the fault of the IRS for cooking up these terms! Defined contribution plans include 401k, 403b and 457 plans, where the employee chooses to contribute. And pensions are called Defined Benefit plans. Only a 457 plan gets the label of "deferred compensation plan". Using DCP for an abbreviation for the 457 plan is not a good idea I guess---I should stick to 457.
  2. krow36

    Illinois Teachers to Get Low Cost Option

    How about: https://www.irs.gov/retirement-plans/irc-457b-deferred-compensation-plans If you look at a few of the state 457 plans in thread I linked above, you'll see they are often referred to as "Deferred Compensation Plans". Sometimes the websites use only 457, sometimes the Deferred Compensation Plan label, and sometimes both. I agree it's not a great label and overlaps the term "Defined Contribution Plans", which includes 401k, 403b and 457 plans. If you look at the Log In page of Steve's favorite 457 plan, that of LAUSD, you'll see both labels at the top. https://my.voya.com/voyasso/index.html?domain=lausd457b.voya.com#/login-pweb I agree that the article was poorly written and edited. The writer shouldn't have mentioned the Tier 3 hybrid pension plan because it isn't relevant to the new 457. I'm confidant that a 4% contribution limit can't be part of a 457 plan. Maybe the writer needed to fill up some space? Maybe he got it from the state representative, or from the head of the IL TRS? Who knows?
  3. krow36

    Illinois Teachers to Get Low Cost Option

    Steve, I think you may have misread the article. The article is about establishing a “deferred compensation program” which is a 457 plan, which I know you are very familiar with. This plan is NOT a hybrid pension plan. According to the article, the IL TRS has already set up a hybrid pension plan, their Tier 3 plan, not fully implemented yet. The coming IL state 457 plan could use the same mutual funds that the defined contribution part of the hybrid pension plan. That’s what WA has done. WA uses a very small number of extremely low-cost funds. What’s your problem with that? It seems only logical to me to make use of economies of scale.
  4. krow36

    Illinois Teachers to Get Low Cost Option

    Steve, I think you and Ed are mistaken to think of the coming IL state deferred compensation plan as some sort of hybrid pension plan. This DCP is a 457 plan, that’s all. It is being set up and will be run by the IL State Teachers Retirement System (IL TRS). It will have to use the IRS rules for 457 plans. CA, WA and other states have 457 plans run by their state TRS. WA has a TRS whose current Tier 3 plan is a “hybrid”—part pension and part defined contribution plan, similar to the Tier 3 of the IL TRS mentioned in the article. I’m a member of Tier 1, a straight pension plan (with no guaranteed COLA). In WA, the very low-cost funds* offered in the defined contribution part of Tier 3 are also the funds offered in the state 457 plan. I think the article probably was referring to that sort of setup. The pension part the WA Tier 3, and pension Tiers 1 and 2, are invested differently and I don’t think the investments are disclosed in any detail. *Examples: US Large Cap Equity Index (S&P 500), ER 0.003% WA State Bond fund (high quality corporate bonds), ER 0.009% The additional management fees total about 0.13%
  5. krow36

    Illinois Teachers to Get Low Cost Option

    A "deferred compensation program" or DCP is another term used for a 457. Some plans don't even mention "457". It is unusual for a politician to be out front pushing successfully for a better retirement plan for teachers, isn't it? I agree with Dan that it's likely that the NYT articles probably helped get this started and approved! Kudos to Tara and Ron and all those that participated in the series!
  6. krow36

    Illinois Teachers to Get Low Cost Option

    At least 21 states have 457 plans for K-14 districts that are run by the state governments as per the thread I’ve been keeping. http://board.403bwise.com/topic/6130-457b-state-plans-for-k-12-employees/. States are added to the list as we become aware of them. Some states have such a plan for their state employees but K-14 employees are excluded. It’s great that IL is starting a 457 for K-14 employees! These plans are low-cost and usually preferable to any of the other vendor’s 457 plans on the district list with the exception of Fidelity. I think Ed is correct that the states’ 457 plans compete with those of other vendors, most of whom have sales reps on-site. However several large districts in WA have only the state 457 plan on their vendor list. WA state law preventing districts moving to a single 403b vendor apparently doesn't apply to 457 plans.That’s encouraging and so maybe IL districts will drop their other vendors in the future. I doubt that Rep Martwick is correct that the contributions will be limited to 4% of salary. The IRS rules for a 457 determine the maximum salary contribution, not state law. Perhaps the IL TRS will be consulting with CalSTRS about establishing their 457 plan. Their Pension2 457 is probably the lowest cost 457 plan most CA districts have (unless they have Fidelity on their list).
  7. IRAs can't be borrowed from, but your can take a distribution from them for education expenses that avoids the early-distribution penalty of 10%. Loans from 401k's and 403b's are possible, as well as penalty-free distributions for education expenses, as I mentioned. The distributions add to your taxable income of course. I agree with Ed about stopping contributions to retirement accounts to help fund your degree. I agree with Tony that loans from your retirement accounts is a bad idea. You should leave them alone to grow. Taking out student loans may make sense if your sure you'll be able to pay them back. Please research them out first. I know next to nothing about them except what I read in the NY Times, and that's a bit scary.
  8. Patrick, the IRS does not permit loans from IRAs: https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-loans#1 I haven't checked the NEA Direct Invest 403b plan yet to see if they allow loans. They do welcome adding retirement accounts from previous employer's plans so consolidation could be done. It is possible to take a distribution from 401k and 403b plans for educational purposes, if the plan allows it. Have you investigated that? The distribution is taxable buy not penalized the 10% for early withdrawal before age 59.5. EDIT It looks like loans are available in the NEA Direct Invest plan. See the Custodial Agreement: http://www.nearetirementprogram.com/enrollment
  9. krow36

    Why Insurance Companies will not do Self-directed 403bs

    To me 403bannuitysaleman’s situation is not as black and white as many of you write. He describes the many outrageous practices of his colleagues but he hasn’t said much about his own practices. Perhaps he tries to avoid selling his company’s more expensive products? He says he discloses the fees of company’s products but that most teachers ignore his advice. Perhaps most of his sales are of fixed annuities, where there is no 3% plus drain on the contributions due to fees? Yes, fixed annuities are more of a savings account than an investment account, but it’s a savings account with a tax-deferral benefit. That’s actually what I had during my 403b contributing years (1976-1992). My 403b rep didn’t try to get me into a higher fee option. Many of you seem to be tar and feathering 403bannuitysaleman with the worst practices that he describes, which I think is most likely unwarranted. I think of him as a sort of whistleblower, all be it one without any whistleblower protections, benefits or higher authority to complain to. I’m glad Dan Otter has seen fit to allow him a platform here to express his perspective. He’s not pushing annuities here, he’s calling for self-directed low-cost index custodial accounts to be an available option in every school district! Sounds familiar. I would like to see his perspective given more coverage. Maybe a NYT article by Tara and Ron? A podcast interview?
  10. krow36

    403(b) help!

    Shannon, let’s not worry about your inherited 457 account right now and go to some basics that we all agree on. First off, about how much can you currently contribute to your retirement accounts? If it’s only about $5500, then all you really need right now is the Roth IRA you opened at Vanguard. If you can contribute more than 5.5k/yr, then also opening a 403b with Vanguard or Fidelity is the way to go. In both the IRA and the 403b, you can choose an all-in-one Target Retirement, low-cost index-based mutual fund. If you want input on which one (2020 or 2055?), just ask. If you can contribute more than the 5.5k to the IRA and the 18.5k to the 403b per year, then working on your school district to add a low-cost 457 plan is worth doing. Either the CalSTRS Pension2 or Fidelity would be excellent. Yes the district and the TPA will resist, but if you persist, it’s very likely they will give in and do the right thing. Other posters here can advise you because success stories are frequent.
  11. krow36

    Why Insurance Companies will not do Self-directed 403bs

    Bashdash, thanks for the kind words. Give yourself most of the credit for your eye-opening. You kept coming back with questions until it was clear what was going on. That makes the process so much easier. The great thing about the forums is that the poster not only learns, but also other readers. I’ve learned so much from reading the forum threads of others. By the way, I think you mentioned that your learning process started with reading one of Tara’s NY Times articles.
  12. krow36

    403(b) help!

    Has anyone sent him a PM?
  13. krow36

    403(b) help!

    WOW, this is a bit complicated! I haven’t found anything on inherited 457 that came from a divorce settlement (the employee being under 70.5!). I think this is a job for a professional, which none of us here are. Maybe one will join us? Hopefully the folks running the City of LA 457 plan (VOYA) have it figured out. But maybe we can help you understand some questions to ask VOYA and we can learn something ourselves? There are 2 other forums that both have experts on retirement plans where you (or we) could ask questions if you have them. To summarize: Your mother received a part of your father’s 457 in a divorce settlement. She died 11 years ago and you inherited the 457. You haven’t said it is a Roth 457 but if VOYA says the taxes have been payed, then it has to be a Roth 457. You should confirm this. Do you get statements or have an online account? You should at least get the former. You’ve been told by VOYA that you must start taking a distribution by the year that your living father is 70.5. I’m not sure if the Required Minimum Distribution will be based on his age, or on your age? It just so happens that it’s 5 years until your dad is 70.5. I was confused because there is a 5 year rule that applies to distributions inherited IRAs (and maybe 457 plans?). So the 5 year rule doesn’t apply in this case. It’s not clear to me yet that you should move the inherited 457 anywhere, including to an IRA at Vanguard. It would be best to postpone that decision I think. You are paying 0.36% in fees on the fund now which isn’t rock-bottom but it’s not too bad, and certainly much better than any of your district’s current 457 vendors. The Aggressive Portfolio Profile for the City of LA 457 plan is 80% US and Int’l stock funds and 20% bond and stable value funds. The 0.36% fee includes the management fee as well as the expense ratio. https://cityofla457.gwrs.com/preLoginContentLink.do?accu=CityOfLaWR&contentUrl=preLogin.InvestmentInformation.A&specificBundle=preLogin
  14. krow36

    Seeking Financial Input 403 (b)/457/Roth

    Am I correct in thinking this is an inherited 457 account? If so I don't think it can be rolled into a 403b account. It can be rolled into an IRA where it will be an inherited IRA. When you inherited the 457 2 years ago, you had a choice of (1) taking RMD’s based on your age, or (2) taking a full distribution by the end of the fifth year following the year in which your father died. You opted for the full distribution in 5 years and there’s 3 years left. Is this correct? You have mentioned that the taxes have already been paid, so this must be a inherited Roth 457? This is a very critical bit of information! Shannon, how much of the above is the case?
  15. krow36

    403(b) help!

    OK, Shannon, that's different. If your 457 is an inherited 457, you don't have that "no-penalty withdrawal at any age" benefit. I think you must take "Required Minimum Distributions" but I need to do some reading on inherited 457 accounts. When did you inherit the 457? Have you made any withdrawals yet? I don't understand your comment about your dad being 70? Can you provide a link to a website that covers the "70 age and time to roll it over" ideas?
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