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PurpleReign

403b Investment Advice

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Purple Reign,

If you want to invest more beyond your 457 max, I would recommend asking your district, and your TPA if you have one, to add Aspire to your lineup of approved vendors. You can self direct or use an Aspire-approved advisor. Either way, they charge $40/year and 0.15 basis points. 

Since you are not in a high tax bracket, I would consider forgoing the tax savings and opting instead to invest in a Roth 457 or Roth 403b. Maybe even half pretax the rest Roth. 

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2 hours ago, MoeMoney said:

Purple Reign,

If you want to invest more beyond your 457 max, I would recommend asking your district, and your TPA if you have one, to add Aspire to your lineup of approved vendors. You can self direct or use an Aspire-approved advisor. Either way, they charge $40/year and 0.15 basis points. 

Since you are not in a high tax bracket, I would consider forgoing the tax savings and opting instead to invest in a Roth 457 or Roth 403b. Maybe even half pretax the rest Roth. 

Either way? Seems like I remember that an Aspire-approved advisor adds a fee of 0.60% per year? I agree with MoeMoney that asking the district to add Aspire is a good idea. The more teachers etc. ask for it, the more likely the district is to add it to the list. 

I agree with Tony that a balanced fund like an index-based Target Retirement date funds with Aspire is all Purple Reign needs and an advisor would add an unneeded expense. 

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10 hours ago, MoeMoney said:

I would recommend asking your district, and your TPA if you have one, to add Aspire to your lineup of approved vendors.

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.

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 I think you might be right. My Aspire advisor added a low .15% on top of the Aspire's rate, which is a very low add-on to charge, one that can be avoided by self-directing.

What I meant by either way was no matter how the contributions go in - either Roth or pre-tax - the costs to contribute are the same. 

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Good point, Ed. Fidelity and Vanguard are not getting back on the approved vendor list where I am in New York so I jumped straight into suggesting Aspire. That could be a solution for Purple Reign if he's in a state that allows them. Security Benefit could open a can of worms for many NOT in the know but they are great for the self-direct.

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Just now, MoeMoney said:

Security Benefit could open a can of worms for many NOT in the know

...for added emphasis.

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A low .15% add on advisor rate is reasonable if its for your account and not per fund. When we first got Aspire, our rep wanted 1%  for Vanguard Total Bond Index  which included the fund expense ratio but not the administrative fee. That is a lot more than a bond index fund should cost under any circumstance and that did not not include the .15 yearly administrative fee. So Moe are you  getting a better advisor deal than others might be getting with Aspire or might you be confusing the administrative fee as the advisor fee? I would make sure you are not paying more than you think you are. Its an easy mistake to make. Aspire IMHO is only worth it if you self direct and pick index funds.

 

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On 4/11/2018 at 6:22 PM, tony said:

ICMA-RC (457)  is the same group that does our 457b choices in Virginia. It is located in D.C.  Your 457 plan is loaded with Vanguard funds.  

PurpleReign, is it true that you are able to choose Vanguard funds (as Tony was able to) with your 457 run by ICMA-RC (457)? When I google “ICMA-RC (457)”, I get a plan that uses only VT VantagePoint funds.

  http://www.icmarc.org/products-and-services/457-and-401-plans.html

Is that your plan? No doubt the funds allowed in a 457 ICMA-RC will vary depending on the plan.

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Krow

Initially our 457 b was all vanguard funds but currently (or last time I looked) Vanguard was no longer offered. Instead it now offers Blackrock index funds and target funds at a very low cost equal to Vanguard. Why the change I don't know but  still a very good low cost lineup which  anyone would be well served to own. I do believe it does have a .19 % administrative yearly fee. I can't speak about anyone else 's 457b plan or what it may offer

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PurpleReign, it really is criminal that the Washington DC school district has no obvious low-cost, mutual fund based provider for their 403b (and maybe their 457?) plan. That list sucks:  https://dcps.dc.gov/sites/default/files/dc/sites/dcps/publication/attachments/403b%20and%20457%20Vendor%20List.pdf

I believe DC is a tough district to teach in and it could be likely that you will move to another district in a few years. That makes the higher fees of your 403b and 457 plans somewhat less important. It’s high fees over many years that really kill the retirement kitty.

I guess you realize that the more you can contribute to tax-deferred accounts, the less income tax you will pay on that higher than average DC School District income. So I’m rethinking my suggestion that you consider a taxable account, and I now think you should defer as much to your 403b and 457 plans (and contribute to your Roth IRA) as possible. If you leave the DC district in 2 or 3 or 5 years, you can roll the 403b into another 403b with your new district, or into an low-fee IRA. Likewise with the 457 account. Hopefully the new district will have low-cost 403b and 457 providers! 

Have you confirmed with Holistic Planners that their 403b plan has no additional fees other than the 0.80% in addition to each fund’s expense ratio? Unless you can get the Lincoln Investment’s Participant-Directed platform which adds no percent to VG’s low ERs, just $35 or maybe $60/year, Holisitic Planners looks like your best 403b provider. I would call the Lincoln Investment 800 number and ask about their Participant-Directed Platform. Nothing ventured, . . . .

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Here's a table that was in a Vanguard blog.

5ad4e68280061_FEEIMPACT.thumb.png.d78e10587c2f691da7ed49d0a4d51629.png

 As you can see, high fees greatly reduce your wealth over longer time periods. A 1% fee reduces a principal by over 25% over 30 years.

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Below is a table that includes what I actually pay for my all Vanguard and TIAA portfolio (Green) compared to higher expenses. The red column is probably the closest to a fee-only fiduciary who charges a 1.0% AUM and the .35% is for the investments he or she chooses for the client. All approximate estimates of course. 

I think the effect in DOLLARS over many years is more direct than the effect in percentages, although both displays are important. 

Fiduciaries are great but they are not cheap either. I suggest to hire them for a year or two, learn from them and then become a do it yourself manager and cuts those fees down to almost nothing and save even more over the years. 

Expenses of Various Portfolios color and bigger.JPG

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