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EdLaFave

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Everything posted by EdLaFave

  1. I'm not surprised to hear that, which is part of the reason I say the only reason this continues is because employees allow it. I believe I would have quietly done the same thing as you, but they made it so painful and they behaved so "poorly" that it drove me to go much further than I ever really wanted to go.
  2. I haven't. Thanks for your responses. I'll add it to my queue, but unless I get more involved it might sit there for quite a long while ?
  3. Moe, my experience paints a more optimistic scenario than perhaps your post does. In my experience, the biggest driver behind our district's bad decisions was ignorance and inertia. When they were given proper information and a bit of prodding, they improved. I do believe the Third Party Administrators are corrupt and I found the union to be useless. However, I found the district to be a standard slow moving bureaucracy that has clear flaws but isn't operating with bad intentions. True, but districts will respond to employee requests and pressure. I suppose that is one of my central questions. Would a district need to abandon Omni (or any TPA) if they refused? It sounds like Omni can't refuse, which matches my experience in dealing with TSA Consulting Group. Of course the other central question is, if Omni relents and adds Vanguard/Fidelity, but the district or union doesn't want to pay it, can the individual investor pay it. It sounds like Krow says they can. That has not been my experience and my intuition tells me that anybody who has said that is either being lazy and/or is ignorant. I was literally the only person calling for reform and I wasn't even a district employee and I "won". I had TSA Consulting Group on the phone with the folks at the district and the VP of something or another at TSA Consulting Group acknowledged that they had to do whatever the district told them to do and while they may provide information, they do not make decisions. ...it sounds like you're talking from personal experience, I'd be interested to hear your experience in a bit more detail (my apologies if I've forgotten it from an earlier post).
  4. You're right. I was just alluding to the end result rather than the hope/desire. @403bannuitysalesman confounds me a bit and I've always wondered if they're just trolling...something I contemplated in this post. I hope they feel free to post, but at the same time I question their intention and can't engage too seriously with their posts.
  5. Your advisor should be ashamed, not you. I politely disagree. We should unapologetically rage against and refuse to accept even a hint of victim blaming. This is the fault of exploítative financial institutions and their predatory employees. This is exacerbated by school districts’ and employees’ ignorance, which is in part due to the financial industry spending unimaginable sums of money to convince us we could never understand investing. Now it is our responsibility to help our peers. While it may be the reality, it isn’t reasonable to build a society where the individual has to study and become an expert on every aspect of their life because everybody is trying to exploít them. At some point trust is necessary and nobody is wrong for resorting to trust at certain points.
  6. Theoretically I suppose you could justify a low cost annuity. However, I can't justify anything with 2% - 3% yearly expenses.
  7. Could the district or the TPA structure it so the fee comes from each individual who is enrolled? I ask because I want to know if an argument can be made to the district that this won’t hurt them financially, it’ll just help the employees.
  8. 403b Your best option is clearly Security Benefit's NEA Direct invest. I documented that plan here. I documented the steps I went through to enroll in OCPS (FL) here. After 30 years of investing with 3% real returns, the fees will eat up 2.77% of your real profits. Your second best option is Aspire. I documented that plan here. After 30 years of investing with 3% real returns, the fees will eat up 9.02% of your real profits. Do you have access to a 403b? IRA/HSA Make sure you and your spouse are maxing out your IRAs. If you have a high deductible qualified insurance plan, make sure you're both maxing out your HSAs. 457b You gave us a lower bound on the expenses, but you didn't tell us exactly how much the 457b costs you. Obviously at a certain point the extra costs outweigh the tax benefit. This is a function of how long until you can roll it over to a low cost IRA, the current tax code, projections of future tax codes, and your income. Depending on those figures/assumptions, a taxable account may be preferable. If it is in your best interest and you want to go out of your way to minimize the costs, you can back-load your contributions so you still get a full $18,500 into the account, but you don't pay fees on that amount until the very end of the year. Does your wife has access to a 457b?
  9. The Bogleheads have enumerated the funds you should use to construct a 3 Fund Portfolio for each major institution (Vanguard, Fidelity, Schwab, etc). Check it out here. If 3 funds isn't your thing, you can always stick with an all-in-one fund which internally holds those individual funds. They come in two variants: Target Date and Fixed Allocation. ...investing isn't complicated, complexity is a "financial innovation" aimed at convincing you to unnecessarily hire somebody.
  10. I'm not terribly familiar with Omni as a Third Party Administrator (TPA), but they have something called the Preferred Provider Program, which does NOT have Vanguard and Fidelity. If a district uses Omni as their TPA, will Omni only allow the district to use the vendors on that list? Can a district demand Vanguard or Fidelity be made available to them?
  11. We're referring to the sales reps' retirement, right? I must admit, the energy I had when I first got involved has been greatly diminished because of this fact. I'm always thrilled to help those who want to help themselves, but if those who are directly impacted don't care then my energy would be wasted on them.
  12. This worked for me: https://www.nytimes.com/2018/08/24/your-money/roth-ira-retirement-rs.html?rref=collection%2Fsectioncollection%2Fyour-money
  13. I liked that one too. I appreciate this quote, which probably suggests the article title was too provocative: “You could also say the chance of a recession not occurring by the end of 2020 are 60 to 70 percent,” said Fran Kinniry, a principal in Vanguard’s investment strategy group.
  14. Good article, I think about this topic quite a bit these days. I started investing in 2007 so I experienced a crash with nearly no assets. I invested regularly without any mental anguish. Things may be different when I lose hundreds of thousands of dollars in the next crash. I’m expecting to move forward like a cold, logical machine, but it should be interesting. I strongly dislike that this quote is treated as wisdom because it is wrong from start to finish: “It’s going to sound terrible, but I’m actually looking forward to the next downturn,” he said of the opportunity to buy stocks at a lower price. “I know it’s an overbought position right now, and I’m just sitting on my hands saying, ‘I can’t wait.’ Hopefully it will go to half the price, and I can gobble up a lot of it.” First of all nobody should look forward to a downturn, it literally destroys lives even if you’re fortunate enough not to know those who suffer most (hint: it isn’t necessarily investors). Nobody knows if stocks are overvalued and if they did they don’t know if it’ll lead to a crash rather than really slow growth. Nobody knows anything and we’re all awful prognosticators. If you think stocks are overvalued then the only rational thing to do is to hold 100% fixed income, i.e. “sit on your hands.” That’s called market timing and it has lost investors unimaginable sums of money. It is the single biggest mistake investors make, even worse than paying high fees. ...the speaker is a cautionary tale, not a role model.
  15. Link isn’t working for me on my iPhone. Haven’t tried to debug it yet though.
  16. Agreed. The thread became more academic than practical at some point. I still hope it’s helpful though ?
  17. I use a spreadsheet to tell me how to keep my allocations in line. So it makes no difference to me if I enter in 48.51% or 49%, but if folks have an affinity for whole numbers, then I totally agree with you...it makes no practical difference. I'd say my ideological purity comes from the desire for asset allocation to conform to market capitalization, which manifests complexity in the form or more funds rather than the precision of a decimal. Not to criticize, but just for the sake of exposing some non-obvious information... This puts 17% of your domestic investment in small cap funds instead of the 6% dictated by market capitalization. This puts 28.7% of your international investment in emerging markets instead of the 17.4% dictated by market capitalization. This puts 27.7% of your stock investment in international which is also out of line with market capitalization. So this is making bets on certain sectors of the market. I suspect you can get closer to market capitalization without adding more funds. Still, I don't consider these bets to be extreme and I have no way of predicting which portfolio will do better. I basically agree, but I want to caution people about a couple things that might be obvious to us and therefore go unsaid. Even if you have a "good" split between stocks and bonds you can still make big mistakes when constructing a portfolio: Choosing high cost funds. Choosing funds that concentrate their risk in one sector like a Health Care or Tech fund for example. Choosing individual stocks instead of owning them all through a well diversified mutual fund (ideally a total market index fund). I also would like to further emphasize your point: as long as you pick something reasonable (well diversified, low cost, and risk appropriate) you'll do fine if you stick with it. Investors under-perform the very funds they invest in because they convince themselves they can make accurate predictions. Given a reasonable portfolio, behavioral mistakes and high fees are your only real obstacles to success!
  18. Funds For the purposes of this post I'll assume you don't have the funds I prefer (I'm rather skeptical of this assumption) and I'll assume that these are the best funds you have: Bonds When it comes to bond allocation, I recognize that stocks can decline by roughly 50% at any point. So I ask myself, how much of my portfolio (and I also convert that to absolute dollars to make it "real" for me) can I both emotionally and financially afford to lose. Then I pick a bond percentage to ensure I don't lose more than that. Only you can select this value, but for the sake of this post I'll assume you can "afford" to lose 45% of your portfolio. So a quick little calculation (100 – 45 * 2) tells us you need a 10% allocation to bonds. International vs Domestic Nobody can tell you what the optimal split between international and domestic is, but for context: US stocks represent about 55% of the world, international 45%. Vanguard target date funds opt for 60% US and 40% international. Guys like John Bogle have suggested 100% US is fine. So I'll assume you want 30% international and 70% domestic. I came to this figure because diversification is important and I won't abandon it, but I'm never inclined to ignore Bogle's advice and he has some reasonable arguments...so we'll try to "split" the difference. Simplest Portfolio Net expense ratio = 0.0246% 63% Fidelity 500 Index Fund (FUSEX) 27% Fidelity International Index Fund (FSIVX) 10% Fidelity Intermediate Treasure Bond Index Fund (FIBAX) The "shortcomings" of this portfolio: 0 domestic small cap Half the domestic midcap it should have Obviously it overweights domestic large cap 0 international small cap A little more than half the international midcap it should have Obviously it overweights international large cap Essentially 0 emerging markets. Complicated Portfolio Net expense ratio = 0.02832% 48.51% Fidelity 500 Index Fund (FUSEX) 10.08% Fidelity Mid Cap Index Fund (FSCKX) 4.41% Fidelity Small Cap Index Fund (FSSVX) 20.52% Fidelity International Index Fund (FSIVX) 6.48% Fidelity Emerging Markets Index Fund (FPMAX) 10% Fidelity Intermediate Treasure Bond Index Fund (FIBAX) This portfolio "improves" on the previous portfolio's "shortcomings" because given the limitations of the funds listed, we're as close to being in line with market capitalization as is possible (i.e. you aren't under or over investing in any asset class like small cap domestic stocks). However, this improvement will cost you an extra 0.00372% (virtually nothing) and twice the complexity. Nobody can tell you with any certainty which portfolio will perform better, but both are excellent because they're very low cost, well diversified, and (possibly) appropriate for your risk tolerance. Final Word If it were me I'd go with the complicated portfolio because I like to be ideologically pure. I suspect the simplicity of the first portfolio will be better for a strong majority of people because it is easier to manage and it makes it more difficult to performance chase and make bets on specific sectors of the market, which people often do by failing to rebalance into the worst performing fund! If you want to change the bond allocation, take it proportionally from each of the other funds...this requires a little math but you want each stock fund to represent the same percentage of stocks that it previously did.
  19. All of my observational evidence suggests the opposite relationship exists. Just a public reminder to all: teachers have all the power they need to change this, so get involved folks!
  20. 403b and 457b plans have slightly different rules that you can read about here and other places if you Google it. Tony also has a great point to consider about stability and your district dropping good 403b plans. If those rule differences aren't particularly important to you then you should choose whichever account type is the cheapest. If you care about the rules difference but there is a large expense delta between your 403b and 457b then you still may want to choose the cheapest one (its a judgement call that's up to you). Otherwise you should choose the account type with the rules that you prefer. Aside from fees I don't expect this to impact returns, so I see no reason to split between the two of them. Also know that you can max both accounts if you have the money to do so. After a very quick review, it seems the New York State Deferred Compensation Plan (457b): Charges a 0.035% fee for accounts above $20,000 and the fee is only applied to the first $200,000. Charges a $20/year fee. Charges a $15/year fee and transaction fees for the self directed brokerage account (not sure what funds are available through this option). A 0.38% fee for a target date fund. A 0.15% fee for Vanguard's Wellington fund. A 0.0084% fee for NYSDCB Equity Index Unitized Account...which might be an S&P 500/Large Cap fund? A 0.0225% fee for NYSDCB Russell 2500 Index Unitized Account...which is a mid/small cap fund. A 0.2% fee for International Equity Fund - Index Portfolio...which is international but maybe not emerging markets? A 0.0198% fee for NYSDCB U.S. Debt Index Unitized Account...which is probably a bond fund? So you can do the math: If you build a 3 fund portfolio with the NYS 457b it'll be cheaper than the 0.208% it costs at Aspire. If you want a target date fund with the NYS 457b it'll be more expensive than the 0.26% - 0.3% it costs at Aspire. If you want the wellington fund with NYS 457b it'll be cheaper than Aspire. I got all of this information about the NYS 457b from: https://www.nysdcp.com/tcm/nysdcp/static/fee_transparency.pdf?r=1 https://www.nysdcp.com/tcm/nysdcp/static/investment_options_guide.pdf?r=1 I'm not sure what the "self directed account" with NYS 457b, which seems to be tied to Schwab, is...so my comments pretend it doesn't exist. You should look into it. ...I'd have to do more definitive research, but my intuition after the initial inspection is to go with the 457b if you can handle managing a few funds. The US stocks and the Bond fund is crazy cheap. You have to pay a bit of a premium for the international fund and it may not even come with emerging market...so I may try to satisfy my international allocation through an IRA or another account, but even buying that fund in the 457b isn't outrageously expensive. ...if you want the target date fund, I'd probably go with Aspire in order to save a few basis points. ...to be extra clear, this only compares the NYS 457b with Aspire, you ought to do a little leg work on Lincoln and the rest.
  21. Are you sure the department of health didn't team up with a company to offer the 403b? It is my expectation that they would have teamed up with one of the regulars (AXA, SecurityBenefit, Voya, etc) to offer the 403b. You don't have any documentation whatsoever? I have heard of states setting up 457bs...folks have recently talking about New Yorks 457b. I haven't heard of that happening in a 403b though (who knows though).
  22. I'll echo what Tony said for the most part... Lincoln Financial has a self directed plan that is apparently very cheap and has access to the index funds needed to build a fully diversified portfolio. However, the plan is only available in certain regions (I think NJ is one and Chicago might be another) so you may want to find out if it is available for you. Search the form and you'll find a bunch of threads on it. Aspire is the 4th best plan I've studied. Yes, they give you access to Vanguard Target Date funds at a fair price, but they also charge a 0.15% AUM fee. Assuming 3% real returns that eats up 5% of your real profits every year. I documented the Aspire plan here. I'm not familiar with every vendor on that list but I'd start my research with Aspire and Lincoln. I'd also look into the NYS Deferred Compensation 457b plan. I haven't studied it yet, but people seem to have good things to say. In fact, it was just discussed here. I'd strongly encourage you to lobby your school district to add Fidelity and Vanguard. I was successful here in Orange County Florida and I'd be happy to help you.
  23. That's more than ok; I appreciate it.
  24. It sounds like jglove is already maxing out the 457b, but it makes sense to verify they’re utilizing the best option. Just out of my own curiosity what are the fees and available investments for the NY State 457? What is its official name?
  25. I'm really happy we could help you and I appreciate the gratitude, but I'd really love it if you could pay it forward to your coworkers by helping them avoid the predatory plans on your list or if you feel ambitious, by pushing for 403b/457b reform within your district. Best of luck to you and let us know if you have any issues/questions.
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