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Everything posted by EdLaFave

  1. Fidelity and Security Benefit’s NEA DirectInvest are so similar that my wife and I couldn’t put ourselves through the pain of switching. Although it was tempting to begin considering that until I remembered the pain of originally enrolling ? I absolutely think what I did is replicable in other states. Perhaps I am naive, but I think the problem is primarily ignorance on the part of districts. I think sharing knowledge can easily get new vendors added. Now removing unethical vendors may be trickier because there may be relationships (financial or otherwise) that might get burned up in removing vendors. I still flirt with the notion of a state legislator solving this problem for every district. Or somebody like Rubio pushing for the TSP plan for all...although you’d need somebody other than Rubio to make it happen. Still, the district by district approach can work...it is just more fragmented and piecemeal.
  2. I’m going to think about this. It might result in a new blog post on my site. Either way, I will post about it here.
  3. My answer: the vast majority of jobs pay a salary that makes it either impossible or exceedingly difficult to amass wealth. If you’re at or near minimum wage then forget about it. You can’t afford to support yourself in a dignified fashion. A teacher at OCPS (FL) starts at about 40k. On that salary the vast majority (possibly all) of your life will be spent outside the ranks of the “rich.” The folks making 60k or so, which is well above the median income, will work for a very long time before they’re rich. So at any given time, a lot of these folks won’t be rich. ...all of that assumes you save well and spend very little. I think that pretty well explains why so few are “rich.”
  4. I’d answer that question by asking which option will allow you to build a fully diversified portfolio at the lowest cost. My guess is Vanguard will. I believe a potential con of rolling a traditional employer sponsored account into a rollover IRA, is that it makes a backdoor Roth less desirable. This doesn’t affect most people and those it does are already in great shape.
  5. Yeah, for selfish reasons I loved getting Fidelity on the 457b list. My wife is already maxing the 403b and now she’ll have an elite 457b option when she is ready to start investing more. It is hard for me to know how significant this partial victory is. I wish I had access to the stats to see how many people ultimately sign up. If I’m being negative, I’m fearful the existence of these excellent options will allow the district to point to them as a reason to stop future reform because “more choice is better”. So if people don’t take advantage of these new plans, their existence may hurt more than help. OCPS (Fl) only implements changes once every five years. So it seems I’ll have some time off, but I may try to reform neighboring districts in the mean time. Who knows, maybe it’ll even benefit me directly if my wife winds up switching districts at some point.
  6. EdLaFave

    Roth IRA

    I thought there was a good chance I may have been out of touch. This is something I acknowledge, but never truly understood.
  7. EdLaFave

    Roth IRA

    I don’t know if the account itself has a minimum. I personally don’t see the value in contributing multiple times to a money market fund in a brokerage account before $1,000. It seems like a lot of busy work that could be consolidated into a single task once $1,000 has been accumulated.
  8. Well that is a subjective question that depends on the “worth” somebody assigns to an “adviser”. I can confidently say that every adviser is paid something and investing is really simple. So for me, I can confidently say every plan that is NOT self-directed charges too much in fees because even a “small” fee is too much. ...and the fees usually aren’t small and the advice given by advisers usually isn’t good. But there are people on this board who will argue that there is a place for advisers. I strongly disagree except for perhaps extremely rare corner cases.
  9. EdLaFave

    Roth IRA

    Target date funds have a 1,000 minimum and half the cost of the Star fund, which is an actively managed fund of funds. I’d recommend the target date fund for now. I’d consider upgrading to a life strategy fund at the $3,000 mark. I’d consider upgrading to the three fund portfolio when you hit the min 10,000 for each fund. There are other considerations when determining which approach is best.
  10. EdLaFave

    Roth IRA

    Forgive me if I'm out of touch with folks working with lower balances, but this is my view... A thousand dollars is such a small amount of money and the time it takes to save $1,000 is relatively very small. Both of those facts mean that any market changes while a sub-1,000 balance remains uninvested will be almost entirely inconsequential. I personally wouldn't involve an investment company that isn't my first choice so that I can maximize my time in the market for an inconsequential change. I'd just wait until I have the minimum and invest with the company that is my first choice. If $1,000 is viewed as large or if the time it takes to save $1,000 is long then the biggest problem to solve is how to maximize the savings rate rather than how to get $1,000 into the market ASAP.
  11. Lines like this hurt my soul because they're incorrect on both counts and possibly intentionally manipulative. Making rules against bad financial advisers absolutely will benefit investors. Speed limits absolutely do reduce injury, death, and property damage. Even though this entire statement is nonsense, I guess it sounds good and is persuasive to folks. Ugh. The first four paragraphs were just too painful, sorry if I missed something of value.
  12. I'm shocked by how expensive Canada's mutual funds are. Is that accurate? Wow!
  13. I agree with jebjebitz, define low. For me: 0.07% is a fair price for a 3 fund portfolio you have to manage. 0.16% is a fair price for a single all-in-one fund that you don't have to manage. Anything over that and you're overpaying. If you start to approach 1%, you're really overpaying. If you start to approach 2%, you're overpaying so much that it may offset the tax benefit of the retirement account. I like to explain to people that you can't think of fees as a percentage of your entire portfolio, which is how fees are stated. You're investing to grow your portfolio in inflation-adjusted terms. So if your portfolio returns on average 6% per year and inflation is 3% then your real return is 3%. Now if you end up paying 1% in fees then you've just given away a 1/3 of your real return to people who didn't take any of the risk to get the return! On top of that, had you not given away a 1/3 of your real returns it would have remained invested and earned you even more money. So it is a double whammy, no thanks. I also like the Gotrocks allegory from Buffett, which explains in understandable terms exactly why advisers hurt investors. I believe that helps to counter the idea that "my investor can overcome his fee with excellent performance." I like to pair this allegory with the stats Bogle provided that list exactly how many funds under-perform in the long term (I don't have those on hand, but you can search my post history).
  14. We achieved a pretty big partial victory in that Vanguard (403b) and Fidelity (403b and 457b) will be available to OCPS (FL) employees beginning in August of 2018! Still lots of work to do, eliminating unethical vendors is a huge goal, but this is a great start. I wrote about it here.
  15. You can read this, https://www.investopedia.com/terms/m/mortalityandexpenseriskcharge.asp. Simply stated, they provide a mechanism for “Wall Street” to make money at your expense. The words mortality/expense fees or annuities are a great indication you’re in an exploítative investment. If all of your fees total 0.07% then you’re getting a fair deal. If more than 0.16% then you’re overpaying. If more than 0.5% then you’re getting ripped off. If above 1% then I start to wonder if a taxable account is preferable. If closer to 2% then I’m almost certain a taxable account is preferable.
  16. Ugh. Thanks for posting, I missed this yesterday.
  17. Possible Improvement #1 As I understand it, you don’t know what fees they’re paying in their current plan. So when you point to the 200k delta, they probably discount such a dramatic figure because they assume their actual costs/performance combination is much better than what you used for their calculation. They also probably discount the calculation because you did it and not them. You could do the leg work of researching the plan/adviser they're using and compiling the actual fees, re-running the calculations, and then passing on the final result to your friend. Possible Improvement #2 Your friend doesn’t buy into the fundamental belief that our “expert” can’t beat all of the other “experts” to such a degree that they can afford to take away a quarter of our real return for themselves and still have extra money to share with us. As an antidote to this thinking, I found Buffett's allegory of the Gotrocks family to be helpful. I also enjoyed John Bogle's "research" from 2005 that examined the actively managed funds that existed in 1970. In the beginning there were 355 funds: 223 funds, 62.8%, were closed before 2005 rolled around. 60 funds, 16.9%, lagged the market by 1% or more. 48 funds, 13.5%, were within + or - 1% of the market (slightly more on the losing side of that coin). 15 funds, 4.2%, beat the market by 1%. 9 funds, 2.5%, beat the market by 2% or more. A fun fact about the 9 big winners, the majority have lagged the market significantly in the final 15+ years and attribute their performance to a period of early dominance (perhaps lucky dominance). A Couple Thoughts I try to kill my ego every day and part of that is knowing I'm extremely unlikely to save everybody and in reality I may only save a few. I think 403b/457b advocates will drive themselves crazy if they fail to embrace this perspective because everything will feel like failure. In my view, educators have all of the power they need to navigate and reform this system. I believe the system exists as it does today because its victims tolerate and/or embrace it. For me at least, this opinion pushes me towards exasperation and tempts me to grow frustrated with and give up on folks like your friend. I think it is important to resist that temptation and just be there for people with objective information, understanding, and good intentions.
  18. Sounds like you’re set on this course of action. If you’re ever open to persuasion in the future then I or anybody else can lay out the case for you. Best of luck.
  19. Morningstar has what you’re looking for. As counterintuitive as it may seem, it is a recipe for disaster to select mutual funds based on past performance, especially over short periods of time. I could explain further, but I didn’t want to step on the soapbox just yet because I’m not sure why you’re wanting to perform the comparison.
  20. I’m beyond suspicious, but I don’t have the energy to analyze it. Aside from educators married to rich spouses, I don’t know of any folks in real life that are even dreaming of becoming a millionaire. Maybe my preconceived notions are wildly wrong.
  21. I don't believe this is fundamentally a publicity/awareness issues. Even if most educators aren't aware, I've seen too many not care once they're made aware. I don't think any amount of publicity is going to solve a problem when the people directly affected aren't advocating for themselves. Oddly enough, I think the question is, how do you make people care about their own exploìtation. I think all of this would end the moment educators did something about it, the external forces keeping this in place are extremely weak and would fold if there was even a moderate amount of resistance.
  22. I’m not ready to call any school board members or administrators that I’ve met “elite”. In my experience, they couldn’t be more ordinary. I’ve certainly met “elites” who have a sense of superiority (my congressperson is one), but I personally haven’t seen that in education. My post isn’t interested in blame, I just caution anybody who supports teachers against feeling like something has been won. I believe these minor concessions will be followed with years of neglect, especially if people are feeling satisfied with the concessions.
  23. That’s fair enough, my wife made the same choice. I believe unions (and labor laws) are critical for the health of the economy because it is critical that the interests of workers be balanced with the interests of those who run/own the employer. I believe it is impossible to achieve that balance when an organized employer can negotiate with each employee individually and the employee can either accept the terms or accept (increased) poverty. So for me it is beyond shameful if people working for or running the union are discrediting and abandoning its true purpose. That is something I won’t easily forgive.
  24. I guess you can count me as a pessimist and perhaps unrealistic. Yes, I see these strikes as improving the situation, but more than that I see squandered opportunity. The thing about "winning" a strike is that it also eliminates any leverage and energy you had leading up to the strike. You aren't going to be back at the negotiation table for a while, so you better make sure you actually won something real. I may be mistaken, but what did the teachers in West Virginia get? Most notably they got a 5% raise after being severely underpaid (even by US standards) and no guarantee that the government will maintain the new pay rates in inflation adjusted terms. Perhaps there wasn't enough unity, but I'd argue passionately for shutting the whole thing down for as long as it takes until teachers are paid in line with their societal importance. Maybe they think 5% above the near bottom meets that goal? Maybe they knew they couldn't sustain a lasting strike? I'm not sure, but I struggle to find cause for celebration in the outcome.
  25. First and foremost, I'd want my union fighting for fair compensation, reasonable hours, and safe working conditions. When I hear about the local union it is never because they're working to address those issues in a substantive way. It is about making it difficult for teachers to be fired (at a time when I hear they're having a hard time finding teachers to hire). It is about curriculum. It is about class sizes in art class. It is about standardized testing. It isn't to say people don't have legitimate concerns or that none of these issues have value, but I'd prefer to put out the fire before we renovate the guest bathroom. So I'm not at all surprised that your union isn't talking about this.
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