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AndyH

16 Year Teacher - Starting more aggressive retirement

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I am starting my 16th year of teaching and just turned 40 this year, but really haven't done much for formal retirement planning until now.  My wife is also a teacher and we are both planning on investing pretty heavily over the next 10-15 years with the idea that we might be able to retire early.

We started a side business 12 years ago, and sold it 2 years ago, which gave us a significant financial boost, enough that we should be able to maximize two 403b's, two 457s, and two IRAs, allowing us to defer/invest approximately $90k of income a year.   

Due to the amount of $$ we are investing, costs are super important to us.   We have other conservative investments, so we are really looking at the tax deferred accounts to be growth accounts over the next 10-15 years and beyond.  

Our plan would be to deffer enough of our income so that we'd be entirely under the 12% tax bracket.     The gap between our AGI and $77,400 12% cap, we'd like to invest in a ROTH account.  It just makes sense for us to pay 12% now on as much as we can.    We'd be using the tax deffered accounts to lower our AGI, but then be using the balance as a ROTH up to the $77,400 limit, if that makes sense.  It will maximize our lower taxes now, but in the future when we pull the $$, it will also keep our tax liability lower then, as the ROTH $$ we pull won't be taxable income.   If anyone sees any holes in this plan, please let me know.

The real reason for posting is that I think I have fairly poor offerings from my district.

 

Of the list, I think that PlanMember is probably the best (from researching this site).  Their retirement select product offers the 403b, roth 403b, and 457 accounts, and from what I am reading has a $50 annual fee, and a .1% annual asset charge, but then I get access to these R-class funds -   https://www.planmember.com/programinfo/index.cfm?currentpage=PlanMember Retirement Select

While I'd love to have an account via Vanguard, our district is not setup with them, and honestly, I don't know the pathway to make that happen anytime soon.

Am I on track with my strategy and selection of PlanMember as the best option from what I have been given?

 

 

 

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Andy

i am not seeing the light why you picked Plan member. The net fees are high. I think Aspire or Lincoln self direct into Vanguard is the way to go IMHO unless I am missing something.

Tony

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Is planmembers $50 a year plus .1% high?

Or is it that the funds I'd have access to have high internal expenses?

Thanks

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Your net  expense ratios within the funds are very high IMHO. This is something i/we have talked about in the past. The expense ratio of the fund is the most important detail. Others are a secondary consideration .With Aspire self direct you can tap into Vanguard much cheaper. I've explained this in the past. you might want to do a search on this site on how to use Aspire to your advantage. Unless I misread Plan member has high fees where they count and hurt the most. Aspire self direct allows you to tap into for instance Vanguard Total Stock Market  Admiral for 0.15% a year fee plus o.o4 expense for the fund.  Thats 0.19% total cost and beats anything on your list by a mile.I believe Lincoln on your list might have a self direct option as well that is worth looking into. If its the same  Lincoln we have been talking about here (there seems to be multiple finance companies that use Lincoln in their name)it might even offer a better deal than Aspire.But you must use the self direct options

 

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You may want to consider what is being done with the money from the business sale. If it has been sitting in cash, that represents an indirect form of market timing.

With the exception of possibly an emergency fund, I think it is a mistake to think of each account as a miniature, stand-alone portfolio. Doing this leads to higher fees, greater complexity, and sub-optimal investment choices. At the end of the day you have a specific risk tolerance and your overall portfolio should conform to that risk tolerance. Looking at one account as conservative and another as aggressive can be a form of mental gymnastics that causes you to stray from the path that is optimal for you.

Who knows if it is best to use a Roth IRA and pay 12% tax right now? I'd have to know your expected income in retirement, but more than that I'd have to forecast the tax code at that time. Whether it is optimal or not, I can't imagine you'll be upset that you paid a 12% tax on income right now. I view this decision as an optimization based on unknowable information. I think your plan is reasonable.

I documented the PlanMember Select plan here. When I looked through their funds the cheapest one costs 0.41% so you'll be paying at least 0.51% for the pleasure of having this account.

I don't see any reason to choose the "Select" plan when you can invest in the Direct plan, which I documented here. You could build a fully diversified portfolio for 0.401% using Vanguard index funds. Still that is quite expensive.

Lincoln has a self-directed account that might be very cheap. Search this form for discussion on that plan.

Aspire has a plan, which lets you build a fully diversified portfolio for 0.208% as Tony said. I documented that plan here.

Even better than that, Security Benefit has a plan called NEA DirectInvest. In that plan you can build a fully diversified portfolio for just 0.063%, which I documented here. I'm personally enrolled in this plan and I think it is clearly your best option (except potentially for Lincoln because I don't know the exact details of that plan). I documented the steps I went through to enroll in it here.

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I wrote my posts in haste as I needed to leave the house. Let me add a few things as I definitely had missed info . I second what ED said.

So we have Lincoln Invest, Lincoln Investment planning LLC, and Lincoln Financial. It confuses me which is which. Also Ed is right I forgot Security Benefit  Direct Invest. Any of the three mentioned Lincoln (the correct one?), Aspire, or Security Benefit Direct Invest  is better than what Plan member offers.  Ed, I don't see where he even has access to Planmember Select . I always default to Aspire because I invested with them and at the time their self-direct option was the best in town and I am familiar with them but honestly the other two mentioned might be slightly better but be careful that you don't somehow get roped in to buying anything other than dirt cheap Fidelity or Vanguard index or target funds.

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3 minutes ago, tony said:

I don't see where he even has access to Planmember Select

PlanMember is in the list. Andy specifically said they had access to PlanMember Select. I kind of assumed that PlanMember offers: Direct, Select, Elite, and a select of Annuities. I suspect Andy would have to call PlanMember to see what deal they worked out for their district.

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6 minutes ago, tony said:

so Ed, which Lincoln are we dealing with from what I mentioned above?

 

think Lincoln Investment has the "Participant Directed Plan" whereas Lincoln Financial Group does not. I think the two threads below support my intuition. I need to be fact checked because I put minimal effort into this post.

https://www.bogleheads.org/forum/viewtopic.php?t=175295

http://board.403bwise.com/topic/6361-lincoln-investments-participant-directed-platform/

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Thanks so much for your feedback.  I have lots to learn, and more research to do.

 

Initially I was thinking that I had two options.  PlanMember or VALIC are the only ones that appear to offer ROTH 403bs.   I got the impression that of the two, Planmember was the better. 

From what I have learned, Planmember Direct is no longer an option, at least for me.   https://www.403bcompare.com/products/194


That being said, if the fees are as much as they look to be with the two options, I may just limit ROTH contributions to an IRA for now.

The state run DRS has some options for the 457 that are under .2% in fees.... but their options are also pretty limited and it appears that I can come close, or maybe even better using Security Benefit or Lincoln.  

Thanks for the links... I will start more homework.

Right now I am just at the shopping stage, so I haven't made any commitments to anyone.  I only talked to Planmember so far to learn about the select program.   While initially the .1% seemed reasonable, I later found that their funds were limited to more costly options, as pointed out above by Tony.

 

 

 

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Andy . Take a  closer look at Aspire, i do know that Aspire self direct as does have the Roth 403b option and you can tap into any funds you want and are not limited to any particular list offering. I don't know if Lincoln or SB offer that option.The DCP plan  actually has some index funds but is missing some components for creating a proper allocation. Some peculiar choices and omissions. I have to wonder who chose the choices.

I would suggest you always compare fund fees to Vanguard fees. Vanguard fees are very low. So if your funds are somewhat in that range slightly higher or slightly lower  you are doing well in your choices. 403bs' often have other fees so you have to look closer. As I stated before don't sweat the one time annual administrative fees as much as the expense ratio.  Although all fees matter.

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Thanks again.

Looking into Lincoln Investment's PDP, it appears that it may be regionally available.  I have a phone call in to them and am expecting a call back.  Not sure if they allow this fund in Washington State.  Looks to be NJ and Chicago areas only from the forums I read.

I put a request in with Aspire yesterday, but haven't heard back yet.

Security Benefit's options seem pretty cheap, but with limited access to funds.  

 

Overall, hoping that Lincoln is an option, but I am not holding my breath.   I'll let you know what I hear back.


Thanks for the advice.

 

 

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Good luck!!

as a side note:

I guess you could do the DCP like this:

US Large Cap Index ( must be similar to a  Vanguard S&P 500 Index Fund)

Global Equity Fund ( similar I guess to Vanguard Total International Fund but the word "global" means it might have domestic stocks as well)

US Small Cap Equity (similar to Vanguard Small Cap Index)

Emerging Markets Index  (similar to Vanguard Emerging Markets Index) You might need to add this depending on how your global equity fund is allocated. Check to see if it has a emerging markets component. Vanguard Total International  I believe has a 20% allocation maybe more in emerging markets and the rest in larger international companies but no domestic stocks)

Seems to be missing a total bond fund which is perplexing and no target funds which is surprising.

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I spoke to Lincoln Investment and it appears there PDP is very geographically restricted, so doesn't look like an option to me.

 

That leaves Aspire and Security Benefit as the two front runners.

 

Still haven't heard from Aspire, but I have been very passive this past week as I have been moving into a new home.

 


Security Benefit seems to have the lowest overall cost in my options, but they also seem to have more limited selections than Aspire.


How important is the vanguard admiral class that Aspire offers for .208% vs Security Benefit at .063%?

 

I am leaning towards Security Benefit because of it appears to be the lowest cost of all my options, and I like that it is affiliated with NEA. 

 

Is the Admiral Class and additional options worth the 300% higher costs with Aspire?  

Of course, that is only an additional cost of .14%

 

Also, there ARE some managed funds with the DRS that I am inserting here.  Overall, their costs don't seem to be competetive with Aspire or Secrity Benefit.

 

 

 

 

 

 

 

 

 

 

 

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11 minutes ago, AndyH said:

Security Benefit seems to have the lowest overall cost in my options, but they also seem to have more limited selections than Aspire.

  
How important is the vanguard admiral class that Aspire offers for .208% vs Security Benefit at .063%?

I don't understand. Security Benefit's NEA DirectInvest offers the three funds you need to build a fully diversified portfolio and they're available in admiral shares (even if you don't meet the typical $10,000 minimum for Admiral).

12 minutes ago, AndyH said:

Is the Admiral Class and additional options worth the 300% higher costs with Aspire?

Aspire is an objectively inferior option because Security Benefit's NEA DirectInvest allows you to build a fully diversified portfolio with lower expenses.

The only arguably valid reason for investing with Aspire would be out of protest because you so despise Security Benefit's general businesses practices outside of NEA DirectInvest.

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