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Everything posted by krow36

  1. As jebjebitz suggested he wanted, keep it short. Maybe just focus on the fact that there are 2 very low-cost providers 403b (and one 457) available. The target is teachers with variable annuities. Both the plans are somewhat hidden aren't they, especially LI's PDP. Maybe mention that expensive accounts can be transferred into a low-cost plan? I think a bar graph illustrating cost over time is necessary! As Steve suggested, anything more is too difficult and complex for a short letter.
  2. First thoughts: Is your audience the 70% who do not have a 403b? Or is it the 25%-30% who have annuity-based, expensive 403b plans? Maybe you should focus on the latter? And of those, focus on those with a variable annuity, not those with a fixed annuity? How about starting out something like: Your national union, the NEA, has developed a super low-cost 403b plan based on Vanguard index funds. It’s the Security Benefit NEA Direct Invest 403b. Why would they do that? They realized that there was a need for a low-cost 403b for K-12 employees. This plan is available in districts where Security Benefit is on the 403b vendor list. Meanwhile, your state union, the NJEA, has arranged for a super low-cost 403b and 457 plan, also based on Vanguard index funds. It’s the Lincoln Investment Group Participant Directed Platform (PDP). This plan is available in NJ districts where Lincoln Investment is on the 403b (and 457) vendor list. In my experience, I get folks’ attention when I show them the large amount of money they are paying in fees, compared to the much smaller amount they would pay at low-cost plan. I think an example is needed, for example, comparing an AXA fund with total fees of say 2%, with a Vanguard fund with a fee of 0.04%. For a $10,000 account, that’s $200 vs $4 in fees per year. For a $100,000, that’s $2000 vs $40 in fees per year. A bar graph is very eye-catching way to illustrate the difference. Maybe use an estimate of the average 403b account balance, and calculate the fees over 5, 10 and 20 years? (The annual account maintenance fee of $35 for NEA Direct Invest for balances under $50,000, and $60 for the PDP are relatively insignificant compared to the fees based on a percentage of the fund’s balance.) I think you can avoid the use of terms like “expense ratio” and others that most teachers are not familiar with, by just sticking to terms like cost, fees, percent and $$$. Make it as simple as possible. Maybe a second letter describing the 2 plans in more detail would be allowed by the union? Or you could provide links to threads on this forum? Trying to convince teachers to invest in a 403b(7) plan that uses the stock and bond index funds, rather than contribute to a fixed annuity, is maybe a discussion best left out of this letter? It seems most teachers prefer the fixed annuity, and we'd like to change that, but that is a complex challenge.
  3. I just occurred to me that you want to do a backdoor Roth IRA (because of your high MAGI) and your tIRA would result in a pro rata tax problem? If that is the reason you want to convert your tIRA to a Roth IRA, have you considered rolling your tIRA into your 403b plan? You would want the 403b plan to be low-cost. (Vanguard does not allow rollovers into their 403b plan.)
  4. I think Ed answered your question. There is an employee contribution limit to employer based retirement 403b plan. For 2019 it's 19k if you are under 50, 25k if you are over 50. The limit applies to any combination of traditional and Roth contributions to your 403b. There is an income limit to contribute directly to a Roth IRA, based on your modified adjusted gross income (MAGI). As Ed mentioned there is no IRS limit if you want to convert a Traditional IRA to a Roth IRA. The conversion will add to your taxable income. It might make sense to wait on conversions until your income tax bracket is lower, say in retirement before you start social security? Or during a year between jobs? But the IRS is always willing to have you pay the tax on the conversion now.
  5. At the bottom of page 1 of original thread by A440 on the LI PCP, see the posts by HAWK23 from “the Chicago area”. https://www.bogleheads.org/forum/viewtopic.php?f=1&t=175295 Good Luck!
  6. It looks like IL will get a state-run 457 plan in the near future, according to this newspaper article. You will probably learn about its details before we do. Please send us a link to any article on it you come across. Teachers who are part of either the Tier 1 or the Tier 2 pension plans can enroll, although Martwick acknowledged it will most appeal to teachers in the Tier 2 plan that has far less generous benefits. But it’s going to be a while before the new program is available. TRS spokesman Dave Urbanek said it won’t be available before June 30, 2019, the end of the current fiscal year. https://www.sj-r.com/news/20180915/teachers-will-get-new-retirement-savings-plan-eventually The forum discussion of this article is here:
  7. You may have lucked out with the Lincoln Investment Participant Direct Platform! There is at least one Chicago area district that is allowed to use it, but you will have to call to see if your district is allowed. The annual fee is either $35 or $65--it seems to vary. You should call a Lincoln Investment regional office to ask for permission. They are the only source of the application form, which states the rules for the plan. They will email you a link to the application form if they allow your district to use it. A local LI rep can't give you permission but would be able to give you the number to call. You can read about the plan in this thread from last year. https://board.403bwise.com/topic/6780-lincoln-investments-participant-direct/ There is nothing on the internet about this option, except on this forum and on the bogglehead.com forum. Lincoln Investment obviously wants to control its use. I have a link to an out of date form and will send it to you if you send me your email address in a Private Message.
  8. None of those 5 vendors are a slam dunk like Vanguard, Fidelity and Security Benefit (only their NEA Direct Invest) would be. However, if you are teaching in NJ, Lincoln Investment has an excellent low-cost 403b and 457 plan that you could use. It's also available in a few districts in NY and near Chicago. VALIC, and VOYA Financial may offer mutual fund based 403b(7) plans in addition to their very expensive annuity based 403b plans. You would have to talk to each of them and study their admin fees as well as the expense ratios of their mutual funds. Please do not let them sign you up to an annuity 403b!! Lincoln Investment does offer a mutual fund based 403b(7) plan that they call their Retirement Solutions Premier. It has a Management/Wrap fee of 1.25% but does offer many low-cost Vanguard Investor class funds. So this is far from ideal, and getting Vanguard or Fidelity added to the vendor list would be the way to go and worth the effort! Many states have a very low-cost state-run 457 plan that is available to school district employees. Teachers can contribute to both a 403b and a 457 plan (a maximum of 19k to each). What state are you teaching in? Does your district have a 457 vendor list? It’s possible that a state 457 plan would be all you need until later in your career?
  9. I think you've got it figured out--nice job! I've used the 0% cap gains rate and Tax Gain Harvesting to do rebalancing out of some "legacy" funds in our taxable account. Because we have pensions, social security and RMDs, we're in the 12% income tax bracket, 6% effective rate.
  10. I wonder if leaving copies of one or more of the NY Times 403b articles in the Teacher's "Lounge" might snag some interest? You know, where teachers pass some time during their non-teaching periods? Maybe chatting or drinking coffee? I retired 27 years ago so I'm out of touch.
  11. I didn’t answer your question did I? Morningstar says that the Growth of 10K graph does not take loads into consideration. I couldn't find anything about whether the Growth of 10K table in the Performance section used loads or not. I think it's highly likely that loads are not used there either. http://www.morningstar.com/InvGlossary/growth_of_10000_definition_what_is.aspx “The returns used in the graph are not load-adjusted.” I'm impressed with the Vanguard tool for comparing the costs of 2 funds. You can control the inputs, loads included. It tells you the percentage of outperformance needed by the higher cost fund in order for it to equal the performance of the lower cost fund. And you can compare the result over time using a load or not.
  12. Try using Vanguard’s “Compare Fund Costs” tool. https://personal.vanguard.com/us/FundsCostCompare You start out comparing a Vanguard TR 2045 fund with an American Fund’s TR 2045 fund. It compares the costs over a period of time you select, and an assumed rate of return that you select. The class of the AF TR 2045 fund the tool uses does not have a load, but scroll down on the result page and correct the load to 5.75% and the ER to 0.72%. Using 10 yrs and 6% rate of return and a 5.75% load, I found that the AF fund would have to earn 6.92% (rather than 6%) to have the same return over 10 yrs. The AF website shows the TR 2045 fund’s return either based on its NAV, and also including the load: https://www.americanfunds.com/individual/investments/fund/aahtx You can compare those returns with those of the Vanguard TR 2045 fund and I think it’s clear that the AF TR 2045 fund has underperformed the Vanguard TR 2045 fund. Does this help?
  13. Is your pension calculated on your 3 (or 5?) last years of salary as is usually the case? If so, what effect does having a year of much lower salary have on your pension payout? Even if the lower salary lowers your pension, it might be worth it to stay teaching in case the situation changes and you are able to return to your fields at full pay? That's assuming you really do want to teach at least another year. I've often thought that the problem with having choices, is that it forces you to make decisions, one way or another! Arrrggg!
  14. My 40/60 portfolio is up 6.6% YTD according to Vanguard.
  15. I retired after teaching 18 years (only got retirement credit for 16 as 2 were overseas), over a 20 year period. I found parts of teaching rewarding, fulfilling and enjoyable and parts were exhausting. I was at the top of the salary scale (equal to 100k/yr today) and left a lot on the table when I retired. The only reason I was able to retire is that the state wanted to save money and temporarily lowered the age and years employed requirements. I've NEVER regretted retiring at age 56 and neither has my wife. It's a very personal decision. My colleagues thought I was making a mistake.
  16. I'm sorry to hear that you've been RIFed (Reduction In Force). It sure adds stress to an an already stressful job. It doesn't seem right that they can't make your .5 time into a block. Does your union think that's OK? I have an idea of how you feel. I was RIFed 6 out of my first 9 years of teaching. We were given the RIF paperwork about this time of year, with several months of the rest of the school year to mull it over. Not great for morale. Although determining who got RIFed was determined by seniority within each subject area, it still seemed personal, emotionally. Because I was a science teacher, I thought there was a fairly good chance that I would be rehired sooner or later. That turned out to be the case, but . . . . Some years I substituted several weeks or months before getting a regular job. Some years I was rehired just before school started. Some years I was rehired late in the summer. A move to a different school was involved in 4 out of the 6 RIFs. It's hard to know when it comes to school budgets, but in schools I've been with, there were changes in staffing made during the summer, and even after school started. Nobody knows for sure if all your colleagues will show up, or if more kids than expected will turn up in Sep. Maybe you should just hang in there with the .5 job offer and see what happens over the summer?
  17. I don’t think we have enough background on the PA teacher pension and 403b/457 plans to be able to understand your situation. A bit of googling indicated that it’s complicated. Reading in the PSERS document below, it looks like PSERS offers a state-wide 403b to teachers. It’s a 3rd option for new hires under Act 5’s 2 hybrid pension plans, and is “allowed” to be offered by the TPA that administers the new 401a to teachers in pension plans prior to Act 5. Is that actually happening? Is the requirement that the district allow 4 403b vendors mean the 4 TPAs, and only those 4 TPAs, all are allowed to offer a 403b? Or are the 4 vendors chosen from the 8 shown in the bar graph on page 6? Does the pension board determine the funds and fees? Can you give us a link to the funds and fees? WA state’s teacher pension plan offers the same funds and fees to both hybrid pension and to the state 457 plan. It uses low-cost index funds.
  18. 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.
  19. 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!
  20. 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.
  21. 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
  22. 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.
  23. 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.
  24. 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.
  25. 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
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