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  3. We don't have all the information on the relative, but from the clues given: 1) charter school, 2) young with only a couple years experience, 3) no match, 4) less than perfect 403b vendor, 5) under $6K to invest annually......Roth IRA seems like the logical choice. She can start making tax deferred investments as her income rises.
  4. We tend to over analyze scenarios here which can confuse. The only reason we mentioned Roth IRA is because that's the account the young lady is already in. A tax sheltered IRA would have been just as suitable I guess. Which is better depends, but saving in either one is a good move regardless.Considering she won't be saving more than the IRA limit, why bother even considering a 403b that is expensive and roadblocked with possible surrender fees and requiring the hassle of initiating a rollover. Looks like charter schools are just as ignorant about offering its employees decent choices as our public educational institutions. Unfortunate.
  5. Got it. I don’t know how you’re defining “worth it”, but if it makes financial sense to put $1 in the tax advantages account then it makes sense to put the next dollar in too. I can’t think of a mathematical reason it would be worth it for 2k, but not 19k. If you’re saying it isn’t worth a person’s time to set up a 403b account and deal with AXA for such a small balance, then I guess that’s a judgement call. The size of the distributions are relative to the size of the account, which makes the absolute value of the distributions irrelevant. The only thing that’s relevant is the tax drag as a percentage of the principal. If the tax drag in a taxable account is just 0.05% of the balance each year then I’d gladly pay an extra 1% fee in year 1 to avoid a lifetime 0.05% fee. The break even point with those figures (and a 7% return before fees/tax drag) is 20 years. I don’t presume to know their tax situation. The tax drag will be less for low income folks. Of course an index fund will be more tax efficient than an actively managed fund. My primary point was just that a short time horizon with the current employer increases the viability of using their higher fee plan because you don’t have to pay the large fees for very long before you can rollover to a low cost tax advantaged account and avoid the potentially lifelong tax drag associated with a taxable account. I use taxable accounts heavily. Roughly 3/4 of my portfolio is in a taxable account.
  6. Ed, the OP states that the relative is with a charter school, not a public school district. Charter schools are often private, non-profit organizations that have a single vendor 403b plan. A "governmental 457" is not available to private schools. We don't know what 403b plan AXA is using, or their fees, or even whether the school matches contributions. If the charter school's pay scale is modest which is often the case, I think it's likely that the relative will be in a low tax bracket. I think using either a traditional or a Roth IRA is very reasonable in this case. I agree that if AXA waived the surrender fee on separation from employment, an expensive variable annuity could be considered over a short period of time, a few years. I don't think that's likely, but we would have to know the plan name and check its prospectus to know for sure. If the relative could max the 403b over 2 years, that might be worth it. I don't think contributing only 2k or 3k/yr would be worth it, and I'd prefer it to into a brokerage account. I think your disparagement of a taxable brokerage account is perhaps unjustified. The modest amount of taxable dividends that a fund like Vanguard's Total Stock Market fund generates should not a significant problem for someone likely to be in the 12% bracket while at the charter school.
  7. This is a false choice. Your friend can choose between the 403b (roth or traditional), an IRA (roth or traditional), and probably a 457b (roth or traditional). I'm not sure why people seem to only consider Roth IRAs, but please know the Traditional IRA is very much an option and often the preferable option. New York State has a very good 457b plan that has been discussed at length on this forums. What district? Most districts do not limit their available options to one plan, so I'll remain skeptical until I see that in writing from an official source. Your friend should prioritize maxing out the tax advantaged accounts that allow them to build a fully diversified portfolio at rock bottom prices. The fact that they plan to leave their employer soon means that even a high fee investment account becomes attractive because they only have to pay those fees for a short time before they can roll that account over to a new employer or to a rollover IRA at their preferred institution. One thing to research is if surrender fees still apply when doing a rollover after employment is terminated. The surrender fees definitely apply if you rollover to a different vendor while continuing employment. The opposite is true. Very rarely do you want to give up tax advantaged space and planning to be with your employer for a short amount of time only increases the viability of utilizing those accounts. Assuming they're already maxing out their other tax advantaged accounts then using a 403b becomes more attractive because they're only stuck with the high fees for a small amount of time. The alternative is putting the excess money in a taxable account where they won't be paying high fees, but they will be receiving taxable income forever and are therefore highly likely to owe tax on that income every single year in perpetuity. If that's the case then they should invest in the account that allows them to build a fully diversified portfolio at rock bottom costs. From the sounds of things that's the IRA (traditional or roth).
  8. Thanks for the replies everyone! I should add that she is not working at a public school but a charter school instead which probably explains the limited options. Tony, your thinking basically reflects what I was leaning towards. Given the short time she will be in the state it probably isn't worth opening the 403b. I actually have my own Roth IRA through Fidelity as well with index funds exactly as you specified. I think I will get her setup with a target date fund to start out. Krow36, given her budget I think it is unlikely that she can contribute more than $6,000 per year. She does have a decent sized emergency fund going last I knew. As you note, Equitable does have high expenses just looking over the available funds they showed me and those surrender fees aren't great either. So, I think the best move then is to stick with the Roth IRA and invest in one of the Fidelity Freedom Index funds? Looks like the expense ratio is about 0.12% for those which is quite low from what I understand.
  9. The answer to Tony's question is important: can she contribute more than $6000 to retirement plans? If not, then skip the 403b. Does she have an emergency fund for unexpected expenses? If her school is a public school, it's possible she can use the excellent NY state 457b plan. It is available to NY public schools although the school may not be utilizing it. Are you certain that Equitable (aka AXA) is the district's only 403b vendor? That's unusual for a public school district, but possible. The Equitable Series 201 is a variable annuity that has high fees: the lowest fund expense ratio is about 0.6%, most are around 1% or more, and there's a 1.20% admin fee. There's a 5% surrender fee that lasts 5 years. So we strongly urge against it.
  10. Hey A Internet User Since she may be in New York for only a short while and depending on how much she plans to save during this time, continuing in a Roth IRA would be the easy smart answer. We like index funds here so make sure she is investing in a Fidelity Index fund or funds and is diversified across asset classes. We recommend a simple 3 fund portfolio here : 1) A Total Market Index Fund, 2) A Total International Index Fund and 3) a Total Bond Index fund. Or maybe even a target fund that corresponds with an estimated retirement date. Target Funds are my personal favorite for inexperienced/ novice investors who are just now trying to learn the investment ropes. Now if she plans on saving more than an IRA allows, you might want to list for us all her choices available in her school provider list. Also see if her district might have a 457b plan available to her in her school district. Frankly, I wouldn't bother with the 403b if she only plans to be in New York a few short years and if she won't be saving more than the Roth limit allows which is $6,000.00 max per year unless she is older than fifty then she can put in an extra $1000.00. This would especially make sense if all her 403B choices are high fee insurance products. By the way it is rare to find a school system that offers a match within a 403b. Some do but they are few and far between. Regards Tony
  11. Hi everyone! I'm new to the forum. I'm in the process of helping a family member with her 403b. She is a young teacher with a couple years of experience working at a school in upstate New York which offers a 403b through Equitable. She plans to stay in New York for only a few years. Unfortunately, there is no employee matching and no other available options like Fidelity or Vanguard. She does have a Roth IRA through Fidelity that I helped her setup not too long ago. Is it worth contributing to this 403b? Or would it be better to mainly focus on the roth instead? I have a list of fund options for the 403b that an advisor from Equitable gave her that I could post here as well. We're newbies at all this so any advice would be appreciated. Thanks!
  12. What is the vendor that your 403b is using now? You need to consider all the fees, especially each fund's expense ratio.
  13. Should I transfer my 403 into calpers? My 403 has a fee of $9.00 /yr calpers does not or should I just leave it alone? There is a fee I switched jobs.
  14. EdLaFave

    Zero fee ETFs

    I felt that way until they opposed the fiduciary rule. I don’t have the data to demonstrate this, but with the plethora of funds they now have (sector funds being the biggest offender), they do seem to be drifting from the founding vision. Still, I think their company structure is the best out there, even if there are better funds at other institutions.
  15. MNGopher

    Zero fee ETFs

    Many Vanguard funds are covered by a patent that lets them keep their funds more tax efficient than other companies. Bloomberg article about this. https://www.bloomberg.com/graphics/2019-vanguard-mutual-fund-tax-dodge/ I would guess not having shareholders, local offices, or a lot of advertising all help to keep costs low as well.
  16. ScottO

    Zero fee ETFs

    I still feel better about getting people started with Vanguard due to the way the company is structured. Fidelity does have slick advertising though(paid for by those holding their other funds): https://www.fidelity.com/mutual-funds/investing-ideas/index-funds https://investor.vanguard.com/mutual-funds/fees Target Date mutual funds at Vanguard have a $1k minimum. Vanguard ETFs are priced by whole shares. VTI is ~$175, BND is ~$90. Scott Dauenhauer has said that the way Vanguard pays out dividends, investors are actually being paid to invest or seeing 0% effective expense ratios - I need to look more into that to understand their structure even better. Vanguard is one of the few companies that I dig up information on and feel better about 😛 More info: https://mymoneywizard.com/vanguard-vs-fidelity/
  17. krow36

    Zero fee ETFs

    You're right, I missed that. It's sort of amusing how a few vendors are trying to make a big deal about beating Vanguard to the bottom on fees on index funds. A bunch of Jonnie come latelys! What took them so long?
  18. whyme

    Zero fee ETFs

    Yes, but I don't think any of the Fidelity "zero" options are bond funds. (Though their low cost Bond offering is low enough to undercut Vanguard.)
  19. krow36

    Zero fee ETFs

    I think Fidelity was the first with zero expense mutual funds a year or 2 ago. https://www.fidelity.com/mutual-funds/investing-ideas/index-funds?imm_pid=700000001009773&immid=100820&imm_eid=ep35516329205&gclid=EAIaIQobChMIvvTMlbfL6wIVryCtBh3P7QvgEAAYASAAEgJC-_D_BwE&gclsrc=aw.ds
  20. whyme

    Zero fee ETFs

    For those among you trying to drive every last penny of fund expenses out of your portfolios, I just stumbled across these, which were introduced earlier this year: BNY Mellon US Large Cap Core Equity ETF (BKLC), 0.00% ER BNY Mellon Core Bond ETF (BKAG), 0.00% ER I know nothing about them beyond what I've read: please take this post as an FYI, not a recommendation. It looks as if they are avoiding licencing fees for the famous indexes and using their own indexes (see the PS below). The Large Cap Core has a couple of hundred stocks, looks to be similar to the SP 500: the most heavily weighted assets of the BNY compared to the Vanguard 500 fund are nearly identical. This is the first zero fee bond fund I've run across: are there others? From the press coverage of these releases, it sounds as if BNY Mellon intends to keep these ETFs at zero fee permanently. (There is no talk of short term fee waivers or any such). Evidently the two zero-fund ETFs are their attention-getting marketing strategy: they are late to enter the ETF field, and they are at the same time offering a bunch of other ETFs that do charge expense fees. PS: The stock fund is using a US Large Cap index from Morningstar. The bond ETF uses Bloomberg Barclays US Aggregate Total Return Index.
  21. Sounds excellent! Get started now, the more you contribute each paycheck, the better (think about how much those contributions now will compound over time). Good work finding your way to this plan.
  22. Eggbread, in addition to finding out the surrender fee from Equitable, you need to get their form for moving your 403b balance from them to Vanguard. They issue a numbered form to you that has to be completed and returned by a set date, maybe 30 days? Folks have had to start over when their turn-in date was passed. Their form will have to be signed by your third party administrator (TPA) and maybe Vanguard (I can't remember).
  23. I keep meaning to call Equitable, but their offices close at 1:30 Pacific due to covid. On the bright side, I just finished my enrollment with Vanguard's 403b. Vanguard Instl Target Ret 2050 Fund is the name. Am I on the right track? If so I will start contributions.
  24. I retired in 1992 and since Roth accounts didn’t start until 1997, I didn’t have to make any decision on Roth vs traditional contributions. We have converted some traditional IRA to Roth IRA. We don’t have your problem of a high tax bracket as we took early retirement after 16 years. With 2 pensions and social security, possibly large deferred contribution accounts could well put you in a higher income tax bracket in retirement than you are in currently. Especially after age 72 when RMDs start. I think it might be prudent to use at least half Roth for the 403b and 457 accounts. You can reassess every few years as the tax code changes. Another consideration is saving in a taxable account vs a Roth account. They both have the same initial tax cost, but with no further tax, the Roth beats taxable. I should have mentioned that Security Benefit has NEA Direct Invest which is lower cost than the state DCP. Is SB on the district 403b list?
  25. One other question-- If I understand correctly, both the 457 and the 403 are tax deferred so it lowers my tax burden now, but I will pay taxes on that money when I pull it out in retirement. I am an administrator and my wife is a teacher, so together we are in a higher tax bracket now. So I am selecting the tax deferred options, thinking I will be in a lower tax bracket in retirement. My only hesitancy is that I have heard some suggestions that people diversity their retirement to include some Roth (taxed now but not later) investing as well so not ALL income is taxed in retirement. But I have also heard that suggestion for newer/younger teachers who are in lower income tax brackets now. Does the DCP 457 plan have a Roth option if I did decide to go with a "taxed now but not later" fund, and do you think this is a good idea in my situation? Since you are retired now, did you have some of both (pre and post tax contributions), and how has that worked out for you now? Thanks! Mark
  26. Thank you, krow36. I am envious that you are already at retirement! Great thought about the lower fee and higher performing Large Cap fund. Vanguard is not on the vendor list. Fidelity Security Life Insurance Co is on the list, but I really can't imagine they would charge less than 0.1373% so I am inclined to stick with the DCP 457(b). And yes, I would like to go this route rather than selecting a higher % on the defined contribution because that option is locked in permanently and I want to choose a fairly high amount now--but also want flexibility for life's "curveballs" that may come! Thank you for your comments. They were helpful! Enjoy retirement!
  27. I am a retired WA state teacher. I understand that you are favoring the state deferred compensation 457 plan rather than contributing more than the minimum to the defined contribution part of the TRS plan 3 hybrid plan. Both use the same funds with the same fees. That sounds reasonable to me. Are you firm on using a Retirement Strategy fund? They are certainly diversified, but the total fees are about twice those of the 2 basic US stock and bond index funds. US Large Cap Equity Index fund, all fees including expense ratio: 0.1313% WA State Bond fund, all fees including expense ratio: 0.1373% As for whether there are lower-cost 403b vendors on your district’s list, that depends. I think you can narrow the low-cost 403b vendors that are lower cost than the WA state 457 plan to Fidelity and Vanguard. Are they on the vendor list?
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