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MNGopher

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  1. 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.
  2. 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.
  3. 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.
  4. MNGopher

    Money Moustache responds to Suze O

    I saw that too. I didn't know cockblocking was now an acceptable journalistic term.
  5. 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).
  6. 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.
  7. Shared. Thanks for the link.
  8. 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.
  9. 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.
  10. MNGopher

    Illinois Teachers to Get Low Cost Option

    Yes, you guys do a great job here helping people, and generally you are more cordial than most of the message boards I visit 😀
  11. MNGopher

    Illinois Teachers to Get Low Cost Option

    No offense to the veterans of this forum, but you guys bickering about acronyms in an obviously poorly written article doesn't really help people. This turns normal people off from getting involved in their finances, and causes them to get overwhelmed, because they think they don't know enough to make a change.
  12. We have some guys that leave magnets, pencils, rulers, etc. in the teachers lounge occasionally. 😜 Once in awhile even 🍩's so I guess they are good for something.
  13. MNGopher

    Need Help with 403(b)/ 457 Options

    I get what your saying and agree if the choice is between Roth 403B/401K and a traditional 401K/403B. Taking the current deduction is best for almost everyone, as you showed with the tax bracket diagram. There is advantages to a Roth IRA though, as opposed to a Roth 403B, so I don't think we should lump them together as being essentially the same thing. With a Roth IRA there is no RMD's when you're older. Also, a Roth IRA doesn't have to be funded with money that is taxed from your job. You just can't contribute more than your income that year. Maybe I get an inheritance or sell a boat or something in January and fund the Roth IRA with those funds, instead of waiting for my pay check. Basically more flexibility on when you contribute and withdraw. I like to think of it as the money I save from my traditional 403B, is enough to fund the Roth IRA.
  14. MNGopher

    Need Help with 403(b)/ 457 Options

    Good to know, thanks. I will bring this up if our TPA ever comes back for an informative meeting (last was 3 years ago). I could see where a married couple could make use of both types of tax deferred plans in their higher income years. The biggest battle in my area is to get people to contribute to something that is not a variable annuity. Only 1/3 of our employees contribute to a plan, and most of those are like $100 per pay check to an annuity. A few use Fidelity and last I heard I am the only one using Vanguard. The culture is just too dependent on the pension unfortunately.
  15. MNGopher

    Advisors related to district employees

    I think they would always benefit more by investing OUTSIDE of an annuity. In their old age, if they are worried about running out of money, they could always purchase a Single Premium Immediate Annuity (SPIA) and create their own homemade pension from a bucket of cash. This would only be advisable well after retirement, not during the working years.
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