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jebjebitz

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Everything posted by jebjebitz

  1. jebjebitz

    Switching vendors; need help!

    That is cool! Looks like Maryland has a state tax break. This link shows you a comparison of expense ratios and provides a calculator if you want to see what you’d save with the tax break
  2. jebjebitz

    Switching vendors; need help!

    Hi Soph, I used AXA for 403b, 529 and life insurance. I got out of the 403b and the 529 but I still have the life insurance. When they set up my 529 for me they just enrolled me in the plan my state offers (NJ). Not sure what kind of commission the rep received or what additional fees I was paying them but, this is something I could have just done on my own. I don’t know about Maryland but NJ does not offer any state tax benefits for contributions to a 529. I opened a new 529 using the Nevada plan which gave me access to Vanguard. I did this directly through the Vanguard website. They offer different investment options tailored to your child’s age and whether you prefer a conservative, moderate or aggressive investment strategy. My children are still only 2 and 4 so I am in an aggressive age based option. You can read more about Vanguards 529 age based options here: https://investor.vanguard.com/529-plan/age-based-options I’m satisfied with the life insurance the AXA rep helped my wife and I sign up for so , for now I’m keeping that the way it is. As for the 403b my story is similar to everyone here. You’re in good hands with the folks on this board. They’ll certainly steer you in the right direction. Best of luck.
  3. I looked into this but am still not 100% certain how it works. I'll describe what it looks like when I rebalance and receive the message to "auto-rebalance" in my DirectInvest account: I choose "Change Investments" From there it asks if I want to use Morningstar recommendations or choose my own investments. I select "Choose my own investments" Next it asks if I want to "Exchange", "Rebalance" or make changes to "Future Investment Elections". I select "Rebalancing" I then perform the rebalance by typing in the percentage of allocation for each investment. At the bottom of this page, before I can continue, it asks: "Would you like these changes to also affect how your future contributions are invested?" I choose yes. Finally, I'm taken to a page that asks: "Would you like to set up automatic rebalancing for your new portfolio?" Off to the side on this page there is an Icon that says: "What is Automatic Future Elections?" followed by a short description that reads, "Automatic future elections enable you to specify the frequency at which to rebalance your asset allocations" It's a little confusing to me because "Automatic Future Elections" sounds a lot like the "Future Investment Elections" option from the earlier menu. I did not click yes to auto rebalance because I'm reluctant to sign up for something that I might not be able to get out of easily. Not sure if this explanation was helpful/necessary but maybe there are members on here that can tell if this is actually an auto rebalance option or something entirely different.
  4. My 403b is with Security Benefit DirectInvest. I use the 3 fund strategy and I do my own rebalancing. However, they do offer an automatic rebalancing option. I personally like to control when I rebalance but, would this be an appropriate option for someone who can’t be bothered with rebalancing but still wants to save money on the added expense of a Target/Life Strategy Fund? Or am I missing something? Is there a difference when setting up your own auto rebalance?
  5. Jam, I’m a NJ teacher who signed up for Lincoln Investments PDP. Yes, you’re in control without an advisor. You will complete all the paperwork necessary to transfer funds from your old 403b( if that’s a step you’re taking) and, opening your account with Lincoln. When I completed this process I was in contact with a representative from Lincoln who was very helpful in walking me through some of the steps in the process BUT...he was not an advisor. The Lincoln PDP provides you with a large selection of Vanguard Funds including Target Date Funds. I personally used Total Stock Market, Total International and Total Bond. I figured out what allocation was best for my personal investment goals by visiting the Vanguard website and using their questionnaire(sorry I don’t have a link) I also asked questions on sites like this and the Bogleheads forum and read through many posts.
  6. So, would it be fair to say that the only way to keep fees “low” is to be in a self-directed plan? Could you say to a teacher asking about fees, “If your using a rep from one of the available vendors, I know without even researching your investments, that you’re paying too much in fees.”? I know that this is true for my district after researching all available vendors. But, is this true for everyone? If so, one of the main things teachers need to know is that they must research and choose their own investments, without assistance from a rep, if they want to keep fees as low as possible. This is where I lose people. They freeze when they hear research and choose investments.
  7. When talking about keeping expenses low, it is helpful to know what “low” is. I had a conversation with a friend who was considering transferring to a different contract because the rep told him about Funds he would have access to that had expense ratios under 1%. The expense ratios were .75%, .80%, .70% etc. Still too high when compared to Funds that were available to him in a self-directed plan.
  8. jebjebitz

    What could I have done differently

    Teachers need to be aware of this. You can convince someone that they’re in a horrible plan. For many, the next step they take is a call to their rep, or a rep from a different company, who takes them and their money Into another bad(or worse) plan. There is a rep in our district who has done pretty well by scooping up people looking to leave AXA and putting them in an annuity under the premise that they will receive a guaranteed 4% return. In reality it’s a complicated income insurance product that most teachers can’t explain or understand all the details of. Well said! Teachers don’t trust that they can research their own investments. Salesmen know this and use the fear of market downturns and losing everything to get teachers to second guess themselves. So, maybe if you’re doing this as a presentation, you do it where everyone has access to a computer. You show them how to navigate the sites a lot of us are using to get information. You demonstrate how to navigate this site. Show them the discussion board, threads you yourself have started and talk about some of the contributors who have given you useful information. For me, those contributors were people like krow, Steve, Tony and Ed(thank you). I would definitely Show teachers how to use 403b compare. This is probably the only place they will be able to see what fees they are paying. Once they get a handle on these numbers they can use any number of compound interest calculators online to see how fees are eating their investments. So, let people learn by doing this for themselves. Let them see that this process is not that different from putting time into researching a purchase like a car, a new roof, a washing machine etc. I would add the Bogleheads site as a place where they can receive help and info as well.
  9. jebjebitz

    What could I have done differently

    For “the hook” I might try to relate choosing your 403b provider with making a big purchase. Take buying a car as an example. When you go to a dealer to purchase a car you probably wouldn’t start by saying, “ I don’t know anything about how to buy a car. You’re the expert. I’ll give you my money and I trust that you’ll pick out the car that’s best for me.” Not a great example but, that’s the way a lot of teachers approach their first meeting with the reps. When you buy a car you do some research into the make and model that’s right for you and your needs. You compare prices between dealers, read through customer reviews etc. All the information you need is at your fingertips. Why don’t you trust yourself to follow this process when it comes to investing in your future?
  10. jebjebitz

    What could I have done differently

    I think people are afraid to not have that “expert” advisor helping them. To them, 2% fees are worth paying because they don’t trust their own ability to choose investments.
  11. It concerns me that our union is not talking about this. Teachers sometimes wonder aloud if there will still be a pension when they retire but no one I talk to is talking about how funding is at 31%! Tony, I’m more pessimistic about our pensions future. It hasn’t been funded the way it should be for close to twenty years. We’ve had incremental increases to our contributions over the past 5 years and a percentage of proceeds from lottery sales have gone towards funding as well. We’re still way short, according to this study, dead last
  12. NJ teacher here. Anyone have information on what happens when a pension system fails? Or information on States or organizations that found creative ways to fix pension systems? Would employees get back their contributions back? It almost seems as though our pension is certain to fail.
  13. jebjebitz

    Frequent trading policies; Best Fund Family?

    I just finished reading Bogle’s “Common Sense on Mutual Funds”. I highly recommend reading this before pursuing this strategy.
  14. jebjebitz

    Wow Look At This Chart

    The rise in college costs is absolutely ridiculous. How is this justified? The education students receive today can’t be that much better/different than it was ten years ago.
  15. jebjebitz

    choosing a 403b plan

    How does the front load work? Do they only take 5.75% from your first contribution?
  16. jebjebitz

    choosing a 403b plan

    These are some numbers on fees according to MorningStar. If you know your allocation you can get a better idea of the weighted expense average. Capital Income Builder A - Initial Sales Fee: 5.75% Expense Ratio: .59% Management Fee: .23% 12 b-1 Fee: .25% Fundamental Investors A - Initial Sales Fee: 5.75% Expense Ratio: .60% Management Fee: .24% 12 b-1 Fee: .25% Income Fund of America - Initial Sales Fee: 5.75% Expense Ratio: .56% Management Fee: .22% 12 b-1 Fee: .25% Money Market Expense Ratio: .37% Management Fee: .27% Growth Fund of America - Initial Sales Fee: 5.75% Expense Ratio: .64% Management Fee: .27% 12 b-1 Fee: .24%
  17. jebjebitz

    choosing a 403b plan

    The Lincoln PDP offers Vanguard Target Retirement funds if it is available for your district. I was in Lincoln's PDP but transferred to Security Benefit's NEA DirectInvest. I'm invested in the three funds that Krow listed in bold. The transfer process was frustrating but now that I'm in DirectInvest I am very happy with the service. The website is great, easy to use and I can update account holdings, re-balance etc. The Lincoln PDP doesn't give you the same access to your account that DirectInvest does. You can view statements but you can't update your investments or re-balance without speaking with a representative. This wouldn't be a problem if you were in a Target Retirement Fund though.
  18. jebjebitz

    403b Vendors Recommandation

    You will not need a representative from Lincoln if they offer the Participant Directed Platform. Just keep this in mind when meeting with the rep. The PDP is done completely on your own. Anything he/she wants to sign you up for should be examined carefully. Best of luck!
  19. jebjebitz

    403b Vendors Recommandation

    Here in NJ, Lincoln Investments offers a Participant Directed Platform that offers a large selection of Vanguard Admiral Funds. You can check to see if they offer that in Illinois.
  20. jebjebitz

    Q1 YTD Return

    Do you guys rebalance? If so, how often?
  21. jebjebitz

    A financial milestone to celebrate!

    Congrats! I’ve learned a lot by reading through your posts on here, thank you.
  22. Krow, Great advice, thank you. Using this formula, I was able to go back into an old AXA statement and figure out my weighted average fee for the portfolio I was in. I was able to find out the fees associated with each fund by searching for it on Morningstar. Morningstar showed the expense ratio, management fee, administrative fee and 12b-1 fee. I had six funds in my portfolio and the weighted average fee was 1.91%. This does not include any other fees I might have been paying within the AXA Equivest Contract and this was always a mystery to me anyway. I also did this for my Vanguard Portfolio and the weighted average fee for my asset allocation came to about .11%. I was able to use these numbers to see the difference between both funds and the effect fees would have on my investments. It's a very powerful and eye opening visual and I'm very happy you were able to help me with this information. Thank you. I was actually doing some research to try to figure out the thinking/strategy involved in picking portfolios by these insurance companies. Like you said, "..it usually doesn't make as much sense as the 3 fund portfolio." But, I think teachers just assume that the insurance salesman must know what he's doing and can't imagine that they'd be able to do a better job. I think if some teachers could see the effect that funds have on their accounts the way I was able to they would be motivated to do some research on the 3 fund portfolio.
  23. I completely buy into the concept of investing in index funds. In fact, as I read through articles like Ed’s Investing 101, it makes sense to me and I would point to something like this when explaining why I moved my investments out of AXA and into NEA DirectInvest. The problem is, and it has been mentioned on here countless times, that teachers are hesitant/reluctant to follow up with this information and improve their investment strategy. My questions are: 1. Is moving funds out of an insurance company and into a self-Directed plan with low cost index funds always better? I “buy into” this idea. I’m hesitant to use that term because I’m sure there are several people on here that can provide countless links to articles proving that low fee index funds outperform 99.9% of funds over a 30 year period but, the majority of people I talk to don’t want to read about this. They are convinced they won’t understand it and are therefore relying on my word, an Elementary art teacher. 2. Should we confidently back such a move to a colleague if they came to us for advice? Anyone who has come to me after I’ve talked about 403b plans has asked me directly, “what do you think I should do?”. I usually answer this carefully and say something like, “ I’ll tell you what I did but I don’t feel comfortable making that decision for you.” This comes off like I’m uncertain and people freeze up when they realize they would have to make an investment decision on their own. in some cases, colleagues have taken advice to leave AXA and have transferred into something equally bad or worse (MetLife has gotten a number of teachers to transfer into their Lifetime Benefit Withdrawal annuity as they look for a way out of AXA.) I understand that a move may not be suitable for someone who’s five years from retirement but, if someone came to you for advice, how confident would you be in guiding them towards low cost index funds?
  24. The Vanguard Tool is very helpful. I like how you can see side by side how fees impact your investment. I was wondering if there is a way to compare insurance company funds with Vanguard funds or funds with lower fees. You can't really search the AXA funds in this tool and it would be interesting to see what I was invested in compared to what I'm invested in now. I was also wondering if there is a way to find similar funds online. For example, if I took my old AXA statement and wanted to invest in a portfolio exactly like the one they put me in within the annuity, is there a way to find funds similar to that and build an identical portfolio with less fees. I feel like this would help teachers who are hesitant to invest in the three fund portfolio. Maybe there is a way to put them in something identical to what they're in now but at half the cost they're paying in fees.
  25. Three great responses thank you! So there's a lot to break down. First Ed: This is a great explanation, clear and to the point. If I had the ability to explain it like this when asked about my strategy I would. Unfortunately I tend to fumble through my explanation and start to miss key points such as keeping fees low and holding on for the long term. It was a conversation I had with a life-long friend that actually inspired me to start this thread. I asked him about his 403b and he told me he didn't know much about it other than he was invested with VALIC. I warned him about high fees and insurance companies, told him about how I switched my investments to total market index funds and he said he would ask a friend of his who's a financial planner about what I was doing. His friend told him that I was right about the fees but should be careful because index funds are not actively managed. I wanted to offer the "data and explanation" to disprove this but his mind was already made up that I was doing something "risky" that I had learned about on the internet. After all he had spoken to an "adviser". I think like you, with this good friend, I should feel a little more comfortable telling him why this is a good idea but would definitely support it with data. This is great information. Steve, I'm not sure how my pension works here in NJ. The only information I have on it is that it has not been funded for decades. Starting in the 90s, one of the Governors started borrowing from it and since then, there has been a pattern of borrowing and not paying back or funding it properly. I would like to do some research to make sure that it is invested the way you are describing above. If so, this is a great argument for why a teacher should reconsider how they have invested in their 403b. This was the thought they originally caused me to send emails to my co-workers. I was upset that I was taken advantage of and I felt that everyone should know about what they had signed up for and the alternatives. Reading through these threads, it's really interesting to see that this is nothing new. It's also frustrating to see that little has changed to protect teachers. I think this is in line with how I think about offering advice. Once you let people know that there are better options available it's up to them to do the research and choose something that they are comfortable with. I can take a teacher by the hand and get them to transfer all of their retirement savings from an AXA Equitable contract to a three fund portfolio with Vanguard Index Funds but would they be able to handle this mentally. After all, a big part of this strategy is holding on to your investments without flinching through the good and the very bad. Would they be able to withstand a crash knowing in the back of their mind that it was an art teacher, with no prior experience in finance, that convinced them to sign up for this portfolio that is now tanking with the rest of the market? Would they question the move and blame me when things went bad? I am comfortable with this plan because I have read and continue to read information about this strategy. I understand, based on what I have read, that the best strategy is too assess your risk level, develop a portfolio and stick with it through thick and thin. I also understand that as I get closer to retirement it is up to me to reassess my allocation and think about moving some investments to bonds. If people are not willing to read about this on their own, they would not have the resources necessary to see this plan through.
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