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Everything posted by EdLaFave

  1. That's great. I'm really happy to have been helpful. I just want to make sure we aren't having a miscommunication. It is common for people to use the word Roth when what they're actually referring to is an IRA (which can be either Roth or Traditional). Yes, if your tax bracket was artificially low then the desirability of a using a Roth increases, similarly a Traditional becomes more desirable when your rejoin your larger tax bracket. Provided capital gains aren't prohibitively large, I generally support selling taxable shares to fund living expenses while temporarily increasing contributions to tax advantaged accounts. At the very least dividends can be used to carry out this maneuver without impacting your taxes at all. I'll trust your math on the EITC, but maximizing tax credits is generally a great idea. I think the Roth vs Traditional is an optimization that is significantly less important than making sure you're earning as much as you can, saving as much as you can, maximizing tax advantaged accounts, owning enough bonds to prevent behavioral mistakes or poor mental health, and investing in a low cost diversified portfolio. Having said that we can't know what is optimal because it requires information from the future, but you are correctly identifying situations that increase the desirability of a Traditional vs Roth. If it were me, I'd max out my IRA and my wife's IRA before contributing to employer accounts (although that's a moot point if you're going to shift a god chunk of money from taxable to tax advantaged accounts). However, because Security Benefit's NEA DirectInvest is such a great plan, this is just another low level detail. You're going to do great.
  2. Well Security Benefit's NEA DirectInvest is certainly the best plan in your 403b list. I wrote a page to document that plan's fees and how to build a fully diversified portfolio. With respect to whether or not you've made the right decision, I'd need to know how much you're investing every year: If you're investing less than or equal to the IRA maximum then I see no reason to use the 403b at all. The IRA will give you slightly lower costs, but most importantly it is completely in your control rather than in your employer's control. If you're investing more than the IRA maximum then using the 403b in addition to the IRA is the ideal move. If you're investing more than the IRA maximum and 403b maximum then you need to push for access to a 457b. The other thing to consider is that Security Benefit's NEA DirectInvest only comes in the Traditional variant. An IRA on the other hand comes in both Traditional and Roth variants. I argue strongly that most people are better off using Traditional, but the answer to this question can't be known until the game is over. Since you seem to have a Roth preference, I figured I'd point that out. Yes, you can push to have your employer add a 457b. You can also push to have your employer add Vanguard and Fidelity.
  3. That may be true, but you may be surprised. List the approved 403b vendors and the approved 457b vendors. If you don't have that information then tell us what district you're in and together we can try to track the information down. I want to make sure you understand the different types of accounts. At the highest level you have taxable accounts and tax advantaged accounts. As the names imply, the former doesn't give you tax breaks and the latter does. Within the tax advantaged accounts umbrella you have accounts that are associated with an employer (403b, 457b, 401k, etc.) and accounts like an IRA that are not associated with an employer. Tax advantaged accounts, whether associated with an employer or not, often come in two varieties: Traditional and Roth. This specifies exactly how the tax break is applied, but I won't get into the details of that. Within all of these accounts you can buy specific investments. Now more to the point for your specific situation... When an employer offers a 403b, 457b, 401k, etc. you have to keep your money in that account. If your employer has multiple vendors for these accounts then you're allowed to transfer the money between vendors (fees may apply), but you cannot transfer the money to an IRA. Some important questions: How much are you investing per year? How long do you intend to work for your district? After answering those questions your course of action should be to enumerate all of the vendors your district has approved and then we can give additional input.
  4. Interesting because with my relatively small sample set, I've never heard of Fidelity telling that to anybody. I wonder if somehow the two are connected.
  5. Here's a link that explains the fees, how to build a fully diversified portfolio, and the steps I went through to enroll. Wow, if I'm reading this correctly, that is an unbelievable plan (I must have forgot about that). Only a flat fee of $30.50 per year and expense ratios like these: S&P 500 (domestic stock): 0.01% MSCI ACWI ex-US (international stock): 0.06% Bloomberg Barclays US Aggregate Bond (bonds): 0.03% That's incredible. I encourage that. Think about getting Vanguard and Fidelity added as well.
  6. When we start to talk about emotions and psychology, I'm not saying there is a right or wrong. However, I'd more easily relate to the emotional drive to rid yourself of a mortgage if it meant that no matter what happened your housing would be taken care of for life, but property taxes and all the rest make that impossible.
  7. I'm confused. I thought we were talking about whether to carry a mortgage as opposed to whether to live somewhere?
  8. I'd maybe talk to somebody else at Fidelity. They never once told me about such a requirement. Of course OCPS (FL) is a large district. Still, it is common place for people in this industry to say incorrect things with absolute confidence. Also, I know you have an eye toward Fidelity, but don't forget about Vanguard. They'd be a huge benefit to your fellow coworkers.
  9. Let's lay out some of the data: Historically the average stock market return is around 10% (minus fees and potential taxes). 30 year mortgages are going for 3% and even sub-3% right now with no points. Therefore, on average you could make 7% per year by investing what you would have sunk into your home. Depending on your tax situation, a mortgage also gives you a bonus deduction. If you have 100% equity in your home and prices rise by a typical 3% then you just got a 3% return on your money. If you have 20% equity in your home and prices rise by a typical 3% then you just got a 15% return on your money. Even if you pay off your mortgage you have NOT eliminated your housing expenses. You'll be paying insurance, property taxes, HOA, maintenance, and all of the rest forever. Obviously stock market returns and home appreciation are highly volatile and aren't guaranteed to be positive.
  10. When I went through this process 2.5 years ago: I spoke to somebody named Holly at Fidelity, 1800-868-1023 I spoke to somebody named James Rollar at Vanguard, 1-800-992-7188 extension 29884, James_Rollar@smallbiz.vanguard.com You'll need to know what process your district goes through to add vendors.
  11. As krow36 and whyme have said, not only is Vanguard your best option, but they're arguably the best option you could hope to have. I documented everything you need to know about their plan here.
  12. Only you know what asset allocation is appropriate for your risk tolerance. Expect stocks will, at some point, lose half their value quickly. If you will do something foolish like sell stock or stop investing during that time, that's a problem. If your mental health will be at risk, that's a problem. Bonds will reduce your expected returns, but they can be used to keep your portfolio from dropping to a level that'll cause you a problem. Fees are a huge deal, but people panicking, selling during a crash, and buying back in after a recovery is a disaster. You need to make sure you never do that. You might want to read the Investing 101 page I wrote. ...whatever domestic vs international stock split you opt for, just stick with it for life. Nobody can tell you what is optimal.
  13. Krow and Tony are correct, you do not have to be a member. I enrolled my ex-wife in the plan and documented everything you need to know about it here. I added Fidelity and Vanguard to Orange County's (FL) list of approved vendors. It took a very long time. If I were in your shoes, I wouldn't allow unused tax advantaged space to expire (2020 is almost over) because you're waiting to add a marginally better plan. You know your situation better than I do though.
  14. A few things to know: Vanguard used to have investor shares and admiral shares. The investor shares had a lower minimum required investment and a higher expense ratio. Some time ago Vanguard eliminated the investor shares and lowered the minimum required investment for their admiral shares. So being told you don't have access to admiral shares is effectively like being told you don't have access to Vanguard funds at all (minor exceptions like the Target Date funds never had admiral shares and Vanguard does issue Institutional shares...but those are just details). So you can safely assume the person who told you that is incorrect and fairly ignorant. If somebody correctly told you that you don't have access to admiral shares then I'm concerned you enrolled in something other than Security Benefit's NEA DirectInvest. The fact that you're even talking to somebody about investment options also points to that direction. Security Benefit's NEA DirectInvest is a self-directed plan, which means you login to their site and pick your investments yourself. There is no rep, which is why the fees are so low. Your comments perhaps suggest you're conflating VFIAX vs VTSAX with Investor vs Admiral shares. Both VFIAX and VTSAX are Admiral shares. However, VFIAX tracks the S&P 500, which are 500 large companies, but VTSAX tracks the CRSP US Total Market Index, which are 3,543 companies that represent the entire US economy.
  15. I know you are feeling overwhelmed, but if you'd like feedback on what you're doing then please tell us why you're doing it. What you've laid out isn't wrong, but it is unorthodox for a few reasons. 1. It doesn't include any bonds. I don't own bonds, but it is because I can lose half my portfolio and keep investing during the downturn. Will you sell your stocks when your portfolio drops 50% (notice I said when, not if)? Will you keep buying stocks in a downturn? Will you lose your mind in the process? 2. Related to the previous point, you should be thinking of your portfolio as the summation of all of your accounts. That's the right thing to do. So maybe you're planning to hold bonds in an IRA? That is generally fine, but I wouldn't hold bonds in a Roth IRA and hold stocks in a Traditional 403b. You want your highest expected performers to be in the accounts that'll have the least tax. 3. VTSAX represents the ENTIRE stock market. It is a fully diversified fund. VFIAX represents 500 large US companies, so by adding that to your portfolio you're implicitly making a bet that those large 500 companies will outperform the market as a whole. VSMAX represents small US companies, so by adding that to your portfolio you're implicitly making a bet that those small companies will outperform the market as a whole. These two bets are at least partially at odds with each other. Why are you making these choices? ...an extra tidbit on the last point, generally speaking making bets on certain sectors of the market is inadvisable. Some people like to make relatively small bets that small companies will outperform and that can generally be overlooked as long as they plan to stick to that bet FOREVER. There will be some years where it pays off and some years where it doesn't, so you have to be ready to stick through SEVERAL years of underperformance. If you're not ready to do that, and you will have to, then don't make this bet. I see no reason to stray from purity so invest in just VTSAX (minus some tax issues that aren't important for this discussion).
  16. This is a result of the fact that districts, even though they're responsible for these plans, basically outsource everything to the Third Party Administrator (TPA). So even though the district is technically in charge, the TPAs are often left to run everything as the districts defer to them. Add the fact that the TPAs are often corrupt and have financial incentives that run counter to employees and that explains why so many districts have awful plans.
  17. You're probably better off NOT talking to anybody at Security Benefit. Even though NEA Direct Invest is an elite plan, Security Benefit is a predatory company. You can read about the hurdles I had to overcome when enrolling in NEA DirectInvest here. You can read the exact steps/paperwork I had to fill out here.
  18. Yes. It can be done entirely online, but Vanguard is happy to help over the phone too. This is what I would do. 1. Decide on an asset allocation that you can live with in good times and bad times. 2. Establish a Security Benefit NEA DirectInvest 403b account and begin funding it. 3. Rollover your IRA to the vendor of your choosing. Vanguard is great. 4. Decide on whether your want new IRA contributions to go to Roth or Traditional. 5. Direct whatever excess money you have to your 2020 IRA contribution limit. 6. If your old 403b plans are with your current employer, consider rolling them over to the NEA DirectInvest 403b. You'll have to learn about surrender fees and such, but I can't imagine this isn't a good idea. 7. If your old 403b plans are with an old employer, consider rolling them over to an IRA. You'll want to consider surrender fees and the fact that this makes doing a Backdoor Roth IRA less desirable (although that doesn't seem like an issue for you). I wouldn't have IRAs at two different vendors if I could avoid it. It isn't a problem financially/mathematically, but I just wouldn't want one extra bit of complexity that isn't giving me something in return.
  19. You're right, their plan is awful and you don't need to investigate further. Luckily for you Security Benefit's NEA DirectInvest 403b is an elite offering that's competitive with Fidelity and Vanguard. When I was with my ex, I enrolled her in that plan. I documented the plan here. You'll only be able to do that if you get your district to add Fidelity and/or Vanguard to the approved list of vendors. I was able to get Orange County (FL) to add both of those vendors and documented some of the steps I went through in my blog. I'd be happy to help you do the same. This process can take a long time so keep in mind that Security Benefit's NEA DirectInvest is still an elite plan and VERY much worth investing in. American funds are known for having large expense ratios and/or loads (i.e. sales fees that go to marketers). What you really need are total market (i.e. diversified) index funds at rock bottom expenses. You can achieve that with Fidelity, Vanguard, Schwab, and a bunch of other vendors. If it were me, I'd move the IRA to my vendor of choice and make sure I maximize diversification while minimizing costs. You may want to read the Investing 101 page I wrote. You should feel that this is an important task to get taken care of. You should not feel time pressure. This is a "slow moving" problem so take your time, understand what you're doing, and get it done. The difference between getting this done tomorrow and getting this done in January isn't terribly significant. Just don't give yourself an excuse to procrastinate and you'll be fine. In my opinion, there is no such thing as making up for lost time. The past is done and you are where you are. That's it. If I were you I'd stick with the basics: Select an "asset allocation" (split between international stocks, domestic stocks, and bonds) such that if stocks drop by 50% your overall portfolio will drop to a level that prevents you from doing something foolish like selling stocks or withholding additional investments. You need to take on as much risk as possible such that you'll stick with the plan in bad times and maintain your sanity during drops that will happen. Minimize spending, which maximizes savings. Invest in total market index funds at rock bottom costs. Try your best to maximize tax advantaged accounts (IRA, 403b, 457b, etc.) before using a taxable account.
  20. The terms Roth and Traditional specify the tax treatment a tax advantaged account will receive. It doesn't specify the type of account (401k, IRA, etc.). I assume you're talking about setting up a ROTH IRA, but for all I know you're talking about using a spouse's Roth 401k. Be aware that Traditional is likely superior to Roth for most people in most circumstances. That is high, but you haven't told us what mutual funds are available in this account and what fees are associated with each fund. I haven't done the math, but even at 0.7% I'd be shocked if that outweighs the benefit of getting a match and I'd be surprised if it outweighs the tax advantages relative to using a taxable account. It is hard to give quality advice when I don't know what accounts your eligible for, how much you plan to invest, and other information. The best I can give you is generic truisms.
  21. What’s the explanation of the Bronfman quote? Is the idea that the person getting 10% on $100 is doing so through actual labor while the person getting 10% on a million is doing it through sitting on their butt? I don’t know if that was meant to be an indictment, but it sounds like a pretty brutal critique of our system.
  22. This really depends on your taxable income. It is true that a larger percentage of the income bond funds generate is taxed as ordinary income rather than being taxed as qualified income (i.e. capital gains rates). Therefore, somebody in the top tax bracket will clearly want to pay attention to this, but somebody with essentially no ordinary income won't care. I am 100% stocks and I would strongly discourage you from this course of action. The reason to hold bonds is to protect you from yourself. When you own bonds you're reducing your expected returns in exchange for less volatility. The reason you're doing this is because you've decided one of two things about yourself is true: You are at risk for selling stocks during a crash and probably not buying back in until the recovery is well under way. Said another way, you're at risk for selling low and buying high. You won't be able to sleep at night during a crash with a stock heavy portfolio. You should read about "anchoring" and something called the "sunk cost fallacy". Whatever has happened is in the past, it's over. You can only make decisions based on what is in your best interest now and in the future. If you are somebody who needs to hold bonds then you should hold bonds regardless of what happened in the past. If you are somebody who can handle 100% stocks then you should be 100% stocks regardless of what happened in the past. International (what?) and stocks aren't mutually exclusive categories. There are international stocks and international bonds. I won't make a strong argument for a certain percentage of your stocks being international and I won't make a strong argument for a certain percentage of your bonds being international. I will however make a strong argument that you should pick a percentage and stick with it forever. No matter what. You cannot make up for lost time, whatever happened has happened. The only thing you can do is make sound decisions going forward, which should not be affected by whatever happened in the past. I'm not sure what tax issues you're concerned with. You've only told us about a 403b and an IRA. Neither are taxable accounts and therefore everything you buy and sell within those accounts will have no impact on your taxes. I would go through the process of identifying an asset allocation that fits my psychology and I'd buy the funds to achieve that asset allocation based on which account allows me to buy those funds for the lowest amount of fees. You may benefit from reading the Investing 101 page I wrote.
  23. You may want to read my Investing 101 page if you need to get up to speed. The best 403b plan you have available to you is Security Benefit's NEA DirectInvest, which I documented here. You can build a fully diversified portfolio with rock bottom fees. This is an elite plan. Aspire is your second best 403b plan, but it isn't worth discussing because it adds on a non-trivial 0.15% fee that Security Benefit's NEA DirectInvest does not charge. I'm not sure about your 457b vendors, but I'm not optimistic. You didn't say what state you're in, some states (like NY) have great 457b plans you can gain access to. You didn't say how much you're contributing. If you're contributing less than or equal to the IRA maximum then I wouldn't bother with the 403b/457b and I'd open up an IRA at a place like Vanguard and Fidelity and fund that instead. If you're contributing less than or equal to the 403b/457b/401k maximum then I'd consider maxing out the 403b because once you hit 50k, they drop the annual $35 fee. If that isn't particularly appealing then I'd max the IRA first and put the rest in the 403b. (all of this is assuming your 457b isn't great). If you're contributing less than or equal to the 403b/457b/401k and IRA maximum then I'd max both. If you're contributing even more then I'd max the IRA, 403b, and put the rest in the best 457b plan (assuming it isn't egregiously bad). If you're contributing more than the max for all three then put the rest in a taxable account. If sure would be easier to answer if I knew how much you were contributing. Valic probably charges surrender fees. The annual fees associated with your Valic account are probably high enough that its worth paying the surrender fees. Again, you'll have to dig into the numbers
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