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Posts posted by EdLaFave

  1. 15 hours ago, CTinker said:

    now in a moral conundrum....

    1. Open the plan and split the contributions between plans. (Knowing those fees are a lot less than the 1-2% fees that are all too common) or
    2. try to get the 403b to 50k then open the 457?

    I don't see a moral conundrum. You got the district to add low cost plans in addition to Security Benefit's already low cost NEA DirectInvest. There's nothing wrong with continuing to use the low cost plan you are already enrolled in. I faced this exact same choice and went with option #2, while simultaneously suggesting to folks that they go for the newly added plans because they won't encounter a sales rep that tries to take advantage of them as they may when using Security Benefit.

  2. 1 hour ago, CTinker said:

    Thanks, Ed!  Actually reading your write ups was one of the main reasons I went for NEA Direct

    That's great. I'm really happy to have been helpful.

    1 hour ago, CTinker said:

    I'm going to 403b now over the Roth:

    • My wife has been working part time while also being a stay at home mother for the past 7 years.  Our tax bracket has been low due to this so I figured I should pay the taxes now expected our bracket to increase.   She could be rejoining the workforce sometime next year when the youngest enters Kindergarten. 
    • We have too much invested in taxable and I am going to sell some of it to allow me to contribute $10,000 from the paycheck to 403b.  This will  shelter some assets before my children fill out a FAFSA.  
    • By transitioning to funding the 403b instead of the Roth I can bring my AGI down to get the Earned Income Tax Credit.

    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.
    1 hour ago, CTinker said:

    I hope this switch isn't misguided but it seemed to make sense to me.

    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.

    1 hour ago, CTinker said:

    I had only been contributing around 4k a year to my Roth but I'd like to bump that much higher when my wife is also working.

    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.

  3. 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:

    1. 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.
    2. If you're investing more than the IRA maximum then using the 403b in addition to the IRA is the ideal move.
    3. 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.

  4. 4 hours ago, Deana said:

    My school district doesn't offer ANY companies that are not high fee

    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.

    15 minutes ago, sschullo said:

    Should I leave it where it is or pay my surrender fees and taxes and just pull it out?  Can I initiate a transfer  to another company like Vanguard or Fidelity and then would it have to be in a ROTH IRA or traditional?

    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:

    1. How much are you investing per year?
    2. 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.

  5. 19 hours ago, Bashdash said:

    NEA Security Benefit has a "direct invest" option.

    Here's a link that explains the fees, how to build a fully diversified portfolio, and the steps I went through to enroll.

    17 hours ago, tony said:

    in Virginia. We have an excellent 457 state plan

    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.

    8 hours ago, DavidFletcher said:

    I have more of a “fight for all” mindset so I will get the 457 plan added.

    I encourage that. Think about getting Vanguard and Fidelity added as well.

  6. 1 hour ago, MNGopher said:

    left brain/right brain

    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'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.

  8. 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.

  9. 10 hours ago, ClarkandAddison said:

    I've not been able to get anyone at Fidelity's 403b sales department to return my calls

    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.


  10. On 11/11/2020 at 5:23 PM, matt rector said:

    Vanguard Total Stock Market = 70%

    ·         Vanguard Total Int’l Stock Market = 10%

    ·         Vanguard Intermediate Term Bond = 20%

    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.

  11. On 11/9/2020 at 11:31 AM, ClarkandAddison said:

    you have to be an NEA member to be eligible for the NEA Direct Invest with Security Benefit?

    Krow and Tony are correct, you do not have to be a member.

    On 11/9/2020 at 11:31 AM, ClarkandAddison said:

    looking into the NEA Direct Invest option

    I enrolled my ex-wife in the plan and documented everything you need to know about it here.

    On 11/9/2020 at 2:07 PM, ClarkandAddison said:

    If I can't get Fidelity added, I'm going to work on joining NEA Direct Invest.

    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.


  12. On 11/4/2020 at 1:55 PM, msucurt said:

    So, i put down i wanted VFIAX (admiral)(vanguard 500 index), but i cant get this with my plan she said. 


    5 hours ago, msucurt said:

    Ok, I think I will call back and ask about the Admiral class and see if it is available. If so, I will switch over to the VTSAX , etc

    A few things to know:

    1. 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.
    2. 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.
    3. 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.
    4. 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.

  13. 3 hours ago, msucurt said:

    On the Docusign form (step #4), i did this:

    • VFIAX - 35%
    • VTIAX - 30%
    • VTSAX - 25%
    • VSMAX - 10%

    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).

  14. 25 minutes ago, tony said:

    I find it hard to your business manager (not HR) who is responsible for 403b transactions wouldn't have this information.

    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.

  15. 17 minutes ago, msucurt said:

    So, would I just go to Vanguard's website, call a rep and get them to set up my account and  roll my current Roth IRA over to them? Then choose my funds?

    Yes. It can be done entirely online, but Vanguard is happy to help over the phone too.

    19 minutes ago, msucurt said:

    1) transfer my existing 403b plans to NEA Direct Invest

    2) Set up a Roth IRA with Vanguard and transfer my existing account to them? I have $13,000 total in those accounts, how should I go about using this?

    3) I have an extra $5,000 to invest. Shall I choose another company for another Roth IRA. Perhaps open up one with Fidelity? 

    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.

  16. 18 hours ago, msucurt said:

    I am currently speaking with an EQUITABLE (AXA) rep...I know for sure I WILL NOT BE DOING THAT

    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.

    18 hours ago, msucurt said:

    I am looking to open up a 403b with either FIDELITY or VANGUARD.

    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.

    19 hours ago, msucurt said:

    In regards to my ROTH IRA, should I leave it with American Funds or also switch those to either Fidelity or Vanguard?

    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.

    19 hours ago, msucurt said:

    feel like I need to do urgently get this taken care of

    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.

    19 hours ago, msucurt said:

    I would like to be moderate-aggressive in my contributions to make up for some lost time so to speak.

    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:

    1. 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.
    2. Minimize spending, which maximizes savings.
    3. Invest in total market index funds at rock bottom costs.
    4. Try your best to maximize tax advantaged accounts (IRA, 403b, 457b, etc.) before using a taxable account.


  17. On 10/14/2020 at 11:07 PM, D.D. said:

    I’ve considered opening up a ROTH outside of the company

    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.

    On 10/14/2020 at 11:07 PM, D.D. said:

    operating fees are 0.7%

    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.

    On 10/14/2020 at 11:07 PM, D.D. said:

    Any advice would be greatly appreciated.

    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.

  18. On 10/3/2020 at 10:13 PM, MissHavisham said:

    I know it is advisable to put bonds in the tax deferred account

    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.

    On 10/3/2020 at 10:13 PM, MissHavisham said:

    I'm not ready for bonds yet.  I am 35 and I feel like I've missed out on time in the market and I have decided to accept that risk for a period of 5 years.

    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:

    1. 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.
    2. 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.

    On 10/3/2020 at 10:13 PM, MissHavisham said:

    I also don't know how I feel about International yet.  Which again, is why i am 100% stock

    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.

    On 10/3/2020 at 10:13 PM, MissHavisham said:

    how do I best make up for missing time and limit tax issues.

    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.

    On 10/3/2020 at 10:13 PM, MissHavisham said:

    My Roth IRA is 100% VTSAX.  I'm wondering if it is dumb to have VTSAX in the 403b as well.  What would you do? What would you hold in your 403b?

    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.

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