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Everything posted by EdLaFave

  1. I'm exhausted at the moment, but I'll have to check out the site.
  2. It sounds like he already is, but I would tell your son he is lucky to have you teaching him this information and that he should listen intently. I wish families talked about money more and I certainly wish mine had. ...on a side note, better late than never, but a few months ago (maybe a year) we helped my grandma and her sister transition their retirement savings to index funds. It felt so rewarding to fire that awful adviser and because it was all in tax advantaged accounts it cost them nothing!
  3. Thanks, but most of the success is attributable to random chance I happened to start programming in middle school because my parents bought a computer and a friend showed me how. My dad saw I liked it and in the most casual way, one time, mentioned that I should study Computer Science. So I did, without giving it any thought or even really knowing what "Computer Science" meant. In fact, the only thing I knew about programming was that I heard a lot of talk about jobs going to India and I had no idea how much the job even paid. Ultimately, it was pure luck that the job pays over 100k and I was fortunate that I didn't take on college debt only to enter a low-wage or shrinking industry like manufacturing. After graduation, which was luckily after the real estate crash, I bought a house that I wound up hating and sold 3 years later. I had no idea that virtually every dime of the mortgage payment in the early years went towards principal or the enormous fees you pay when you buy and sell. That was a very ignorant and costly decision (that could've been much worse had I been born 2 years earlier), again because I put in no research and just did what I thought I was supposed to do. I got ripped off for years by two separate financial companies and again on my own by buying high cost mutual funds. That lasted several years and I didn't put in a single bit of effort to learn anything, not even 1 google search. It was random chance that one of my co-workers had been ripped off with an annuity, told me the whole story, and told me about the virtue of index funds and the boglehead community. That is the only reason I have a solid portfolio today. ...I guess I say all of this because I don't want anybody to think my success is attributed to how 'awesome' I might be. Sure, I try to do a good job at 'life', but almost every success I have is attributable to luck and the people who came into my life and helped me.
  4. This question has fascinated me for a long time because, assuming average growth and assuming the upcoming recession doesn't hit just yet, we're on course to, in two years, hit a million by 35 years old. We're "pound-foolish" in the sense that we bought a 500k house when a 180k house (or renting) would have done just fine. We're 'penny-foolish' in the sense that we literally eat out every single day. We go on vacations. So we aren't living an austere life filled with deprivation. There are a lot of families that make as much and sometimes significantly more than us, but they talk about maxing out their 401k as if it were an unachievable fantasy. They talk about the possibility of early retirement as if it were a pure delusion. There is never an answer as to where all the money goes and I simply can't imagine an answer that would explain the disparity in results...it doesn't seem like it should be possible. This of course is widespread...you see it on a teacher's income, I see it on an engineer's income, and I think we all read about it on the income level of the solidly rich. So I've always been fascinated by where people spend their money and to what degree (if any) it brings them happiness.
  5. I thought the OP was talking about how some fund families have a policy where after you sell shares of a fund, you aren't allowed to buy any more shares for a set period of time. Vanguard requires you to wait 30 days after a sale in an account before you can buy into that fund again. https://personal.vanguard.com/us/whatweoffer/overview/redemptionpolicy The idea is to minimize turnover within the fund because if there is a lot of selling going on then the fund may have to liquidate some of its underlying assets in order to allow the trades to go through. I thought the OP basically wanted to buy shares of a fund one day, sell them two days later, buy them back 30 minutes later, and sell them again in 4 days. This behavior is generally bad for the individual investor as well as their fellow shareholders. However, perhaps the OP is up to something else?
  6. I don't really know what I'm talking about because I have no interest in ever owning an ETF, but I was under the impression that, from a taxation point of view, ETFs and mutual funds are the same. I was under the impression that both an ETF and mutual fund will have a tax liability that is directly tied to their turnover rate and just as a mutual fund can be tied to an index (and thus have low turnover) so to can an ETF. I might be totally wrong, I'm an index fund guy, but that is how I thought it worked. @403bidiot, out of curiosity what are you up to that is causing high frequency trading restrictions to give you trouble? If you're 'day trading' then ETFs are the answer and I won't try to beat you over the head with arguments/data about why that is a poor approach because I assume you're well aware and just disagree with me. However, if you're up to something else then there might be a better way forward than ETFs?
  7. When I've called Fidelity I've had a hard time getting to people who are useful. I believe I called 1800-868-1023 and spoke to a woman named Holly who seemed to be somewhat helpful, but my memory is foggy at this point. I had a better experience talking to the folks at Vanguard.
  8. Sure I'm disgusted by people getting ripped off, especially people who don't have much money to start with and especially when those people are performing a foundational service for our country. I'm not disgusted by the OP and obviously he can keep posting...most people seem to like it. I'm just saying I've read tons of troll posts over the years and I've known people who troll message boards. If somebody wanted to successfully troll a message board their posts would sound very much like the OP. A 'good' troll isn't going to take an outrageous position that is hostile or diametrically opposed to the board because the last thing they want is to be written off as an unreachable jerk and then subsequently ignored. No, their goal is to pick some kind of conflicted middle ground that'll suck people in and illicit an earnest, taxing, and upsetting conversation; a conversation that the troll doesn't take seriously at all (and thinks you're a fool for taking seriously). The troll will never specify a clear or obvious reason for their posts (despite being asked) because they don't want it to end, they just want it to bounce around from one "trigger" to the next. They make sure to just stop by every now and again and drop a new post that'll get a rise out of people and keep things going. Ideally the troll can get the message board to argue among themselves so they don't have to keep posting and can just sit back and watch the show. ...that may not be what is happening, but it is certainly the vibe I got.
  9. Just in case somebody reads this post and they're thinking of starting an ethical investment company in Orlando...get a hold of me. I have no interest in the stress associated with starting/running a business, but I do have an interest in helping. I have significant doubts that a company offering financial advice for the "average" person can generate meaningful profit/income while still remaining ethical (i.e. only purchasing investments that are optimal for clients and charging rock bottom fees). I believe you'd have to eliminate nearly all human interaction with your clients, embrace automation, and scale massively and quickly. If you were able to accomplish that, I suspect your clients would be 35/40 and younger and I suspect targeting the education 403b/457b market would be a disastrous business decision. I've long ago come to the conclusion that some businesses are inherently incompatible with the profit motive and I think this is one of them. I believe communities like the Bogleheads, required financial/investment education for our kids in K-12, and access to a company like Vanguard (a check on the entire industry) is the only viable path forward. Although, I may simply lack vision because had I been around in the 50s/60s I may have given a company like Vanguard 0% chance of coming into existence.
  10. 403bannuitysalesman, what is your purpose for posting all of this? Nothing you’ve said is news and you’re complicit in this unethical industry that you willingly and freely participate in. So what is the point? There are innocent answers to my question, but I honestly wonder if you’re just trolling...having a laugh at the pain you create for a dollar.
  11. I think it is a great idea to reach out to her. It can be tempting to think of these sorts of people as the opponent because they're essentially the gatekeeper between you and a better plan. However, if people like us can form relationships with people like them then it is a solid step towards reform. Maybe she is friendly with her counterparts in other districts and perhaps she can be encouraged to reach out to them to help reform other districts? Maybe, like you said, she can better help you understand how to convince her counterparts and folks like her. I think there is always tremendous value if you can bring different groups of people together. Here at OCPS (FL) our RFP is published on a website and I believe vendors can log in and view it. However, as far as I know, it isn't generally advertised and the district doesn't reach out to every vendor to ask for submissions. On top of that hurdle, as I'm sure you know and as Tony pretty well documented in his Vanguard/Newport thread, these vendors aren't exactly on top of things. So I felt it was critical to attempt to serve as a liaison between OCPS (FL) and Vanguard/Fidelity. Here at OCPS (FL) vendors are only added/removed once every five years, they have to submit to the RFP, and a "fringe committee" goes through some kind of process to decide who is in and who is out. The "fringe committee" is apparently made up of folks from the district as well as the union...however, when I talk to our union I get the sense that they don't exercise their power in this role. Here at OCPS (FL) our TPA is TSA Consulting Group and technically they have none of the power but in practice they have tremendous influence. I haven't read the contract or anything but this is my read. TSA Consulting Group basically says to OCPS: Dealing with all of these vendors is a pain. Understanding the legal requirements is a pain. We're experts in this field and we can guide you through it. Ultimately you make all the calls but we'll make sure everything is done "right". So technically the TPA should be a glorified paper pusher. However, the folks at OCPS Retirement Services know very little about investing and even less about the law. So TSA Consulting Group always mentions lawsuits in vaguely threatening ways, side note: I was on a conference call with OCPS Retirement Services and TSA Consulting Group because I wanted to help Retirement Services understand the problem and they patched TSA Consulting Group in, well TSA Consulting Group made a big deal out of me helping teachers understand their plans and vaguely threatened me with a lawsuit at which point I asked him to remain quit for the rest of the call. So at the end of the day I think OCPS just throws up their hands and more or less does whatever TSA Consulting Group tells them to do. Although, now that I'm challenging that arrangement, it may change a bit.
  12. Let me start by acknowledging some nuance. I do not believe one person can reasonably go it alone, but at the same time I think people significantly overestimate the number of people necessary to affect meaningful change. When I read about successful reform efforts from the past, I'm always struck by how few people make up the core engine behind the movement. Often times they eventually receive significant support, but it doesn't take many people to spark something bigger than themselves. I can't prove it and I may be overly hopeful, but I believe there are enough teachers who understand the issue to reach critical mass. So what should these teachers do? The fact that I don't have definitive answers speaks to the value of working with a group rather than going it alone as I currently am. I need a wider perspective and I need other people's ideas. If I had a group of people these would be my initial thoughts: 1. It would be great to have somebody who could focus on documenting the remaining inferior OCPS (FL) plans that I haven't gotten to. That could help convince people who are currently in those plans. 2. It would be great to have somebody who could focus on developing relationships with the union and putting something in place to reach out to union members. I meet with the union when I can and I communicate when I can, but time is limited. 3. It would be great to have somebody who could focus on interfacing with low-cost vendors and the folks at retirement services so that the low-cost vendors submit to the unadvertised Request for Proposal and are therefore at least considered. 4. It would be great to have somebody who could focus on working with retirement services to make sure they understand the investing principles that would allow them to see how awful their plans are. 5. It would be great to have somebody who could focus on developing relationships with the school board so that when we speak at the school board meetings our message is taken to heart. 6. It would be great to have somebody who could focus on reaching out to local media, run social media accounts, and try to bring some publicity that would grow our group and perhaps apply shame/pressure that could lead to change. 7. It would be great to have somebody who could begin to explore how the state legislature might some day fix this issue with legislation. For instance, here in Florida we have an FRS Investment Option that is fantastic...why can't we have something like that for 403(b) and 457(b) plans? 8. It would be great to have somebody who could focus on teacher outreach to try to grow the group. 9. It would be great to have somebody who could focus on administrator outreach so we can reach more than the one school this all started in and so we can get "more important" people behind us. 10. It would be great to have somebody who could specialize in exactly what it takes to transfer accounts from bad vendors to good vendors so that hesitant teachers feel more comfortable moving forward. 11. If we had a solid group of people we could consistently show up at school board meetings, call into retirement services to request reforms, keep each other motivated, and hold meetings on financial topics to help each other and grow the group. 12. If there was a solid group of teachers spouting this message then I think other teachers would be more inclined to listen, change, and jump on board. When you're just one person it is easy to be dismissed as a crazy person who thinks they know more than the professionals. How many times on this board have teachers been referred to as a "herd?"
  13. We've talked about a lot of the groups who've contributed to this failure: state legislatures, school boards, retirement services departments, unions, investment companies, advisers, administrators, and teachers who do nothing when they learn about the problem. However, one of the groups that frustrates me is the subset of teachers who learn about the problem, get their accounts in order, and more or less silently move on with their lives. When I talk to some of these folks they basically say that they won't get involved in reform because they don't want to risk retribution from the "higher ups" who setup and endorsed this system. I believe their fears are unfounded, but I just don't know what to say to somebody who is committed to looking the other way. It's upsetting. ...if this small group were to get together it is possible they alone would be sufficiently large to affect change.
  14. I agree Tony, none of this is new. Unless I'm not considering all possibilities, I see only two ways somebody inside the industry can help with reform: Document all of the unethical behavior and ideally capture broken laws, broken regulations, and shocking behavior. Then present that information to the world in an effort to hurt the company and hold people accountable. Start an advocacy group to educate teachers and use your past indiscretions to add credibility to your new effort. It is also worth noting that I don't believe K-12 employees are any "worse" than the general population. For example, our 401k automatically enrolls everybody in a high cost target date fund, something like 1.3% or so. When I was hired virtually every employee was invested in expensive funds and thought nothing of it even though we have access to index funds at 0.31% (still way too expensive I might add). These employees didn't even have to contend with sales reps pushing them into inferior, high cost investments. I believe the degree to which K-12 plans are inferior to the rest of the population is a direct result of the school system allowing investment companies to construct a trap tailor made for K-12 employees, which I wrote about here. The rest of the population, as flawed as their employers and 401k may be, don't have to contend with such a well crafted, premeditated attack...
  15. I believe the state of affairs is a direct result of teachers' quiet acceptance, which is ironic because I've seen teachers raise hell over incredibly trivial issues.
  16. If I were in charge of a school district we’d have exactly one vendor (Vanguard, Fidelity, etc) and the fund choices would be limited to the three fund portfolio, target date funds, and fixed allocation funds. No fund would exceed roughly 0.16% ER and any other fee would be minimal (say a $35/year maintenance fee or whatever). When an employee is hired they’re automatically signed up for the plan and unless they specify otherwise some reasonable percentage of their salary is directed to the target date fund based on their age. There would always be somebody available to help change an employee’s account or to answer basic questions about diversification and asset allocation (which does not constitute financial advice since it is just repeating well established academic information about the stock market). Private companies implement retirement procedures like these and they work.
  17. The solution is simple: a functioning HR department. Every job I’ve ever had begins day 1 by sitting with somebody from HR where they explain the 401k and hold my hand through the enrollment process. This isn’t rocket science. School districts need a legit HR department just like every other large employer. None of the 403b/457b problems require innovative or complicated solutions.
  18. That is a dark and arguably accurate description of our version of capitalism. I think we can do better.
  19. Again, what is it exactly that you sell to teachers? It is nothing new that "advisers" put their money into index funds while they direct their clients' money into high cost "investments". Clearly, we all have an obligation to not take advantage of people. To conclude that it isn't your "job" to disabuse somebody of the very ignorance you're exploìting is a weak attempt to relieve a guilty conscience. The more vulnerable somebody is, the more obligated we are to protect them. To imagine people as being so flawed that they're incapable of initiating or understanding a 5 minute google search (I'd argue passionately that it takes much more than that) and then to conclude that those people deserve to be exploìted...well that's just plain backwards. This is the same kind of thinking that goes into any ideology of supremacy, the claim that a group is inferior and therefore worthy of awful treatment. The idea that they wouldn't be investing at all if it weren't for a 403b adviser is at best debatable (for instance I know plenty of folks who don't trust financial people and just plow all of their money into their mortgage, not what I'd do, but they may be coming out ahead of their peers). However, even if that were true this is just another weak attempt at a rationalization. How far can we take that logic? Am I doing them a favor by taking 50% of their real returns? Am I doing them a favor by taking 100% of their real returns? Am I doing them a favor by taking 50% of their total balance? What if I cleaned out their account and left a penny behind? After all that would be a penny they otherwise wouldn't have had because I guess in this hypothetical world they blow all their cash on frivolous purchases? ...it is also a false choice. It isn't a sub-par product or no product at all. You could simply open your mouth and tell them about the good options. How is it that you're personally addressing this moral issue? If it were me I'd feel obligated to spend the rest of my life trying to educate K-12 employees on how they're being exploìted.
  20. lol, that's exactly what I say with amusement and it is always met with a shrug. I hope the original poster replies. I'm quite interested to know exactly what they're selling, how they confront what appears to be a moral dilemma for them, and generally what their perspective is on this whole thing.
  21. You're absolutely right, administrators have a responsibility to every employee at their school (arguably at any school) and they're failing to live up to that responsibility. Some are failing for innocent reasons, while others are failing for more sinister reasons. People have called me a pessimist my entire life, but I truly believe more administers fall into the former category than the latter. I'd also add that ignorance isn't shameful so long as you're willing to learn and change when new information presents itself. I've repeatedly voiced my frustration that too many teachers and administrators fail this test with regard to 403b/457b plans. If not for these failings, we could solve this problem ourselves, in spite of institutions operating against us.
  22. The employees are correct in believing vendors have been "vetted"...they're just incorrect in believing that the vetting process is in any way rigorous, ethical, or legitimate. Here in Florida there is something called the "Model Plan". It is a collection of handpicked 403b/457b vendors selected by the state. It literally comes with something called the "Seal of Approval", which according to them means every vendor was, "vetted to ensure they provide high-quality, low-cost supplementary investment options — guaranteeing top value for all public school employees in Florida." Literally the first "Selection Criteria" listed is, "expense charges." Therefore the state has "vetted" these vendors. Here in Florida each district gets to handpick the 403b/457b vendors their employees are allowed to use (surprise, the vendors from the "Model Plan" are often used). That means the district, the school board, the retirement services department, and so forth are all standing behind these selections as "vetted." Here in Florida administrators have a large degree of autonomy in their schools. They alone decide which, if any, vendors are allowed on campus to sell their products. So anybody on campus has the implicit consent/endorsement of administration. So yeah, teachers rightfully believe vendors are "vetted" because the state, district, and school have all signed off on it. Believe me, I would love to see the world in terms of "good guys" and "bad guys"...especially in the context of 403b/457b vendors. However, I don't think we can assume administrators are complicit in deceptive behavior...I believe a mixture of inattention, ignorance, and incompetence are the more likely culprits here. In our culture there is a tendency to believe that the people who earn more money or have more education are smarter or possess better decision making skills...and in that context it would be reasonable to conclude that administrators are complicit for not protecting the teachers. However, in my anecdotal experience administrators have arguably been less knowledgeable and lose even more money to vendors than the teachers do. I personally believe the less you earn, the more experience forces you to learn how to manage your money. I basically grew up poor and as an adult I now know a lot of people that are on the lower end of rich and believe me the poor people would be shocked at how foolish the rich are with their money. I'm not even sure how many of the sales reps are "bad guys". It wouldn't surprise me at all if a huge percentage of them were incredibly ignorant, received minimal training, were brainwashed with false and misleading information, and just parrot whatever their company tells them to say/do. To some degree every problem we face boils down to a lack of education/knowledge and I don't think this is any different.
  23. Can you tell me, in specific terms, exactly what you sell to teachers?
  24. Here in Orange County (FL) TIAA offers a mutual fund option, which I documented here. The cheapest 3 fund portfolio still costs 0.63%, that expense consumes 21% of real profits after 1 year and 26.2% of real profits after 30 years (assuming 6% returns and 3% inflation). There aren't surrender fees with this type of account. Unless the TIAA reps failed to mention it, they don't offer a guaranteed 3% annuity in our district. I have nothing to add to the debate between a 3% guaranteed return and a bond fund except to provide the historical returns of the two funds Krow mentioned: 2017 = 3.56% and 3.85% 2016 = 2.60% and 2.83% 2015 = 0.40% and 1.27% 2014 = 5.89% and 6.96% 2013 = -2.15% and -3.45% 2012 = 4.15% and 7.02% 2011 = 7.69% and 10.74% 2010 = 6.54% and 9.49% 2009 = 6.04% and 6.90% 2008 = 5.15% and 5.01% 2007 = 7.02% and 7.70% 2006 = 4.36% and 3.98% 2005 = 2.49% and 1.82% 2004 = 4.33% and 5.30% 2003 = 4.04% and 5.70% 2002 = 8.32% and 10.91%
  25. I rarely make definitive statements, but I’ll double down on that sentiment and say there is exactly no doubt.
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