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Everything posted by EdLaFave

  1. Just my opinion: don’t let anybody (even yourself) push you towards making a time sensitive financial decision. Walk away every time and make the decision when you’re good and ready. If the “opportunity” has expired by that time then you most likely dodged a bullet. If you ask questions I will happily provide direct answers. I don’t feel comfortable definitively telling you that Aspire is your best option because I haven’t personally researched every vendor on the list and I’m not sure if you also have access to 457b plans (especially the NY state variant). However, I feel entirely comfortable in definitively telling you that using Aspire and the funds I referenced on my site is going to be massively superior to anything an “advisor” would put you in. It isn’t even close. I also feel comfortable telling you that even if you’ve got a great 457b, it cannot be that much better than the Aspire 403b. So if you’re just overwhelmed and can’t get to it, then investing through Aspire is an entirely reasonable middle ground until you find more time to get into it. I should also mention that maxing out your IRA (6k/year) is a great thing to do as well...and it takes almost no effort relative to this 403b/457b mess. I’m not sure if I linked you to my Investing 101 page, but it takes five minutes to read and gives you virtually all of the knowledge you need. The industry makes this appear far more complicated than it actually is because they want you to hand the keys over to them. I’m happy to guide you through all the nonsense.
  2. What I preach is: 1. Vanguard and Fidelity are tied for first place in the 403b space. 2. Any changes I make to my portfolio are done slowly. So I am following my approach. I expect to own Fidelity’s ZERO funds after another year or so. If Fidelity were to raise the price, I’d simply exchange them for something else. Easy. There is no evidence to suggest that Fidelity is being dishonest about anything. ...Fidelity is able to generate revenue from a ZERO fund due to securities lending.
  3. I say they’re lower because you can build a fully diversified portfolio at Fidelity with a lower expense ratio than you’d get if you did the same thing at Vanguard.
  4. Best to stay out of that advisor loop 😀 I’ll happily provide sound information and data for free to anybody who feels the need for an advisor, but prefers to keep their money in their pockets. ...plus I hope everybody knows that an advisor is NOT required to act in your best interests and is almost always incentivized to act against them!
  5. I think a couple 0% funds are enough to sustain my lifetime investment needs and if not I can just as easily purchase another type of fund from a different vendor. I will agree with the sentiment that saving 0.06% per year is far less important than things like maximizing income, maxing our tax advantaged accounts, properly assessing your risk profile, and so on. However, if you’re doing all that then why not take the extra 0.06%? I’ve read people wondering if Fidelity’s ZERO funds will be as tax efficient as Vanguard’s. I’m wondering that too, but it really only matters in a taxable account. I’ve also wondered what would happen if Fidelity shut down the funds because they were losing too much money on them. Again, that’s only consequential in a taxable account. My biggest concern is whether or not Fidelity’s funds will properly track the total market because one of the ways they save money is by NOT tracking a pre-existing index. They’re essentially following their own index (or so I read). I’m not sure how to evaluate the quality of the index. Maybe just review a long enough track record of performance?
  6. I agree with you and that’s exactly why I used the word arguably. No real conflict between our opinions. I also share your instincts about the culture (to a reasonably large degree). However, it is an undeniable fact that Fidelity’s 403b fees are roughly half of Vanguard’s (which you’ve correctly characterized as already being very low). However, I would give some handholding to a rookie because, as we’ve discussed in previous threads, Fidelity does things like have two types of target date funds—one is good and one is quite expensive. Vanguard has nothing of the sort. At the end of the day my web site has Fidelity and Vanguard listed as tied for first place because I’m unable to decide who is best. If Fidelity’s prices were greater to or equal to Vanguard then I’d be comfortable naming Vanguard the winner...but Fidelity’s prices are lower.
  7. Is a 0% fund a good deal? Of course. I will more than likely own the Fidelity ZERO funds in a year or so. The only reason I don’t own them now is because part of my financial strategy is to always move slowly and cautiously.
  8. The best provider is the one that allows you to build a fully diversified portfolio for the lowest price. In practice that means the vendor with low fees and total market index funds. The only vendor that is arguably better than Vanguard is Fidelity...so you’re very fortunate to have Vanguard! The gap between them and everybody else is large. I documented the Vanguard plan here. Your question was fairly basic leading me to believe you might have some other fundamental questions. I wrote an Investing 101 page that might help you. Please come back and ask as many questions as you need (how to pick the right funds, how to split money between stocks/bonds, and so forth).
  9. I just wanted to add a bit of context. Fidelity allows you to build a fully diversified portfolio for 0.03% (or 0% if we’re talking outside of a 403b/457b). Vanguard does the same for 0.06%. In my opinion anybody charging more than 2-3x those rates is clearly taking advantage of you. It is true that some folks have been charged 30x those rates, but that shouldn’t excuse less severe price gouging. We wouldn’t happily accept a 2-3x markup on any other product...I see people curse when gas goes up by 0.5x.
  10. I want to second what whyme said about 457b plans and state sponsored plans. I’m not familiar with every vendor on your list, but I strongly suspect Aspire is your best option. I’ve rated it the 4th best plan that I’ve studied. Read about Aspire here. You can build a fully diversified portfolio for 0.21%. That isn’t the best plan out there but it is somewhere between reasonable and good. Over 30 years that 0.21% fee consumes (approximately) 9% of real returns...since you switch jobs from time to time, you’ll likely give up much less to fees.
  11. If anybody does the work, please post the options and fees of the self directed portion of the plan. That way when people google it they can find the end result on this thread.
  12. I only skimmed the 30 to 40 page PDFs. I didn’t see what the fees and options were in the self directed option. You’re right, that option must be explored.
  13. They’re half right. People do want a person to guide them, but they have no idea what that ends up costing them and are therefore largely incapable of making a decision about the trade off. I suppose that may be true assuming they don’t have a personal moral/ethical obligation that they’re trying to fulfill. The only people teachers can reliably count on to fix this is themselves. This is just more data to support my hypothesis that people (teachers, administrators, school board, etc) are ignorant and generally disinterested even if they themselves are paying the price. This sounds really negative, but it’s actually quite good. It is easier to deal with this attitude than it is to deal with outright corruption or ill intent. If teachers get together, these people can be made uncomfortable and/or enlightened enough such that action is taken. If you weren’t retiring I would have said: I wouldn’t give up. This would only make me amp up the pressure by getting teachers on my side to force change.
  14. It is interesting that the county seems to have a single 403b and 457b vendor. On its own, that would be a good thing because it minimizes confusion. However, the single plan being offered is rather bad. If I were in your shoes (and I was at one point), I’d push to reform the plan. The single Vanguard fund is actually great, but everything else ranges from slightly bad to awful. I don’t know what your preferred asset allocation is, but personally I would strongly consider exclusively using the Vanguard fund and use an IRA or my spouse’s account to hold my international and my bond funds. I’d be willing to compromise on my ideal asset allocation if it meant rock bottom fees.
  15. Security Benefit’s NEA DirectInvest is an elite 403b plan and it’s your best option. I’m enrolled in it. I documented the plan here and I documented how I enrolled in it here. Unfortunately, it isn’t offered as a 457b. If you can max out your 403b, IRA, and every other tax advantaged accounts then PlanMember Direct is your best option for a 457b. I documented that plan here. ...how did we miss this post from all the way back in April?
  16. EdLaFave

    Crying Poverty

    I know you’re not judging anybody in a negative way. I like the articles you link to. I’m just reacting to how this article made me feel on a personal level. If the author is going to discuss poverty and responsibility then IMO he must simultaneously acknowledge the realities of our economic structure. As my mom once told me, “I know it’s not fair, but this how you can get by playing their game.” I grew up on the higher end of poor and worked with pretty poor people. I now have a fancy job and work with people who are decidedly not poor. The poor people worked much harder and were less wasteful (not that they had much choice). It felt like this article was too focused on individuals’ mistakes. I’ve watched a political party echo that message as they’ve transformed the rules of our economy towards inequality (sometimes in a bipartisan way). They blame my generation’s circumstances on our desire to have avocados and toast for breakfast rather than on the structures they’ve intentionally built. They tell us our collective circumstances are a result of our flawed character rather than the system we were born into. This article reminded me of that type of argument because it was one sided.
  17. EdLaFave

    Crying Poverty

    Great to have you back Tony. Two principles: everything/everybody is interconnected and we lack the balance we require. Yes the individual should take responsibility for the decisions they make. At the same time, we aren’t born with the belief that our value as human beings can be measured by the things we own. We aren’t born believing that things are just as important (if not more so) than people. This is something we’re taught at an early age and we are social creatures who are heavily influenced by everything around us whether we want to accept it or not. I’d feel a bit foolish scolding somebody (whether they’re blowing their $1,000/year surplus on shoes or blowing their $100,00/year surplus on a boat and vacation home) too thoroughly for trying to attain success in exactly the way society has defined it for them. At that point I think it would be more useful to have a discussion about whether these purchases bring them anything more than fleeting happiness and what they’re giving up in exchange. I’d feel incredibly foolish scolding low wage workers who literally don’t have enough to survive when you can clearly see that over the last forty years nearly all of the wealth has shifted to the top. If I ever talk to an individual, I focus on what they have control over (personal responsibility). If I ever talk to a group, I focus on what they have control over (economic structures and values).
  18. I’m too lazy to type much, but I got Vanguard and Fidelity added to my wife’s district. Nobody helped me and I wasn’t even an employee. This is achievable. I can help.
  19. I’m confused because I don’t know what an aggregator is and I don’t know what GWN stands for. Didn’t take the time to google, sorry. I’m also confused by you saying that you already have a SB account, but SB isn’t an approved vendor. It would seem you couldn’t have the former without the latter. Aspire is an entirely different vendor that is separate from SB.
  20. Thanks. I’m trying to find time to improve the software, the two big ones: 1. Model social security and possibly pensions. 2. Instead of just calculating a specific outcome if you follow a specific strategy, I want to determine the best outcome by having the software examine a variety of different strategies (take SS early, go beyond the 0% bracket on Roth conversions, etc). ...I haven’t gotten into the Mega Backdoor Roth. My software models Roth conversions. I personally only fully understand the regular Backdoor Roth, I haven’t had the energy to learn the Mega Backdoor Roth yet (maybe never will).
  21. ...a few additional details after looking through the data more: In those first 40 years, thanks to Tax Gain Harvesting, you were able to erase $735,849 worth of capital gains from our taxable account. That represents $1,827,414.26 worth of sales/income. In those first 34 years, thanks to Roth Conversions, we were able to move $290,164.81 from our Traditional account to our Roth account without paying any tax. This demonstrates the immense value of Traditional investing. RMDs generated very little tax, which once again demonstrates the immense value of Traditional investing. $567,206.40 worth of RMDs were issued. $21,130.83 worth of tax was paid, effective rate is 3.7% Two years RMDs didn't generate any tax thanks to the standard deduction. Fourteen years RMDs pushed us into the 10% bracket. Tweleve years RMDs pushed us barely into the 12% bracket. I'm not breaking news, but that Taxable account is a huge tax drag! By our late 70s (just a few years after we started paying taxes for the first time), most of our yearly tax bill is caused by the dividends being produced. By the end we've paid $108,400 due to qualified dividends and $30,235 due to unqualified dividends...that represents 87% of all the taxes we paid! Obviously the ever increasing dividends are expensive, but they have secondary effects. It lessens our ability to perform Roth conversions, which means our RMDs are larger, which means we pay more tax. It also lessens our ability to Tax Gain Harvest (which didn't hurt us much in this hypothetical run). All of that is to say, the taxable account may (in truth) account for more than 87% of the taxes we paid if you include the secondary effects.
  22. I've continued to study how one might minimize taxes in retirement (Part 1 and Part 2). I'm writing software to model the strategies I've previously laid out and eventually to optimize them. The software isn't as sophisticated as it'll eventually be, but it just provided its first bit of interesting data. Suppose the following: You retire at 37 years old on Jan 1. You'll die at 100 years old on Dec 31. You're single. You've got $1,144,198.89 (77.37% taxable, 18.15% traditional, and 4.48% roth) You spend $35,000 per year on living expenses. You follow the basic steps I previously described (no fancy optimizations). Notable results (bugs are possible, I still need to test the software, hopefully this data isn’t errroneous): The first 34 years (without RMDs) are very good to you. You don't pay a single cent in taxes thanks to the 0% capital gains rate! Your balance is now $2,884,664.16 (52.85% taxable, 10.67% traditional, and 36.48% roth). That balance is quite nice to look at, but notice how much the Roth account grew thanks to Roth conversions. Now you're 71 and the next next 30 years (with RMDs) are pretty good to you too. You pay taxes every year. The first 2 years your RMDs are below the standard deduction, but the unqualified dividends from your taxable account push you into taxable territory. You continue to enjoy the 0% capital gains bracket though so no taxes on qualified dividends and you keep Tax Gain Harvesting. You pay less than $500 in tax each year. The next 4 years your RMDs exceed the standard deduction, but you continue to enjoy the benefits of the 0% capital gains bracket. You pay less than $800 in tax each year. Thanks to increasing RMDs and increasing dividends from your taxable account, you're no longer able to take advantage of the 0% capital gains bracket (Tax Gain Harvesting has come to an end after 40 years, not a bad run). The next 2 years your Ordinary Income (RMDs and unqualified dividends) keeps you in the 10% tax bracket. The next 22 years your Ordinary Income (RMDs and unqualified dividends) keeps you in the 12% tax bracket. By the time you're 81 years old your taxable account is a runaway train and you're paying more tax due to qualified dividends than ordinary income (RMDs + unqualified dividends). When everything is said and done: Your portfolio is worth $9,763,150.34 (52.13% taxable, 1.28% traditional, and 46.59% roth), basically the traditional's decrease became the roth's gain. You avoided taxes entirely for the first 34 years. You paid $159,766.00 in taxes during the final 30 years. Taxes started at just $399/year but grew to $12,372/year. Taxes averaged $5,325.53 in those final 30 years. Tax growth was mostly driven by the ever increasing dividends thrown off by the taxable account and not by the fact that the RMDs tended to increase year over year. Since our ordinary taxes eventually bumped into the 12% range, it may be worth experimenting with doing Roth conversions in the 10% bracket in the years when we're leading up to the 12% bracket...that may prevent us from reaching the 12% bracket and that might increase the value of our accounts? This is where a simulation is helpful. 100% of capital gains tax was due to dividends...I'd have to look closer to see if any taxable sales (i.e. the tax gain harvesting) was used to pay bills, but we certainly didn't have to sell taxable shares that would be taxed in order to pay bills. We never had to tap into the Roth Account at all. A few notes on the particulars of the software (some of which introduce small/negligible inaccuracies) that was used to calculate these results: It uses inflation adjusted dollars (2018 dollars). It pretends RMDs are issued on Jan 1. It pretends that dividends are issued all at once on Jan 1. 1.93% of initial taxable balance are dividends. 83.85% of dividends are qualified. It attempts to Tax Gain Harvest right after those dividends are issued. It assumes living expense will remain constant at $35,000 every year. It pays all of the living expenses for the year right on Jan 1 after Tax Gain Harvesting. It pays the tax bill right on Jan 1 even though it isn't due until April of the following year. It reinvests the surplus in the taxable account right away (on Jan 1). It assumes a steady 5% real return every single year. It models RMDs. It does Roth Conversions every year as long as doing so doesn’t generate any taxes. It assumes the tax code never changes (2018 tax code). It does not include social security or pensions yet.
  23. I really don't like the sound of that. I hope he is ok.
  24. Now this is the classic Security Benefit experience that I’ve gotten used to! I can’t give you definitive answers, but I suspect you could rollover to NEA DirectInvest and they’d make you pay the surrender fees. The difference in fees between Vanguard and NEA DirectInvest is quite small. If it were me I’d choose whatever route is easier. Vanguard may even be preferable if you want an all-in-one fund because NEA DirectInvest doesn’t offer a reasonably priced one while Vanguard does.
  25. Some of them do. That is a totally valid reason to switch. One or two basis points (0.01%) isn’t a huge deal, but it is something. I’ll be lazy for a bit. I’ll hope Vanguard lowers the Mutual Fund shares. I’ll also continue to monitor the 0% funds from Fidelity.
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