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EdLaFave

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Everything posted by EdLaFave

  1. 403b Questions/Options

    I use Security Benefit's NEA DirectInvest and I documented the plan here. I documented exactly how I enrolled in the plan here. I'm an enthusiastic support of NEA DirectInvest and I couldn't be happier with it. However, it is worth acknowledging that Security Benefit is an unethical company and through a mixture of incompetence and shadiness they won't help you too much in setting up the account...it is largely on you to fill out the correct paperwork. Aspire is costing you an extra 0.15% per year plus an extra $5-$40 annual fee depending on your balance. Only you can determine if the headache of switching is worth the savings.
  2. There is a fundamental truth to this article; switching from saving to spending can be difficult. However, I believe some people are just hard wired to save; it's just who they are. I suspect they'll have a much more difficult time of it because spending just isn't in their personality. However, if you're saving because it is a necessary behavior to achieve your goal of financial independence then I think you'll have an easier time transitioning. When the goal changes it is easier for a goal-oriented person to change their behavior accordingly.
  3. I enjoyed the article, but I wanted to offer a slightly contrarian view. Perhaps millennials are more likely to reject consumerism and materialism in favor of enjoying their time on earth, but we should realize that this is still an extremely fringe view, even among young people. I'm told my field, software engineering, is particularly fertile grounds for FIRE and anecdotally I can tell you that those of us pushing for financial independence are still very much in the minority. I really only know 1 person who is seriously working towards that goal and a few who are toying with the idea without taking significant steps towards it yet. ...I also wonder if the rejection of consumerism/materialism will subside as we further distance ourselves from the financially brutal decade that was the 2000s.
  4. 403(b) Choices

    You’ll want to get the full list of vendors for both the 403b plans and the 457b plans. If you don’t know the difference, ask and we can explain. I strongly agree with everybody else. Those fees are way too high and the “advisor” is acting in their best interest, which is in direct conflict with your interests. We can get you pointed in the right direction when you have the complete list of available vendors.
  5. 403b Investment Advice

    ...for added emphasis.
  6. 403b Investment Advice

    I disagree with this recommendation. You can build the same fantastic portfolio but with cheaper expenses if you convince the TPA to add Fidelity, Vanguard, or SecurityBenefit (presuming they give you access to NEA DirectInvest). If you had to settle for Aspire (who is in the next tier of vendors) then you still won, but I wouldn't target them from the beginning. Aim higher.
  7. 403b Investment Advice

    I second everything Krow is saying. Without doing the math myself or fully knowing your personal details, my gut tells me the 0.8% fee is going to make it a close call. FYI, I believe Lincoln offers a low cost, self-directed plan in certain areas of the country.
  8. He Retired After Working Just Five Years

    I’m glad you posted it because I enjoyed the read, but I think it is dangerous to give anybody the idea that it is anything but wreckless to plan retirement on that budget. I’m all about minimalism, but that is a formula for disaster. I won’t deconstruct it line by line, but just ask a few seniors with Medicare what they spend on premiums, meds, doctor visits, etc.
  9. Carrots and Sticks

    I’ve dreamt of financial freedom since my first job at 15. How sweet it’ll be.
  10. Potential crash?

    It looks like the market is down about 8% over the last week or so. Maybe this is the start of the next crash, maybe it'll level off, or maybe it'll quickly bounce back. My emotions are convinced we're witnessing the start of the next crash, but emotions have zero predictive power and must be entirely ignored. Remember from 11/30/2015 to 2/15/2016 when the market went down about 12 percent? Well by 4/22/2016 it jumped up 14% only to keep going up and up from there. So it is important you don't pull your money out and miss these really rapid ascents. ...or if it keeps dropping, maybe we'll use this thread to commiserate. Either way, I'll be maintaining my huge allocation to stocks no matter what. Best of luck to everybody!
  11. Potential crash?

    That reminded me of a poster who declared they were shorting the entire S&P 500. Want some more excitement in your life?
  12. Potential crash?

    Looks like we're down close to 10% since the January peak. I'm enjoying the crash/trade war discussions that are breaking now :)
  13. Q1 YTD Return

    I think we may be mixing terms, specifically Roth/Traditional with account types (IRA, 457b, 403b, etc). I would have assumed that with a teacher's salary you would have been eligible for a Traditional IRA. For instance, the 2018 tax code says that a couple filing jointly (who has access to a retirement plan at work) can only claim a partial deduction from a Traditional IRA if their Modified Adjusted Gross Income is greater than 101k, but if it exceeds 121k then they can't claim the deduction at all. I'm guessing most teachers don't have to worry about hitting either limit. Yup, as it must be...I'm guessing you meant Roth IRA. Same could be said for a Traditional IRA though. I'm guessing you meant making a Roth 457b available? I wouldn't have a strong opinion either way, but I would have a strong opinion about guaranteeing a Traditional option is available.
  14. Q1 YTD Return

    My IRA is a Roth. I am not eligible for a Traditional IRA. My 401k is a Traditional by choice.
  15. Q1 YTD Return

    I don't know how well I can explain it but this is the mathematical explanation: Roth Value = $1 earned * (1 - Your Highest Tax Bracket) * (1 + Growth Rate) ^ (years invested) Traditional Value = $1 earned * (1 + Growth Rate) ^ (years invested) * (1 - Your Effective Tax Rate in Retirement) So the thing to note about those equations is that the only difference is the tax component. If you're in the 24% tax bracket then a Roth results in paying 24% tax on every dollar you invest. However, with a Traditional the first Y dollars you pull out in retirement are taxed at 0%, the next Z dollars at 10%, and so on and so forth. So even if you're in the 24% tax bracket in retirement, your effective tax rate will be well below 24%, making the Traditional a superior investment due to lower taxes. Of course all of this assumes the tax code won't change because we can't predict how it'll change.
  16. Q1 YTD Return

    I was speaking with a veteran and however they were compensated they basically didn't have to pay taxes. So they were able to take that income and put it into a Roth (I think TSP and IRA). Talk about tax savings. In the general case I like traditional accounts because I'd rather fill up the lower tax brackets in retirement than pay exclusively at my highest tax bracket to invest in a Roth. If I expected to be in a higher tax bracket in retirement then I'd try to put enough into a traditional to fill up those lower brackets in retirement and then put the rest in a Roth to pull from in the higher brackets. I think the optimization can get tricky so I tend to put my energy into saving/investing every dime.
  17. Q1 YTD Return

    Initially my new contributions were 100% of my account balance and now they’re down to 10%. During the 10 year bull market I haven’t had to “rebalance” once because every payday I just buy what I have too little of. The delta on my allocations has always been less than 1% off the target. As the new contributions get smaller and smaller (eventually 0) relative to my portfolio size then maybe I’ll have to rebalance. I’d be hesitant to own a target date fund in a taxable account because eventually the fund will hold a ton of bonds. Bonds provide a ton of distributions that are taxed as ordinary income. I’ve listened to the counter argument that holding bonds in a tax advantaged account wastes valuable tax advantaged space that a faster growing equity fund could have taken advantage of. I haven’t done the math or a full analysis myself. Just something to consider.
  18. Q1 YTD Return

    I’m with you on this. The beauty of owning total market index funds is not having to know what you made in any given time period because you already know you made exactly what the market returned. I never calculate my rate of return and I definitely don’t think in terms of 3 month periods.
  19. 1. I have the mind of a mathematician/scientist. So you'll have a hard time getting me to make absolute statements. I can imagine that somebody in the world has the choice between a self directed account with low cost index funds, but a huge Assets Under Manager (AUM) fee OR a managed plan that also invests in index funds (or closet index funds) with lower fees. In this rare case I'd probably invest in the latter. However, I feel entirely comfortable saying that it is ALWAYS in your best interest to own a portfolio that is fully diversified, charges the smallest fees possible, and has the lowest turnover possible (minimize tax liability in a taxable account). That portfolio is almost always a self-directed portfolio composed of total market index funds. Of course another portfolio may end up beating you over a small time window, but the odds that you don't come out on top in the long term are remote. 2. If I were just a regular person talking to a friend or acquaintence, I would feel entirely comfortable "telling them what to do," but also offering up all of the data and explanation that they're willing to hear. However, because I have a web site, because I speak at school board meetings, because I irritated the TSA Consulting Group guy, I have no idea if somebody may want to come after me legally. So with that backdrop, when people ask me what they should do I usually explain that I don't know what the laws are and I'm not a registered financial adviser of any kind so I don't think I can legally give advice....HOWEVER, I've put every dollar of my life savings into this plan (sometimes I even open up Vanguard and show them), all of the data says this is an easy decision (a superior choice), all of the experts like Bogle and Buffet tell investors to do just this, and every friend/family member I've educated has done the same.
  20. This problem will not be solved for an exceedingly long time because at the end of the day teachers are amazingly apathetic. I think history has shown that ending victimization is nearly impossible without engagement from those most affected. There have been a few exceptions (particularly teachers who’ve found me through my website), but on the whole teachers just don’t care. Surprisingly, I’ve found that teachers who are the most engaged and have the most to say about the plight of teachers, they’re the least receptive to even listening to how they can improve their personal situation, much less how to address the systemic problem. This experience stands in stark contrast with how my coworkers responded to my declaration that our 401k is a rip off. Several people asked me to give a presentation (which was well attended), others stopped by my office for more personal help, most wound up significantly improving their retirement plans (advisers were fired, IRAs/401ks were reallocated, contributions to annuities ended, etc), and there are now jokes about starting the Church of Bogle. This difference in engagement is why 401ks are vastly superior to 403b/457b. I was warned, but I was still surprised by how difficult it is to get a teacher to care about their own exploítation or the exploítation of their peers.
  21. Conclusion after a year of 403b/457b reform.

    However anybody feels, Rubio hasn’t been reliable. I too would love to see the TSP available to everybody for every type of account. I’m shocked Rubio wouldn’t consider that to be big government, but I’d support him 100%.
  22. Conclusion after a year of 403b/457b reform.

    It is an interesting thought. I wish I could run a simulation to find the answer. I hypothesize that enough workers would stand up and prevent a good portion of the nonsense we see in K-12, but I'm not overly confident in that hypothesis. At any rate, the awful nature of the 403b/457b world can only exist because of teachers' willingness to accept it. I'm reasonably confident that level of acceptance won't change for a very long time (if at all). Hopefully I'm wrong.
  23. Conclusion after a year of 403b/457b reform.

    Yup and I'm happy for them; they're a counter example to some of what I've personally observed. We ought to tie the lower and upper bounds of salaries to inflation. We don't need to beg for random, one-time 5% increases. That's a solid hypothesis. However, I imagine if I had a pension I'd still be very upset that somebody was basically stealing money from my supplemental account. If I could I'd test this hypothesis with another profession that also has a pension, but I don't think I'll ever know for sure why people have behaved the way they have. Rubio is well known in Florida for talking quite a bit and doing very little unless it we're talking about cutting services for everyday people or using deficit spending to finance corporate tax cuts. Having said that, using the TSP for 403b and 457b plans would be genius. Similarly we could expand the FRS Investment Option (alternative to a pension in Florida) to handle 403b/457b plans too. These ideas would be fantastic. Fair enough. I can only gather so much data in my personal life...not nearly enough to come to a scientifically valid conclusion. However, I must note that the non-technical folks were equally receptive as the technical folks. I'm not ready to specify a reason that this problem exists. Resistance to financial knowledge, unwillingness to take action, etc...who knows for sure? Maybe all of the above. Your hypothesis may be true, but I'm still left wondering why the general public has 401ks that are far less awful. I suspect they engage more strongly. To be clear, the population at large does not invest well. I used to be in that group. However, my anecdotal observations show that teachers invest (or don't invest) far worse than any other group that I have personal experience with. It isn't particularly close either.
  24. Conclusion after a year of 403b/457b reform.

    I would have liked to have known you when you were making enemies 😀. I don’t attack anybody, I typically just state the objective truth that Plan A will consume 75% of real investment returns while Plan Z consumes just 3% and I appeal to the idea that you deserve to keep your money. So I haven’t made enemies, but I’ve found an almost aggressive level of indifference. I’ve previously entertained the hypothesis that teachers’ lack of interest in money (something I’m not willing to concede is actually true) is the reason for apathy. However, I’ve found that the teachers yelling the loudest about how poorly teachers are compensated are also the most apathetic about having their retirement accounts raided by fees. So it seems I’ve observed the opposite correlation being hypothesized. Something that I’ve found generally notable about teachers (at least relative to my profession) is a generally strong willingness to voice grievances and a relative unwillingness to act on that discontent. I also see the union as being fairly disconnected from the teachers. I’m not sure if these observations have anything to do with 403b plans, but it stood out to me nonetheless. I’ll still be around to offer my opinions to individuals seeking help, but any optimism for a collective solution has largely been extinguished.
  25. If you buy and hold then you’re fine. However, I’m not sure what an ETF is giving you in that scenario that a mutual fund wouldn’t also provide. I find ETFs to be slightly annoying because I don’t think you can buy fractional shares.
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