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Everything posted by krow36

  1. Tony's suggested 40/20/40 is a good one also. Are there target date funds available in the VOYA 403b? If they are low-cost, I agree with Tony that they would be an excellent hands-off choice. You're welcome, glad it helped clear up question. So I guess you are starting contributions to the VOYA 403b when you meet with the rep today? And ask about the procedure for transferring the HM 403b to your VOYA 403b? You could also ask about the VA state 457 plan. Sounds good to me! Like Tony, I admire your determination to understand your retirement account options. Please continue to ask questions if you have them.
  2. The Net Fund Exp. is the expense ratio that you will pay on each fund. Sometimes the net ER is reduced from the gross ER for various reasons. Your district's 403b looks very straight-forward to me, and I would expect that you will not be required to pay extra for an "advisor", but you may have that option. Is there a PDF or handbook that discusses fees? There should be. Look around the website. A 75/15/10 asset allocation seems very aggressive to me. How would you feel if another serious recession reduced your equity funds by 50% as happened in '08-'09? You may think that you should be very aggressive because you think you are behind in retirement savings? That can backfire. The way to catch up is to save more, and to use a stock/bond ratio that you can live with when the future downturn happens. To be an investor is to experience scary downturns, sooner or later. Selling in a downturn is "buying high and selling low", which guarantees loosing money. The asset allocation is a very personal decision and it's VERY difficult to know how you will react to a big downturn sometime in the future. I think it makes sense to be something between aggressive and conservative, maybe a stock/bond ratio of between 80/20 and 60/40? It's controversial how much of equities should be international equities, all the way from 40% to 0%. The late John Bogle, the founder of Vanguard and the first to offer index funds, allowed that 20% was OK but actually preferred 0%. Vanguard currently uses 40% in their target retirement and LifeStrategy funds. It's up to you and you can change it in a 403b or 457 account without any tax consequences, so don't worry about it. I use 20% of equities in international in our portfolio. Maybe 70%/30% stock/bond and 20% of equities in international? So 14% (.7*.2=.14=14%) international equities, 56% US equities and 20% bonds? The 3 Vanguard funds you chose are great ones and the ones we recommend if possible.
  3. VOYA's fee of 0.17% is very reasonable and shouldn't keep you from using the district's 403b. Granted $2.54/month ($30.48/year) for your husband's 457 plan is lower cost, especially as the account balance grows. Remember, if you continue teaching at your district, you need a low-cost 403b account to hold your HM balance. I took a brief look at the VA hybrid pension that your husband has. It’s interesting to see there are 2 different 457 accounts possible. The "Hybrid 457 Deferred Compensation Plan" pension allows employee contributions of up to 9% from a required 5%. This is optional further 4% is matched by an employer match of up to 2.5% to a 401a account. In addition to the pension plan, he can contribute up to 19k in 2019 to the "Commonwealth of Virginia 457 Deferred Compensation Plan". I think there can be an employer match of up to $20/pay period. And in addition, he can contribute up to another 19k to a 403b account, as you mentioned he is doing. Your school district is allowed by the state to offer the Commonwealth of Virginia 457 Deferred Compensation Plan to their employees. This is stated in the VA Plan 1 Pension Handbook, page 19. https://www.varetire.org/pdf/publications/handbook-plan-1.pdf You should be able to get this 457 plan added to your district’s vendor list. Follow Tony’s advice on getting this done. This may take a while and in the meantime, you have an excellent VOYA 403b plan to contribute to. After it’s established, you can organize a trustee to trustee transfer of your HM 403b account balance to your 403b VOYA account.
  4. Large cap refers to large capital value of companies. It’s based on the value of all the company’s issued stock. So the large cap companies are the very largest in value, the mid cap companies have lower value, and the small cap companies are those with the lowest value. You can google the terms and find the exact definitions, in terms of billions of stock value. If you invest in a Total Stock Market Index fund, you are investing in all 3 caps, based on value. The mid and small caps together make up about 20% of the total value of the stock market, and that’s included in the TSM index fund. The Horace Mann equity funds were actively-managed funds, which means the the fund managers were buying and selling stocks, trying to pick the winners and avoid the non-winners. This trading results in trading costs, and also those fund managers are expensive. These expenses are reflected in the higher fees of HM’s expense ratios. Passively managed index funds use the index to determine the stocks in the funds. There is no trading to try in outperform the index. There are no expensive managers’ salaries to pay for. This results in index based mutual funds being, by far, less expense than actively-managed mutual funds. It has been found that index based funds outperform actively managed funds about 80% or more of the time in a single year. Over time, index funds out perform over an even higher percent of the time.
  5. This looks very promising! The "Net Fund Exp %" is that fund's expense ratio. That's the number you need to know. The Vanguard Total Bond Market index fund with ER of 0.05% would be an excellent choice. What are the other funds offered? In addition to a bond fund, you need a stock fund, hopefully Vanguard's Total Stock Market Index fund, and possibly an international stock index fund. That would cover all the major investing areas, and you would be very diversified.
  6. Your district can add or remove vendors from their 403b and 457 lists. Those vendors removed can be grandfathered in, so that they can continue to be used if already established. But no new accounts with Prudential could be started. Although Aspire is good, Fidelity is excellent and the low-cost leader in 403b plans. Their Freedom Index funds are completely diversified and do rebalancing for you. All in a single fund. Both the Fidelity and Aspire plans are internet based, with no local rep to hold you hand. With a target date fund like the Freedom Index fund, a local rep is not really needed in my opinion. It looks like the American Funds Target Date 2050 R3 fund has an expense ratio of 1.07% which is very high. https://www.capitalgroup.com/individual/investments/fund/rcitx The Fidelity Freedom Index fund has an expense ratio of 0.12%. https://fundresearch.fidelity.com/mutual-funds/summary/315793869 Their annual custodial fee is only $24. I would stop contributing to the AF 403b. Then contact Fidelity and set up a 403b account with them. After it’s started and you are contributing to it, contact Fidelity for the form for transferring your AF 403b balance to your Fidelity 403b. An AF transfer form may also be required and this whole process can take a month or more.
  7. You are making progress on the VOYA plans, but you don’t know what the actual mutual funds are, or their expense ratios. Are the funds those listed in “Mutual Funds” under PRODUCTS in the VOYA website linked to your district’s 403b/457 webpage? https://www.voya.com If so, you need to find out which class of funds you can use. The overall cost of the VOYA 403b or 457 may be lower than that of your current Horace Mann 403b, but it may be much higher than the state run VA 457. I’ve assumed that your HM account is a 403b plan, not a 457 plan. Is that correct? I don’t think you can roll your HM 403b into an IRA unless you are over age 59.5 or you are no longer employed by the 403b’s “sponsor” (your school district). While you are still employed by your school district, I don’t believe that the 403b can be rolled into a 457 plan, only to another of the district’s 403b plans. If the 403b plan was with a previous employer, then a rollover to a current 457 plan is allowed. This was discussed in this 2017 thread. https://board.403bwise.com/topic/6375-exchange-rollover-transfer-from-a-403b-to-a-457bis-this-poss/ My advice if you stay employed at your school district is to find out the VOYA 403b funds and their ERs. If they are lower than those of HM, change vendors and transfer the HM balance to a VOYA 403b. Follow Tony’s advice and get the state 457 added and then contribute to that plan instead of to the VOYA 457. If you retire soon, roll the HM 403b into an IRA at Vanguard.
  8. I’m guessing that you are in the “Group Variable Annuity” with Horace Mann Life Insurance Company. https://www.403bcompare.com/vendors/1014#/productlist If you click on that, and scroll down to Fees and Charges, you’ll see: Surrender Period* Surrender Percentage 1 5.00% 2 5.00% 3 5.00% 4 5.00% 5 5.00% 6 0.00% *Expressed in contract years I think this means that if you last contributed over 5 years ago, there is no surrender fee. I think it’s calculated on the year’s end balance. If you haven’t made contributions for the last 3 years, then you would owe the surrender fee on contributions the balance for this year and last year. I don’t know exactly how it’s calculated but you can ask HM to give you what the fee would be at this time. On VOYA fees, I think you will have to get them from a VOYA rep because your school district may have negotiated the fees. Here’s how I looked up the funds available and the ERs of the different classes of each fund. https://www.fauquiercounty.gov/government/departments-h-z/human-resources/benefits/retirement gets to your school district’s webpage on 403b/457 plans https://www.voya.com goes to their website for your district. Scroll down to “Mutual Funds” under PRODUCTS. Click on Equity Opportunities to see the stock mutual funds available. The VOYA Large-cap Growth Fund has a net ER of 1.04% and a sales load of 5.75%. If you click on the Fund Fact sheet, you’ll see the various classes, A, C, I, R, etc. You need to find out which class you can use. On being able to use the VA state-run 457 plan, ask your district HR if it’s available. It should be but if it’s not, call the VA 457 and ask them how you go about getting it added to your district’s 457 vendor list. Hopefully Tony will give you some first-hand hints because he has done this for his district.
  9. Your selections of US equity funds are diversified which is good although I don't think the JPMorgan fund is not necessary. I used 403bcompare to look up the Horace Mann fees: in order, the first 3 have expense ratios of 0.35%, 0.78% and 0.53%. The Dreyfus fund was not on their list. There's a admin fee of $25/yr and a 1.25% mortality and expense fee. There's a 5% surrender fee that lasts for 5 years. You need to know the VOYA fees before deciding to transfer your Horace Mann balance to VOYA. Are you still contributing to the HM 403b? The big question is whether the VOYA 403b allows you to use a custodial 403b(7) account that is mutual fund based, rather than a 403b annuity based plan? The custodial 403b(7) plan will not have an M&E fee or a surrender charge, although it's possible their mutual funds could have front-end or back-end loads (fees). Because your district has a single vendor, they may (should) have bargained for a lower cost 403b plan from VOYA than the standard plan available to multivendor school districts. It should certainly include a custodial account choice. You will have to find out from VOYA what plans are offered and what the fees are. Like Tony and Steve, I'm a retired teacher, so I certainly understand your wish to retire. After you retire, you will be able to move your 403b accounts to a traditional IRA at Vanguard. Tony was able to get the low-cost VA state-run 457 added to his district's 457 vendor list. Both you and your husband should be able to contribute to it, rather than to a high-cost 403b.
  10. Have you asked the district's TPA (TSA Consulting Group) for the plan number? I think it’s likely that all Security Benefit options have the same plan number. But maybe not? The district or the TPA can’t tell you which of the SB options you should use. In any case, ask a SB rep, and don’t be surprised if they claim to have never heard of NEA Direct Invest. Hang in there!
  11. I certainly admire you for your efforts to improve your district’s 403b plan! I wonder if you shouldn’t feature the graph more prominently in your presentation? After all, it shows the result of the present state of the K-12 403b world, doesn’t it? Maybe start out with the graph and ask the audience, which would they prefer? Maybe say, how can this be?? What’s going on? Explain that the magic of compounding the 6% assumed growth is also compounding the costs. The difference between the top and bottom graph of $158,083 is due to the compounding costs. That difference is going to the insurance company instead of to the teacher. I think that if you could get this point, and only this point, over to the audience, that would be great! The 2nd paragraph is a tough one to condense down to the important basics. It’s worth a chapter! I think it could be improved, maybe by emphasizing the 2 basic types of 403b plans? I’m not sure that the 3rd paragraph on the SEC investigation deserves the space. It doesn’t seem to relate very strongly to any of your goals. The WSJ article will have the subscription wall. I wonder if your audience is no more informed about the 403b than most of the district’s teachers. You might be throwing way too much information at them? Do they all know about the vendor lists? Although reducing the number of annuity vendors is an admiral goal, it seems to me to be too difficult to have as a beginning goal. Likewise the fiduciary requirement. If you focused on proposition 1 and 3 (especially fee disclosure), you’d be less likely to overwhelm your audience. Even just that will be a challenge I suspect. Maybe the 403bcompare.com website is worth a mention? Nitpick: 403b, not 403B? Scott prefers the correct 403(b) but I'm too lazy to use that on the forums. I guess it might be better for a handout though.
  12. Have you considered selling just the funds with long-term cap gains this year so that the space in the 12% bracket doesn’t go to waste? I didn’t explain what I meant very well, sorry. I was just trying to make the point that maxing out your tax-deferred accounts and the Roth IRA before contributing to a taxable account for retirement is usually recommended. Of course there are lots of other reasons to save in a taxable account. Your plan to max out your 403b, half traditional and half Roth is great!
  13. I think your proposal makes sense. Hopefully you can sell in your brokerage account without having to pay any (or not much) capital gains tax? If your income plus any capital gains don't push you out of the 12% bracket, your capital gains will be taxed at 0%. If you're currently contributing to the brokerage account for retirement, instead I would max out the 403b before adding to the taxable account. Is the 0.45% administration fee the same for each of the 6 vendors in the Consortium? I don't think the 0.45% admin fee should influence you decision to max out the 403b account, or to go Roth on half of your contribution.
  14. I think the OMNI P3 sales pitch to school districts is that all the P3 vendors will pay the TPA fees. Since all the insurance company vendors are usually willing to pay the TPA fees, the P3 is a con that effectively screens out the low-cost vendors such as Fidelity and Vanguard. It sure seems like the districts are being hoodwinked. The only vendor with reasonable fees on the P3 list is usually Aspire. Assuming that Aspire is on the district’s 457 (since it was on the 403b list that you posted), I would go ahead and use it while trying to educate the district’s decision makers about adding Fidelity. If Aspire is not on the 457 vendor list, then that should be your goal! You might consider talking to Fidelity about getting added to the vendor lists. You never know, they might be willing to pay the TPA fee. I think it’s only $20-$30/yr/account. Of course the district should be willing to pay the TPA fee for Fidelity. What state are you in? About half of the states have low-cost, state-run 457 plans that K-12 employees can use. Here’s an incomplete list:
  15. Thanks for giving us an update. Lincoln Financial may come around the school but if they are not on the current vendor lists, I don't think the district will allow them to be used for 403b or 457 contributions. Are you sure you have the current vendor list? In any case, there seems to be a difference between Lincoln Financial and Lincoln Investment Group. According to 403bcompare.com, Lincoln Financial is an insurance company that sells expensive annuity-based 403b plans. Lincoln Investment Group offers mutual fund based custodial accounts and in NJ they offer the Participant Directed 403b/457 internet-based plan as well as more expensive local rep-based plans. Unless the vendor list you posted is not complete, and Lincoln Investment Group is actually on the list, I think Aspire would be the easiest vendor to get added. That's because the employee rather than the district pays the TPA fee. That will make all the Vanguard low-cost index funds available. You only need the 3 basics funds to be completely diversified (either Vanguard's or Fidelity's): Total Stock Market Index Total Int'l Stock Market Index Total Bond Market Index Of course if the district is willing to pay the TPA fee (around $20/yr/participant), then adding either Vanguard or Fidelity would be the very best outcome. But Aspire is definitely low-cost enough to be a very good option for you. Adding a vendor to either of the lists will probably involve talking to the business department head for the district, maybe a school board member, your district's TPA, your union? Face to face is probably more effective than email or phone. Other posters on this forum can give you first-hand advice for adding a vendor.
  16. None of the low-cost 403b vendors such as Vanguard, Fidelity, Aspire or Security Benefit’s NEA Direct Invest have a local rep explaining the importance of low-cost investing. We understand that the reason they are low-cost is because they have no local rep. And we don’t know the enrollment numbers of any of these vendors except that the numbers are low. We all agree that SB’s main business plan is to take advantage of uninformed K-12 employees by selling outrageously expensive 403b annuity contracts. We all agree that NEA prostitutes itself by selling its name to these products. Sure, SB’s NEA Direct Invest doesn’t remove the sins of SB’s and NEA’s main relationship. And that main relationship is what makes NEA Direct Invest possible. Steve is very proud of the very low expense ratio of his portfolio. If his only choice of vendors was SB’s NEA Direct Invest and Aspire, would he choose Aspire and add 0.15% to his overall ER? Probably, but others (BashDash and Ed LaFave) choose Direct Invest. I think either choice is valid, but I don’t think we all have to agree to that.
  17. I don't believe Steve's opinion that "Very few people have successfully enrolled with SB DirectInvest" is accurate. Although there have been complaints about the slowness of the process, and about the poor phone help, it's rare to read of a failure to enroll on this forum or on the boglehead.org forum. Once enrolled, posters are very satisfied with the very low-cost plan.
  18. I think you need to confirm with SB that your application has been accepted. This usually seems to take several weeks? The district or the TSA likely has their own Salary Reduction agreement, so you should ask them about that, and they can give you the SB plan number.
  19. No, a custodial account is the name the IRS gives to 403(b)7 accounts, which allows for mutual fund based 403b plans. Prior to the passing of the 403(b)7 regulations, all 403b accounts were annuity plans sold by insurance companies. Often, the 403(b)7 accounts are just called "mutual fund" accounts to contrast them from annuity accounts. The 403b thread on first questions to ask was: https://board.403bwise.com/topic/7528-small-district-with-a-few-choices/ Yes, you should contribute to a mutual fund based 403b and/or 457 plan and avoid expensive variable annuity or index annuity plans because they will have fees of 1 to 3%. A third type of annuity is the Fixed annuity, which only grows at a very low rate, maybe 2% or less. It's the equivalent of a non-FDIC- insured savings account. Have you been contributing to an IRA every year? For 2019, that can be $6000. You can choose Vanguard or Fidelity. After you've maxed out the IRA, I think you would be better off contributing to a taxable account for retirement at Vanguard or Fidelity than to contribute to an annuity based 403b/457 plan. A taxable account using either the Total Stock Mkt Index fund or the S&P 500 Index fund is very tax efficient, especially if you are in the 12% income tax bracket (0% tax rate on most dividends). You should keep in mind that it is possible to get a low-cost index providing vendor added to the district's list. Your district does not have a leg to stand on when they deny their employees that option! It's up to you and your colleagues to push for low-cost vendors. Districts that have low-cost vendors have them only because employees have asked for them. Districts and the insurance industry resist change, but change is possible.
  20. Your question was asked in another thread recently about 403b vendors and here's my answer. Substitute 457 or 403b: A first question should be to determine if the vendor has a mutual fund (MF) based (403(b)7) plans. AXA has only annuity based (403(b) accounts which are expensive insurance products. VALIC has both types of plans but you should only be interested in the custodial MF accounts. If a vendor does only annuity accounts, I would not have further questions. The second question of a vendor with custodial mutual fund 403b is, what are the fees? For VALIC, assuming the Group plan is available in your district, what is your district’s fee? We’ve seen a 0.6% group fee, and also slightly lower, but districts’ vary. Ask about all their fees and get it in writing. A third question would be to ask the vendor for a list of all the mutual funds in the plan, and their expense ratios (ERs). This is a fee that every mutual fund has, and can be 0.04% for a Vanguard fund and up to 1% or more for actively-managed mutual funds. Ideally your ERs should be <0.10%, although somewhat higher is acceptable (~0.30%?) if there’s no lower choice.
  21. The SB NEA Direct Invest 403b plan has been discussed a lot on this forum over the last few years. You could start by looking at: https://www.bogleheads.org/forum/viewtopic.php?t=260609 This thread has links to previous threads. You can use the forum’s Search feature to look at the many past threads on this plan. This plan does not use a local rep. It is internet based with phone support that is minimal. There is no “advisor” to help with your investments. But you can certainly get advice here on this forum. I agree with KRC121212 that Direct Invest is your only low-cost option. It is a no-frills 403b plan but if you use the Vanguard broad-market index funds on offer, you will have a very, very low-cost 403b. I would stay away from the TR Price target retirement funds as they are not low-cost (0.79% to 0.97%). All you need is: Vanguard Total Stock Mkt Admiral, ER 0.04% Vanguard Total International Stock Mkt Admiral, ER 0.11% Vanguard Intermediate-term Bond Index Admiral, ER 0.07% Are you contributing to an IRA? Because you can choose the vendor, rather than your employer, you can go with Vanguard or Fidelity, the low-cost leaders. The limit for 2019 is $6000 for both you and also for your spouse, even if the spouse does not have income.
  22. Thanks Tony! This Investment News article seems more detailed and indicates the SEC letters were sent to some Third Party Administrators (TPAs). Maybe the TPAs will be required to include a low-cost custodial account vendor? One that offers competitive priced broad market index funds? It doesn’t look like all TPAs were sent letters?
  23. It's about time we see the SEC investigating the K-12 403b problems. https://www.wsj.com/articles/sec-launches-investigation-of-practices-in-retirement-plans-for-teachers-government-employees-11570651944 The pay-wall blocks this article for me. Maybe Tony can help?
  24. Public school district employees in WA state can contribute to the state-run 457 plan (also called a Deferred Compensation Plan (DCP). This plan can be used instead of the 403b, or in addition to the 403b. It is very low-cost and the funds and their fees are the same as those used in the defined contribution part of the state teacher’s Plan 3 hybrid retirement plan. https://www.drs.wa.gov/dcp/assets/DCP-Enrollment-Booklet.pdf Funds and fees: https://www.drs.wa.gov/dcp/investments.htm You district should but may not have this plan on its 457 vendor list. It should be easy to get it added to the list. An advantage of a 457 plan over a 403b plan could be if you retire early before age 59.5. There is no early withdrawal penalty (10%) from 457 plans after leaving the plan’s employer. Any withdrawal would of course be taxable income. The 10% penalty applies to withdrawals from 403b and 401k plans before age 59.5 although there are exceptions that may apply.
  25. Are you planning to make a contribution to a deductible traditional IRA? I ask because the salary limits on a deductible IRA are lower than the salary limits for making a direct contribution to a Roth IRA. The limits depend on your filing status (single, MFJ and are based on your Adjusted Gross Income (AGI) which is line 7 on the new Form 1040 for 2018 tax year. In prior years it was line 37. You can take a full deduction on a traditional IRA contribution if your AGI is $64,000 or less if you are Single. For MFJ, it’s $103,000. You can make a full Roth IRA contribution if your AGI is $122,000 or less if you are Single. For MFJ, it’s $193,000. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits If indeed your AGI is above the limit to make a full Roth contribution (congratulations!), are you aware that you can still make a Roth contribution by using what’s called a “backdoor Roth”? It’s perfectly legal and is widely used by those with higher incomes. It involves contributing to a traditional IRA but not deducting it. There is no salary limit on contributing to a non-deductible tIRA. Within a few days, the tIRA is converted to a Roth IRA. There is no limit of any sort on converting a tIRA to a Roth IRA. This is a non-taxable event because you bought the tIRA with after-tax money, as you would do if you contributed directly to a Roth IRA. There is one catch that can make the backdoor Roth not worth doing. You should not have any other traditional, SIMPLE or SEP IRAs because their balances will be partly or mostly taxed due to the IRS pro rata rule. This applies to any non-Roth IRA balance on Dec 31 of the year you make the conversion. The IRS requires that you complete a Form 8606 to keep track of the non-deductible tIRA contribution and its conversion to a Roth IRA.
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