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AndyH

16 Year Teacher - Starting more aggressive retirement

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Ed, I was just taking the top recommendations from this thread and looking at them to see what the best option is.  To me, it seems Security Benefit is the best option and can't see myself why I wouldn't go that route.   I didn't realize that Admiral Shares were available with DirectInvest.  I thought that was a competetive advantage that Aspire had.... but it appears I was mistaken.

For now, I think Security Benefit Direct Invest will be the direction I go with the 403b, but I'd also like to setup a 457,  which I don't believe is available in DirectInvest.   

 

While I understand this is a 403b website, curious if there are any top 457 opinions, or a site like this specifically for 457s.

 

Thanks


Andy

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It looks like Aspire is probably your best 457b vendor with PlanMember Direct coming in 2nd place. If you could get Fidelity added then they'd be the clear winner.

...you'll have to fact check me though because I haven't studied all of your plans. Think of my opinions as a great starting point.

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On 8/7/2018 at 10:39 AM, AndyH said:

For now, I think Security Benefit Direct Invest will be the direction I go with the 403b, but I'd also like to setup a 457,  which I don't believe is available in DirectInvest.   

While I understand this is a 403b website, curious if there are any top 457 opinions, or a site like this specifically for 457s.

Thanks

Andy

AndyH, I was out of the country with very limited access to the internet this last summer and was unable to post on your thread. I’m a retired WA teacher and so your thread is especially interesting to me.

For other readers, here’s a link to the website for WA State 457 fee table that you posted:  https://www.drs.wa.gov/dcp/investments.htm

An Administration fee of 0.1283% is added to the fund’s “Investment fee” (expense ratio or ER). The total fee for one of the Target Retirement funds (they call them “Retirement Strategy funds”) would be the fund’s ER of 0.15 to 0.17%, plus the Admin fee of 0.1283%, or about 0.29% total.

The fees on $10,000 of the 2035 Retirement Strategy fund would be $29.44/yr. The annual fees on the WA State Bond fund and the US Large-cap Equity fund would be much less, only $13.69 and $13.13 respectively. Their ERs are 0.0%!

You can compare the WA 457 fees on $10,000 with those of the Security Benefit NEA Direct Invest 403b, which are very low. Its Vanguard Total Stock Market fund has an ER of 0.05% and the admin fee is $35/yr for balances less than $50,000. So (0.0005)(10,000) = $5. Add in the $35 admin fee that will apply for at least several years, and that’s $40/yr.

A 403b account with Vanguard (through Newport Group with whom they outsource their 403b) would cost a $10,000 balance the $5 ER plus an admin fee of $60, for a total of $65. (Which is still a bargain!)

I’m trying to convince you that the WA State 457 is a very low-cost plan.  I suggest you consider your and your wife’s accounts together. The WA State Bond fund is a very low-cost bond fund that is 100% high grade corporate bonds, while SB NEA Direct Invest’s Vanguard Intermediate-term Bond Index fund is about 47% Treasury bonds and 53% corporate bonds. I prefer the VG fund, but using some combination of the 2 funds might be worth considering. Or you can just use one of the Retirement Strategy funds in the 457 and call it good.

Your plan to contribute to both a tax-deferred 403b and 457 as well as a Roth IRA is a good one in my opinion. Staying below $77,200 in taxable income tax bracket is also a great idea. Especially if you have a taxable account where long-term cap gains and qualified dividends on stock funds are taxed at 0%.

The folks here at 403bwise are knowable about 457 plans as well as 403b plans. In fact there's a forum platform for each but we all participate in both platforms. 

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Thanks for your very thorough response.   The beginning of school sidetracked my research into this topic, and also, we have moved and are now renting our prior home out instead of selling it.     These were distractions, but in the end, don't change my goals.   I have additional monthly income now that I need to account for, and need to figure out what my best strategy is in my current scenario.   This is in addition to the almost 15% raise my wife and I got this year because of the McLeary decision.

With rental income of potentially 30-40k (we have other rentals besides our old home) , the tax deferrals may become more important, but as I go on, I am more and more attracted to having some in ROTH accounts too.

I am going to do some math and determine my best course of options.   If I can get my district to accept a NEA DirectInvest with Planmember as a ROTH 403b, I think I will do that along with a 457 through the state system.    For a ROTH IRA, I'll probably set that up with Vanguard or Fidelity.

The first thing I will do is get the accounts setup with a smaller contribution set, and then once everything is set up and I have a clearer idea of my rental expenses, I can throttle my contributions to their maximum potential.

Thanks again for your help and sorry for the delayed response.

 

On 9/12/2018 at 7:52 PM, krow36 said:

 

 

AndyH, I was out of the country with very limited access to the internet this last summer and was unable to post on your thread. I’m a retired WA teacher and so your thread is especially interesting to me.

For other readers, here’s a link to the website for WA State 457 fee table that you posted:  https://www.drs.wa.gov/dcp/investments.htm

An Administration fee of 0.1283% is added to the fund’s “Investment fee” (expense ratio or ER). The total fee for one of the Target Retirement funds (they call them “Retirement Strategy funds”) would be the fund’s ER of 0.15 to 0.17%, plus the Admin fee of 0.1283%, or about 0.29% total.

The fees on $10,000 of the 2035 Retirement Strategy fund would be $29.44/yr. The annual fees on the WA State Bond fund and the US Large-cap Equity fund would be much less, only $13.69 and $13.13 respectively. Their ERs are 0.0%!

You can compare the WA 457 fees on $10,000 with those of the Security Benefit NEA Direct Invest 403b, which are very low. Its Vanguard Total Stock Market fund has an ER of 0.05% and the admin fee is $35/yr for balances less than $50,000. So (0.0005)(10,000) = $5. Add in the $35 admin fee that will apply for at least several years, and that’s $40/yr.

A 403b account with Vanguard (through Newport Group with whom they outsource their 403b) would cost a $10,000 balance the $5 ER plus an admin fee of $60, for a total of $65. (Which is still a bargain!)

I’m trying to convince you that the WA State 457 is a very low-cost plan.  I suggest you consider your and your wife’s accounts together. The WA State Bond fund is a very low-cost bond fund that is 100% high grade corporate bonds, while SB NEA Direct Invest’s Vanguard Intermediate-term Bond Index fund is about 47% Treasury bonds and 53% corporate bonds. I prefer the VG fund, but using some combination of the 2 funds might be worth considering. Or you can just use one of the Retirement Strategy funds in the 457 and call it good.

Your plan to contribute to both a tax-deferred 403b and 457 as well as a Roth IRA is a good one in my opinion. Staying below $77,200 in taxable income tax bracket is also a great idea. Especially if you have a taxable account where long-term cap gains and qualified dividends on stock funds are taxed at 0%.

The folks here at 403bwise are knowable about 457 plans as well as 403b plans. In fact there's a forum platform for each but we all participate in both platforms. 

 

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AndyH, welcome back! Congratulations on the 15% raises! Using the NEA Direct Invest 403b and the WA State 457 to save for retirement and lower your current taxes is certainly a good idea. That both you and your wife can contribute gives you a lot of flexibility.

You mention the small number of funds offered by both NEA Direct Invest and also by the WA State 457. As Ed has mentioned, all you need is a total US stock market fund, a total int’l stock market fund and a broad-market US bond fund. This gives you maximum diversification and minimum duplication. Because they are index funds, they are as low-cost as you can get!

NEA Direct Invest has these 3 basic funds. The WA State 457 has the US stock and bond market funds, but the int’l stock mkt funds are more expensive. I suggest you contribute to int’l stock mkt in the 403b accounts and possibly in your taxable account, not in the 457 accounts. It is a good idea to consider all your accounts as one portfolio. That means that it’s not necessary to have all the components of your asset allocation in every account.

Whether you should contribute to traditional vs Roth accounts, or some combination, is not a simple question. Because the 2 of you will have pensions as well as Social Security, and also taxable account income, your tax bracket in retirement may be about the same as it is currently. After age 70.5, the Required Minimum Distributions of your traditional 403b, 457 and IRA accounts could push you into a higher bracket. So contributing to a Roth IRA and a Roth 457 will help reduce those RMDs. Contributing to the traditional 403b accounts will help reduce your current taxable income. I suspect that the above is your plan?

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