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  1. Questions about Roth and Real Estate

    Here’s what the IRS says about Roth IRA distributions in Pub 590B: So, there’s not tax or early distribution penalty on the direct contributions to her Roth IRA. By “principal” do you mean direct contributions? Converting a tIRA to a Roth IRA is not a direct contribution but a conversion and there are different rules for that.
  2. 403(b) Choices

    Hopefully the NY state 457 info will motivate your HR department to add it to the vendor list. I think it’s probable that adding it will require a buy-in from a higher-up in the district. If you find out who actually makes the decision, and if rules have been established for making additions, you’ll be better able to focus your efforts. Kevin, the link you provided for Legend doesn’t give the info that you need, which is: the names of the different 403b plans that Legend offers in her district. You need to know the funds and their expense ratio offered in each plan, and each plan’s fees (mgt/wrap fees, flat fees/yr etc.). I don’t know if you can pry this info out of her current rep? You may have to talk to his boss or his boss’ boss? I looked at the 403b plans that Legend offers in CA. https://www.403bcompare.com/vendors/1052#/productlist Granted they may offer different plans in NY. Only FREEMARK and STARS look to be worth a quick look: FREEMARK: Mgt/wrap fee is 1.25% to 2.25% with breakpoints, 7 Vanguard funds including 500 Index, Small Cap Index, Developed Mkts (Int’l) and Total Bond Index. I think the 2.25% mgt/wrap fee for her 10k makes this plan way too expensive. (Breakpoints allow different fees depending on the account's balance. 10k would no doubt get her the most expensive fee.) STARS: Mgt/wrap fee is 1.50%, 9 no-load funds including TIAA S&P 500 Index (0.06%), TIAA Int’l Eq Index (0.06%), TRPrice US Bond Index (0.30%). Also too expensive in my opinion. As for getting a better 403b plan from Lincoln Investment (LI), you should try to get the Participant Directed Platform for her. If that is unsuccessful, find out if the LI Retirement Solutions Premier is available. It’s available in CA: https://www.403bcompare.com/vendors/1068#/productlist In CA it has a mgt/wrap fee of 1.25% (and an optional advisor fee of 0.3% which she doesn’t need), and 65 Vanguard Investor class funds. This plan is expensive but it offers more diversified and much lower-cost funds that what she is in now. You should find out if her current LI plan allows her to drop the advisor and his fee. If so, what are the remaining fees? The weighted expense ratio of her current funds could be greatly reduced it she dropped the expensive funds (0.90% and above) and moved that money into the lower ER funds: FDBAX-Federated Bond Fund Class A Shares, Corporate Bond, ER 0.86% GFAFX-Growth Fund Of America Class F-1, Large Cap Growth, ER 0.70% I think she (and you?) have online access to her account? If so, this exchange may be able to be done online (maybe after dropping the “advisor”?). Otherwise by mail, or through the rep. I think you need to be with her when dealing with the rep, and be prepared for what you (and she) want from him.
  3. 403b Questions/Options

    Yes, VTSAX at an ER of 0.04% plus the 0.15% is probably the lowest cost per fund balance possible through Aspire. The additional $40/yr fee does add to 0.19%. As you've mentioned, using VTSAX in the Security Benefit NEA Direct Invest will cost only the fund's ER of 0.05% if the balance is above 50k, and an additional $35 if the balance is under 50k. Since you've said that Security Benefit is a 457 vender for your district, I assume it is also a 403b vendor. If that were not the case, I would recommend being satisfied with Aspire. Working to add Security Benefit to a vendor list is not ethical in my opinion due to the predatory nature of their plans other than Direct Invest. You might benefit from using Direct Invest but many (most?) of your colleagues will end up in high-cost (over 2% in fees!) plans.
  4. 403b Questions/Options

    VTSAX is listed on the Aspire website as available. Best give Aspire a call if in doubt.
  5. 403b Questions/Options

    Vanguard funds come in 2 classes, Investor and Admiral. The TSM Index Investor fund has an ER of 0.14% and the TSM Index Admiral fund has an ER of 0.04%. Once the balance in the index Investor funds gets to 10k, Vanguard will convert the Investor shares to Admiral shares. I'm not sure if Vanguard requires Aspire to start you out with Investor shares, or lets you start out with Admiral shares. I think in the past it was allowed, but I'm not sure. You should ask Aspire. In accounts held directly with Vanguard, once you have a 10k balance in the Investor fund, Vanguard will ask you if you want to convert to Admiral shares.
  6. 403(b) Choices

    Kevin P, it’s possible you can find her district’s 457 vendor list, if there is one, yourself. Look through the district’s website, sometimes it’s there. If you know the third party administrator that the district uses, check there also. The NY state 457 is an excellent, super low-cost plan which is available to all NY public school teachers IF their district adds it to their 457 vendor list. Come to think of it, I think you can phone the NY state 457 plan and they will be able to tell you if they are on her district’s list. If all she is able to contribute is $4000 a year, it would be much, much better to use the 457 than the expensive 403b. Hopefully you can find a less expensive 403b and transfer her current balance at Lincoln to it. Can you provide us a link to the Legend 403b plan that has Vanguard funds? I’m glad to hear that she isn’t being charged front-end loads. Have you confirmed it by comparing her pay statements with her Lincoln Investment statements? It’s fairly common for teachers to have little interest and/or time in the details of retirement savings. It frequently falls to their spouses to battle through the many obstacles to finding a good plan. Hang in there! It’s perfectly legal and acceptable for you to make calls for her, and join her for appointments.
  7. 457 Plan - Which Vendor/company?

    I agree with Tony! Perhaps the payroll supervisor would like to avoid any extra work? Communicating with the school board is an excellent idea. If your district uses a third party administrator, find out if there is a procedure for adding a provider. Maybe your union is involved? If you can get even a few colleagues involved, that can help move the process forward. If Aspire is already a vendor on the 403b list, there’s no good reason it can’t also be on the 457 list. If you give Aspire a call, I think they might be helpful. The more you know about the process, the better. You should confirm that Aspire’s fees are the same for both the 403b and the 457 plans. The NY Times series on teacher’s 403b plans might be helpful in pointing out the importance of a low-cost plan. https://www.nytimes.com/2016/10/23/your-money/403-b-retirement-plans-fees-teachers.html?smid=tw-share&_r=0
  8. 457 Plan - Which Vendor/company?

    OK, your 457 plan with Voya is annuity-based. I wonder if you have been told about all the fees? It’s possible that the 0.95% fee is the mortality and expense (M&E) fee that they have renamed the “contractural fee”? You should find out if your plan has a surrender fee, although I don’t think you know of a better option at this time. Voya may also offer a 457 plan that is mutual fund based that might be less expensive. It would be worth while asking about it. Aspire is a good option for your 403b, and I wonder if you could get Aspire added to your district’s 457 vendor list? I see from the Aspire website that they do both 403b and 457 plans. Aspire pays any Third Party Administrator fees out of the $40 fee that you pay, so the district isn’t charged. Why don’t you call up Aspire and see if it’s possible? If they say it’s possible, then you’ll need to work on your district and the TPA. You and your colleagues deserve at least one low-cost 457 vendor! It’s difficult for me to decide between your current 457 plan and a low-cost taxable account. It depends on your situation. Do you have a spouse contributing to your taxable income, and/or is your 1099 income a significant addition to your taxable income, so that maxing the 457 puts you in a lower income tax bracket? Your income tax bracket is based on your “taxable income” on line 43 of your Form 1040. If you could use an Aspire 457, maxing it out seems like a good idea to me. If you can’t get Aspire added, maybe at least start an after-tax account and split your 18.5k contribution between it and the 457. I don’t have any experience with 529 plans. If your own future education plans are indefinite, perhaps funding from a taxable account makes more sense. It could have a more conservative asset allocation than that of your retirement portfolio. As for funding 529 plans for relatives, I don’t know enough about 529 plans to help on this.
  9. 457 Plan - Which Vendor/company?

    Hi dankupper, Is the Voya 457 a mutual fund (MF) based plan, not an annuity based plan? Hopefully that is the case. Annuity based plans usually have an additional fee of about 1%, usually call an M&E fee as well as surrender fees. Even MF based plans usually have an additional administration fee that can be 1% or more. Maybe you already know that your 457 is MF based? Those fees on each fund are called expense ratios (ERs). For a rough calculation you can take an average of the 4 ERs. However you can calculate your weighted average ER which is more accurate. For example: Fund A 40% of the 457 Fund B 20% " Fund C 15% " Fund D 25% " Multiply each fund's percent times it's ER: Fund A: .40 * .0038 = .0015 Fund B: .2 * .0044 = .0009 Fund C: .15 * .0046 = .0007 Fund D: .25 * .0055 = .0014 Add: .0045 = .45% which is almost the same as the simple average in this example. But it could be quite different if the percentages and ERs were more varied. If we assume that the ER of your 457 is 0.45% and add the 0.95% for a total fee of 1.40%, you are getting to a fee level that many consider too high to be worth using. Others disagree. How close to retirement are you? As soon as you retire (or separate from your employer for any reason), you can roll the 457 into a low-cost IRA. However that would loose you the 457 plan's special feature of allowing penalty free distributions at any age after separation. If you are in a high income tax bracket, then paying a high fee to use the 457 is worth the tax reduction. Are you maxing out a Roth IRA every year? Are you saving for retirement in a taxable account? A taxable account at a low-cost provider like Vanguard or Fidelity using tax-efficient funds has some advantages, especially if you are considering early retirement.
  10. 403(b) Choices

    With only the 4 403b providers (Lincoln Investment, Legend, AXA and VOYA), I think your best bet is either a better plan with Lincoln Investment, or possibly the Legend plan that has Vanguard funds? I posted about the Lincoln Investment PDP on April 19. There has been 1 or 2 posters in NY that were allowed to use the PDP although it’s mainly for NJ districts. As explained, it involves getting permission from a regional office. As you have pointed out, your wife is paying at least 3 fees with her current Lincoln plan that are seriously hurting her returns: Load fees of 4.5% to 5.75%. This reduces her initial contributions by that percent. Advisory fee of 1.25%, applied to her balance. Expense ratio fees of 0.62% to 1.37%, applied to each fund’s balance. There should be a phone # that she/you can call about fees, including the Premier renewal fee of $90/Q?? She/you needs to find out what “Platforms” Lincoln offers her district. Is the Premier Platform offered and if so, what is the management/wrap fee? She/you needs to find out the list of funds she can use, their ERs and whether they have loads. It’s possible that the “Advisory fee” is optional. See if it can be dropped. Can you give a link to the Legend 403b plans available in her district? I see that in CA, the Legend Freemark has 7 low-cost, no-load Vanguard index funds, Admiral class, with a management/wrap fee of 1.25% to 2.25%. She/you need to find out if the Legend plan with Vanguard funds that you mentioned has a management/wrap fee, and if so, how much is it? I don’t think you’ve provided us with her district’s 457 vendor list. Is there one? The NY state 457 plan is certainly much better than her 403b options. If she doesn’t have it, she should ask for it! Teachers can contribute a maximum of 18.5k to both a 403b and a 457 account.
  11. 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?
  12. 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.
  13. 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.
  14. 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.
  15. 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!