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EdLaFave

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Everything posted by EdLaFave

  1. EdLaFave

    Beginner..

    As Krow said, go with Fidelity. I documented their plan (fees and funds to use) here.
  2. EdLaFave

    Beginner..

    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.
  3. 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.
  4. EdLaFave

    Help!

    Security Benefit’s NEA DirectInvest is your lowest cost option; it’s an elite 403b plan. I documented the plan and the funds you can use to build fully diversified portfolio.
  5. Please ask questions. A 457b is virtually identical to a 403b. They have slightly different rules, for instance it is easier to pull money out a 457b. However, it is generally wise look at fees when choosing between a 457b and a 403b and use the slight differences between account types as a tie breaker. In 2020 you can contribute $19,500 to each account, more if you're old enough and therefore qualify for "catch up" contributions. Well, you might have better approved vendors in your 457b, but your district may not allow you to have a 457b. I'm not sure what you mean by that, but here is some info to get you started. Tax advantaged accounts (IRAs, 401ks, 403bs, 457bs, etc) are allowed to grow tax free (i.e. distributions/dividends aren't taxed and you can exchange funds with profit without paying tax). However, when and how tax is paid is determined by whether it is Roth or Traditional. Taxable accounts on the other hand do not receive this tax benefit at all. If you put $1 into a Roth account, it is tax right away and then grows tax free. After 30 years it looks like this: $1 * (1 - Highest Marginal Tax Rate When You Earned The Dollar) * (1 + Average Yearly Return) ^ 30 years If you put $1 into a Traditional account, it grows tax free and isn't taxed until you withdraw it. After 30 years it looks like this: $1 * (1 + Average Yearly Return) ^ 30 years * (1 - Marginal Tax Bracket The Withdrawn Dollar Falls Into During Retirement) As you can see these equations can be reduced to: Roth = (1- Highest Marginal Tax Rate When You Earned The Dollar) Traditional = (1 - Marginal Tax Bracket The Withdrawn Dollar Falls Into During Retirement) So the end goal is to have enough money in traditional such that every dollar you withdraw falls into a tax bracket that is less than or equal to your highest marginal tax rate when you were working. As long as you can do that, and most people easily can, then you'll get a larger tax benefit from traditional than roth.
  6. Option 3: All of the above. Of course it is appealing to me, but it doesn't mean I don't want it lower. As krow pointed out Fidelity beats them in both the admin fees and the expense ratio fees. Security Benefit's NEA DirectInvest charges a $35/year fee. As long as we're talking about somebody who is saving a good deal (let's say maxing out their 403b) then these admin fees in the 10s of dollars are trivial and I'd focus on the other fees.
  7. I don't have a detailed breakdown of every vendor on that list, but I'm pretty confident that none of them are good. On the blog portion of my site, I wrote about adding Vanguard and Fidelity to the OCPS (FL) list of approved vendors. I'd encourage you to follow in my footsteps. In the meantime, does your district not allow you to contribute to a 457b plan? If not, you should push them to allow that. I'll never understand why so many people seem to think a Roth IRA is the fallback to a Traditional 403b. The decision to invest in a Traditional or a Roth should be made independently of whether it is in a 403b or an IRA. It is almost always the best decision to max out an IRA before contributing to an employer sponsored plan like a 403b. The reason for this is that IRAs are essentially guaranteed to be lower cost, have more options, and give you total control (i.e. the employer can't wake up one morning and prevent you from using you preferred financial institution). A couple rare cases where you might give preference to the employer sponsored account: Suppose you're saving enough to max out an IRA and still contribute to an employer sponsored plan. Further suppose the employer sponsored plan reduces/waives fees if you exceed a specific balance (like the $35/year admin fee NEA DirectInvest waives when you get 50k). In that case you're already guaranteed to pay the "fixed" fees (like the $20/year fee Fidelity charges) associated with the employer sponsored plan (since even if you maxed an IRA, you'd still be putting money in the plan). Therefore, it may be in your best interest to contribute everything to the employer sponsored plan to get the fee reduction and then go back to maxing out the IRA. If you expect to do backdoor Roth IRAs some day then putting money in a Traditional IRA account can reduce the effectiveness of a backdoor Roth IRA. Maybe other corner cases exist?
  8. Don't forget about 457b plans. Your district has somebody who is in charge of retirement plans. At OCPS (FL) it was the "Retirement Services" department. You need to figure out who is in charge and ask them. You may reasonably think that this department is running the whole show, but they often outsource most of the work to a Third Party Administrator (TPA). The TPA should also be able to tell you who the available vendors are. In the case of TSA Consulting Group (an infamous/common TPA) they post the vendors online, here is a link to the OCPS (FL) vendors as an example. Whatever your version of "Retirement Services" is, they should supply you with the necessary forms. You open a 403b account with a specific vendor (approved by your district), so by definition you must pick a vendor first. You fill out a "Salary Reduction Agreement" with your district to give them permission to direct a portion of each paycheck to the 403b account. Whatever your version of "Retirement Services" is, they should supply you with the necessary forms. You don't pick the TPA, the district does. Whenever employment ends, you have the option to roll the 403b account over to a new employer's 403b vendor or to your own IRA account. Remember, your district may not have approved Vanguard or Fidelity. In that case you can pick the next best vendor as your push your district to add Vanguard and Fidelity.
  9. You should search the forum for the NYS 457b discussions. I can't remember their exact fee structure, but I think it is better than Aspire and worse than Security Benefit's NEA DirectInvest.
  10. Not exactly. Yes, you'll avoid the ongoing, day to day fees like high expense ratios or AUM (assets under management) fees. However, 403b and 457b vendors are notorious for discouraging you from leaving by charging fees to do so. The most notable such fee is called a surrender fee where you have to give up a percentage of your account to leave. Read the AXA page I wrote here.
  11. I assume: The transfer out fee applies when you close the account and move the money elsewhere. The loan application fee applies if you were to take a loan against your 403b; don't do that. The distribution fee applies when taking money out of the 403b. If you were to go with Aspire, the 0.15% fee they charge on top of the mutual funds' expense ratio should be more than enough motivate you to roll that money over to an IRA when you retire. Therefore, I assume the only relevant fee here is the $75 transfer fee. NOTE: Ethical vendors like Vanguard don't charge you distribution fees for IRAs.
  12. I documented AXA here. I documented Fidelity here. You'll see the fee difference along with fund information.
  13. krow has provided great information. I enrolled in Security Benefit's NEA DirectInvest. I documented the plan here. I documented the paperwork I filled out to enroll here. I was able to get Vanguard and Fideilty (the two best vendors) added to my district. I'm happy to help you if you'd like.
  14. It is a verifiable fact that in the past people have seen better results with portfolios that disproportionately invest in small caps. Although as Bogle pointed out in one of his books, literally every investment scheme people preach is guaranteed to work well with prior data. If these schemes didn't backtest well, it would be quite difficult to sell something that's been a historic failure. The argument Bogle goes on to make (and I agree) is that the overperformance in particular asset classes or investment approaches is likely due to one of two things: Pure random chance and we're seeing a pattern where one doesn't exist (something that humans are notorious for, think of how many shapes you can see in clouds for example). A strategy that wasn't lucky, but worked in the past due to conditions that are no longer present or explainable.
  15. Offer your opinions all day long. If you find incorrect data or faulty logic in my posts then point it out and I'll happily concede and update my world view.
  16. By definition the total market index doesn't tilt toward anything. It invests based on market capitalization. If you tweak that by adding a small cap fund then you're adding a tilt rather than correcting a tilt. I can always find specific funds or asset classes that outpaced the total market index (diversification vs concentrated risk). Past performance doesn't predict future performance. This line of thinking is literally representative of the argument between index vs active. Still, your statement doesn't provide an accurate representation of the past. If you use morningstar to chart small cap vs the total market you'll find that there are relatively small periods of time where the small caps really outperformed. I think most of the time small caps were coming out tied or behind (but I stopped looking at historical data around the 90s), but thanks to that period of overperformance (depending on when you invested) you may have come out ahead. Although the total market has dominated the last decade, especially recently: 2019: 30.84% vs 27.35% 2018: -5.17% vs -9.33% 2017: 21.19% vs 16.24% 2016: 12.68% vs 18.26% 2015: 0.4% vs -3.68% 2014: 12.58% vs 7.54% We can cherry pick specific time segments when small caps won or lost relative to the total market index. Bogle never heard persuasive evidence for why small caps would predictably outperform in the future (i.e. the market currently undervaluing them and then correcting) and he discouraged people from tilting; so do I. However, the main point here is that if you're going to tilt then you need to know you will have years/decades where it doesn't go your way and if you can't stick with your plan for life then you're very likely to come up a loser. Again, it depends on what time frame you're looking at. By definition a diversified portfolio will always have winners and losers. This temptation to eliminate the losers is how you move away from diversification and start pumping money into assets that are at their peaks while pulling money out of assets at their lows. Although tempting, this is usually a disaster. We all have to accept that we can't predict the future and we see patterns where they don't exist. The point of my post was to highlight that the total market fund is not over or under invested in anything. If you build a portfolio that is over or under invested in something then you are placing a bet. You're saying that the market currently has something (small cap) valued at Z% and you think that the market is going to "correct" this "undervalued" asset and shift to Y%. That's a bet. As I said as long as somebody makes this bet in moderation, uses low cost index funds, and sticks with the strategy until death, then I think they'll basically be fine. This is particularly true when the bet is on something as broad as small cap companies as opposed to something as narrow as Snapchat. However, don't fool yourself into thinking your not making a bet or you're correcting an unbalanced total market fund.
  17. Keep us posted. I hope my cynicism is proven wrong.
  18. I'm confused, is somebody pointing to this bill and telling you the problem has been solved? Why can't you just point to the glaring problem in front of us today to prove there is a problem? We already know districts prevent employees from picking the vendor of their choice.
  19. These are the same people who fought and defeated the fiduciary rule. Best of luck, fight the good fight. In my view, the only path forward is removal from office. Persuasion isn't an option because being "business friendly" is core to their beliefs. Pressure isn't an option because teachers don't really care. I'd love to be wrong.
  20. I am curious, but not curious enough to read the bill. Everything I know leads me to believe that some combination of the following will allow school districts to maintain their list of approved vendors: Exceptions in Subdivision 8. Exceptions in Subsection B. The definition of a qualified investment product. The registration process under Section 8A. It looks like there are lots of loopholes here. If you get to the bottom of the text, I'd love to read your conclusions.
  21. I've got really bad news for you that I'm sure you're fully aware of. Texas Republicans are always going to side with financial institutions over workers. I guarantee it. ...although I don't know what is in HB2820/HB2020 (not sure which is right, you used both).
  22. Just to add clarity for other people reading this... A total market fund (like VTSAX) invests in large, medium, and small companies based on the share of the US market that those companies represent. One point of nuance...this split isn't based on the sheer number of companies (there are far more small companies than large); it is based on the value of companies (large companies are far more valuable than small companies). So if Apple is valued at 3% of the entire US economy then 3% of a total market fund will be invested in Apple. Similarly, if Small Company ABC represents 0.000000000001% of the US economy then 0.000000000001% of the fund will be invested in Small Company ABC. Therefore a total market fund's investment in small companies is exactly equal to their value in the US economy (roughly 5%). If people buy additional funds with a focus on small companies, they're doing something referred to as "tilting," which is a fancy way of saying they are betting that small companies are undervalued and they believe a period of over-performance (relative to medium and large companies) is on the horizon. Said another way, this is a form of market timing and prediction, which is something I highly discourage. The bet may or may not pay off, whose to say? Although I wouldn't go down this road, I don't think it's terrible as long as you stick with it forever and only use low cost index funds to implement it.
  23. I don't have a definitive answer. I've never heard of this and all of my experience tells me that 403b contributions (with the employee's money) are purely voluntary. So I think she has the choice, but I can't say that for sure. If we assume she has to put the money into a 403b, then I'm not sure why it would specifically have to be Voya. Unless Voya is the district's sole 403b vendor? Another reason to doubt that she has no choice, what would happen if an employee had already maxed out their 403b? As others have said, she can roll it over into any IRA of her choice. However, if the money has to first enter the 403b, make sure you figure out the surrender fees. If the contribution is left in cash as opposed to buying mutual funds, do any potential surrender fees get waived? Do the surrender fees get waived no matter what when employment is terminated? Do the legwork to try to avoid this potential fee. If you assume she doesn't have to pay a surrender fee then having the money go into a tax advantaged account (like a 403b) provides maximum flexibility. You can then choose to pull the money out and pay tax on it (as you would if it were paid to you directly) as well as potential IRS penalties depending on your circumstances or you can let it stay in the account and enjoy the tax benefits.
  24. "Equities" is a fancy way of referring to stocks. Similarly, "securities" is a fancy way of referring to any financial holding (stocks, bonds, etc.). ...every subculture seemingly has to invent their own terminology if for no other purpose than to keep people from joining the club. Don't worry about it.
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