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MNGopher

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  1. MNGopher

    How To Teach Your Kids About Money

    I grew up thinking we were much more poor than we actually were. My parents never spent extravagantly on anything. It wasn't until my 20's I learned my parents had a bigger portfolio than I ever imagined. By then it was too late, the frugality was already grained into me. So I didn't learn specifics from them, just good habits.
  2. I try to talk to anyone at work about low cost investing who will listen, without being too annoying about it. I tend to get different vibes from younger and older teachers. The under 40 crowd seems hesitant to tie up money (all the way) until retirement. It just seems so far off for them. They are busy getting married, raising families, buying a house, getting a masters degree, etc. Investing for retirement is a lower priority for them, and they tend to put it off, missing out on years of compounding. The over 40 crowd at my school seem fearful of doing it on their own. I often get questions like, "You mean you pick your own investments?!?". Me: "Not really, I pick an index fund that fits my needs and costs me about 0.14% annually instead of the 2% you're paying." We do have Vanguard and Fidelity as choices for our 403B. We have about 500 total employees in our district. When they showed us the stats of most popular vendors (about 2 years ago), I was the only one using Vanguard and about 5 people were using Fidelity. About 200 were using variable annuities and about 300 were deferring nothing. And we have a small employer match after 5 years! I just don't know what the answer is to help people help themselves.
  3. MNGopher

    Big Change At Vanguard

    A reaction to Fidelity's "Saved by zero".
  4. I held my mortgage from 1995-2007. It started out at 7.5% and I refinanced once at I think 6.25% I never crunched the numbers exactly but I probably would have done slightly better in the stock market during that time period instead of paying extra on the mortgage. I didn't have any low priced 403B options at that time though, so it's kind of a moot point. I suppose I could have started a Roth account sooner. During the last 10 years, with the bull market and lower mortgage interest rates it's clear investments would have given better returns than paying off the mortgage. The next 10 years...who knows?
  5. I'm single and I max out my 403B and Roth IRA, but this is fairly recent. In my early years of teaching I put most of my extra money into paying off my mortgage as quick as possible, which in retrospect probably wasn't the best financial decision.
  6. MNGopher

    The Pension Gamble

    Thanks for the link. I thought the retirement gamble was very well done, so looking forward to watching this one as well.
  7. MNGopher

    Help deciphering fees

    I'm not a mathematician either but here is how I got the $70,925. $300 bi-weekly contribution multiplied by 5.75% (.0575) = $17.25 per pay check $17.25 multiplied by 24 pay periods per year = $414 per year* If you plug $414 annually at 8% for 34 years into a compounding interest calculator like this one, that is the amount that the money you paid in fees would have grown to if it had been invested (with the assumptions I listed). http://www.moneychimp.com/calculator/compound_interest_calculator.htm *This isn't really by-weekly, my employer pays every 15th and 30th of the month, so that's how I figured it. A true bi-weekly pay period would be an even greater difference.
  8. MNGopher

    Help deciphering fees

    Great job doing some investigating. It's very difficult to find these fees and charges by looking at the providers websites. I'm not really a math person but I'll take a stab running one possible scenario using Forster's Financial's numbers. Please point out errors in my calculations. Let's assume a teacher has a 34 career and that they contribute $300 every bi-weekly paycheck for their whole career. Let's assume that before fee's their investment returns 8% nominal. I am not factoring in taxes or inflation in this example. The 5.75% fee on contributions would subtract $17.25 from the amount invested every pay period, or $414 per year. Over 34 years this shortfall would have compounded to about $70,925. The 1+% expense ratio would lower their rate of return to about 7% compared with the 8% from a low cost vendor like Vanguard or Fidelity. This 1% difference over 34 years would be a difference of about $245, 375 (1,235,480 - 988,105). Add those numbers together and it comes to $316,300 less than a low cost vendor. The salesman was right that the 5.75% contribution fee is probably less damaging to the portfolio than 1.5 -2% expense ratio, but still far from a great deal for the teacher.
  9. MNGopher

    Roth 403b Limit of $18,500?

    You can put that much into your Roth 403B, but you should look closely at your individual situation to see if that is best for you, tax wise. In general if you are just starting out and not in your peak earning years and/or have a great pension, than the Roth option is probably best. If you are in your higher income stage of your career, the deferred tax option is probably better. Doing some of both is great, because that you gives you options in an uncertain future. At my age (53 and about 4 years to retirement) I max both, but if I had to choose, the deferred 403B would be the better choice, because I expect to be in a lower tax bracket between age 57-70 than I am now. I would need about a million $ more than I have now in my 403B to produce withdraws that would put me in the same tax bracket that I am now. If I had it to do over I would have started maxing my deferred 403B sooner, but like many teachers I had terrible investment options so I can't blame myself too much.
  10. MNGopher

    Money Moustache responds to Suze O

    I saw that too. I didn't know cockblocking was now an acceptable journalistic term.
  11. MNGopher

    Suzie O Throws water on FIRE movement

    I don't doubt that it can be done mathematically by some people. I question more the human behavioral issue of making bad financial decisions. Plus, a lot can change nationally and globally over a 40-50 year period that we can't predict right now. I guess it's a personal balance for everyone between the balances of various risks, financial security, longevity, quality of life, how much you enjoy or dislike your job, etc. Personally, I'm shooting for age 57. By then I should have more to live on than I currently spend annually, while hopefully have enough time and health left to enjoy some non-working years. As a middle school teacher, I can't imagine retiring for 10 or 20 years and suddenly realizing things have changed and needing to go back to work for much less pay in my 60's ? .I guess subbing is an option, but in my school a sub's daily pay is only 1/5th of a teacher at the top of the pay scale (and no benefits).
  12. MNGopher

    Suzie O Throws water on FIRE movement

    I'm not a big fan of Suze, but I think she is pretty much right about this. The idea that anyone would only work for maybe 1/4th of their adult life and live off that for the remaining 3/4 seems pretty unreasonable. Even for the ultra-highly compensated I don't think it works well. In the case of athletes and celebrities they usually tend to blow through it pretty quickly if they have nothing to do every day. Most people are not good at flipping the switch from a high pay check to living off savings and no income. On the other hand, I totally get quitting a highly compensated position after a couple decades to do something more fulfilling for less money. I just wouldn't look forward to retirement if I had to do extreme budgeting for 40-50 years.
  13. Shared. Thanks for the link.
  14. MNGopher

    District 457 Approval

    About 3 or 4 years ago our district started working with a Third Party Administrator to handle our 403B's. About that time they came to our district to put on a presentation about the benefits of tax deferral and why most people should be saving more, etc. This same year I just happened to notice that vanguard and fidelity were added to our approved vendors list. However during the TPA's power-point presentation they only listed the 10 or 12 insurance companies that have been offered forever as approved 403B vendors. At the end, during Q and A time, I asked about this. Me: "I noticed Vanguard is on our approved vendors list, but you did not include them in your presentation. So, is Vanguard an option for us?" TPA: After an awkward pause, as if she was carefully choosing her words, she coldly replied..... "They're on the list". (and then crickets chirping) I went home and began the process of moving to Vanguard, whom I already had other accounts with.
  15. MNGopher

    District 457 Approval

    I'm sure you're right that the TPAs do benefit from the high cost vendors and intentionally steer employees away from the low cost choices. I have experienced this myself firsthand.
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