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EdLaFave

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Everything posted by EdLaFave

  1. Maybe I am missing something but the Freedom funds have ERs of 0.75%...http://www.morningstar.com/funds/xnas/ffffx/quote.html The Roth is definitely taxed well before distribution; it’s taxed when you earn the money and it is taxed at the highest bracket you’re currently in. The commutative property of multiplication means it doesn’t matter when you’re taxed, only the effective tax rate. Roth Value = Money Earned * (1 - Highest Marginal Bracket) * N Years of Growth Traditional Value = Money Earned * N Years of Growth * (1 - Effective Tax Rate as Lower Brackets are Filled) Some folks like Roth because they believe the US will have much higher tax rates when they hit retirement. I personally don’t like to make bets on my non-existent powers of prediction.
  2. I use Security Benefit’s NEA DirectInvest and I love it. I documented the plan here https://educatorsfightingforfairness.wordpress.com/best-ocps-403b/ and I documented how to enroll here (some steps are OCPS-specific) https://educatorsfightingforfairness.wordpress.com/set-up-your-ocps-403b-457b/ Fidelity is also great and I documented them in a page where I covered Florida’s best vendors, https://educatorsfightingforfairness.wordpress.com/floridas-best-403b-457b-vendors/ I consider the rest of the options to be exploítative.
  3. I’ve got a web site for 403b/457b plans that you might find useful. My Investing 101 page will give you a good foundation, https://educatorsfightingforfairness.wordpress.com/investing-101/ I also documented Fidelity (they’re great) in a page where I covered Florida’s best vendors, https://educatorsfightingforfairness.wordpress.com/floridas-best-403b-457b-vendors/ Generally speaking, I’d max out the 403b/457b before I used an IRA. Generally speaking, a Traditional account is preferable to a Roth. With a Roth you get taxed at your highest marginal bracket. With a Traditional you get to fill up lower brackets and therefore you can generally expect a lower effective tax rate. The Roth is better if you plan to have enough money in higher tax brackets than your current highest tax bracket...I don’t expect this to be the case for many.
  4. Now I haven’t fully studied the new fee structure for Vanguard’s 403b but as I understand it, they charge you a flat fee and give you access to the lower cost admiral shares no matter how much/little money you have. If I understand you correctly you’ll be contributing to a Vanguard 403b no matter what you do with your old 403bs, which means you’ll be paying that flat fee no matter what. So the real question is, which options allow you to make the most use of admiral shares? If you prefer a one fund portfolio then admiral shares aren’t available and in terms of fees it doesn’t matter if you roll the old 403bs into an IRA or the new 403b. If you prefer a three fund portfolio then admiral shares are available and the question becomes whether your old 403b accounts are big enough to allow you to buy admiral shares in an IRA. If yes then it doesn’t matter if you roll over to an IRA or the new 403b. If no then you can save money by rolling it into the new 403b where you’ll have access to cheaper admiral shares. Another thing to consider is the fact that rolling money into an IRA makes the “backdoor Roth” less beneficial. So if that is something you may wind up doing then this should be thought out. The other thing to consider, depending on what other accounts you have, is the convenience factor of having everything in one account. There may be subtle differences in how you could gain access to funds in those accounts too...I ignore this because I don’t expect that to be an issue. You mentioned Roth as though it were inherently supperior and despite hearing people make such claims I’ve never seen the math. I believe a traditional will be best for virtually everybody because of the progressive nature of the tax code and because most people probably won’t be in a higher tax bracket in retirement. When you pay tax on a Roth it is being paid at your highest marginal tax bracket, say 25%. When you eventually pay tax on a traditional, you get to fill up the lower tax brackets first...so even if you end up in the 25% bracket, the effective tax rate can be lower. Of course all of this assumes the tax brackets don’t change because I can’t predict how they might change. ...now if my original assumption about you definitely contributing to a 403b was wrong because maybe you can only contribute $5,500 per year then maybe you’d be better off rolling into an IRA and only using the IRA in order to avoid the flat fee charges by Vanguard’s 403b. Sorry for all the contingencies and corner cases, but you didn’t provide all of the details I’d need to analyze the situation. ...also I didn’t know what you meant when you said you have a Roth Fidelity account. It wasn’t clear if this was an IRA or a new 403b. So my post ignored this bit of information.
  5. No problem Dan, best of luck everyone.
  6. Get your predictions on the record now. Put me down as a "No, this won't happen".
  7. TIAA has reportedly taken a bunch of innocent/unsuspecting investors for a ride and thus far your harshest criticism has been "they made mistakes but when you are in a relationship, it comes down to people". However, in that same time you've managed to lump me into the same category as annuity sales reps and without a hint of irony you've criticized people not named TIAA, who basically just stole from people, as laughing all the way to the bank. I truly can't fathom how you've arrived at this type of response. The folks laughing all the way to the bank are those who just profited off of exploìting unsuspecting investors. TIAA deserves to be attacked right now, not defended.
  8. It sounds like your son isn't investing in a plan, it sounds like you're investing in a 529 plan that you intend to spend on your son. Have I got that right? I'm sure others can offer information on 529 plans because I'm fairly ignorant on that topic. Here are 3 things I think are relevant to what you've posted so far: You really need to figure out what your best 403b and 457b vendors are before you can know your optimal path forward. As long as you remain employed (unless there is a loophole I'm unaware of) you cannot roll the 403b/457b into an IRA. If you're single you can contribute $5,500/year to an IRA. If you're married you can contribute $11,000 to an IRA. Using a Vanguard IRA you can build an excellent portfolio with rock bottom costs...almost certainly lower than anything you'll find in a 403b/457b. Statistically speaking, any vendor that is on campus is probably one you'll want to avoid. The best 403b vendors that I'm aware of are: Vanguard Fidelity Security Benefit's NEA DirectInvest (not any other plan they offer though) ASPire PlanMember Direct ...the first 3 are definitely better than the last 2. There may be a few others out there that I'm forgetting (I think Lincoln may offer a self-directed program of some kind if you live in a particular region). However, if you see one of those 5 then you have a reasonable path forward.
  9. You're 100% right. Bogle is a hero to investors. I think it is the confluence of 3 things... 1. Investor ignorance (which exists everywhere). 2. School districts prefer not to take on any responsibility so they outscource it. 3. As a result of #2, vendors are allowed on campus but low cost vendors can't afford to do that. So it sets up a space where only unethical vendors can really participate and they do so with the authority of being "district/state approved". Regular companies face similar circumstances with their 401ks. Two thirds of the companies that I've worked for have had horrible/suboptimal 401ks because at the end of the day the company is ignorant about investing and they allocate their resources to bringing in revenue, not taking care of employees' retirements. ...heck my wife's 403b is just as good or better than any 401k I've ever had. I hope you're right but I fear you're wrong. If I am able to get Vanguard/Fidelity into OCPS (FL) I suspect almost nobody will enroll with them and the sales reps preying on teachers on campus will continue to get all of the business.
  10. Don't worry, I'm not leaving Vanguard for Merrill Lynch. My idealism is paired with cold logic. Despite this reality that I'm newly aware of...I still can't name a company that is better than Vanguard (for now).
  11. What does Bogle say about all of this?
  12. Allow me to express my sentiments without emotion. I found their arguments to be disingenuous and ineffective. I found their arguments to be similar to those I've heard from folks like "The Mooch". When a company claims the circumstances where they'd be required to act as a fiduciary are "too broad", what I hear is that they want to protect a subset, or entirety, of their business that relies on NOT acting in the client's best interest. In my view, there is absolutely no circumstance where a financial firm shouldn't be required to act in their clients' best interest. If I understand it correctly, Vanguard is arguing that only advice that is "individualized" should be held to the fiduciary standard. That is a loophole you could drive a truck through. Under those rules if I preface my "advice" with some kind of general statement like "these types of things are great for teachers" or "this is what I do for all of my most important clients"...well now I have no ethical requirement to act in your interest. Vanguard wants to exempt their marketing material and investment "education" from the fiduciary standard. Again, another massive loophole. That would allow firms to pump out material that is against clients' best interests. Ever since being repeatedly ripped off, I've always felt the need to verify any advice I was given. However, up until now I assumed Vanguard was "innocent until proven guilty". From now on, I'll have to start with the presumption of guilt just as I would with any other financial company. I suppose I'll stay with Vanguard until I start hearing concrete instances of unethical behavior that exceed their competitors, but any sense of brand loyalty is 100% gone.
  13. Vanguard's arguments were awful and they've completely destroyed any trust or goodwill they may have built up with me. Disgusting.
  14. We both agree that was the only rational choice because they were by far my lowest cost option. I've highlighted their deceptive practices on my website. On this site I've repeatedly categorized them as an unethical company who can't be trusted. If TIAA happened to be offering the best product for something, then I'd encourage people to buy it. However, they're so far away from offering the best 403b/457b product in OCPS (FL). Of course I believe it, I'd have difficulty not believing it. Then let me take this time to applaud you and Dan. Your efforts have helped to significantly improve my wife's financial future and we are deeply appreciative. You don't have to tell me that; I posted about this the moment the news broke. I also predicted this fact would be largely ignored because it affects the least of us. The ethical route would have been to spread the cost around by adding a basis point to the ERs, exactly what Security Benefit NEA DirectInvest has done. I can't remember the exact number, maybe $68,000, but the lower ERs from admiral shares means you don't need much of an account balance to pay for the higher fixed fees. While I find it generally appalling that low balance investors are asked to pay more, their biggest problem isn't paying tens of extra dollars per year. Their biggest problem is that they are going to have to work until they die or spend their final years in poverty because they aren't able to save any money...what we have here is a social and economic problem that is out of control and well beyond the scope of retirement plan fees. The point is, in our 403b/457b, TIAA doesn't let anybody invest for less than 0.63%. Assuming 6% returns and 3% inflation, that consumes 26.2% of real investment returns over 30 years. They literally give you nothing in return for that cost. The only way to describe that is exploìtative. As I've said before, I have no issue with anybody buying any product that is an excellent choice. My problem is when people believe "Company XYZ has done wonderfully ethical things" and then they invest with them, or encourage others to invest with them, which leads to people being needlessly exploìted. I'm not making the case that TIAA is off limits. I'm making the case that no financial company should be regarded as "trusted good guys" and no financial company should get our money using inferior products. As I said in an earlier post about sacred cows...we can only love low fees and ethical behavior (which are really one in the same in this case) and we cannot love a company. The natural conclusion of this logic is that nobody should invest in the OCPS (FL) 403b/457b run by TIAA because it is a garbage deal and given that they offer such a garbage deal, nobody should be shocked that TIAA got themselves into this latest bit of trouble. ...also I did not know that Vanguard opposed the fiduciary rule (I'll google but please link resources). That infuriates me and strengthens my resolve that no financial company should be trusted. As I've said before...maybe Jack was a saint (maybe he wasn't), but especially without him I expect anything can happen with Vanguard. I don't view people as opponents and I certainly don't view you as an opponent.
  15. Here in OCPS FL, TIAA charges 0.58% for a 403b/457b and they offer funds as high as 2.5%. Those are facts. I don't need to wait for a response or an investigation or anything else, it's in black and white. Anybody willing to charge such high fees for literally nothing, is acting criminally in spirit. That is obviously unethical behavior. End of story in my book...but it looks like their story just gets uglier and uglier. I'm very surprised you're not condemning them more harshly. I couldn't care less what they've done in the past. It is entirely irrelevant, especially when a good chunk of their past was as a non-profit, which they aren't anymore. I don't get to rob my entire neighborhood's retirement accounts and then point to all those years I wasnt robbing people, or to all the thieves who stole more than I did, as evidence that I'm a nice guy, and neither should they.
  16. Somewhere in my inbox somebody emailed me an interesting idea that I need to look into when I have time...why can't the states run the 403b/457b plans? For example, the state of Florida already has something called the FRS Investment Option, which is an alternative to the pension. The FRS Investment Option has spectacularly low cost total market index funds and target date funds. There might be some exploìtation around the edges (I have to study it more closely), but when you go their page, the first thing you see are target date funds with 0.08% ERs. Then if you poke around you see total market funds suitable for a 3 fund portfolio for 0.02% (Domestic), 0.03% (Foreign), and 0.05% (Bonds). Why couldn't the state replicate the same thing, once for a 403b and once for a 457b and then force every district in the state to use it? This might be the real path to reform, I'd like to hear everybody's thoughts on this path because I haven't had any time to learn new information.
  17. To be fair to the sales reps, I bet a lot of them don't understand investing themselves and just parrot what they've been told during a week of 'training'.
  18. I loved your post Tony. You got me fired up a bit. Let me start by acknowledging that the 403b/457b issue is, in reality, small potatoes. I know this, but I only know one way to engage in matters of right and wrong and that comes from Dr. King and Gandhi. In my view, they essentially laid out a theory of everything; their philosophy works beautifully at the personal, group, national, and international levels because it is based on a deep understanding of human nature. One of the most beautiful aspects of their shared philosophy is how they view suffering. Suffering for a righteous cause is to be celebrated because it connects you to a higher level of humanity and softens the heart of your so called enemy. Both men transformed jail cells from things of shame and fear to badges of honor and human dignity. I've internalized this to a deep degree and so if I were a teacher, and I know this isn't on the scale of Indian independence or American human rights, I'd happily invite any cost somebody was misguided enough to inflict. It would be an honor and I'd use it for everything it is worth. I want to go up against a Bull Connor, not a Laurie Pritchett. I often think about this before going to sleep. We're obligated to do something. YES!
  19. The irony of that site is that an HSBC ad came up, blocked the article, and because it was unclosable, I couldn't read the article. If anybody else is having that issue, I'm sure the article is explaining how Republicans just voted to allow mandatory arbitration for financial firms. That seems technical but what it really means is that it stops class action lawsuits. Class action lawsuits are particularly necessary when a corporation screws over a bunch of people but only to a degree that is less than each individual would have to pay for litigation. Class action lawsuits allow an entire class of people to share the cost of litigation for a common wrong that was done to all of them. This is a giant gift to corporations who thrive on screwing over consumers bit by bit.
  20. Thanks! We're in very similar situations. I'm a software engineer and I wish I could get into schools and raise some hell. My wife on the other hand wants to help people, but doesn't want to make waves. It is a classic problem, we're in great shape but trying to help people could hurt us and will not provide us with a direct benefit. ...I'm personally of the belief that attacking this problem without anger, but with pure concern for the teachers will not produce any negative issues for us. My wife isn't 100% sold on this notion.
  21. If you were able to successfully go after the individual, and in my uninformed opinion I have no reason to believe it would be a success, I would still applaud you because they deserve a consequence for their immoral actions. However, if it were me I would not go after the individual because the individual is simply carrying out the core values of AXA. If the individual is removed, the machine keeps going. If it were me, and in some ways it is, I'd put all of my effort into two areas: Educating everybody in the school and the district about exactly what is happening. Lobbying the school district to replace every unethical vendor with ethical vendors. This is exactly what I'm doing here in Orange County, Florida. You can check out my site at https://educatorsfightingforfairness.wordpress.com. My blog documents some of the steps I've taken. I've got a page documenting AXA in particular. I've got a page calling for specific reforms. You'll find some other stuff on the site and I'm always available to help in any way possible if you go down this road.
  22. A hero of mine once said, "A man's head will not long remain wrong, when his heart is right." ...and so I'll patiently wait for your head to catch up to your heart.
  23. This article doesn't contain a mathematical argument, which tells the world exactly how seriously she should be taken. ...having said that there is an accidental amount of truth in her argument. The majority of Americans do not and will not have enough money to ever retire. Their eventual retirement is forced by external events and the timing determines exactly how grim their remaining years will be. Sorry that got dark, she doesn't put me in good spirits.
  24. EdLaFave

    Todays Graph

    My emotional graph is the exact opposite. In 2008 and 2009 I was beyond greedy (although I had almost no money) and for the last few years I've been fearfully waiting for the crash. I hope the lesson everybody learns from this graph is that you can't trust yourself, you must humble yourself and accept that you know nothing. I hope people don't take this graph to mean that they should "sell high and buy low" because that is a doubly impossible task.
  25. Dan, I edited out things I thought were maybe too political or irrelevant. Feel free to edit further if you see things differently. I couldn't more strongly endorse the idea of voting with your money. If done collectively it is incredibly powerful.
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