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Everything posted by krow36

  1. There are no "bonehead" questions here--we look forward to any questions. Whatever question you ask, there are probably other folks with the same question, lurking, just waiting for you to ask a question! We think it's best to look at all your retirement investments as a whole. That means in addition to your 403b account, you should also consider your other retirement accounts such as IRAs, your taxable account, your spouse's retirement accounts, etc. Do you have a preferred asset allocation, the ratio of stock funds to bond funds? If you are 5 years from retirement, you might consider an asset allocation of about 60% stocks and 40% bonds. However this is a very personal decision and you might reasonably choose one that's anywhere between 40% and 80% stocks. Do you invest in international as well as US stock funds? Do you have a pension? If so, consider that you may not need to take withdrawals from your 403b or IRAs until well into retirement? So you will be investing for a longer period than just 5 years. Will you be 59.5 when you expect to retire? Your easiest choice of a good low-cost Vanguard fund for your 403b is one of their Target Retirement funds. I suggest you decide on an asset allocation, for example 60/40, and pick the TR fund with that asset allocation. TR funds gradually become more conservative over time, so if it's 60/40 now, in 5 years time your fund might be 50/60. Here's the TR 2025 fund which is now 65/35. https://investor.vanguard.com/mutual-funds/profile/VTTVX Another very easy choice would be one of Vanguard's Life Strategy funds. These funds don't change their asset allocation over time. The LS Moderate Growth fund stays at 60/40. https://investor.vanguard.com/mutual-funds/lifestrategy/#/ If you only want a US stock market fund, we prefer Vanguard's Total Stock Market fund. You can't get a fund that is more diversified, based on companies' value in the US stock market.
  2. This link provides the Security Benefit Direct Invest phone # that has worked best for other posters. https://board.403bwise.com/topic/7056-security-benefit’s-nea-directinvest-number/ I would call SB up and find out exactly what they need. If they are already on your school district's 403b vendor list, they should have your employer's plan document. Find out if SB is indeed on your district's vendor list. There's nothing about the NEA Direct Invest 403b that would require anything from the district different from SB's other expensive plans. I think the plan number is a number that the district or the Third Party Administrator assigns to each vendor, although perhaps it can be assigned to each vendor's plan? If the latter, perhaps no one in your district has opted for NEA Direct Invest, so it doesn't have a number yet?? If your district uses a TPA, ask them for the SB plan number. If not, ask your district. Sometimes the TPA's or district's websites provide the plan number. Don't get discouraged. You are in this for the long haul. NEA DI is worth pushing for!
  3. Your welcome, and thanks for reporting back! We're glad it went smoothly. I don't think you can make a real mistake, whether you contribute to the 403b only, or contribute to both the Roth IRA and the 403b. Hopefully as your salary increases, you'll be able to max them both eventually.
  4. Tara Siegel Bernard, a personal finance reporter, recommends apps for budgeting, investments and helping little ones as young as 6 understand the value of money. https://www.nytimes.com/2019/03/13/technology/personaltech/spending-is-as-easy-as-pushing-a-button-the-hard-part-keeping-track.html
  5. No, no, no! I know enough to no that I don't know much. Just a few things I've picked up from the Boglehead forum, and doing our own taxes (with TurboTax). We do have a taxable retirement account so that can complicate our taxes. Roth IRAs started in 1998 and by then we had been retired 6 years. We did do some conversion of traditional to Roth that first year. They allowed the tax hit to be spread over 2 years which was nice. Maybe we should have done more conversions? Maybe not? Hard to know. The 40k that I converted to a Roth IRA is now 189k. Not bad for an asset allocation of 40 to 50% equities---about 9% over 20 years? I doubt very much that we will ever take a distribution from our Roth IRAs. We have no kids but have a niece and nephew who are the beneficiaries.
  6. The Backdoor Roth comes up a lot on the Boglehead forum. Ed did a great job of explaining it. The final step is dealing with the Form 8606, which keeps track of things so that there's no double taxation. This year, Ed will use a 2018 Form 8606 to report the contribution to a non-deductible tIRA. Next year he will use a 2019 Form 8606 to report the conversion to a Roth IRA. Why bother with a Backdoor Roth IRA instead of putting the 6k in a taxable account? There's no further taxes on the Roth IRA! The taxable account produces taxable dividends every year and capital gains when it's sold. It's a no-brainer.
  7. Ed, perhaps you've read this article by the WCI? https://www.whitecoatinvestor.com/0-income-tax-retirement/ As always the comments are interesting also.
  8. For 2018 tax year, it's a 12% income tax bracket. Due to an oversight by Congress, the top of the 0% cap gains bracket is slightly lower, but let's ignore that and assume it's the same. If your taxable income, excluding what might qualify for the 0% cap gains rate is: A. over the top of the 12% income tax bracket, your cap gains and qualified dividends will not be taxed at 0%, but at 15%. B. under the top of the 12% income tax bracket by 10k and you have 30k of cap gains and QDI, 10k will be taxed at 0% and 20k will be taxed at 15%. Here’s the IRS cap gains worksheet for figuring out whether your cap gains will be taxed at 0%, 15% or higher. https://apps.irs.gov/app/vita/content/globalmedia/capital_gain_tax_worksheet_1040i.pdf It’s a very non-intuitive worksheet, at least for me, but I think you can look at your income tax records and figure out what’s going on. There are a number of excellent BH threads on this subject, including this one: https://www.bogleheads.org/forum/viewtopic.php?f=2&t=251561&p=3971176#p3970451
  9. Are you assuming that your wife retires when you do but does not start her pension until later? From what you've written previously she enjoys her teaching career and plans to go into administration! If you file MFJ, you have to include her income along with any cap gains, right? Remember that the cap gains are added to all other non-cap gain income, to see which cap gains tax rate applies*. If you have no earned income and the wife's taxable income is 70k, and you have 20k of cap gains, only about 9k will be in the 0% cap gains tax bracket. The other 11k will be in the 15% cap gains tax bracket. * I learned this the hard way, paying 15% on some cap gains that I thought would be taxed at 0%.
  10. OK! Please let us know how setting up the Fidelity 457 goes, and how the 457 transfer from SB to Fido goes. Good luck on the SB surrender fees!
  11. I'm glad that the loads have been waived on your SB 457. I agree that those ERs are way too high. Did you ask them to calculate what your surrender fee would be? I believe that Fidelity offers the same fund selection and fee structure to both their generic K-12 403b and 457 plans. The 403bcompare.com website gives Fidelity's funds and fees. This website is run by the CA teachers pension system and is accurate for CA. Most vendor plans for the K-12 403b market are generic plans used in other states. https://www.403bcompare.com/products/68 I would recommend that you use only Fidelity’s super-low-cost index funds. The custodial fee is $24/yr. Fidelity® Total Market Index Premium, FSTVX, ER 0.02% Fidelity® International Index Premium, FSIVX, ER 0.05% Fidelity® US Bond Index Premium, FSITX, ER 0.03% Or you could use one of the index target retirement funds Fidelity Freedom® Index 20(XX) Investor, ER 0.14%. You would pick out one that has the stock to bond ration you prefer. Or you can just use your expected retirement date.
  12. Yes, this is bad! The first thing I would do tomorrow is to stop your contributions to this 457. The loads are like a sales tax, levied when you buy these funds. It's a one-time fee which will be levied each payday if you are contributing to all those funds. However, it's possible that the numbers you got from M* are not those that this plan uses. To be sure, you should verify the loads and ER numbers with Security Benefit. I think it's likely that the M* numbers are those you are paying. SB is not known for giving investors a break on fees! Because you started with this account 14 years ago, your actual surrender fee is complicated and you should ask SB to calculate it for you. It is likely a "rolling surrender fee", which I believe applies the fee to each year-end balance. So there would be no fee to w/d the year-end balances for years 1 through 7, year 8 (6 yrs ago) would have a fee of 1%, etc. Assuming that your contributions over the last 6 years have been fairly constant, the average fee for those last 6 years might be about 4%. The overall surrender fee for your full account might be only about 2%. These charges are guesses on my part, but SB must inform you of their value and explain them if you request it. If 2% is close to it, I would plan to transfer it all to a Fidelity 457. Remember you are paying at least 1.0% in ERs (depending on the balance in each fund) every year. In addition, these actively-managed funds have other costs that reduce their growth, such as trading costs. I think that Fidelity's super low-cost Total Index funds will outperform the funds in your list, although I haven't bothered to look them up. A load fee is never reasonable these days. In our view on this forum (and other forums I'm familiar with) paying a load for a mutual fund is nuts. As for ERs, you will pay about 0.04% to 0.10% for the Fidelity or Vanguard index funds you need for a 3 fund portfolio. I think Fidelity's 403b admin fee is $24, Vanguard's is $60. That's it! There is no admin fee for IRAs at Fido or VG. There are many studies that have confirmed that low fees are the best predictor of fund outperformance over time.
  13. We subscribe to our local newspaper and to the NY Times M-F. I find the eNYT easier to read due to the small font of the print edition. I also subscribe to the eNewYorker. I agree we need to support good journalism by paying for it! Tara and Ron's articles have been outstanding. I keep checking the My Money section always hoping for another of their articles. I like the Jeff Sommer articles on investing also, for instance: https://www.nytimes.com/2015/05/10/your-money/fees-on-mutual-funds-fall-thank-yourself.html?mabReward=wR3&moduleDetail=recommendations-1&action=click&contentCollection=Your Money&region=Footer&module=WhatsNext&version=WhatsNext&contentID=WhatsNext&configSection=article&isLoggedIn=true&src=recg&pgtype=article
  14. 1. You can not roll the 457 to a 403b unless you leave your employer. 2. If you tell us the name of the Security Benefit 457, we/you may be able to find the fees using 403bcompare.com if it's a similar plan. Is the plan an annuity-based 457 or a mutual fund based 457? The title may help you with this. 3. You are very fortunate in having Fidelity as an option. It has excellent low-cost index funds. There's absolutely no doubt in my mind that a Fidelity 457 can be much lower-cost than a SB 457. Good luck on the surrender fees. 4. I would open an 457 account with Fidelity. Find out how much lead time your district needs to stop the contributions to SB. Start contributions to the Fido account. Talk to Fido about transferring your SB account to them. The paperwork can take weeks or more and may involve paperwork from both parties, signed by you and them. It can be frustratingly slow, so patience is needed. A contribution to a low-cost IRA, either traditional or Roth, at Vanguard (or Fido) is an excellent option. Opening a Vanguard 403b is a great option, but the $60/yr fee makes it a bit more expensive than an IRA or the Fido 457. All 3 are great options. I'd max the 457 first because of the flexibility in distribution if you quit your employer before age 55. Then the IRA, finally the 403b.
  15. As Ed mentioned, NY state teachers have access to the excellent state-run, very low-cost 457 plan (also called a Deferred Compensation Plan): https://www.nysdcp.com/tcm/nysdcp/static/Brochure_NYSDCP_Education_Kit.pdf?r=1 Although your district may not have this vendor on a 457 list, or have a list, it may be possible for you to get it added. You could call up the NYSDCP and ask them about adding it to your district's options. Other posters have been able to get the NYSDCP added in this way. Although 403b plans are often (usually?) very expensive, and often sold as annuities or expensive mutual fund plans, the Security Benefit NEA Direct Invest plan is an excellent, very low-cost 403b plan. It is internet and phone based, not local rep based. Lots of folks that post here and on Bogleheads forum are using it. Please study Ed's link.
  16. RuthD, welcome to the forum! I agree with your points a, b and c. We don't know enough about you to know for sure about d, but I suspect you are correct. How big will your tax-deferred accounts be when you retire? Will you need to make withdrawals in retirement, or will you pension be adequate? If you do not make withdrawals until age 70.5 when Required Minimum Distributions (RMDs) are required, have you estimated the size of the accounts? That would give you an estimate of the size of the RMDs which will add to your taxable income. When do you plan to take Social Security? That will add to your income. Rather than make Roth 457 contributions during your working years of peak taxable income, it makes sense to make traditional contributions during those years, as you are doing. Then in early retirement when income is usually lower, do some conversions of the traditional 457 (or 403b) to a Roth IRA. This plan fits in with delaying SS which results in an 8% increase for every year of delay. So I'm guessing you are probably correct in continuing to contribute to the traditional 457 and 403b. Do you contribute to a Roth IRA? It's not a bad idea to have some tax diversification. I hope you are maxing the NYC 403b that pays 7% on a fixed value fund!
  17. Does your district have no 457 plan vendors? If so, it's possible that the school administration needs to have a written and signed 457 plan for their employees, and that they don't have it. From your screen s of the 403b vendor list, the district is using a third part administrator (TPA). Was that who you asked about the 457? If not, see what the TPA says. I’d give the NY state plan a call back and see if they can help you get the district to cooperate. You could also find out who makes the decision about 457 plan. It’s probably not the HR person that you talked to.
  18. The "funds" in a 403b annuity are indeed different from the mutual funds in a custodial 403b7 account. The insurance companies often call them "sub accounts" instead of funds. They are based on mutual funds but have higher expense ratios (ERs) due to costs added by being offered by the insurance company. In addition, the 403b annuity will have a "mortality and expense" fee of at least 1% and probably an administration fee of maybe $35. The total fees frequently add up to over 2%! This compares the the SB NEA Direct Invest plan using the 3 Vanguard index funds where the total fee adds up to about 0.07% (if the balance is over 50k so that the $35/yr fee is dropped). The difference between an annuity-based 403b and a mutual fund-based custodial account 403b is not just due to a sub account/mutual fund difference. It's all the extra fees in the annuity.
  19. The 403b(7) designation means that it a mutual fund based 403b plan, called by the IRS a "custodial account". Prior to the 403b(7) law, all 403b plans were annuity plans offered by insurance companies. Being self-directed is not a factor. Security Benefit has 403b(7) plans that are sold by local reps and are very expensive, with fees over 2%. SB's NEA Direct Invest is the only low-cost custodial account they have.
  20. Dan and Scott tell the story on Episode 26 of their April 2016 podcast. By chance, Dan met an NEA Members Benefit official at bus stop in MD where he was living. Some time later, Dan and Scott met with him for dinner. They tried to convince the official that NEA should be offering teachers a low-cost 403b plan, not the very expensive “NEA Value Builder” products. Several years later the official called Dan and asked advice on fund offerings in the low-cost plan. Dan and Scott do not know for a fact that they were instrumental in the establishment of NEA Direct Invest, but it seems highly likely to me. You can listen to this story starting at minute 21 of Episode 26. http://teachandretirerich.libsyn.com/page/2/size/26 I don't doubt that the lawsuit also figured into reasons that NEA and Security Benefits decided to create a very low-cost 403b option.
  21. The low-cost state 457 plan are usually added to the district's 457 vendor list because an employee has asked for it. Of course a district that was looking out for their employees would have added it, but unfortunately that's not usually the case. Neither the district HR office nor the TPA are usually aware of the importance of low-costs. Any low-cost option is only added to the list due to employee pressure. Sometimes it doesn't take much, sometimes persistence is needed. The exception might be the NEA Direct Invest option. Security Benefit's main business is selling very expensive annuity and mutual fund 403b plans to unsuspecting teachers. However NEA, the national teachers union, has sponsored the ultra-low-cost Direct Invest plan. NEA also allows the NEA label to be attached to other very expensive Security Benefit 403b plans. Security Benefit pays NEA several million a year for the use of the NEA label. NEA Direct Invest most likely exists because Dan (owner of 403bwise) and Scotty (CFP and contributor) talked to an NEA official. All the low-cost 403b plans are internet and phone based, NOT local rep-based. Unfortunately teachers seem to think they need a local rep, mistakenly thinking the rep is looking out for their best interests.
  22. I think you were misinformed. The NY State 457 plan is being used by many NY state teachers who post on this forum and on the Boglehead forum. You should check on your district's 457 list of vendors. If it is not on the list, it likely possible to add it without much resistance from the district or TPA. Give the plan a call and they can helpful.
  23. LiT, I agree with Steve and you that the NEA Direct Invest plan is excellent and your only low-cost option. That assumes that you choose the Vanguard index funds as discussed in the link that Steve provided. The target retirement funds and other actively-managed funds are too expensive. Are you aware of the excellent 457 plan run by NY state?
  24. I'd give them at least a week and then call and ask for a progress report. Some posters have used email to communicate, and you might ask them about that. Good luck!
  25. Steve, thanks for the link. It's great to see that Simon has returned to the K-12 403b problem again. Although M* pushes a subscription, it doesn't cost anything to sign in for a Basic "subscription". That gets past the pay wall.
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