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Everything posted by EdLaFave

  1. What is a TSA match? Does TSA mean tax sheltered annuity? Are you just saying the employer will match some percentage of your salary/contributions in the 403b?
  2. I’d add to what Krow said...the best vendor is the one who lets you build a fully diversified portfolio at the lowest cost. You may want to read my Investing 101. Fidelity is arguably the best vendor in the industry; you’re lucky to have them. I documented their plan here.
  3. Just a reminder that a primary goal of any troll job is to get people fighting with each other.
  4. I don't know what the truth is. It doesn't surprise me to see a 457b listed underneath the "Deferred Compensation Plan" banner; that makes total sense. What I'm not sure about is if 457b plans are just a subset of the plans under that banner. I'm not sure if a 401k, 403b, etc also fall under the same banner; that would make total sense to me. Missouri State lumps 403b and 457b plans under the same banner here. The Round Rock Independent School district lists a 403b under the same banner here. ...from a quick google search I saw other examples. I also saw that there was a particular tendency to refer to a 457b as a DCP. I don't know what the truth is. Whatever the case, I hope it works out for the teachers in Illinois, but until I see the final details and until those details are clear, I'll naturally assume teachers/investors are being taken advantage of. That has been a safe bet for a long time. I hope I'm wrong.
  5. I didn’t know that a deferred compensation plan is the same thing as a 457b and I haven’t found anything on google yet to confirm a DCP is equivalent to a 457b. In fact, this investopedia page seems to state that DCP is a general term not limited to a 457b. If you’re right then this is confusing terminology because so many other plans are also based on deferring compensation. I found the article to be confusing. I guess we will see what happens, but this is the quote that got me: ”The amount teachers will be able to contribute to the new deferred compensation plan also has to be determined. One possibility is 4 percent, the amount that workers were supposed to contribute to a 401(k)-style plan under a Tier 3 pension plan.”
  6. It wasn’t clear to me if this was a 457b or something else?
  7. Cliff notes of the interesting bits?
  8. The article was really light on details, probably because the plan itself is very light on details. It sounds like it is in addition to a pension, 403b, 457b, etc. and all of the predatory plans will be allowed to continue. It also sounds like there may be a 4% of salary contribution limit, which isn't a lot on a teacher's salary. I'm pretty cynical and un-trusting on this because it reminds me of the "Model Plan" here in Florida. They hit all the right notes with the rhetoric, but then implemented something in direct conflict with everything they said. It is especially frustrating because it is so easy to solve this problem: Expand the TSP so everybody can use it for 401k, 403b, 457b, etc....or create a new plan modeled on the TSP if that is easier. Force school districts to exclusively use that plan. Force school districts to auto-enroll employees in a target date investment with the TSP using a "reasonable" contribution amount that they can opt out of or change if they want.
  9. That’s awesome. I’m glad you’re going to end up with a portfolio that reflects your risk tolerance. Your stated asset allocation is very reasonable.
  10. Take your time. Ask questions. Come back much later and reread the thread. No rush. A lot has been said but if you grasp the concepts in the Investing 101 page I linked to earlier, then you’re in great shape. I agree. That is the decision I’ve made in the past. I’m not an expert on this. Give it a google. I believe with a 457b you can withdraw from it at any age without having to pay a fee as you would in a 403b or 401k. However, if we are talking about early retirement then I believe you can withdraw from those other accounts fee free too. So this is more of an irregular/emergency situation issue. The two accounts are so similar that a lot of people will simply pick the one with lower fees. Not really. Maybe you want to have a little money in the 457b to take advantage of the penalty free withdraw perk, but you want the rest in the 403b because it has lower fees and better investment options? This is the single most important choice you will ever make. So take your time with it and try to honestly evaluate your relationship to money. Stocks have higher expected returns but they will repeatedly have huge drops. You need to be able to sleep through the night and not panic sell when that happens. Divide a stock percentage by half and that is a rough estimate for how much your portfolio will drop in a crash. Pick a percentage you can financially and emotionally afford and know that the fewer stocks the lower the expected return. This is the most dangerous thing that can happen in the mind of the investor. We all have to intellectually accept the fact that we cannot predict anything at any time...especially not in a time frame measured in months or years. Maybe decades but nothing less. Then we have to acknowledge the reality that our emotions will keep telling us that we can predict things. We have to promise ourselves to ignore our emotions. Pick a bond percentage that makes you feel secure. Invest in total market index funds. Stick to the plan. Write down your predictions in concrete terms as you just did and then look back years later to see how you were so often wrong. If you look in my post history, you’ll see I emotionally predicted a recession in January. I was wrong but I ignored my emotions and kept investing so I won. It is reasonable to have an emergency fund in a high interest savings account. Some people buy CDs. Other people hold bonds in an investment account (taxable, IRA, 403b, whatever). It is up to you. It doesn’t really matter that much.
  11. This new information makes rolling over to a 403b less risky because you won’t be there too long, but I still find the slightly lower costs of an IRA appealing. One thing to keep in mind if you’re moving from job to job is that it makes expensive retirement plans more viable because you’ll only have to pay the fees for a short time before rolling over to a low cost IRA. It’s common for people, especially teachers planning to work in the same district for decades, to ask if their expensive 401k/403b/457b is worth the tax break. You’ll have an advantage in these scenarios. IRA = individual retirement account. So it is entirely up to you to open, fund, and manage the account without any tie to your employer. The employer is tied to accounts like 401k, 403b, 457b, etc because the only way you can invest in them is by your employer deducting money from your pay and putting it in the account. I don’t know Tony’s rep but probably. I think you can open an account from their website or by calling. A 457b is another tax advantaged account that is very similar to a 403b, but has some slightly different rules. Often times the same financial institutions that offer 403bs also offer 457bs. In any given year you can contribute $18,500 to a 457b and another $18,500 to a 403b. Most teachers have access to both types of accounts. Other government workers have access to only one...you may fall into that case, but find out for sure. That is a reasonable portfolio for what I think is a typical worker. However, aside from my emergency fund, which is 100% in bonds, I have a 100% stock portfolio. On a side note, for people in my circumstances I think an emergency fund is a sub-optimal result of mental accounting. In my case it’s an artifact from the past when I truly couldn’t afford to have a chunk of money disappear. I should probably get rid of it, but I move slowly when making financial changes If you have 25% bonds then your portfolio might drop by 37.5% during the next crash. If that reflects your risk tolerance then great! When it comes to asset allocation, don’t make the mistake of thinking each account has to reflect your asset allocation. It is the summation of all of your accounts that must reflect your asset allocation. I wrote a blog post on investing and marriage that briefly and indirectly highlights why this is best.
  12. I’m going to steer clear of the inheritance/rollover issues because I don’t have the knowledge to provide trustworthy answers. I believe investing with Vanguard is a great choice. I think the target date fund is awesome because you probably would prefer to pay the slightly higher fees than manage a three fund portfolio. I think it is important that you choose the date for the target fund. You need to understand the risk and be okay with it. I still think a Traditional is likely to be better for you than a Roth, but I think you’ll be just fine either way. Just save as much as humanly possible and never sell your investments (short of paying for bills in retirement).
  13. I think the IRS allows you to rollover old 401k (and 403b) accounts to your new 403b. However, you may not find that to be optimal because: 1. You could roll it over to an IRA where you’ll have access to the best funds at the lowest costs. 2. You’ll be subjected to the whims of your employer. At any point they could decide to get rid of every reasonable vendor and go with only high cost vendors. This perhaps isn’t likely, but I’ve certainly read threads where it happened. SecuirtyBenefit waives their $35/year fee if you exceed $50,000 so rolling it over to a 403b might help you get there sooner However, I think they also charge an extra 0.01% more per fund. So these are conflicting forces that need to be quantified over time. If you rollover to a Traditional IRA then it may make doing a fancy maneuver called a Backdoor Roth less desirable. I’ve always rolled over my old employer accounts to an IRA. If you do something like roll a Traditional 403b into a Roth 403b that’ll increase your taxable income for the year and cause you to owe more in taxes. It may also be the case that your 403b has surrender fees associated with it, but every case I’ve seen it is worth it to pay the surrender fees because the annual fees are so high. However, sometimes it is worth waiting...for example if the surrender fee is set to expire next month, but it isn’t worth waiting a long time In reality you may pay lower fees by doing a rollover. It is often the case that your employer subsidizes your retirement account and that subsidy ends when you quit. So by rolling the account over, you may be escaping a fee that you may not have realized you were paying. I won’t comment on taking loans against retirement accounts except to say it intuitively feels like a bad idea. If it is possible to temporarily stop contributing to your retirement accounts and use that extra money to pay for tuition then that might be desirable. Also, if it is possible to get loans where interest doesn’t begin until graduation then that may give you flexibility. ...just ideas to explore. The best plan you have is Security Benefit’s DirectInvest, which I documented here. Just be careful because they’re an unethical company and may try to steer you towards enrolling in a bad plan. You can read about our story when enrolling here as well as the steps we went through to enroll here. Your second best plan is Aspire, which I documented here. There were some vendors I wasn’t familiar with and Lincoln may have a self directed plan (called PDP) for you to investigate, but it is only available in some areas. My only advice for teachers is to beware of 403b/457b vendors, annuities are dangerous, and know that you can put $18,500 into each account type per year...37k per year. My advice for somebody who is 40 (or any age really) is to pick a stock/bond mix that is appropriate for your risk tolerance. You may want to read my investing 101 page if you’re looking for the fundamentals. I think Traditional IRAs are optimal for the vast majority of people because I believe it will result in them paying less in taxes. You can read the case for this opinion here.
  14. Breaking out the large font. I’m just happy I’m not alone in not trusting these posts. They seem disingenuous to me. ...but of course keep posting if you want, it’s just my two cents.
  15. lol, I never could spell. Math sure, but language not as much. Oh well ?‍♂️ Although I haven’t noticed the oddity of a near zero change for the day, it is strangely satisfying when your asset allocation happens to fall perfectly in line down to the hundredth of a decimal.
  16. I finally found somebody with a more intense addiction than I have! I have a spreadsheet that shows the value of my portfolio in real time. It is on one of my screens almost 100% of the time the market is open. However, the only data I archive is how much I invested each year and how much my portfolio is worth at the end of each year. I almost never know: How much my portfolio shifted on a daily basis. The exact performance of any one asset class. Although I sometimes have a rough/relative idea...for example, this year I know I've been pouring money into international trying to maintain my asset allocation. So it is pretty clear international is once again lagging domestic. The return on investment my portfolio generated for any time period. I'm 100% addicted to that spreadsheet. I'm literally counting down the days until freedom. It isn't exactly healthy and I hope people avoid being like me in this respect.
  17. Take their advice. Seriously. You're hurting people every time you go to work. I also don't believe you actually want this because it would hurt your bottom line. If everybody enrolled in low-cost, self-directed plans then you'd be out of a job. The fact that you keep showing up to work demonstrates you want this job. Also for anybody reading this thread, although the original poster's sentiment that insurance companies don't support low-cost, self-directed plans is generally true...just know that it isn't universally true. For example,. Security Benefit offers a self-directed plan called NEA DIrectInvest. It is awesome and I documented here.
  18. Awesome, thanks for teaching me that. You might want to google it to see if there are any implications of such a transfer. I think something might be incorrect here. If the 457b has already been taxed that would mean it is a Roth. I think (not sure) you could put that into a Traditional IRA, but it certainly doesn't have to be. Most folks would roll it into a Roth for the same reason they originally put it into a Roth. I don't believe this is accurate, but I may not fully understand the special cases your 457b may have. Generally speaking, I think the following links support my skepticism: https://money.cnn.com/retirement/guide/401k_457plans.moneymag/index4.htm https://smartasset.com/retirement/what-is-a-457b-plan https://www.bogleheads.org/wiki/457(b) I think Krow has voiced support getting your district to add a low cost 457b (Fidelity) and then rolling the old 457b into that account so you could take advantage of the penalty free, early withdrawals (when you leave the district) and you can take advantage of the low fees. That sounds totally reasonable to me. However, I'd point out that a 457b Fidelity account comes with a fixed yearly fee, which isn't charged for an IRA and I don't think Fidelity offers their 0% index funds in their 457b, which I think are available in their IRA accounts. So you will be paying a bit more in fees to maintain that fee-free early withdrawal perk. The primary reason I'd withdraw money early is because of early retirement. In that case I think there are ways to get money out without paying the penalty. So I'm not sure how valuable that withdrawal perk is for me personally? I think I'd probably roll it over to a Traditional IRA to get the absolute lowest fees possible and that is certainly what I'd do if I couldn't get a low cost 457b. If you can get a low cost 457b, I think either choice is fine.
  19. You will get solid advice here and if you follow it blindly and with fidelity, you'll do great. However, if you understand the fundamentals you're more likely to stick with your plan (abandoning your plan is common and extraordinarily costly) and select the amount of risk that is right for you. You may want to read my Investing 101 page to get an understanding of fees, active vs index, asset allocation, three fund portfolio and an all-in-one fund portfolio. To answer your question, based on the level of knowledge that I'm guessing you have, I think a Vanguard Target Date fund is most suitable for you. Just pick the fund with the date you plan to retire. For example, they have a 2060 fund. However, if you learn a little bit (it doesn't take a lot) then you may be better off saving on expenses and going with the 3 fund portfolio that Tony suggested VTSAX, VTIAX, and VBTLX (that is what I have). I don't think you can roll a 457b into a 403b, but I might be wrong...google it. I think you're using the term "ROTH" to refer to a Roth IRA, which is adding potential confusion here. When you open an account like an IRA, 403b, 457b, 401k, etc. you can often choose for it to be a Roth or a Traditional. With a Roth you're taxed on the money you earn based on the highest tax bracket you're in and then the money goes into the account, grows tax free, and is withdrawn tax free. With a Traditional you're not taxed on the money you earn and then the money goes into the account, grows tax free, and is taxed when you withdraw it allowing you to fill up the lower income brackets before you get to your top bracket. If you were to roll a Traditional 457b into a Roth 457b then you'd generate an immediate tax bill for the year the conversion was done. I'm not sure if you even can roll a Roth into a Traditional...if you did I suppose the government would have to give you some kind of tax refund? If both accounts are the same type (Roth/Traditional) then there will be no tax bill for the conversion. I think you can rollover a Traditional 457b into either a Roth/Traditional IRA or Roth/Traditional 457b as long as you no longer work for the employer where you acquired the original 457b. However, I believe there are extra restrictions for some 457bs (maybe governmental 457bs) when it comes to rollovers. So that is something to google. Also as Krow has suggested, the withdrawal rules for a 457b are different than other account types like an IRA. That should be googled and considered. Also, rolling a Traditional account into an IRA makes a fancy tax maneuver called the Backdoor Roth less valuable. This won't affect most people, but it is worth noting. Personally, I have always rolled over old employer retirement accounts (like a 457b) to an IRA because the IRA was always significantly cheaper.
  20. So if you have $24,000 per year to invest then: Put $5,500 in the Vanguard IRA. Put $18,500 in the Vanguard 403b. In the meantime go ahead and convince your district to add a low cost 457b provider. I haven't taken the time to determine which of your 457b plans is the best, but they're not great I know that much.
  21. If you buy into two ideas: The FIRE community has grown significantly in recent times. American workers have grown increasingly aware that companies view them as disposable objects to be maximally used and exploíted. ...then I wonder how much of this growing FIRE community is driven by the desire to escape that abusive employer/employee relationship. The correlation is there, but is it causation? I struggle to think of other "new" factors that would have driven growth in this movement. Presumably everybody always wanted freedom/independence, but they didn't seem to be as driven as they are now. FIRE is almost exclusively for rich folks and I often wonder about the poor folks who experience the worst of this economy. If I were working minimum-wage type jobs that guaranteed I'd always struggle and never get ahead, then I'm not sure I wouldn't just reject and abandon the entire system. I think about folks like Gandhi who fundamentally rejected an exploítative economic system and led people into the country side to grow their own food and hand make goods to sell for a bit of money. Sometimes I'm amazed that our working class doesn't take a page from that book. ...I reread this post and found it interesting that poor and working class have become synonymous in my mind.
  22. I’ve refuted the major reasons listed for why you “shouldn’t” retire early, am I wrong? Identity crisis. You may have an identity crisis, but if your identity is tied to a job, especially a job that is making you consider early retirement, then isn’t the bigger danger to never develop your own identity as a human being outside of your identity as a laborer? Others won’t understand. You’re the one who has to live your life, not them. Lost future wages and lower SS. Money is here to buy you independence and freedom; it isn’t something to arbitrarily collect. If you have all you need, more is useless. Medicare Age Restrictions Save enough so you can afford insurance on the open market. 401k Early Withdrawl Penalty If you’re retiring early, I believe you can access the money without fees if you meet certain conditions. I think the main condition is you agree to take out a regular amount every year. Also, if you’re retiring early then you almost certainly have far more money in your taxable account so you shouldn’t need your 401k for many years.
  23. Yup, it would be beneficial for people who know something or ask for help. This would be an inferior approach, but perhaps not the most inferior approach. If you could get a district to think it is a good idea (assuming they have the authority to implement auto-enroll), then I think you could overcome predatory institutions' objections. It is so clearly the superior solution and the auto-enroll feature negates the standard objection from "advisers" that self-directed plans result in most people not contributing anything.
  24. Krow, do you know why Vanguard doesn't offer a 457b or why SecurityBenefit's NEA DirectInvest isn't available as a 457b? It is unfortunate that aside from some state run 457b plans, the only low cost vendor seems to be Fidelity.
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