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EdLaFave

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Everything posted by EdLaFave

  1. EdLaFave

    Retirement's Sometimes Dismal Reality

    Something I've always wondered about: how much poverty and income inequality can you inflict on a nation before they refuse to accept it? If I answered this question in a vacuum I certainly would have underestimated the answer. I don't think we're necessarily there yet. I think a diverse nation who has woven personal and institutional bigotry into their DNA is more likely to accept awful conditions (relative to a more homogeneous nation). So I think we're more willing to accept this, but it is starting to feel like the limit may be within sight. Wow. However, it does seem odd that we're comparing February 2013 - November 2016 to 1991. Anytime I see something like this (especially with respect to money), I wonder if the data is being cherry picked.
  2. EdLaFave

    403-b

    If you rollover a traditional 403b to a traditional ira then you will not pay taxes as a result. If you withdraw money from the traditional 403b or the traditional ira then you will pay taxes as if you earned the income through labor. If you rollover a traditional 403b to a roth ira then you will absolutely pay taxes.
  3. EdLaFave

    403-b

    SJP-3, I know you listed all of the funds, but if you can list their fund symbols then I can speak definitively about them. For example, the symbol for American Funds Europacific Growth R5 is RERFX. ...that fund in particular has a 0.53% expense ratio, which is 100% unacceptable. You've solve the case! I wasn't into investing when TIAA had a good reputation. Literally every single thing I've ever heard about TIAA has been negative. Every story involves them charging too much and pushing investors into things that benefit TIAA rather than the investor. TIAA is not on your side, remember that folks. Sometimes it makes sense to invest through a financial predator (I do so at Security Benefit), but you need to understand the relationship you're in...it is absolutely adversarial.
  4. EdLaFave

    Switching vendors; need help!

    I just want to second that piece of advice...but sometimes even the word Index isn't proof it is a good fund. To illustrate the problem in its totality. Target Date Fund Fidelity Freedom 2060 Fund (FDKVX) has an expense ratio of 0.75% Fidelity Freedom Index 2060 Fund (FDKLX) has an expense ratio of 0.14% International Stock Fund Fidelity International Enhanced Index Fund (FIENX) has an expense ratio of 0.59% Fidelity Global ex-US Index Fund (FSGDX) has an expense ratio of 0.06% Domestic Stock Fund Fidelity Large Cap Stock Fund (FLCSX) has an expense ratio of 0.67% Fidelity Total Market Index Fund (FSTVX) has an expense ratio of 0.015% Bond Fund Fidelity Total Bond Fund (FTBFX) has an expense ratio of 0.45% Fidelity US Bond Index Fund (FSITX) has an expense ratio of 0.025% ...so be careful. Posting the mutual fund symbols you plan to purchase here is a good opportunity for a sanity check before you pull the trigger.
  5. EdLaFave

    403-b

    I couldn't agree more. I wrote my second blog post on this very topic about a year and half ago when I first got into this 403b/457b mess.
  6. EdLaFave

    Switching vendors; need help!

    You may want to read my Investing 101 page here. With respect to your options... I documented the AXA plan here. I documented the Fidelity plan here. I documented the Security Benefit's NEA DirectInvest plan here. ...that should give you an understanding of why AXA is inferior to those two choices. You want a fully diversified portfolio with fees as close to zero as possible; Fidelity hits both of those marks. I'm not a 529 expert (so fact check me) but this is basically why I'm not a fan... When it comes to federal taxation, contributing to a 529 doesn't reduce your tax liability. Had you contributed to a traditional IRA, 403b, 457b, HSA, etc then you would have saved money on taxes, but not so with a 529. When it comes to state taxation (something we don't even have here in Florida) each state gets to decide whether or not 529 contributions will reduce your tax liability and to what extent. So your mileage may vary with this perk. I don't understand the exact circumstances, but in a subset of circumstances if the 529 account balance exceeds qualified education expenses then I think you're hit with fees! I'm sure careful planning and luck can mitigate this risk, but you should really know this stuff in and out before engaging in it. So the main benefit for a good chunk of folks is that the money in the 529 can grow tax free and you don't pay taxes on that growth as long as you spend it on education expense (under specific circumstances). I'm aware of some alternatives where you can get tax free growth and under certain conditions withdraw without penalty (for example a Roth IRA)...so I would certainly fully explore those options (which are probably less restrictive) before jumping into a 529. Perhaps my biggest problem with 529 is that most folks aren't well positioned to support themselves in retirement! I know parents want to do everything for their kids, but I think it is reasonable that they save themselves first...which is why I cringe when 529 accounts are used before regular tax advantaged accounts (403b, 457b, IRA, HSA, etc) are being maxed. I favor tuition/fee free higher education, but if a bill must be paid by the attendee then it is reasonable to me that the student (who will benefit financially from the degree) take care of that bill especially because they may have access to scholarships and interest free loans. If you're a super wealthy person who is already going to send their kids to private school and then to college and you're not only maxing out tax advantaged accounts but you're investing heavily in a taxable account then a 529 is a great way to shield your assets from taxation. This part of the tax code (as most others) was never written for regular folks...it targets spending that rich folks already engage heavily in and gives them tax breaks for it. When things like this are created, regular folks may be able to benefit but typically if you're a regular person who is just trying to get by and take care of your kids then a 529 will be far less useful and possibly inappropriate. This is half opinion and half supported by fact. You can read all about 529 plans here.
  7. EdLaFave

    Switching vendors; need help!

    I’ll give a more detailed reply later, but you’re going to want to switch your 403b and 457b to Fidelity. There are almost certainly better options for the 529. I personally and perhaps philosophically don’t like 529 plans, but I really don’t like them if you’re not maxing our all of your tax advantaged space in your IRA, 403b, and 457b. This opinion will probably be rejected by some, but I can explain more if you’d like. Again, it may be controversial but I don’t like life insurance as a good use of money. Reasonable people will disagree, but I suspect most will find that AXA’s offering isn’t good (just a hunch).
  8. EdLaFave

    403-b

    Let me give you some good news... All of these funds are in a tax advantaged account. That means you can sell all of them and invest in whatever funds you want (whether you stay with the TIAA account or move elsewhere). If this were a taxable account you’d likely have to pay capital gains tax to do this and that cost may be prohibitive. So you have total freedom and total control! Take your time and ask questions. Although you will ultimately want to make changes, there is no rush. This is a really slow moving “problem.”
  9. EdLaFave

    403-b

    I believe strongly in the information we provide and I follow it myself. Still, I recommend everybody prove it to themselves first because trust is what got folks into sub-optimal positions in the first place...and they have no way of knowing how well intentioned, qualified, or informed we are until they've proven it to themselves.
  10. EdLaFave

    403-b

    I hope you make it Tony 😀 It is important for investors to realize that simplicity is key. When people boasted about simplicity it initially turned me away. I thought they were observing the fact that it was possible to build a really simple portfolio and because of that fact it was possible for an amateur to manage the portfolio themselves. I assumed that the complexity conjured up by advisers was the special sauce that would generate superior returns. If it didn't then why would advisers bother with it? It turns out, advisers create complexity for at least a couple reasons: To discourage investors from doing it themselves by convincing them that advisers are indispensable. To keep investors in a state of confusion so they never look into it and figure out just how much money they're losing. At the end of the day I hope you take our advice after you verify for yourself that it is quality advice. When it comes to your money: You shouldn't truly trust anybody (us included). Nobody cares about it more than you do.
  11. EdLaFave

    403-b

    In the worst case (which is common) an advisor will rip you off. In the best case you'll unnecessarily pay for simple information that is readily available on this site and others. You may want to read my Investing 101 page, which has a great deal of the information you'll need to understand. I have to believe this is a typo, but if it isn't then you sorely need to consolidate. Perhaps you should list all 47 accounts? Which institution are they with (TIAA, Vanguard, Fidelity, etc) and what type of account is each (taxable, Roth IRA, Traditional 403b, Roth 457b, etc.). I'm not sure what the metaphorical bird in the hand is. Is that the 47 accounts? I'm not sure what the metaphorical several in the bush are. Is that a single consolidated account? I'm guessing the current reality is that you're paying large fees in an overly complicated portfolio that probably has diversification issues or concentration of risk issues. It also may not be appropriate for your risk tolerance. The alternative is a simple portfolio with rock bottom fees that is fully diversified and appropriate for your risk tolerance. The financial services industry survives because they spend huge sums of money to convince people investing is too difficult to understand. It is not. As a general rule of thumb you can roll over your old tax advantaged accounts (403b, 457b, etc) to a Vanguard rollover IRA. Since you're retired, you most likely have a risk tolerance that will remain fixed for the rest of your life. As a result you can invest in a single Vanguard Life Strategy fund and be done with it. The Vanguard Life Strategy funds invest in international stocks/bonds and domestic stocks/bonds and it maintains the proper split between those assets for you. It is fully diversified. There are 4 different version of the Life Strategy fund: 80% stocks, 20% bonds 60% stocks, 40% bonds 40% stocks, 20% bonds 20% stocks, 80% bonds Pick the one that is appropriate for your risk tolerance. As a general rule, you can count on advisors to muddy the waters rather than providing clarity. Their profits largely depend on clients who remain confused and ignorant.
  12. EdLaFave

    403-b

    No need for a firestorm. In terms of fees for a fully diversified portfolio, TIAA isn’t even in the top 5 vendors here in Florida. TIAA has been repeatedly caught exploíting their customers. Those are irrefutable facts, what anybody does with that data is up to them. I’d invest through TIAA if they were my best option. I wouldn’t trust the adviser at all. I’d lobby for the addition of a better vendor and switch when one is added. ...others may disagree and that is fine. No emotion on my end. 😀
  13. EdLaFave

    403-b

    You should be laser focused on fees, how well diversified your portfolio is, and whether or not it meets your risk tolerance. The fact that you're dealing with an "adviser", otherwise known as a sales rep, is a big red flag. Tony is right, I think we need more information from you, specifically: What are all of the fees associated with the TIAA account? What specifically are you (or can you be) invested in through TIAA? Are you retired or is the TIAA 403b from an old employer? If so Tony is right, rolling over to an IRA is almost certainly in your best interest. If not, what are the other 403b and 457b vendors available to you? Vendors are free to negotiate different deals with each district, but here in OCPS (FL) TIAA is a bad option. They allow us to build an excellent portfolio, but they charge us 0.63% per year for it. Assuming 6% returns and 3% inflation, that fee consumes 26.2% of real returns over 30 years. I documented their plan here...if they have a similar deal for your 403b then there is a good chance you can do better. Once upon a time, TIAA was structured to benefit the investor. Those days are gone. I believe they're now a for profit enterprise, which has been discussed all over the internet (here and here for example). I believe an ex-Merill Lynch guy took over a decade or two ago and that was bad news for everybody. As Tony alluded to, this change in incentives has resulted in the company basically stealing from their customers by pushing them into high cost investments. ...the financial world is so incredibly corrupt that I will still invest with unethical institutions (for example I'm enrolled in the Security Benefit 403b), but you need to go into it with your eyes open. Don't buy into the outdated reputation that TIAA is on your side; they're not.
  14. EdLaFave

    Don't Obsess Over Expense Ratios

    If anybody prefers Fidelity’s zero index funds and you have a tax advantaged account (IRA, 401k, 403b, 457b, HSA, etc) then you can transfer the entire account to Fidelity without having to pay any taxes. If you have a taxable account and don’t want to pay capital gains then you can simply stop investing in your current funds, turn off automatic dividend reinvestment, sell any lots that are at a loss, direct all new money to Fidelity, and tax loss harvest out of the funds if conditions permit. If you have a taxable account and prefer the tax efficiency that Vanguard offers through their ETF/mutual fund patent, I believe that patent expires in a couple years and I imagine Fidelity and everybody else will use the same technique. I personally don’t mind that the gambler clients at Fidelity are subsidizing my proper investments. To some extent I prefer it. To some extent that already exists in market crash when I keep buying and too many other folks sell at deep losses. I like Vanguard’s mission statement, I like that the people who buy the funds own Vanguard, and I like that they run funds at cost. However, with Jack gone I’m not sure what to expect out of Vanguard. I mean they fought against the fiduciary rule didn’t they? I’m going to have a hard time trusting anybody who did that. I don’t quite care about minimums. If you’ve got less than a few tens of thousands of dollars then time in the market means virtually nothing. So I don’t really mind the concept of people saving up to invest so that we all have lower fees. I don’t feel strongly either way, but it might lose Vanguard customers. I’d like to see Vanguard reduce the cost of the all-in-one funds or have admiral versions. I don’t know what it really takes to run a fund like that, but I can’t believe they’re that expensive. A lower cost there could create a competitive advantage for folks who want simplicity (my wife would love it). It’ll be interesting to see if Vanguard has permanently lost the lowest cost title. I’m hoping they continue dropping fees in the next year or two. After that I may make the switch to Fidelity.
  15. EdLaFave

    Don't Obsess Over Expense Ratios

    I understand the white coat investor is just a person’s personal blog, but the tone of that article was absolutely biased and lacked a cold, objective analysis. It made it difficult to trust/read even if I agreed with a subset of the conclusions.
  16. whyme, I suspect you’re right. I’ve considered retiring to a cheaper Asian or Central/South American country. I may have enough money to do it right now and I find it highly tempting. If I’m honest I think I’m staying put because of the cultural unknowns, having to learn a new language, not wanting to plan such a big change, and just a general apprehension of the unknown. Perhaps traveling would increase the liklihood of me actually doing it I’m restricted to warm locations and I really enjoy living in areas with good food and in particular good Indian restaurants (which usually requires a reasonably sized population of recent immigrants)...so that has a fairly significant limiting factor because it essentially rules out most “small” USA towns where living is really cheap.
  17. EdLaFave

    CampFI conference report (Financial Independence)

    As somebody who is speeding towards financial independence, I just wanted to add my perspective. For me, financial independence doesn’t require consistent intentional thought; it required a single realization. A little while ago Dodge bastardized Dr. King’s words from Drum Major Instinct in a commercial for trucks, which prompted somebody to overlay his actual words on that same commercial. His point is that material objects don’t bring you happiness or define you. Gandhi made clear that materialism actually brings you unhappiness because you end up working and fretting to maintain and protect inanimate objects. Yet we have an entire class of professionals working everyday to convince us to buy things that we don’t need and probably can’t afford; things that we stop enjoying almost as soon as they’re purchased. It is like an addiction in that it is a hollow pursuit which always leaves you unsatisfied, but wanting more. If you fundamentally reject consumerism and materialism because you view them as tools being used against you, then you don’t have to be intentional about budgeting. You simply no longer have the desire to participate. You don’t feel a sense of deprivation because you purchase only the things that improve your life and are turned off by the rest. It no longer requires effort. The wealthy have dictated values to us, which benefit them. We are taught that hard work in the context of our jobs is paramount and similar effort directed towards personal happiness is selfish and lazy. We are asked from an early age what we want to grow up to be as if our entire reason for existence is to serve some commercial enterprise. We are taught that this economic system is a meritocracy and if you work hard you will succeed. So when we enter an economy where all the wealth is at the top despite how hard we’ve worked, we think something is wrong with us. The longer I live the more clear it is that companies treat employees like things rather than people and that mentality sinks into the employees who begin treating each other as tools or a means to an end. It is a broken culture. Tyler Durden, Chuck Palahniuk’s character from Fight Club, was wildly flawed but he had something to say on this topic and he was right So when you see that this system is built to lie and exploít you, to define your morals and values for you, and when you know your life is painfully short then naturally you no longer want to be forced to participate and rely on working every day, all day for some company’s profits. When you realize how much wealth you’re wasting on consumption that doesn’t improve and sustain your life, it makes financial independence possible. Beyond coming to these conclusions I don’t think it requires much intentionality...or at least that’s been my experience.
  18. PEteacher, you're awesome. Great job. I wish there were a few folks like you here in OCPS (FL).
  19. I've got the same question. What I can say, is that in Security Benefit's NEA DirectInvest I haven't noticed an auto-rebalance feature, but they definitely have a regular rebalance feature. You just have to tell it what percentage you want each fund to be and it'll take care of the rest. This is convenient for folks who don't want to do any math because all they have to know is their preferred asset allocation. Given the huge inflows into Vanguard and index funds in general and given the creation of expense free index funds, I think there already are more of "us" 😀 ...unfortunately very few teachers have joined "us."
  20. I’d like to read people’s feedback on this. I’m a control freak by nature and so I always ignore this feature at various vendors. If there is positive feedback then I might start giving a different opinion when hands-off people ask what I think.
  21. EdLaFave

    New Teacher Choosing a Provider

    I'm not sure what the abbreviations in the columns mean. I'm guessing VA = Variable Annuity and MF = Mutual Fund, but I'm really not sure. I'm guessing for the rows that say "Please contact provider for investment type" they're just telling you that they haven't documented exactly what that vendor offers. The good news for you is that you won't have to pay attention to those columns because we can steer you in the right direction. I am not familiar with every vendor on the list, but I've ranked the top 5 vendors in florida and you've got access to 4 of the 5. This is how I rank your best options along with links to pages I wrote documenting the plans: 1a. Vanguard 1b. Fidelity 3. Security Benefit's NEA Direct Invest 4. Aspire You've also got Lincoln, which may have a self directed plan in your area. So you can look into that too. I'll let others comment on the quality of your state 457b plan. I think I remember reading good things about it, but I'm not 100% sure.
  22. I completely respect that. I'm just saying that since I struggle to predict this group's behavior (and because I haven't done the math yet), it isn't clear to me if a more expensive auto-balancing fund will turn out better than a cheaper 3 fund portfolio that is never (or very rarely) re-balanced. My intuition is that a target date is best in this scenario, but I have doubt.
  23. Portfolio 1: Fidelity's ultra low cost (even 0% for the stock funds) 3 fund portfolio Portfolio 2: Target Date Fund costing 0.16% Over 30 years Portfolio 2 will eat up about 7% of real returns relative to Portfolio 1. So my question is, does rebalancing make up for the extra cost associated with having an all-in-one fund do it for you? If not then MAYBE it is still better to make fixed contributions to a 3 fund portfolio and never rebalance? I tend to suggest an all-in-one fund for folks who won't rebalance because it'll keep the risk level of their portfolio at an appropriate level for them. However, I've never done the math and so I'm not sure if they're likely to come out the other end with more money. If somebody is unwilling to rebalance their portfolio then I wonder how important maintaining an appropriate level of risk is. If they can't be bothered to rebalance then presumably they aren't looking at the account regularly and they wouldn't do something even if they did look. So maybe the behavioral risk of selling during a crash isn't that significant? ...it is tough for me to get in the mind of folks who would prefer to sit in traffic than use an equation to make the proper sales/purchases, which takes mere seconds (minutes at worst).
  24. It looks like Aspire is probably your best 457b vendor with PlanMember Direct coming in 2nd place. If you could get Fidelity added then they'd be the clear winner. ...you'll have to fact check me though because I haven't studied all of your plans. Think of my opinions as a great starting point.
  25. I don't understand. Security Benefit's NEA DirectInvest offers the three funds you need to build a fully diversified portfolio and they're available in admiral shares (even if you don't meet the typical $10,000 minimum for Admiral). Aspire is an objectively inferior option because Security Benefit's NEA DirectInvest allows you to build a fully diversified portfolio with lower expenses. The only arguably valid reason for investing with Aspire would be out of protest because you so despise Security Benefit's general businesses practices outside of NEA DirectInvest.
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