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krow36

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Everything posted by krow36

  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?
  16. krow36

    403(b) help!

    Ed asked why Security Benefit and NEA don't include a 457 plan, only their 403b plan. I was making some guesses as to why. So NEA Direct Invest is a 403b option for Shannon (but we prefer VG or Fido), but it's not a 457 plan option. SB's 457 offerings are only their expensive stuff.
  17. krow36

    Seeking Financial Input 403 (b)/457/Roth

    Tony, Shannan's $30k 457 account is with a previous employer, the City of Los Angeles. His current employer is Temple City School District. So he could roll it to a traditional IRA with no tax consequences. Or to a Roth IRA and have $30k added to his taxable income. I think Shannon should work to get a low-cost 457 vendor, as I discussed in Shannons' other thread. Rolling it to another 457 will keep that no penalty at distribution after quitting advantage. You never know when it might be handy. The Security Benefit NEA Direct Invest plan is only a 403b, not a 457. We need to take a look at what Shannon has in the 457 and their fees. As you say leaving it there may well be the best idea.
  18. krow36

    403(b) help!

    As I mentioned, your list of 457 providers does not include a low-cost index fund provider. They are all expensive insurance companies. However, your 403b list does include CalSTRS Pension 2, which also offers a 457 plan. It should be relatively easy to get your district to add them to your 457 vendor list. They SHOULD be on the list already! The CalSTRS Pension 2 plans are good plans with excellent Vanguard index funds, so you shouldn’t hesitate to use it for your 457. It is run by the same organization as runs your state teachers pension. You could use the following funds in the 457: Vanguard Total Stock Mkt Idx Instl Pls (VSMPX), ER 0.02% Vanguard Total Bond Market Index Adm (VBTLX), ER 0.05% I suggest you use an international stock fund in your other accounts as they are more expensive actively managed (not index) funds in the Pension 2 plans. Also consider the Easy Choice (target retirement) funds with a date close to your retirement date. They are a bit more expensive but have the advantage that they do the rebalancing for you. CalSTRS adds 0.25% management fee to each fund’s ER, but there is no flat dollar admin fee as there is with Fidelity and Vanguard.https://www.calstrs.com/sites/main/files/file-attachments/p2_fee.pdf Adding Fidelity to the 457 vendor list might be slightly more difficult but certainly worth a try, considering they are already on the 403b list. They are significantly lower-cost than CalSTRS. I would call them and get their input before talking to the district. I would not roll your old 457 account into an IRA. 457 plans have an unique advantage over IRAs and 403b accounts in that you can make withdrawals at any age after you quit. The other plans have a 10% penalty for withdrawals before age 59.5 (there are some special exceptions). It's possible this could be useful in the future, who knows? So be patient and leave your old 457 plan where it is until you have a low-cost vendor available. If you post the funds you are using and also other funds available in the old 457 account, we can see if that can be improved? Please include the fees (expense ratios, etc.)
  19. AndyH, I was out of the country with very limited access to the internet this last summer and was unable to post on your thread. I’m a retired WA teacher and so your thread is especially interesting to me. For other readers, here’s a link to the website for WA State 457 fee table that you posted: https://www.drs.wa.gov/dcp/investments.htm An Administration fee of 0.1283% is added to the fund’s “Investment fee” (expense ratio or ER). The total fee for one of the Target Retirement funds (they call them “Retirement Strategy funds”) would be the fund’s ER of 0.15 to 0.17%, plus the Admin fee of 0.1283%, or about 0.29% total. The fees on $10,000 of the 2035 Retirement Strategy fund would be $29.44/yr. The annual fees on the WA State Bond fund and the US Large-cap Equity fund would be much less, only $13.69 and $13.13 respectively. Their ERs are 0.0%! You can compare the WA 457 fees on $10,000 with those of the Security Benefit NEA Direct Invest 403b, which are very low. Its Vanguard Total Stock Market fund has an ER of 0.05% and the admin fee is $35/yr for balances less than $50,000. So (0.0005)(10,000) = $5. Add in the $35 admin fee that will apply for at least several years, and that’s $40/yr. A 403b account with Vanguard (through Newport Group with whom they outsource their 403b) would cost a $10,000 balance the $5 ER plus an admin fee of $60, for a total of $65. (Which is still a bargain!) I’m trying to convince you that the WA State 457 is a very low-cost plan. I suggest you consider your and your wife’s accounts together. The WA State Bond fund is a very low-cost bond fund that is 100% high grade corporate bonds, while SB NEA Direct Invest’s Vanguard Intermediate-term Bond Index fund is about 47% Treasury bonds and 53% corporate bonds. I prefer the VG fund, but using some combination of the 2 funds might be worth considering. Or you can just use one of the Retirement Strategy funds in the 457 and call it good. Your plan to contribute to both a tax-deferred 403b and 457 as well as a Roth IRA is a good one in my opinion. Staying below $77,200 in taxable income tax bracket is also a great idea. Especially if you have a taxable account where long-term cap gains and qualified dividends on stock funds are taxed at 0%. The folks here at 403bwise are knowable about 457 plans as well as 403b plans. In fact there's a forum platform for each but we all participate in both platforms.
  20. krow36

    New Teacher Choosing a Provider

    "Please contact provider for investment type" just means that either OMNI or the companies neglected to supply the investment type and phone number. Perhaps OMNI charges the vendors for including this information? It's very disappointing in any case. I agree with Ed, Tony and MoeMoney that either Vanguard or Fidelity are excellent choices. Either google them for their phone numbers, or better yet, use 403bcompare.com to look them up where you'll find complete info on fees and mutual funds offered.
  21. krow36

    Best 457 vendor?

    I should not have included Security Benefit as a good vendor for a 457 plan. SB's Direct Invest plan is for a 403b only. All of SB's plans other than Direct Invest are very expensive and are definitely not recommended.
  22. krow36

    403(b) help!

    Ed, I don't know why Vanguard doesn't offer a 457 plan but we can speculate. It's probably related to the same reasons they contracted with Newport Group to run their smaller (K-14?) 403b plans. That is, their costs per participant. The K-14 457 plan market must be much smaller than the 403b market, so less economy of scale? As for SB's Direct Invest, I guess neither SB nor NEA think it's worth bothering with. We can only guess at the real motivation behind the 403b Direct Invest. I think of it as a plan subsidized by the expensive SB (so-called value builder?) plans that the NEA name is attached to. Without that 2M+/yr subsidy that NEA gets from SB, there would be no SB Direct Invest.
  23. krow36

    403(b) help!

    Shannon, your district does give you access to a 457 plan in addition to the 403b plan. https://www.tcusd.net/site/handlers/filedownload.ashx?moduleinstanceid=152&dataid=5902&FileName=TDS_457-Salary_Reduction_Agreement_20170922.pdf Unfortunately there are no low-cost providers on the list. If in the future you are able to max out contributions to a Roth IRA and the 403b plan, you could ask your district to add Fidelity and/or CalSTRS Pension2 to the 457 vendor list.
  24. krow36

    AXA Low-Cost Product?

    Unless he’s referring to the AXA Retirement 360 plan which is listed on the 403bcompare website but which is not explained on AXA’s website, at least I couldn’t find anything when I looked a year or so ago. 403bcompare says it has an admin fee of $0 to $100 per quarter, so that’s a mystery. It does include a dozen or so Vanguard funds, including 3 LifeStrategy all in one funds, and Fidelity's 500 Index fund, all with very low ERs, so it is certainly an unusual AXA plan. We need to know about the details of the admin fee.
  25. krow36

    AXA Low-Cost Product?

    I don't think so, I certainly haven't. Did the AXA rep give you any details?
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