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whyme

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Everything posted by whyme

  1. whyme

    2019 YTD return--January is good!

    Fair enough, Steve, if you want to keep your focus squarely on 403b issues rather than investment policy. I'm not a fan of everything CalStrs does, but I think you are being a bit rough on their investment record... down 3.2% in 2018 is better than I did, and even your very conservative portfolio was down 2%, if I recall correctly. And January more-or-less erased those drops. They need market returns to fund pensions for decades or even centuries into the future (they plan based on an annual gain of 7%/year), so they need to have more exposure to market risk than an individual retiree with a much shorter time horizon. The state (led on this by Jerry Brown) has taken significant steps to keep the pensions funded and address that "liability gap," notably by increasing the participant contributions (I now pay 10.3% of gross pay, before tax) and district contributions (that is ramping up to something like 20% of salary, which is a big argument our district uses to cut health benefits and suppress pay raises, but I digress) and reducing the benefits a bit for newly hired folks (instead of getting the maximum "age factor" multiple at 63, new hires will have to work to 65). There are a couple of states with pension plans that are seriously underfunded and could flame out (Illinois is one, I think), but California looks pretty solid to me, though of course nothing is ever truly guaranteed.
  2. whyme

    2019 YTD return--January is good!

    Steve, if you are curious about why and how Calstrs makes its investment decisions, this podcast features a long interview with the guy in charge of them: https://capitalallocatorspodcast.com/2019/02/10/ailman/
  3. Purely a guess on my part, but my application of Ockham's Razor would lead to the hypothesis that he just composed a bunch of emails to people he found on LinkedIn as a way of prospecting. It would have been interesting if he wanted to argue with you, but somebody who wants to think about those issues isn't long for that business.
  4. Thanks for that, Ed. So I guess that is some staffer's (or volunteer's?) summary of the to-be-announced plan. There's much in the actual document that remains hazy to me in terms of actual policy, and I think I saw where AOC said she thought of the GND as a kind of "request for proposals" rather than a concrete statement of policy. As you said above, it's basically an assertion of ideals, not law making. The universal income discussion would quickly wander pretty far from 403b matters, but it is compelling. One aspect that is interesting to me is how that idea comes into and out of fashion (or "the Overton Window") in different periods. President Nixon (!) actually proposed some kind of basic income for the poorest households in the late 1960s, and a minimum income was part of McGovern's presidential campaign promise in 1972, I think. I don't know my history well enough to know about the depression era, but I think it's a safe bet universal incomes were part of the discussion then, too (the Works Progress Administration seems like a variation on that concept).
  5. Tony, I think you may have been bamboozled by Fox News or a similar partisan source. Best I'm able to decipher, something -- a now-deleted blog post or a "fact sheet," depending on the account -- was "posted" or "sent out" before the "Green" resolution went public, which contained the "unable or unwilling to work" line. It still isn't clear to me who wrote it or authorized it, but more to the point, if you read the actual "Green Deal," you saw no such language. The document was submitted to Congress and is easy to find and read online. https://www.congress.gov/bill/116th-congress/house-resolution/109/text There is plenty to criticize: naive idealism (maybe one could say grandiosity) in calling for "prosperity and economic security for all people of the United States," or the head-scratching demand to "upgrad[e] all existing buildings in the United States," but the antithesis of the American Dream? Seems to me that dreaming about what a just society or a good government ought to be is a characteristically American activity. As a teacher, I've known many a student whose exuberant idealism exceeded their grasp of practical reality; I hear echos of them in that document, a sign of great ambition, not shirking work.
  6. Kudos. If my experience rolling assets into Vanguard is any guide, the Vanguard folks will make it as easy as it can be--I seem to remember a phone call that was followed up by forms emailed to me with almost all of the information filled out, I basically just had to sign and submit. I wasn't dealing with a guardianship, though, no doubt that adds a significant layer of complication. Anyway, good work!
  7. whyme

    Need Help Selecting 403b Service Provider

    I think Krow found some boilerplate language that probably doesn't apply beyond the fee description I copy-and-pasted above. I'd put nothing past Nationwide in terms of sneaky fees, but I suspect the state mandates fee transparency in such accounts. So I'd guess that that list covers it. If you are concerned and are considering this plan, you might want to also post over at the "Bogleheads" forum--there are a larger number of participants there, and you may find people who actually have accounts with the Maryland state supplemental retirement plan. (Especially given that that program also offers 401k accounts.) Again, if you can fight your way past the "advisors," Security Benefit DirectInvest looks like a great option. I read Ed's account of picking the DirectInvest option for his wife's plan (https://educatorsfightingforfairness.wordpress.com/our-story/)--it is harrowing! An advisor actually enrolled his wife in a different high-fee plan when she submitted the paperwork for DirectInvest. Wow, that is profoundly unethical. I hope you don't encounter such shenanigans. PS: I posted this before I saw Krow's post above. Bottom line, we both think that list of fees covers it.
  8. whyme

    Need Help Selecting 403b Service Provider

    Krow, I was only able to find that fee page via the search box. The state must have mandated that. I have a Nationwide 457b (the only option in my district), and I'm still not sure I've sussed out all of their fees: they bury them, layer them and pretty much do everything possible to avoid transparency.
  9. whyme

    Need Help Selecting 403b Service Provider

    PS: I just looked at Ed's file about Security Benefit DirectInvest. If I understand it correctly, they just charge a $35 annual fee, which is waived for account balances over $50,000. It looks like they have slightly higher-cost (non-institutional) versions of the same Vanguard funds that the Maryland plan has, but those are still very low cost funds. If I've got that right, the DirectInvest plan would probably be preferable over the long haul, because it doesn't have any fee tied to the size of your balance. Getting started, that .14% is small potatoes, but it will add up over the years as your balance grows. (Still, .14% is a lower fee than most 457 plans offer.) One thing I note in Ed's documentation of the plan--he said it was difficult to access (sounds like they have a sales force steering folks into higher-fee options, another argument for fiduciary regulations). I'm sure Ed will be a great resource if you do decide to open a DirectInvest account, Tricia.
  10. whyme

    Need Help Selecting 403b Service Provider

    I'm baffled by what krow36 found--I can't replicate it. I clicked through the link and got a list of funds. I also went back and looked at 403b as opposed to 457 options, and at a glance both the fund choice and the fee statement appeared identical. I don't know anything about Security Benefit's options, but perhaps someone (Ed, you up for this?) will jump in with a comparison.
  11. whyme

    Need Help Selecting 403b Service Provider

    Very strange! I clicked on the Maryland plans and got different info! https://www.marylanddc.com/iApp/tcm/marylanddc/index.jsp I clicked through to see the 457 offerings (they also have 403b and 401k plans that I didn't investigate): they have some excellent very low fee Vanguard offerings, which you'll need to pick from a list of much higher-priced funds. (These include institutional class Total Bond, Total International and SP500 funds.) I searched for fees and it appears there are additional fees as follows: 0.14% of your total balance per year, paid monthly, to a maximum of $2000/year. Plus an additional fee of 50 cents per month (weird). I'm made a little queasy by the fact the plan is operated by Nationwide, who are notorious for making it difficult to discover all the expenses. Here's what I found at https://www.marylanddc.com/iApp/tcm/marylanddc/about/how_do_they_work_fees.jsp Retirement Plan Fees Maryland Supplemental Retirement Plans (MSRP) is required by Maryland law to pay all costs associated with the plans. The Board of Trustees (the Board) collects these fees by charging participants, based on account balance. Annual account fees The annual fee per participant is currently 0.14 percent of your account balance. This fee: Is charged monthly and reported on your quarterly account statement Covers services provided by the Board of Trustees – 0.05 percent, and Nationwide® Retirement Solutions (Nationwide) – 0.09 percent Can’t exceed a maximum of $2,000 per account, per calendar year Additional administrative fees In addition to the 0.14 percent annual account fee, a monthly charge of 50 cents is charged to all 401(k), 457(b), and 403(b) plans. This fee: Is not charged against 401(a) match plans Is not charged against accounts of less than $500 May be adjusted periodically at the Board’s discretion to sufficiently cover service provided by MSRP and Nationwide Mutual fund fees There are costs associated with the mutual funds that are available for investment. These costs are detailed in the fund prospectuses, and are deducted from the return on your investment.
  12. https://www.philly.com/columnists/john-bogle-vanguard-scraps-plain-talk-no-profit-at-cost-20190207.html
  13. Bill, you have obviously paid attention to the holdings and taken the actions of posting here, contacting Vanguard, etc. That ain't nothing. Seems to me like you are doing a great job so far--it's a strange position to find oneself in, you are correct to make moves deliberately, if at all. (That is pretty good advice for investing in general, come to think of it.)
  14. So, if I am correct , Bill can move the stocks and other assets to Vanguard and, later, develop a strategy for moving money into Vanguard funds. This might unfold over many years to avoid any big tax hit. Again, a Vanguard consultant would help with this, and if he's bringing multiple millions to Vanguard I suspect he could get a good bit of advice for free. More please-apply-salt-I'm-no-tax-specialist musing from me: If I found myself holding a utility stock with a million dollars in unrealized capital gain, I would not sell a large fraction of it at once. My first thought is to consider redirecting the dividends into diversified Vanguard funds. Then, if the dividends were being used for living expenses, I would consider whether I could sell enough of the utility stocks each year to replace that income, in other words, draw the desired amount of income from the sales of a small fraction of the utility stocks each year instead of from the dividends. (If you are stuck with a huge tax due to that buyout, then my thought would be to avoid any further selling at all during the same tax year, unless there is something that can be sold at a tax loss.) One more thought: everybody here is convinced of the wisdom of investing in diversified funds. I think that can sometimes lead to a sort of panic in the face of concentrated individual stock ownership. The truth is that lots of folks have done ok over decades with just a handful of dividend paying stocks--in other words, a small number of utility stocks is definitely not an optimal portfolio, but it's been working and there's no reason you can't make the changes slowly.
  15. While Bill would certainly want to confirm this with someone who knows the details of his situation before making any move (Vanguard can probably walk you through it), I'm pretty sure there would be no tax consequence to moving the stocks"in-Kind" to Vanguard. Just E-trade's transfer fee. As I understand it, capital gains tax is only triggered when something is sold, not when it is moved between brokerages.
  16. My 2¢: bring your cash to Vanguard and make new purchases there. Eventually, you'll probably want to consolidate everything at Vanguard. They'll charge $0 to buy or sell Vanguard mutual funds or etfs (including non-Vanguard etfs), and if you have a substantial balance held at Vanguard, the cost of buying or selling individual stocks becomes negligible (at 500K+ total in Vanguard accounts, stock transactions are $2, at one million plus, the first 25 transactions are $0). The only downside I can see to moving assets "in-kind" from ETrade (that is, transferring assets without selling anything) is that Etrade slaps a fee on you for transferring the account out. I think it is $75 if you transfer out the entire account. Given the dollar amounts you've described, I personally think it would be worth that small hit to make the transfer and handle everything at Vanguard in the future.
  17. Thanks, Steve. At the risk of persecuting the proverbial dead horse, I'll also point out that the hypothetical example in the article does not reflect the vast majority of real-world situations. 1. "Susan" retires with virtually 100% salary replacement from pensions (she is obviously bringing in more than 30k total in Social Security, since part of the SS benefit is not taxed). 2. She retires at 70--maximizing SS and minimizing any chance to roll money into a Roth during the typically lower-tax years at the beginning of retirement before RMDs. 3. She has both a substantial public pension and full social security -- this is possible, but school employees in fifteen states (including Texas, Illinois, Massachusetts and my own California) do not contribute to Social Security at all, and if they qualify for benefits based on other employment, the amount of the benefit can be sharply reduced (via the "Windfall Elimination Provision"). The states that enroll school employees in SS tend to have lower pension benefits -- many have median benefits for new retirees hovering around $20,000/year. 4. While drawing a modest salary and paying into both pension systems, she managed to roll up one million in a 403b. Good work, Susan, but if my anecdotal discussions about retirement with my colleagues are any indication, this is an unusual scenario (unless there's family money or another supplemental income source). In other words, "Susan" is designed to push a point about Roth options, while conspicuously failing to note that only a tiny fraction of retirees are in her situation. More typically public retirees' combined pension and social security will replace a relatively small portion of their final year earnings. For one thing--I'm thinking now specifically of K-12 teachers, college professors and academic administrators in California's CALSTRS system, one of the most generous public pension systems--most retirees don't work 35-40 years in the same pension system, the point at which pensions approach full salary replacement. It's far more common to retire in one's early sixties with something like 20-25 years tenure: in California, 20 years "service credit" (for someone at least 63 years old, it's less if you are younger) would translate to a pension (without survivor benefits) of 48% of base salary (based on the average of the three highest-pay years, so the actual percentage replaced would be a little lower). There is a sort-of COLA with that, but it is weak, so the purchasing power is virtually guaranteed to erode over the years. And, as mentioned above, no Social Security on top of this, at least not for the years of Calstrs covered employment. In conclusion, Susan's colleagues should be encouraged to contribute as much as possible to those tax-deferred 403b accounts.
  18. A large taxable income in retirement is a very good problem to have, don't you think? The advantages of using a tax-deferred account for retirement savings are 1. you get an immediate, known tax reduction at the time of contribution and 2. that deduction allows (and encourages) many to contribute more than they would to a Roth. I would not discourage anyone from contributing to the traditional tax-deferred accounts, including teachers expecting a pension. Roths are also attractive, and if you are willing and able to max out a Roth, great, go for it. Ditto for splitting the contributions between Trad and Roth, or rolling money into a Roth when you have a relatively low income (maybe during the retirement years before the RMDs kick in?). But I bristle a bit at the suggestion that tax-deferred retirement saving is a questionable practice. Are there really many retired folks who wish they had contributed less to such accounts?
  19. I have no experience with that fund (or any tax exempt fund), but I believe krow36 is mistaken to consider it a junk bond fund, as roughly 83% of the holdings are "investment grade," (BBB or better), about 7% are at the higher end of "junk" (B or BB) and about 10% are not rated. Compared to an intermediate-term fund VWALX has much longer-term bonds and a bit of that riskier "junk," hence it would indeed be expected to be the more volatile of two, but unlikely to match stock-market price swings. The name of the fund promotes confusion, I think. Vanguard's taxable junk bond fund (VWEAX--almost everything it holds is rated BB or below) is also called "High-Yield."
  20. First of all, BK10s, I feel for you. I've also found myself with unexpected responsibilities for family members--my situation hasn't yet gone so far as yours, but I've experienced some of the emotional and mental weight that comes with those circumstances. You are responsible for managing his finances (it's great that he has such resources, even though at the moment the decision making may be nerve-wracking), so I advise you to ignore what he did with his investments under different circumstances years ago--that's not relevant. You'll be doing a great job for him if you put the money in some version of the three-fund index portfolio. You may want some professional help, though, to make decisions about tax management (if this $2 million is in a taxable account, you'll probably have a six-figure tax bill, unless there's some way to defer the capital gain by reinvesting in the "new" outfit) and to decide whether and how to replace the ongoing dividend income that the utility shares provided. If you qualify for a free CFP consultation with Vanguard (I think that depends on the amount of Vanguard funds and ETFs in your linked Vanguard accounts), that would be a great place to start. Otherwise, you could either pay Vanguard the 0.3% for as long as it takes to get this situation settled (then say thank you and end that fee), or look for a local fee-only fiduciary financial planner who will review the situation with you as needed, for an hourly fee. There are networks of the latter, some of the folks here might be able to supply referrals.
  21. whyme

    2019 YTD return--January is good!

    Yes! But as you know, those results can turn the other direction anytime... I suspect you'd also be happy with the results if you check back 2 or 3 years on your own accounts. PS: I'm using the Personal Capital aggregator to get these figures... given the fact that I've been consolidating various far-flung employer-related accounts in the past two years, I'm not confident the percentages are accurate. But that's the best record I've got. Things are looking good, I can say that much, though I still have a way to go before I'm convinced that I have all I need for retirement.
  22. whyme

    2019 YTD return--January is good!

    Since you ask, it looks like mine's up about 7.2% in January '19. Up 1.14% for 1/1/18 - 2/1/19. Up 25.84% for 1/1/17 - 2/1/19. For the benefit of any newcomers: these short term returns don't imply that we should respond to them by making any kind of investment change; sticking with a planned allocation and regular contributions over the long (multi-decade) haul is what matters. Making moves in response to the market ends up costing you money, and following market gyrations can cause unnecessary emotional upset. I recall John Bogle's advice about periodic brokerage statements, advice which all of us on this thread are clearly ignoring: "Don't peek!"
  23. whyme

    Out of line?

    Others here will know more about PERSI and the particular funds on offer, but at a glance that sure looks to be a superior option to anything on the 403b menu. A portfolio of the US Broad Market Index, International Index and US Bond Index would be very low cost and a great way to build savings. You might consider starting with few or no bonds, then easing into a larger proportion of bonds (which are less volatile but are also expected to yield less that stocks over long periods of time) as you get closer to retirement. Seeing this list makes me mad at that sales guy who steered you away from this good 401k plan so that he could sell you annuities... it's hard to separate the victims from the perpetrators in that business.
  24. whyme

    Out of line?

    Piggybacking on Ed's linked article, I suggest that 403learning look carefully at a Traditional IRA and a Traditional (as opposed to Roth) 403b/457b/401k. The main reason, from my POV, is that the immediate tax benefit probably outweighs the promised Roth benefits, especially given that you are far from "max out" contributions. 1. The immediate tax deduction allows you to contribute more without reducing your spendable income. The amount you contribute, combined with time, are keys to retirement savings success. For my advice to really work, you need to contribute more. 2. The deduction lowers your taxable income, which not only reduces taxes; it also may (depending on your taxable income level), allow you to contribute to a Trad IRA even when you are enrolled in a pension plan (you'll need to check on this one--figure where you taxable income falls in relation to the IRS phase-outs for the IRA deductibility benefit). 3. You get an immediate tax benefit when you contribute to a Trad IRA. This encourages savings, at least it has with me. 4. While the Roth IRA is not a bad choice (I contribute to one), nobody knows what the tax situation will be when you retire decades from now. If the government were to, for example, impose a big consumption tax (like a VAT) while lowering income tax rates, the advantages of money from a Roth will be reduced. This is a good problem to have: both the Trad and the Roth are good places to build investment portfolios, especially when you can access low cost providers such as Vanguard. Consider the pros and cons, but so long as you consistently fund one (or even fund both) you'll have made a reasonable choice that you'll be happy about as retirement nears.
  25. whyme

    What Bogle Taught Us

    You've got me there!
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