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Everything posted by EdLaFave

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. 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.
  9. 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.
  10. 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.
  11. I'm ambivalent on this topic. Clearly the "winning" solution is to have a single vendor (Vanguard or Fidelity) that offers just a core set of funds (total market index funds, target date funds, and maybe fixed allocation funds). The district would then auto-enroll teachers into a target date fund based on their age. They'd have the ability to opt out, select a different investment, or modify the contribution rate...but by default they'd be put on a path to financial success. The problem with a huge list of vendors is that it overwhelms people, but every district I've seen with a huge list will usually have either Vanguard, Fidelity, or Security benefit so employees have access to elite plans this way. The problem with a "small" list, let's say 5 vendors, is that in my experience they're often 5 financial predators. So teachers aren't necessarily overwhelmed, but they don't have access to an elite plan either. ...I'd clearly pick the winning solution, but short of that, I think I'd prefer to have a massive vendor list.
  12. If you're going to have a 403b with Vanguard, it is reasonable that you'd open an IRA with them too (use their website or call them).
  13. Let me start by commenting on the big picture: You (and everybody else) can contribute to an IRA, which gives you all the same benefits of a 403b, but with even lower fees. You can contribute up to $5,500 per year. In addition to a 403b, you also probably have access to a 457b. You can contribute $18,500 to each type of account per year. So if you're able to max out your IRA and 403b then you should start investigating your 457b options. I'll let others comment on the CalSTRS Pension...but if they do make sure you get quantitative answers rather than a generic "it's great" comment. I am not familiar with every single vendor on that list, but out of all of the vendors I've studied, you have access to the top 3, which are nearly perfect: 1a. Vanguard, which I documented here. 1b. Fidelity, which I documented here. 3. Security Benefit's NEA DirectInvest, which I documented here. I agree with Tony in that I'd enroll with either Vanguard or Fidelity. I briefly discussed both plans relative to each other here. I also agree with Tony that an all-in-one fund like a Vanguard Target Date or a Vanguard LifeStrategy is a superior choice for the majority of folks (especially novices). However, you can build a 3 Fund portfolio, which has lower fees and is equivalent to an all-in-one fund (which is 2-3 times as expensive). Since this is all new to you, you may want to read my Investing 101 page, which explains the basics including all-in-one vs 3 fund and picking the "right" amount of bonds vs stock.
  14. I think this line of thinking usually leads to the truth. I think it is at least partially true in some cases throughout our nation's school districts. However, I really believe ignorance and neglect are the primary reasons school districts often fail to add lower cost plans. For the school districts who have low cost plans and fail to remove high cost plans after being pushed to do so and being given the explanation for why it is best...well then I start to question motives more strongly.
  15. This is true, but can you explain why and under what circumstances Required Minimum Distributions (RMDs) are harmful? I'm under the impression, perhaps mistakenly, that RMDs only hurt folks who have other sources of income and therefore would prefer to leave their retirement accounts alone to continue growing tax free. For example, if somebody's taxable account was large enough that its distributions paid the bills then being forced to take an RMD would generate an unnecessary tax bill. Wouldn't this primarily affect the wealthy or those who've over-saved for retirement? Is your typical investor and/or educator likely to be negatively affected by RMDs? I'm too tired to do the math to determine which "burden" is larger: Using a Roth IRA and therefore paying tax at your highest tax bracket. Using a Traditional 403b and therefore taking an RMD without actually needing the money, paying a lower effective tax rate, and then presumably paying the yearly tax drag associated with re-investing that money into a taxable account. I suspect #1 is the bigger cost, but I'll defer to whoever has done the math. Unless I'm missing a technicality, I believe this is true. However, when you receive a bit of irregular income you could use that income to pay your bills, increase your contribution rate to your retirement account (403b, 457b, 401k, etc), and decrease the contribution rate when the irregular income is exhausted. This is essentially equivalent to contributing to a Roth immediately and although it may be a bit of a hassle, I think it is worth the favorable tax treatment.
  16. I'd like to see the data on sales reps' income and I'd like to break it down based on the number of years in the industry. I suspect the financial institution is always winning and I suspect there are some employees making great money and others who wash out because they can't rip off enough people fast enough. Even with "huge" percentages/commissions, if your "clients" have small balances then you need a lot of them.
  17. The only moral and ethical thing for @403bannuitysalesman to do is to find a new career that doesn't involve taking advantage of people. Anything less than that is a justification for their indefensible actions. They'll answer for themselves, but I suspect what they want from us is one of two things: They're a shark that embraces the immorality of their actions and therefore they enjoy messing with us. They're troubled by the immorality of their actions, but rather than stopping, they're seeking a rationalization, justification, or penance for their behavior by writing posts that condemn the very practices they willingly continue to engage in.
  18. jebjebitz, this really is a black and white issue. High cost annuities are always bad and I support you in doing everything you can to kill the sale of any such product. There are three types of annuity sales reps. The first is entirely ignorant. The second is a total shark that embraces the immorality. The third is somebody we’ve heard from recently who attempts to justify their immorality. ...but at the end of the day, all three affect teachers in the same way. All three exploít teachers and severely damage their retirement prospects. The world would be better off if there were a bunch of jebjebitz’s running around and forcing these financial predators into new careers. You’re looking for nuance and extenuating circumstances, but I have none to offer.
  19. I just wanted to quickly add that I believe a Roth account (IRA, 401k, or otherwise) is an inferior option for most people. I came to this conclusion because of the progressive nature of our tax code. That means with a Roth, every dollar is taxed at your highest tax bracket. However, with a Traditional, you get to fill up the lower tax brackets first. As a result, the Traditional account will likely have a lower effective tax rate. The only time I’d contribute to a Roth is if my highest bracket for the year is less than the tax bracket that I expect to be in during retirement due to the expected value of my Traditional accounts, pensions, and so forth. Most people are never or rarely in that situation. For a more thorough argument read this: https://thefinancebuff.com/case-against-roth-401k.html On the other side of the coin, I view this argument as an optimization that is far less critical than paying high fees and making behavioral errors. So I wouldn’t fret over it.
  20. Seeing as how your name is literally "annuity salesman", I assume you take advantage of teachers by selling them unnecessarily expensive and complex products. If all of the folks you "worked" with went with a low cost, self-directed option then I assume you'd be out of a job. I must emphatically state, nobody has to decide between making a living or ripping off teachers. That is a false choice. There are an almost endless number of ways to make a living without taking advantage of people, public servants in particular. If you're selling high cost products to teachers then you're a huge part of the problem...and the fact that you understand what you're doing makes it much worse.
  21. ...I think jebjebitz is talking about the FIRE folks who've reached retirement and therefore will have a lot invested, but won't have new money.
  22. Jebjebitz, there are folks who convince themselves of all kinds of mental gimmicks. Some believe in a magical rebalance bonus in the sense that they believe if they keep a percentage in bonds or cash and then rebalance into stocks during a crash that they’ll do better than an all stock portfolio. This isn’t mathematically correct because the bonus from “buying low” in a bad year is outweighed by the “drag” of owning bonds/cash during the many good years. Some believe in a “bucket” approach because they hate the idea of “selling low” to get money during a crash. Again, this isn’t mathematically correct because you’re stil selling just as much as you otherwise would have, but now you’ve got big chunks of your portfolio sitting in a bond/cash bucket creating a drag. You should think of your portfolio as the summation of all accounts, creating arbitrary subdivisions will increase drag, costs, complexity, and so forth. Some believe in a high dividend approach again because they hate the idea of selling stocks. They say to themselves if I own enough stocks that the dividends pay my bills then I’m golden forever. This isn’t how it works mathematically. When a stock gives you a dividend it also drops in value, which is functionally equivalent to selling some stock that doesn’t give you dividends (the latter may actually put you in a better tax scenario). Plus a stock can eliminate/reduce dividends at any time. All of these things that people do are just logical errors that make people feel good. The only key is to pick an asset allocation you can live with without doing something foolish and save up a massive amount of money such that the inflation-adjusted growth is greater than your expenses. Maybe your portfolio should be 33x your expenses, maybe it should be 50x, nobody can know. Then be ready to work again if you get a recession, or back-to-back recessions in the case of the 2000s, that drags your portfolio below a value that makes you feel comfortable. ...it is a stressful scenario because you never know if you have enough unless you accumulate so much that you almost certainly worked many more years than necessary.
  23. If they were to invest the full $5,110 on day one of each year and they got 4% real returns then when they turn 65 they'd have $584,649.80 dollars. At a 4% withdrawal rate that would support $23,385 per year. If you combine that with social security, I suppose that could support a modest retirement. ...I suppose their claim is technically true because if you assume 7% nominal returns they'd have $1,354,767 when they turn 65, but my suspicion is that people reading the $1,000,000 figure will think in terms of today's dollars and not tomorrow's devalued dollars. ...my calculations are rough because I lump summed each year rather than dealing with $14 each day and I'm not sure that 4% real returns is representative of an S&P 500 fund.
  24. I don't think this thread sets peoples' expectations in line with what is mathematically possible/probable and I believe that is always a harmful state of mind for folks to be in (even if it feels good initially). Let's look at a quick example: Here in Orlando a starting teacher makes something close to $40,000 and let's really quickly estimate some "essential" expenses: Taxes will be close to $2,000 (no state or local tax). Assumes they invest 10k in a traditional account to get a bit of a tax break. Assumes the standard deduction. Assumes the $250 teacher expense deduction. Completely ignores the expense of social security and medicare/medicaid because I'm lazy. Mandatory 3% pension costs about $1,000. You can't find housing for less than $13,500. Transportation, food, clothes, cell phone service, and internet cost roughly $6,500. Throw in another $6,000 for healthcare and all of the things I may be forgetting. Notice I've budgeted $0 for entertainment, vacations, pets, children, etc. That leaves you with just $11,000, but let's be extra generous and assume the following: The person manages to somehow invest $15,000 per year (36% more than we think they'll even have). The person starts investing at 23 years old. The person benefits from a 4% real return. Their inflation-adjusted portfolio won't be worth $1,000,000 until they're 55 years old. They'd have to invest $25,000 per year to hit the $1,000,000 by the time they're 46. Possible criticisms of my model: I didn't model a slowly inflation-adjusted increase in investing each year. It was too much work so I just gave them 36% more than I thought they'd have right off the bat. I didn't model the financial benefit you'd get from splitting housing expenses and such with a spouse/roommate. I also didn't saddle the person with kids...something quite a few teachers have. I didn't model home equity or the reduction in housing costs if you live there for 30 years. I also didn't model the full cost of taxes and I gave them a generous inflation-adjusted yearly return.
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