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Halle23

Fidelity, USAA or MetLife

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It's great to have such good choices! It might depend on what your long-term plans are. A 457 account has an advantage over a 403b account or a traditional IRA and that is when it comes to distributions. Folks that are hoping to be able to retire early (before ~65?) value their 457 account because the IRS rules allow distribution after separation from your employer at any age without a penalty. For penalty-free distribution from an IRA it's age 59.5. From an 403b (and I think the TSP?) it's 55 after separation from your employer. Even if you don't have early retirement hopes, it's great to have options. So a good 457 plan would probably be my first choice, then maybe a Roth IRA (more flexibility and options), and then the 403b.

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Thank you so so much! I am going to get on that. This really helped me get off the fence with Fidelity and Metlife and getting that 403 switched and a 457 started!

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I’ve got a web site for 403b/457b plans that you might find useful. 

 

My Investing 101 page will give you a good foundation, https://educatorsfightingforfairness.wordpress.com/investing-101/

 

I also documented Fidelity (they’re great) in a page where I covered Florida’s best vendors, https://educatorsfightingforfairness.wordpress.com/floridas-best-403b-457b-vendors/

 

Generally speaking, I’d max out the 403b/457b before I used an IRA.

 

Generally speaking, a Traditional account is preferable to a Roth. With a Roth you get taxed at your highest marginal bracket. With a Traditional you get to fill up lower brackets and therefore you can generally expect a lower effective tax rate. The Roth is better if you plan to have enough money in higher tax brackets than your current highest tax bracket...I don’t expect this to be the case for many.

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1 hour ago, EdLaFave said:

I would recommend Fidelity, but in almost all cases I would not recommend their funds-of-funds because they are too expensive. I would recommend their 3 total market index funds: one for US stock, one for US bonds, and one for international stocks.

Because the Freedom Index funds are only offered in the Investor class, the ER’s are about 0.10% more expensive than the 3 broad market index funds. If you’re willing to deal with a balance of the 3 funds based on your asset allocation, then that’s preferable. It’s not difficult. However if you want Fidelity to do the rebalancing for you, then the Freedom Index Investor fund is a reasonable choice in my opinion. Of course you can change from the 3 funds to the single fund of funds later.

Fidelity Total Market Index Premium, FSTVX, ER 0.04%
Fidelity International Index Premium, FSIVX, ER 0.06%
Fidelity US Bond Index Premium, FSITX, ER 0.05%

Fidelity Freedom Index 2035 Investor, FIHFX, ER 0.15%

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1 hour ago, EdLaFave said:

Generally speaking, I’d max out the 403b/457b before I used an IRA.Generally speaking, a Traditional account is preferable to a Roth. 

Quote

 

https://www.bogleheads.org/wiki/Roth_IRA
The Roth IRA should be considered if the present marginal tax rate is expected to be lower than the future marginal rate at distribution. If the outlook for tax rates is uncertain, one should consider diversifying contributions (or conversions) between the two account types.


 

I don’t think that the decision on a traditional vs a Roth IRA is as cut and dried as Ed says. Many investors value a Roth IRA because it adds an income source that is not taxed at distribution in retirement (or before?).  

You can find your income tax bracket by checking line 43 of your Form 1040 and use this website: http://www.moneychimp.com/features/tax_brackets.htm  There are income limits on the deductibility of a traditional IRA and also there’s a higher income limit to be able to contribute directly to a Roth IRA. The backdoor Roth IRA method is a way of contributing to a Roth IRA regardless of income. The Boglehead Wiki has lots of information on the Roth IRA. Maybe it would be best to postpone the IRA until you’ve got your 403b and 457 accounts set up?  

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Maybe I am missing something but the Freedom funds have ERs of 0.75%...http://www.morningstar.com/funds/xnas/ffffx/quote.html

The Roth is definitely taxed well before distribution; it’s taxed when you earn the money and it is taxed at the highest bracket you’re currently in. The commutative property of multiplication means it doesn’t matter when you’re taxed, only the effective tax rate. 

Roth Value = Money Earned * (1 - Highest Marginal Bracket) * N Years of Growth

Traditional Value = Money Earned * N Years of Growth * (1 - Effective Tax Rate as Lower Brackets are Filled)

Some folks like Roth because they believe the US will have much higher tax rates when they hit retirement. I personally don’t like to make bets on my non-existent powers of prediction. 

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3 hours ago, EdLaFave said:

Maybe I am missing something but the Freedom funds have ERs of 0.75%...http://www.morningstar.com/funds/xnas/ffffx/quote.html

Yes, you are missing that Fidelity has two series of target date funds. The Freedom funds use managed funds for the component funds and have ERs of 0.75%. The Freedom Index funds use index funds instead and have ERs of 0.15%. Both series are listed on 403bcompare.com which I think means that Fidelity makes both series available nationwide to their K-12 403b customers. 

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Thanks, I missed that. I’ll have to update my site now.

I agree, I think the freedom index fund-of-funds are a reasonable alternative for those who don’t want to manage three index funds on their own.

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Can anybody explain a conflict I'm seeing?

I found this Fidelity 403b page and it links to a pdf that lists the funds. It lists the Freedom Index Funds with higher expense ratios than they're listed in Morningstar. For instance the PDF says the expense ratio is 0.21% while Morningstar says it is 0.15%. what accounts for the 0.06% delta?

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My guess: The Fidelity PDF is up-to-date as of Sep 30, 2017 and Morningstar and 403bcompare.com are using-out-of-date info? At the bottom, the PDF says “Expense information changes periodically”, and “Fidelity is voluntarily reimbursing a portion of the fund’s expenses.”  I suspect that all Fidelity’s index funds have loss leader ERs thanks to Vanguard.  
 

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