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Posts posted by EdLaFave

  1. 19 minutes ago, Omar said:

    I was able to find information for my District (in California) in the CalSTRS 403bCompare website

    If I were you I'd prefer to get this information from your district or the TPA (Third Party Administrator) that your district is using. You're going to have deal with these people anyways.

    403bcompare may or may not be up to date and it definitely doesn't list anything about your 457b options.

    19 minutes ago, Omar said:

    It has many options

    I don't know what the CTA Retirement Savings Plan is, but I don't know of any vendors better than Vanguard and Fidelity (maybe a state run 457b can occasionally compete, but I'm not sure and I don't think California's can).

    19 minutes ago, Omar said:

    Would my next step be to (1) Stop current transfers to Invesco, (2) open account with one of the products below (Vanguard 403b), (3) and transfer Invesco funds to Vanguard (abour 30K)?

    This may be the easiest course of action:

    1. Establish an account with Vanguard.
    2. Redirect new contributions to Vanguard.
    3. Rollover the Invesco account to Vanguard.

    If you begin by stopping contributions to Invesco then you'll likely miss out on 403b contributions for a few paychecks. To compensate for that you'll have to artificially inflate your initial Vanguard contributions and then go back and change it to a sustainable level later. It is important that you get as much in your 403b as possible.

    You haven't said how much you're contributing. Remember you can put 6k in an IRA, 19,500 in a 403b, and another 19,500 in a 457b. If you're not investing more than 6k then it is probably quite a bit easier to not worry about making new contributions to a 403b or 457b.

    19 minutes ago, Omar said:

    Or just talk to the product provider or a CFP for guidance with this next part?

    It is in your best interest to kill whatever instinct is telling you to pay other people to manage your money. They'll inevitably put your money in their pockets.

    19 minutes ago, Omar said:

    Which Vanguard products do people here advice for a middle career teacher (20 years completed) with at least 15 more years still to go?

    Please read my Investing 101 page. That'll give you the fundamentals in an easy to understand, condensed way.

    Then read my Vanguard page. That'll tell you how to apply those fundamentals.

    Then come back and ask questions.

    19 minutes ago, Omar said:

    I did find an archived list of the old 403(b)wise Fiduciary Advisory Directory and saw a couple of people in Southern California (San Gabriel/LA) area or would be open to other recommendations in the area if that is a must.

    ...again, kill that instinct.

  2. 17 minutes ago, ScottO said:

    Roth IRA usage/allocation is a separate topic than what I originally wanted to discuss, but for some people the liquidity of a Roth IRA is important and could be what gets someone started investing. We all have different investment goals, time horizons, financial situations, etc. Yes, there are drawbacks to the idea of not maximizing the tax benefit on earnings and overall opportunity cost, but if you can make someone feel comfortable enough to get in the habit of regularly putting money into an account and watching that money grow(even at a lower rate of return) that's good. Perhaps they rebalance later if their financial situation changes and the idea of using the account as an emergency fund is no longer applicable(or proven to be incredibly disadvantageous on a forum they are a member of 😋.)

    I believe you're missing the point.

    Let's just assume it is a good idea to treat your Roth IRA as a savings account. It is still sub-optimal to hold your bond allocation in your Roth IRA. Your asset with the highest expected performance should be put in the Roth IRA because the (hopefully) larger growth will be tax free.

    I would argue vigorously against treating certain accounts differently than others (like imagining that your bonds represent an emergency fund), but again, let's put that argument aside. If you wanted to only use bonds for your emergency withdrawals then it is easy:

    1. Hold bonds in some other account (say your Traditional 401k).

    2. Hold stocks in your Roth IRA.

    3. Sell 10k of stocks in your Roth IRA.

    4. Exchange 10k of bonds in your other account for stocks.

    You've effectively sold 10k worth of bonds and your Roth IRA is enjoying the benefit of containing your highest expected performer.

    17 minutes ago, ScottO said:

    Bogleheads says if you're going to do it, don't consider the emergency fund a part of your overall asset allocation.

    Again, this is mental accounting that just doesn't hold up to math. Your portfolio is the summation of all of your accounts and it should match your expected risk tolerance. Anything you do to get away from that is a mistake.

    The only potential exception I'd make to this is if your portfolio is so small that unexpected expenses combined with a downturn really would wipe you out. But in that case your ability to take risk is so small that your portfolio should effectively be all bonds...which would mean you aren't jumping through the mental hoops that the "bucket" system demands.

  3. 11 minutes ago, sschullo said:

    I have not seen these prized returns since the tech bubble 20 years ago.

    It looks like the US market was up just shy of 31%. That is a great year any way you slice it. We may or may not hit a bear market soon. However, I'd like to add some context to the implication that great returns point to us potentially being on the cusp of bad news. We've broken the 20% mark 3 times in the last 10 years and one of those times, 2013, was even better than this year.

    • 2017: 21.19%
    • 2013: 33.51%
    • 2009: 28.76%

    The bear market will eventually happen, but as they say, more money is lost preparing for bear markets than going through actual bear markets!

    ...it's also worth noting that the following years have tempered the explosive growth that we've seen in the years mentioned above:

    • 2018: -5.17%
    • 2015: 0.4%
    • 2011: 1.08%

  4. 8 minutes ago, whyme said:

    I guess we can't rule out zero ER funds from them

    I would love to see it.

    At this point I'm waiting for a negative expense ratio that'll pay me to own the fund. The notion seemed ludicrous until a few years ago when I heard about central banks keeping interest rates below 0. So who knows?

  5. 22 hours ago, whyme said:

    I suspect we’ve heard or read many of the same Bogle interviews.

    I'm legitimately sad there won't be any more to watch. I know he basically said the same thing every time, but what a pleasure to listen to.

    22 hours ago, whyme said:

    he was against anything that promoted trading (this was his problem with ETFs)

    That's exactly right. Nothing wrong with holding a total market ETF for decades.


  6. 12 hours ago, whyme said:

    I'm not sure what you are including in "all that stuff,"

    I've listened to interviews where Bogle (after stepping down from Vanguard) gripped about some of Vanguard's offerings. I believe I've heard him complain about sector funds, ETFs, and investment strategies like focusing on small cap value stocks.

    So I made the assumption that a lot of those things were added after Bogle stepped down as CEO in 96 and as chairman in 99. Maybe my assumption is wrong, but that would make his complaints a bit more confusing?

    12 hours ago, whyme said:

    I guess it's a matter of opinion whether funds charging a few basis points per year compete effectively with the ZERO funds. It remains to be seen whether the Fidelity funds actually do as well as the Vanguard equivalents

    Yeah, I just meant they're not going to be able to win on price. Just to quantify the differences:

    • The domestic ZERO fund is 4 basis points cheaper and beat Vanguard by 35 basis points.
    • The international ZERO fund is 11 basis points cheaper beat Vanguard by 16 basis points.
    12 hours ago, whyme said:

    I think they use different indexes, and I'm guessing some behind-the-scenes stuff (such as securities lending) might make a difference at the fractional-point level.  

    I'm told Fidelity made their own index, which means they don't have the expense of paying to use an existing index. I like that idea quite a bit.

    I'm guessing everybody does securities lending, but maybe there are differences in how each fund/institution implements it?

  7. I believe Vanguard has committed to the principle that each fund must generate the necessary income to sustain itself. In other words, you can’t have a “loss leader” that is subsidized from another income source. I’ve heard this argued as the reason Vanguard will never be able to compete with Fidelity’s ZERO expense funds.

    ...all of that is to say, the expensive Vanguard funds aren’t necessary to have the cheaper Vanguard funds. Plus I don’t think they had all that stuff when Bogle was running the show, which proved it isn’t necessary. 

  8. Quote

    either lack the means to knock on Wall Street’s door or are wary of doing so...markets were hammered by the financial crisis of 2008-09, an event that’s still one reason many millennials steer clear of equities...Bankrate.com did a survey this summer asking millennials what they believed was the best investment for the next decade. The top response was real estate, at 36%, while cash and savings accounts were 18% and the stock market was 16%.

    An absolute collective failure of financial education/literacy.


    Over the last two years, 55% on average of the adult population owned stocks directly or indirectly, down from 62% before the crisis

    If you believe in that silly anecdote about selling stocks when your shoe-shiner begins to talk about stock tips, then I guess you don't need to worry yet?


  9. 19 hours ago, whyme said:

    It looks as if their ETF fees are going to continue to be a bit lower than those of many of the equivalent traditional funds. 

    This mildly irritates me. I'm not currently willing to switch to ETFs, but doing so would save me 2 basis points on international and 1 basis point on domestic.

    In reality, I'm growing increasingly likely to switch over to Fidelity's ZERO funds (FZROX and FZILX) in order to save 11 basis points on international and 4 basis points on domestic. At the very least, I think I'll make this switch in my tax advantaged accounts because it'll easily let me switch back without tax consequences if the funds are ever eliminated or modified in a way I don't want.

    14 hours ago, tony said:

    I guess managed funds is where Vanguard makes their money

    I believe the late, great Bogle disapproved of Vanguard's move into actively managed funds, ETFs, and sector funds. I certainly am.

  10. On 12/20/2019 at 8:16 PM, tony said:

    The euphoria of reaching a million can very easily be defused when the market crashes.

    Why yes it can. I’ve been mentally preparing for a crash for a long time now, but we just keep going up and up! When it inevitably hits, I will pay the price for sure.

    On 12/20/2019 at 8:16 PM, tony said:

    Be prepared. Ed,  as I would hate to see you  emotionally upset if you should lose 50% of your investment and end up with half of your current portfolio

    I’m prepared in the sense that I’m counting on losing 50% of my portfolio multiple times before I die. It will be upsetting and if it happens soon then I will continue to work through the recovery.

    However the pain is all part of the long term plan and expectation that over 20+ years stocks will have higher returns. One thing I will never do is change course due to market conditions, but maybe we can commiserate when the pain hits!

  11. Krow has given you great guidance. I just wanted to throw in one extra bit of information about withdrawing money early from a Traditional 403b or IRA.

    Yes, if you take out money early, you’re typically charged a 10% fee. However, a lot of the time people ask about that, they’re thinking about how they’d pay the bills if they retired a little (or a lot) early. They wouldn’t want their money locked up. I won’t bore you with the details, but just know, in that situation you can access the money without paying the 10% fee.

    When I chose between a 457b and a 403b, I did so on the basis of expenses because I personally found the differences in the withdrawal rules to be inconsequential, which isn’t to say that you shouldn’t consider those differences. 

  12. On 6/24/2019 at 12:37 PM, MNGopher said:

    I assume the numbers are actuarially neutral

    I haven’t analyzed these situations yet because they’re just a bit too far in the future for me, but I did want to point out one thing...

    I assume they define “actuarial neutral” based on the expected returns of the investments underlying the pension and the average employees lifespan.

    However, if you would use that income to invest in a portfolio with a risk profile that differs from the pension, then what is neutral for them will not be neutral for you. Make sense?

    I don’t have an answer, just a thought to consider.

    If it were me, I’d build a spreadsheet that shows how my portfolio would look year-by-year, in inflation adjusted terms, for each scenario I was considering.

    ...I just realized this is an old post. I think my original reply was better in terms of detail. 

  13. On 12/13/2019 at 3:20 PM, ScottO said:

    Do you have any suggestions? Fidelity? Vanguard?

    I don't believe Vanguard offers a 457b, which is why Fidelity is clearly the best 457b in the nation.

    On 12/18/2019 at 12:32 PM, ScottO said:

    I see the point of it, but it's convenient to keep the same allocation in case we stop contributing to a particular account.

    I'm not sure how you're defining convenient in this context, but keeping the same allocation in every account is unnecessary and leads to additional complexity and fees.

    If you were to stop contributing to one account and its allocation falls out of line with your overall desired allocation, then you would simply adjust new contributions to the other accounts accordingly. I have a spreadsheet that keeps track of what I have in all of my accounts and generally tells me "if I contribute an additional $A then $B of it should go to domestic stock and $C of it should go to international stock." It is really easy.

    On 12/18/2019 at 12:32 PM, ScottO said:

    I do like the idea of fixed income investments(bonds) in the Roth IRAs through, just in case they are needed as emergency funds.

    This approach is very likely sub-optimal in terms of taxation. You want your assets with the highest expected returns to be in accounts with the lowest tax liability (i.e. your Roth account).

    Ideally your Roth IRA would have at least 2x what you'd want for an emergency fund. That would allow you to hold stock in a Roth and even in a huge crash (50%) you'd still have the necessary money available in your Roth IRA. In that case you could hold your bonds in another account like a Traditional IRA and if you ever removed stock from your Roth IRA you could simultaneously exchange bonds in the Traditional IRA for stocks, so it is as if you're selling bonds.

    However, the idea that you should hold bonds for your emergency fund is another game of mental accounting that gets you into trouble. Your portfolio should have an overall percentage of bonds such that you don't do something foolish and you can sleep at night. That percentage should be constant. If you only sold bonds during an emergency then you'd be making your portfolio more risky in a time of emergency. That isn't how asset allocation should be handled.

    Also, I would be extremely hesitant to give up tax-advantaged space for an emergency fund. I haven't done the math, but I'd be far more inclined to diligently tax loss harvest in my taxable account and later on be able to apply those losses to selling taxable shares to cover an emergency or even sell the most recently purchased taxable shares (i.e. shares with minimal gains or potentially shares with a loss) to cover an emergency. I haven't done the math, but my intuition suggests that is optimal.

  14. Thanks everybody. This market has been insane! Now that I hit this milestone, I think I'll go back to not peeking for the next year or so...I don't even want to know how many times I'll have to recross this threshold.

    On 12/18/2019 at 7:06 PM, tony said:

    you understood the secrets to successful investing right from the start

    Not so fast my friend! I got taken to the cleaners by Schwab, Merrill Lynch, and then individually selected actively managed funds. I touched the proverbial stove three times before I did my own research. I hope others learn from that lesson.

    On 12/18/2019 at 8:05 PM, sschullo said:

    I reached that milestone at the ripe young age of 53 but lost most of it during the tech wreck.

    I can just imagine that pain. Absolutely brutal.

    On 12/19/2019 at 12:48 AM, krow36 said:

    Your timing has worked out.

    No kidding. I got into the housing market at the bottom of the crash. My entire investing career has been one giant bull market. I managed to graduate with degree that is highly valuable nowadays and wasn't affected by the financial crisis. Lots of luck went into this and as always, I'm mentally bracing for the inevitable crash.

  15. Hey Steve, I think you'd benefit from reading my Investing 101 page here.

    54 minutes ago, Steve3108 said:

    My only hesitation is I don't really know what I am doing as far as making selections.

    Your goal is to own the entire stock market (international and domestic), that gives you diversification.

    Your goal is to own enough bonds so that when stocks crash, as they inevitably will, your portfolio doesn't drop to a level so low that you can't sleep or you do something foolish, that gives your protection from yourself.

    Your goal is for your portfolio to have rock bottom costs, that gives you maximum returns.

    To achieve those goals you have three options:

    1. Build a 3 fund portfolio (VTSAX, VTIAX, and VBTLX).
    2. Buy a target date fund (contains those same funds under the covers, but increases your bond holdings over time).
    3. Buy a life strategy fund (contains those same funds under the covers, but keeps the bond holdings constant over time).
    54 minutes ago, Steve3108 said:

    How often do you check in with your stock options every month or six months? 

    Here are the rules:

    1. If you didn't spend your entire paycheck on living expenses, immediately invest the rest.
    2. When you make a new investment, buy the funds that move you back to your desired asset allocation.

    Notice: Neither of these rules require you to know what the market is doing or what your funds are doing (hint: they're performing exactly in line with the market).

    Bonus: If you went with a LifeStrategy or TargetDate fund then you don't even have to concern yourself with Rule #2 because the fund will do that for you!

    Subtext: Give up the wildly incorrect belief that you can use past performance data or current events to predict the market. Stop it!

    54 minutes ago, Steve3108 said:

    Just let it ride until the economy starts to tank and then reevaluate?

    See rule #1 above. Buy stock every paycheck, no exceptions.

    54 minutes ago, Steve3108 said:

    My current 403b are they managing anything really?

    They're managing the fees they extract from you to fund their lifestyle.

    Nobody can predict the market. Fund managers sell people on the notion that they can pick the best stocks. Advisors sell people on the notion that they can pick the best fund managers and pick the best time to switch back and forth between stocks and bonds. Nobody can predict the market.

    54 minutes ago, Steve3108 said:

    So I start to wonder who is looking at the account.

    Nobody is looking after your account. The "advisor" really serves two purposes, to give you the illusion that somebody smart is protecting you and to give you somebody to blame when you lose money in the next bear market. Neither purpose leaves you with more money.

    54 minutes ago, Steve3108 said:

    I just want make sure I can handle Vanguard selections and manage on my own.  Thoughts? 

    You can handle it. Own the entire market, own enough bonds so you don't do something foolish, and stick with your plan until you retire (no exceptions for market conditions or the latest BitCoin fad).

    54 minutes ago, Steve3108 said:

    Should I consider another vendor such as Valic where I have an advisor ( is he really going to do anything for me except I won't have load fees) or am I screwed on fees unless I go with Vanguard.

    You should not use an advisor because of fees and their proclivity for market timing.

    There are vendors other than Vanguard that offer really low fees (Fidelity for instance), but unless you go with a self-directed account (i.e. no advisor) then you're going to get killed on fees.


    ...in this post I've really only given you the conclusions, but I'm happy to give you the underlying data, logic, and philosophy behind these conclusions.

  16. My portfolio exceeded a million dollars for the first time today! Combine that with the equity I have in my house and I should be able to rely on a 3% withdrawal rate to safely live out the rest of my days without having to earn another dollar or be directly dependent on anybody else.

    Thirteen years ago when this all began, I imagined I'd be joyful and celebratory, but I'm far more ambivalent. I'm just really tired; the grind has absolutely taken its toll. It has cost me relationships and in many ways it has done its very best to disconnect me from the things that make me human.

    On the happier side, I recognize how lucky I am to have the opportunities I have in front of me. I suppose I'll spend the rest of the night reflecting on just how awesome that is. I almost can't believe this is real.

    ...I'll largely keep this story to myself, but posting it on the internet is a really nice release.

  17. What district are you in?

    Your state run 457b is here apparently you can call 877-644-6457 for help. The funds and fees are listed here.

    You can build a fully diversified portfolio with these three funds:

    • Vanguard Institutional Index (0.02% net expense ratio)
    • Vanguard Total Bond Market Index (0.03% net expense ratio)
    • Vanguard International Index (0.07% net expense ratio)

    Or you can use their target date funds ("LifePath"), which have the exceptionally low expense ratio of 0.06%.

    I couldn't find any other fees and if there aren't any then this is an exceptionally great plan to invest in.

  18. 1 hour ago, Adrienne said:

    Ed I apologize for my ignorance with this subject...(I don’t say that often..) what am I looking at for a 70k investment to leave and not wait it out?

    If you were in OCPS then the worst case scenario (which you probably aren't in) would cost you 6%, which equates to $4,200. However, I'd have to know more about how they assess surrender fees and the particulars of your specific account.

    I believe in Orange County (FL) AXA will charge a 6% fee in you pull money out in the first five years, 5% for the sixth year, 4% for the seventh year, and so on. However, I don't know exactly how they apply that time measurement, there are a few possibilities:

    1. It could be based on when the account was opened. So regardless of when each contribution was made, when the account exceeds the 10 year threshold the surrender fee drops to 0%.
    2. It could be based on when each contribution was made. So a contribution you made 11 years ago would be subject to a 0% fee whereas a contribution you made today would be subject to a 6% fee.

    ...but even if it is on a per-contribution basis it is further complicated:

    1. Do they let you specify which contribution you're cashing out?
    2. Do they force you to withdraw the most recent contribution first (and therefore pay the highest fees)?
    3. If you own mutual funds in the account then there is something called a "distribution", in most cases that distribution is automatically reinvested by purchasing more shares. Would those reinvestments be treated as a brand new contribution and start at the beginning of the fee schedule, year 0, 6% fee?
    4. How is profit/appreciation treated? Could you pull out the profit and pay 0% fees because you haven't touched the original balance?

    There are just so many possibilities for how they've specifically implemented this fee schedule and because of that I can't give you a definitive answer.

    Personally this is what I would do:

    1. Immediately redirect new contributions to a low cost plan.
    2. Understand that the annual fees of AXA are so high (the management fee alone is 0.9% and the fund fees range from 0.61% – 1.45%) relative to what you get if you average the 6% surrender fee over the full ten year window (it comes to 0.6%/year if you don't account for the opportunity cost of not having that upfront fee invested in the market). So the back of the envelope calculation suggests it may be in my interest to pay the surrender fees because they're low relative to the annual fees (again the opportunity cost of being invested in the market is an unknown). However, perhaps there is room for optimization. For example, if your surrender fee would drop from 1% to 0% tomorrow then you would clearly wait to rollover those funds, but if it wouldn't drop to 0% until Dec 1, 2020, then you would roll it over now.
    3. Spend a minimal amount of time trying to figure out the exact details of the AXA surrender fee schedule so I could optimize my withdraw strategy and spend a little bit of time with the more accurate detailed equations I laid out above.
    4. If I can't get a clear picture, then just pull everything out and be done with it.
    5. If I can get a clear picture, then optimize my withdrawal strategy.
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