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Posts posted by EdLaFave

  1. 4 hours ago, ScottO said:

    What are the best ways you've found to keep others calm about their investments and explain why doing nothing is recommended?

    I don’t try to convince anybody to do anything because in my experience 90% of the time it is wasted energy. However, when people ask me how I feel, I tell them how much I’ve lost (usually quite a bit more than them) and how calm I am about dumping my next paycheck into the market. I think people find that level of confidence and emotional stability to be reassuring.

    2 hours ago, tony said:

    But the cause of these loses this time is somewhat unique or at least it feels that way to me. But we will have to see what happens next. 

    I know nothing and I don’t think anybody else does either.

    For all I know the virus was just the spark that triggered the selling process on an already overvalued market rather than being the main driver behind the selling.

    Let’s assume the sell off is 100% because of the virus. Financially speaking, it seems like a virus with a low mortality rate is less scary than a fundamentally and structurally unsound financial system where every institution is on the brink of collapse.

    It wouldn’t surprise me at all if we bounce back from this within the next 12 months.

  2. If you save less than the IRA contribution limit (6k for those under 50, 7k for those over 50) the just stop the 403b and only use an IRA.

    If you save more than the IRA contribution limit then figure out what 403b and 457b vendors you have access to, stop National Life group, and fund some combination of an IRA and a better vendor (we need more information to be more specific on that split).

    NOTE: Your IRA doesn't have to be a Roth, it can also be a traditional. The same can be said for most 403b and 457b plans. The choice between Roth and Traditional should be made intentionally, you shouldn't simply default to a Roth IRA and a Traditional 403b.

  3. 2 hours ago, sschullo said:

    It is eerie that only a few of us are posting during this MAJOR crash. 

    Maybe when the market closes today we will have officially crossed into bear market territory.

    I haven't looked, but I can do rough math and I know I'm down over 200k. I was/am considering early retirement, my current job is highly insecure, and I'm getting my roof replaced tomorrow. I'm told this is a recipe for emotional disaster, but I feel nothing. I get paid on Friday and I'll be buying stock with whatever is left after I pay my mortgage.

    If anybody needs a pep-talk to stay the course, let me know. Everybody knew this would happen, we just didn't know when. This changes nothing.

  4. 10 minutes ago, profinGA said:

    Actually, you can submit the limit to the three of them independently. I know because when my husband had a really high-paying job about 3 years ago we did that (max his 401k; my 401a, 403b, 457b). 

    I believe you were able to do this because he owned the 401k and you owned the 403b. I suspect if one of you had both accounts then you would have been in trouble.

  5. So your current 401k charges 0.50% plus whatever the expense ratios on the funds are. That's a lot and you're right, the three 403b vendors you listed would have lower fees.

    If I were in your shoes, I'd be generally advocating for lower fees. Moving to a Vanguard 403b is certainly one possible way to get there, but so is moving to a low cost 401k (presumably Vanguard offers that too). I wouldn't limit my focus to one of the many solutions to the overall objective.

    2 hours ago, 403bquestioning said:

    In addition, our 401k plan only allows investing into 29 different funds (bond, equity, money mkt), 22 of which are Vanguard funds.  

    Don't confuse complexity with effectiveness. All you really need are three funds:

    1. Total Market Index Fund for domestic stock.
    2. Total International Market Index Fund for international stock.
    3. Total Bond Fund for bonds.

    For those that don't want to manage 3 funds you could throw in all-in-one funds too (they contain those individual funds under the hood):

    • A fixed asset allocation fund like Vanguard's LifeStrategy funds.
    • A target date fund that gets more conservative as you approach the target date like Vanguard's Target Retirement funds.

    So 29 funds is actually a lot more than you need (provided those 29 funds include the things I mentioned above).

    2 hours ago, 403bquestioning said:

    Are there other things I should be thinking about besides fees in deciding whether to advocate for a 403(b)?  

    The number one thing I'd concern myself with is what tax deferred (401k, 403b, 457b, etc) plans will allow you to build a fully diversified portfolio at rock bottom costs.

    The number two thing I'd concern myself with is that it would be nice to have a 457b in addition to a 401k/403b because (and fact check me on this) the 19.5k limit is shared between 401k and 403b contributions but the 19.5k limit on 457b plans is in addition to the 401k/403b limit. So I'd be trying to maximize the amount of tax free space my employer provides me.

    The number three thing I'd concern myself with is the various differences between each type of account. For example the 457b has slightly different withdraw rules than the 403b does. However, this concern would be a distant 3rd.

  6. 23 hours ago, Tom F said:

    I thought the fiduciary standard was driving advisors away from commission based structure and to more transparent fee based model.  Is this not the case?


    12 hours ago, sschullo said:

    I am not happy with this development in recent years. Like you, I thought that the hour fee would solve all of the high-cost problems and conflicts of interest in one fell swoop. For the most part, it did solve the conflicts of interest part of the problem with selling commission-based products,  but the AUM is WAY too high and merely replaced those hideous commissions.

    The Trump administration killed the Obama-era fiduciary rule. I won't comment on the effects surrounding the buzz/speculation related to the fiduciary standard. However, for anybody reading this thread I wanted to make a clear point:

    Either you're paying an ethical advisor on the front end or you're getting a "free" advisor who is selling you conflicted/expensive investments. In both cases it is very much against your interest to hire the advisor because of three things:

    • You're working with small margins because the stock market is a get rich slow scheme; you're not pulling in huge amounts of money in any given year.
    • It costs a lot of money to pay for a "professional's" salary.
    • The professionals cannot beat the total market index funds so they're not bringing anything to the table. You're paying for nothing.

    You don't need the advisor because:

    • You're clearly smart enough and capable enough to buy 3 total market index funds (bonds, us stocks, and international stocks) and keep them in proportion to each other over the years.
    • Even if you're lazy and don't want to spend the 2 hours a year to keep them in proportion to each other, you can spend an extra 0.10%, buy an all-in-one fund like a target date fund, and literally do nothing (this is your "advisor").
    • You already know that you should be trying to max out your tax advantaged accounts (IRA, 401k, 403b, etc.)
    • Folks at sites like this one or bogleheads or any number of others will give you free, unconflicted advice!

    ...the advisor isn't giving you anything, his job should go the way of the travel agent.

  7. 2 hours ago, JC. said:

    Ed thinks IPX is unethical.

    Just to be clear, what I said is that I have every reason to believe they’re unethical because they don’t list any useful information on their website. I reserve my actual judgment until I have the necessary information.

    I followed the link you sent. I see a $50/year custodial fee and I see a $121 annual cost fee listed at the top. I’m not sure what is what there.

    I also see you have access to:

    Fidelity 500 - 0.02%

    Fidelity Mid Cap - 0.03%

    Fidelity International - 0.04%

    Fidelity Emerging Markets - 0.08%

    Fidelity Intermediate Treasuries - 0.03%

    So if you only have to pay $50 on top of those expense ratios and there aren’t any other fees then this is a really good plan. 

  8. 21 minutes ago, JC. said:

    Does anyone have experience with IPX? It seems like Aspire, but less expensive. $50 a year for Fidelity funds.

    I don't know why you're phrasing the expenses this way and I'm deeply skeptical of the "$50 a year for Fidelity funds" phrasing because:

    • Vendors typically charge a flat rate to have the account (like Vanguard's $60/year) and/or an AUM to have the account (like Aspire's 0.15%/year).
    • Furthermore, vendors at least to my knowledge, don't give different fees for a family of funds (like say Fidelity funds in your example)...they may inflate a fund's expense ratios.

    Additionally, I went to their website and it doesn't provide any useful information despite having pages and pages of "content." This is the same approach used by vendors looking to rip-off investors because they want you to call or they want to send a rep to you so they can apply high pressure tactics to get you to sign up for something you don't understand. They certainly don't want you to understand the product in the comfort of your home and then count on you signing up because it is so awesome.

    So although I don't have any experience with IPX, I have every reason to believe they're unethical.

  9. That’s great news.

    Security Benefit’s NEA DirectInvest is an elite 403b plan and I documented it here.

    The NYS 457b is also a great plan, the details of which have been discussed several times on this forum in the last month or two. Just use the site’s search feature.

    I feel quite confident that Voya isn’t a better option than NEA DirectInvest, but it won’t hurt to do the legwork to prove that out.

    Yes, if Voya is more expensive then I’d definitely roll that account over to the Security Benefit’s NEA DirectInvest 403b.


  10. There’s a website called 403bcompare that lists fees for plans offered in California. It isn’t always up to date. Still, that’ll provide a good proxy for the fees you’re likely paying.

    However, if you’re a K-12 teacher, I can almost guarantee you’re paying high fees with Voya. If you can figure out what vendors your district approved for 403bs and 457bs (the lists may differ from each other) then we can tell you what your best option is. If you have no good options, I can teach you how to get your district to add Vanguard and Fidelity.

    I don’t know why so many people feel like they have to choose between a Traditional 403b/457b vs a Roth IRA. The decision between Roth vs Traditional should be made independent of whether you’re using a 403b, 457b, IRA, or any other tax advantages account.

    Generally speaking, you should max out your IRA because it’ll have lower costs than a 493b/457b. One of the exceptions to this rule is if your 403b waives fees when you hit a certain balance, then you might consider dumping money into the 403b until the fees are waived. I’d need to know everything about your circumstances in order to give a well informed opinion.

    You can’t find the fees because they don’t want you to know what the fees are. Voya is a bad actor, I wouldn’t bother with them or their reps. Like I said, identify all of your available vendors. 

  11. 30 minutes ago, Mooney_Lupin said:

    I have approx. 40k with AXA and I hate to lose that jumping off point as I know it can make a big difference in 20+ years.

    I don’t understand why you’re talking as if you’re losing the 40k.

    I’m going to guess that you’re not saving more than the 6k IRA limit plus the 19.5k limit that applies to 403b/457b plans. Therefore, what you need to do is:

    1. Keep maxing out your IRA where costs are lowest.

    2. Stop contributions to AXA and direct them to whatever employer plan is the cheapest (it sounds like you’ve said the state run 457b is your best option).

    3. Lobby your district to add Vanguard and Fidelity.

    4. Rollover your AXA plan to Vanguard or Fidelity and then assuming your state run 457b is more expensive than Vanguard or Fidelity, do the same with that account.


  12. 20 hours ago, Luisa said:

    I am planning to go to Aspire. I guess, SB DirectInvest has lower fees but it's not offering 457

    It sounds like you've researched the particular differences between 457b and 403b plans and it is worth the extra expense to you. I'm glad you put in that leg work. My personal preference is the lower fees, but as long as you understand everything, it just comes down to preference.

    20 hours ago, Luisa said:

    Aspire is easier to recommend to my teacher friends who wish to get new 403b/457b or get out of the high fees from other vendors. As I read in other posts, some may get confused and avail the annuities from SB instead of the low cost mutual funds under DI. 

    Just a warning to you (and something for you to let your teacher friends know about), Aspire also has an "advisor" option that isn't low cost. I've never worked directly with Aspire so I can't comment on how hard they push people towards those more expensive plans, but I'm guessing if somebody calls in then the advisor is pushing in that direction because it makes them money to do so.

    20 hours ago, Luisa said:

    I prefer to get 457 for following reasons:  1) I may retire early and no need to wait for 59.5 age to get distributions without penalty or  2) I may contribute more  3 years prior to my normal retirement age to catch up with missed contributions in my younger years.  Am I right in my understanding of 457?

    Number one isn't a problem. There are well defined ways to pull money out of a Traditional 403b/401k/IRA/etc without penalty if you retire early. Some approaches are highly specific like withdrawals for medical debt, but the general approach used for early retirement is known as Rule 72t and can be read about here.

    Number two was news to me and is a pro in the 457b column. However, I suspect only a small number of people would find it advantageous. According to the IRS page, IF your plan allows you to (you'll need to verify that) then the IRS is okay with you contributing the lesser of:

    • Twice the annual limit $39,000 in 2020 and $38,000 in 2019, or
    • The basic annual limit plus the amount of the basic limit not used in prior years (only allowed if not using age 50 or over catch-up contributions)

    So if you have lots of previously unused 457b space and enough spare money from your salary to take advantage then this is a good way to go. However, be aware of the fact that 403b and 457b plans have a more well known catch up rule that allows people over 50 to contribute an extra $6,500 (so $13,000 total). Therefore, if you don't have enough expendable money to contribute more than $58,000/year (6k IRA, 19.5k 403b, 6.5k 403b catch up, 19.5k 457b, 6.5k 457b catch up) then this 457b perk is actually meaningless.


  13. I'm not sure if you're getting all of those numbers from 403bcompare, but I believe at least some of them are incorrect or unclear:

    • The expense ratio for Vanguard depends on what funds you buy and you can certainly build a fully diversified portfolio for less than 0.15%.
    • Vanguard's annual fee is $60, not $75.
    • I'm not sure what the $243 figure you quoted is, perhaps an annual fixed fee for Voya?

    To simplify your question you appear to be asking, "is it worth paying a 2% fee now in order to save at least 0.58% every year?" That's a simple math equation that yields that following data.

    The first column is staying put. The second column is moving to vanguard (using the 0.15% rate, which is higher than it has to be). Each row represents the value in the account after each passing year (assuming 7% market growth - expense ratios). This doesn't account for whatever the fixed costs of the accounts are (like $60 at Vanguard). So you can see at the end of the 4th year you've made up the 2% initial loss and from then on you're making more money.

    $85,016.00 $83,770.40
    $90,346.50 $89,508.67
    $96,011.23 $95,640.02
    $102,031.13 $102,191.36
    $108,428.49 $109,191.47
    $115,226.95 $116,671.08
    $122,451.68 $124,663.05
    $130,129.40 $133,202.47
    $138,288.51 $142,326.84
    $146,959.20 $152,076.23
    $156,173.55 $162,493.45
    $165,965.63 $173,624.25
    $176,371.67 $185,517.51
    $187,430.18 $198,225.46


    So the question becomes, do you think you'll be at this district job for more than 4 years? If so then paying the 2% fee and moving to Vanguard is in your best interest.

    It is worth noting, I don't know exactly how surrender fees are reduced, but I know they get reduced over time. Maybe it applies to each contribution, maybe it applies to the entire account, I don't know. However, if you're right on the precipice of a reduction, it could be worth waiting a small bit of time.

    ...also fact check those calculations, I did them really quick and could have made a mistake.

  14. 16 hours ago, krow36 said:

    American Funds Europacific Growth R6, RERGX, ER 0.49%

    I cringe at the thought of paying 49 basis points for something that should maybe cost 11 basis points.

    16 hours ago, krow36 said:

    The ER of the target retirement funds is 0.10%. So you could go with individual funds, or choose a target retirement fund of your choosing, and there would be a very modest difference in expense ratio. If it was my choice, I think I would choose one of the target retirement funds that matched my desired stock/bond ratio.

    I'm with krow on this one. The primary appeal of having individual funds is that you get a lower price in exchange for added complexity. If you're paying more for having individual funds then I can't imagine why you'd go that route?

    Another alternative is to use this account to hold the really cheap VIIIX fund and then use your other accounts (IRA, taxable, etc.) to hold your international and bonds (presumably where it is cheaper).

    16 hours ago, krow36 said:

    It’s not clear to me that the fee is 0.11% per year, or of 0.44% per year??

    Big difference.

    I might be looking at a different/wrong source but the link below indicates an annual record keeping fee of 0.065% (not sure if that would expand to 0.26% if it were assessed every quarter), but the admin fee is only $4/year:


  15. 1 hour ago, JT1906 said:

    By switching my funds to the the three Ed and KRow suggested I have already started to see growth; whereas in the original funds I selected were stagnant and more fee cost.

    The heart of what you're saying is absolutely true, total market index funds are superior to other more costly investments. However, there is a subtlety that I want novices to understand...

    The primary alternative to an index fund is an actively managed fund (or even worse, an advisor trading multiple funds for you). Index funds return exactly what the market returns (minus rock bottom fees) while actively managed funds make bets on segments of the markets in the hopes of outperforming (minus expensive fees).

    In any given year roughly a third of funds WILL outperform the index. However, they will NOT be able to sustain that performance year after year. Nobody can accurately predict the market and remember they have to beat the market by a good deal just to break even thanks to the high fees they charge! In 2005 when John Bogle reviewed the performance of the 355 mutual funds that existed in 1970:

    • 223 funds (62.8%) were closed before 2005.
    • 60 funds (16.9%) lagged the market by 1% or more.
    • 48 funds (13.5%) were within +/- 1% of the market.
    • 15 funds (4.2%) beat the market by 1-2%.
    • 9 funds (2.5%) beat the market by 2% or more.

    So in the long run you can see that it is nearly impossible to beat the market. In fact, those who were lucky enough to beat the market were very likely just plain lucky. If you have everybody on the planet flip a coin repeatedly, you're going to find somebody who got heads every single time; it doesn't mean they're skillful.

    Finally, past/current performance is NOT a predictor of future performance. In fact, the best way to underperform in the future is to pick the highest performing fund because the only way to become the highest performer is to make bets on the market and nobody can accurately predict the market.

    So just remember, we invest in total market index funds because:

    • They have rock bottom fees (you get exactly what you DON'T pay for).
    • They are fully diversified because they essentially own every publicly traded company.
    • They own each company in proportion to each company's worth (i.e. they're not betting on certain segments of the market).
    • Nobody can predict the market.

  16. 11 hours ago, K. Cook said:

    should I just put more money into my husbands TSP until we max it out? 

    The TSP is a great retirement plan because they only charge 0.042% for each fund. Luckily for you, you have Fidelity, which charges even less (if you ignore their $24/year administrative fee). Of course you may not always have Fidelity, but for now this decision is of little consequence.

    However, I personally would NEVER do what you're suggesting. Even before I got divorced, I was adamant that everybody should invest with the clear understanding that a divorce may happen (forever is a long time), which I wrote about here. Personally, I had a prenuptial agreement that allowed each person to keep whatever was in their own accounts and I would never have allowed either one of us to use one person's paychecks to pay the bills while the other person loaded up their retirement savings. I don't pretend to know how all 50 states would handle the division of "shared" retirement accounts and I certainly wouldn't want to find out using my own money. Regardless of where you come down on this issue, please make your decision after having considered it.

    7 hours ago, K. Cook said:

    Is it better for me to have an IRA instead of a 403 b with all the potential moving around? 

    I could give an incredibly detailed response covering a million corner cases, but the rule of thumb is to do whatever results in the lowest fees and still allows you to build a diversified portfolio.

    You haven't said how much you invest in a year. However, falling back to the rule of thumb, I'd max out the IRA and put the rest in the Fidelity 403b.

  17. You’re looking for:

    1. Vanguard

    2. Fidelity

    3. Security Benefit’s NEA DirectInvest

    4. Low cost state run 457b

    5. Aspire

    ...approximately in that order. Like krow said, post the list of available vendors and we will help.

    Don't feel anxious. You caught this early. In the mean time, go ahead and tell the district to stop directing money to the AXA plan. They’ve got surrender fees so every dollar in will cost you pulling it out, may as well mitigate that pain right away. 

  18. That self directed Lincoln plan is good, but given that it is limited to specific areas, I’d always wonder how permanent such a plan is. If I were you I’d sleep easier knowing I had Vanguard and Fidelity available. Given the choice, I don’t see any reason to stray from those two.

    Security Benefit’s NEA DirectInvest is an elite 403b, but given the choice I’d bypass them in favor of a vendor that won’t actively steer investors towards other exploítative options. See Vanguard and Fidelity. 

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