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Everything posted by EdLaFave

  1. It sounds like you've got this under control, but for anybody else reading this thread: I documented the fees associated with Fidelity as well as the funds I would recommend for building a fully diversified portfolio with rock bottom expenses. I also wrote an Investing 101 page that explains the fundamentals of fund selection.
  2. In my view, the purpose of an emergency fund is to guarantee (within reason) that you'll always be able to cover unplanned expenses. Driven by that goal, this is what I did: When I first started out, I barely had enough money to cover an emergency. Therefore, I kept my money in a high yield savings account. As I saved more, I definitely had enough money to cover an emergency but if I lost half that money in the market then I'd be in trouble. Therefore, I kept money in a high yield savings account. Now that I have more than enough money to go through a cataclysmic market crash and still handle an emergency...well, I keep everything invested. I will never voluntarily put money into an asset class that has a low expected/guaranteed return. I just won't ever do it. Some people will cling to fear. They'll talk about the pain and suffering of selling stock for an emergency at a market "low". Well how reasonable is this fear? I invested my 10k emergency fund in 2010 and that block of money is now worth 36k. Had I let it grow at 2% for that time (a very generous interest rate that wasn't attainable for each of those years) then I'd only have 12k. As you can see, even in this supposedly doomsday scenario of a 50% market drop, my stock emergency fund is still worth 6k more than the savings account emergency fund. Aside from fear, this is just another example of how "mental accounting" hurts you. Money is fungible and when people start to mentally put chunks of money into "boxes" for specific purposes, they often make mathematically inferior decisions. Still, whatever helps somebody sleep at night, good for them. As a general rule of thumb, I put my asset class with the highest expected returns in my Roth account. In practice this means I will never hold bonds in my Roth account. So the question becomes, should I put domestic stock or international stock in the roth? I don't know. I was too lazy to do the research to see if US stocks have a higher expected return or not. I know for sure that International stocks have lagged US stocks for well over a decade now. I also know international stocks have much lower P/E ratio, which would normally indicate higher returns in the coming years. So who knows? Ultimately, I decided to keep international stock in my taxable account because doing so gives you a tax credit. Unfortunately international funds are also less tax efficient than domestic funds so I'm not even sure if that pays off. But, since I made that decision, I put domestic stock in my Roth. ...I think the main take away for you is, just make sure bonds aren't in your Roth account. If you want your Roth to be all domestic, all international, or a mix...you'll be fine. Just pick something and stick with it.
  3. I enrolled my ex-wife in this plan around March of 2017 and we haven't noticed any other fees (trust me, we've been looking for them). I'm feeling too lazy to dig into this right now, but there might be a 0.01% 12b-1 fee added on top of each fund. I have a vague memory of this being the case, but I couldn't find it in 15 seconds of looking so I gave up. Honestly, that's how I feel about every product or service I buy. You're right to be paranoid/untrusting when it comes to anything in the financial industry so I'd like to encourage that instinct. In this case the incompetence you're seeing is likely because: 1. The customer reps are poorly paid and unskilled. 2. The customer reps are likely only trained on the products that generate revenue for Security Benefit. Please push for Fidelity and Vanguard. The ease of enrollment there will result in more people signing up. It's okay that we have different views on this, but I do acknowledge the reality that some people will want to pay in order to not rebalance themselves. I just want people to make an educated decision on what that convenience is worth to them. In this case it'll cost an extra 0.29% to buy a single fund-of-funds at Aspire than it will cost to buy the three fund portfolio at NEA DirectInvest. Let's assume 6% annual returns and 3% inflation. After 1 year that extra fee will consume 10.7% of inflation adjusted profits. After 30 years that fee will consume 14.25% of inflation adjusted profits. Rebalancing takes maybe 30 minutes per year. It's a personal decision whether or not that convenience is worth it.
  4. What information are you trying to get? I can't remember if I dealt with a "plan number" or not. I do remember when I researched TIAA they looked up my school district, gave me a plan number, and then I could enter that plan number into their website to see the funds available in my plan. Certainly the district/TPA know the plan number associated with their relationship to Security Benefit. Similarly, Security Benefit must know it to and be able to look it up given the school district's name. So yeah, keep pushing. Good luck.
  5. Let me save you some time. Read the page where I ranked the best vendors available in Florida (a great proxy for the nation as a whole). You're right about Aspire, I documented them here. You'll find that Security Benefit's NEA DirectInvest is better than Aspire. I documented that plan here. Finally, you'll find that Vanguard and Fidelity are the best. Vanguard is documented here and Fidelity here.
  6. If Vanguard is the standard for a fair advisor then they'd charge you 0.30% and put you in either a three fund portfolio or a single fund-of-funds. So we're talking about a total expense of 0.36% - 0.46% or so? This other advisor is charging 0.3752% and they're using funds that cost around 0.9%. So thats a total of 1.2752%, which is more than 3x as expensive. Then to add insult to injury they're charging 5.5% sales commission every time shares are purchased. It should be criminal.
  7. I can't stress this enough, paying even $1 to a financial advisor is an absolute waste of money and using a financial advisor sets the stage for you to be taken advantage of. Having said that, if you're trying to figure out what a "fair" price is, Vanguard charges 0.3% for their "Personal Advisory Service." Security Benefit's NEA DirectInvest is an elite 403b plan that I documented here. For a variety of reasons, Vanguard and Fidelity are better, but this is an objectively elite plan with rock bottom fees and the ability to build a fully diversified portfolio. If they can max out their 403b then investing the remaining money in Aspire's self-directed 457b is a great idea. I documented that plan here. It would be nice to get Vanguard added because they'd provide some competition to NEA DirectInvest, but the plans are comparable. However, it would be a real benefit to add Fidelity to compete with Aspire's 457b, there is an opportunity for some real savings there.
  8. No problem. Please try to educate your coworkers. We need more people willing to speak up on this issue. That's exactly why I don't have a single fund-of-funds. However, be psychologically prepared to maintain your asset allocation: If international is lagging domestic (as it has been doing for a very long time), you'll be pumping new money into that instead of the high performing domestic. If stocks are crashing, you'll be pumping new money into that instead of your steady bonds. You need to be able to always buy what seems to be doing poorly, sometimes terribly. That's how this works. If you read the links I posted earlier then you know enough to get going. You can always learn more, but it won't change the core fundamentals: Lower your spending as much as possible without impacting actual happiness, which is different than the fleeting happiness you get from a useless purchase. Invest as much as possible in low cost, total market index funds. Know that bonds reduce expected returns, but based on your personality, you may need them to keep yourself from making disastrous investing decisions. Once you pick an asset allocation, stick with it unless your life circumstances change. Market crashing? Do what you were doing before. War started? Do what you were doing before. Read some business news? Do what you were doing before. Friend bragging about the millions they've made in bitcoin? Do what you were doing before. Max out your tax advantaged accounts (IRA, 403b, 457b, HSA, etc.) before investing through a taxable account. There's lots of information to learn beyond those 5 points, but this will get you to the promised land. Everything else is either useless or a mere optimization. There may be some confusion (maybe I need to write a blog post on this): At the highest level there are two different types of accounts: taxable and tax advantaged. As the names imply, tax advantaged accounts receive tax benefits that a taxable account does not. Tax advantaged accounts have yearly contribution limits and/or income restrictions. Examples of tax advantaged accounts are IRA, 401k, 403b, 457b, HSA, etc. Tax advantaged accounts often come in two flavors: Roth and Traditional. Regardless of what type of account we're talking about Taxable, Traditional 401k, Roth IRA, etc. you're allowed to purchase investments (stocks, mutual funds, etc.) within those accounts. Having said that, we've spoken extensively about Roth vs Traditional on this form. Nobody can definitely say if a Traditional is better than a Roth because it relies on future information we don't have and information specific to each person. However, I feel entirely comfortable predicting that the majority of people, in most cases, will be better off using a Traditional account rather than a Roth. I consider this to be an optimization. If a teacher has a pension that increases the appeal of using a Roth. If a teacher won't be getting social security that increases the appeal of using a Traditional. If you want to get into Roth vs Traditional discussion just say the word and we can.
  9. If I were you I'd prefer to get this information from your district or the TPA (Third Party Administrator) that your district is using. You're going to have deal with these people anyways. 403bcompare may or may not be up to date and it definitely doesn't list anything about your 457b options. I don't know what the CTA Retirement Savings Plan is, but I don't know of any vendors better than Vanguard and Fidelity (maybe a state run 457b can occasionally compete, but I'm not sure and I don't think California's can). This may be the easiest course of action: Establish an account with Vanguard. Redirect new contributions to Vanguard. Rollover the Invesco account to Vanguard. If you begin by stopping contributions to Invesco then you'll likely miss out on 403b contributions for a few paychecks. To compensate for that you'll have to artificially inflate your initial Vanguard contributions and then go back and change it to a sustainable level later. It is important that you get as much in your 403b as possible. You haven't said how much you're contributing. Remember you can put 6k in an IRA, 19,500 in a 403b, and another 19,500 in a 457b. If you're not investing more than 6k then it is probably quite a bit easier to not worry about making new contributions to a 403b or 457b. It is in your best interest to kill whatever instinct is telling you to pay other people to manage your money. They'll inevitably put your money in their pockets. Please read my Investing 101 page. That'll give you the fundamentals in an easy to understand, condensed way. Then read my Vanguard page. That'll tell you how to apply those fundamentals. Then come back and ask questions. ...again, kill that instinct.
  10. Krow is right, step 1 is to enumerate all of the vendors your district has approved for 403b and 457b plans. If Vanguard or Fidelity is on either list then you’re in great shape. If not, we can go from there.
  11. I believe you're missing the point. Let's just assume it is a good idea to treat your Roth IRA as a savings account. It is still sub-optimal to hold your bond allocation in your Roth IRA. Your asset with the highest expected performance should be put in the Roth IRA because the (hopefully) larger growth will be tax free. I would argue vigorously against treating certain accounts differently than others (like imagining that your bonds represent an emergency fund), but again, let's put that argument aside. If you wanted to only use bonds for your emergency withdrawals then it is easy: 1. Hold bonds in some other account (say your Traditional 401k). 2. Hold stocks in your Roth IRA. 3. Sell 10k of stocks in your Roth IRA. 4. Exchange 10k of bonds in your other account for stocks. You've effectively sold 10k worth of bonds and your Roth IRA is enjoying the benefit of containing your highest expected performer. Again, this is mental accounting that just doesn't hold up to math. Your portfolio is the summation of all of your accounts and it should match your expected risk tolerance. Anything you do to get away from that is a mistake. The only potential exception I'd make to this is if your portfolio is so small that unexpected expenses combined with a downturn really would wipe you out. But in that case your ability to take risk is so small that your portfolio should effectively be all bonds...which would mean you aren't jumping through the mental hoops that the "bucket" system demands.
  12. It looks like the US market was up just shy of 31%. That is a great year any way you slice it. We may or may not hit a bear market soon. However, I'd like to add some context to the implication that great returns point to us potentially being on the cusp of bad news. We've broken the 20% mark 3 times in the last 10 years and one of those times, 2013, was even better than this year. 2017: 21.19% 2013: 33.51% 2009: 28.76% The bear market will eventually happen, but as they say, more money is lost preparing for bear markets than going through actual bear markets! ...it's also worth noting that the following years have tempered the explosive growth that we've seen in the years mentioned above: 2018: -5.17% 2015: 0.4% 2011: 1.08%
  13. I would love to see it. At this point I'm waiting for a negative expense ratio that'll pay me to own the fund. The notion seemed ludicrous until a few years ago when I heard about central banks keeping interest rates below 0. So who knows?
  14. I'm legitimately sad there won't be any more to watch. I know he basically said the same thing every time, but what a pleasure to listen to. That's exactly right. Nothing wrong with holding a total market ETF for decades.
  15. Thanks for the link, that was interesting to read.
  16. I've listened to interviews where Bogle (after stepping down from Vanguard) gripped about some of Vanguard's offerings. I believe I've heard him complain about sector funds, ETFs, and investment strategies like focusing on small cap value stocks. So I made the assumption that a lot of those things were added after Bogle stepped down as CEO in 96 and as chairman in 99. Maybe my assumption is wrong, but that would make his complaints a bit more confusing? Yeah, I just meant they're not going to be able to win on price. Just to quantify the differences: The domestic ZERO fund is 4 basis points cheaper and beat Vanguard by 35 basis points. The international ZERO fund is 11 basis points cheaper beat Vanguard by 16 basis points. I'm told Fidelity made their own index, which means they don't have the expense of paying to use an existing index. I like that idea quite a bit. I'm guessing everybody does securities lending, but maybe there are differences in how each fund/institution implements it?
  17. I believe Vanguard has committed to the principle that each fund must generate the necessary income to sustain itself. In other words, you can’t have a “loss leader” that is subsidized from another income source. I’ve heard this argued as the reason Vanguard will never be able to compete with Fidelity’s ZERO expense funds. ...all of that is to say, the expensive Vanguard funds aren’t necessary to have the cheaper Vanguard funds. Plus I don’t think they had all that stuff when Bogle was running the show, which proved it isn’t necessary.
  18. An absolute collective failure of financial education/literacy. If you believe in that silly anecdote about selling stocks when your shoe-shiner begins to talk about stock tips, then I guess you don't need to worry yet?
  19. This mildly irritates me. I'm not currently willing to switch to ETFs, but doing so would save me 2 basis points on international and 1 basis point on domestic. In reality, I'm growing increasingly likely to switch over to Fidelity's ZERO funds (FZROX and FZILX) in order to save 11 basis points on international and 4 basis points on domestic. At the very least, I think I'll make this switch in my tax advantaged accounts because it'll easily let me switch back without tax consequences if the funds are ever eliminated or modified in a way I don't want. I believe the late, great Bogle disapproved of Vanguard's move into actively managed funds, ETFs, and sector funds. I certainly am.
  20. I wish the article would have included the data on the actual current median age for retirement. It wouldn't surprise me if people's expectations are significantly optimistic.
  21. Why yes it can. I’ve been mentally preparing for a crash for a long time now, but we just keep going up and up! When it inevitably hits, I will pay the price for sure. I’m prepared in the sense that I’m counting on losing 50% of my portfolio multiple times before I die. It will be upsetting and if it happens soon then I will continue to work through the recovery. However the pain is all part of the long term plan and expectation that over 20+ years stocks will have higher returns. One thing I will never do is change course due to market conditions, but maybe we can commiserate when the pain hits!
  22. Krow has given you great guidance. I just wanted to throw in one extra bit of information about withdrawing money early from a Traditional 403b or IRA. Yes, if you take out money early, you’re typically charged a 10% fee. However, a lot of the time people ask about that, they’re thinking about how they’d pay the bills if they retired a little (or a lot) early. They wouldn’t want their money locked up. I won’t bore you with the details, but just know, in that situation you can access the money without paying the 10% fee. When I chose between a 457b and a 403b, I did so on the basis of expenses because I personally found the differences in the withdrawal rules to be inconsequential, which isn’t to say that you shouldn’t consider those differences.
  23. I haven’t analyzed these situations yet because they’re just a bit too far in the future for me, but I did want to point out one thing... I assume they define “actuarial neutral” based on the expected returns of the investments underlying the pension and the average employees lifespan. However, if you would use that income to invest in a portfolio with a risk profile that differs from the pension, then what is neutral for them will not be neutral for you. Make sense? I don’t have an answer, just a thought to consider. If it were me, I’d build a spreadsheet that shows how my portfolio would look year-by-year, in inflation adjusted terms, for each scenario I was considering. ...I just realized this is an old post. I think my original reply was better in terms of detail.
  24. I don't believe Vanguard offers a 457b, which is why Fidelity is clearly the best 457b in the nation. I'm not sure how you're defining convenient in this context, but keeping the same allocation in every account is unnecessary and leads to additional complexity and fees. If you were to stop contributing to one account and its allocation falls out of line with your overall desired allocation, then you would simply adjust new contributions to the other accounts accordingly. I have a spreadsheet that keeps track of what I have in all of my accounts and generally tells me "if I contribute an additional $A then $B of it should go to domestic stock and $C of it should go to international stock." It is really easy. This approach is very likely sub-optimal in terms of taxation. You want your assets with the highest expected returns to be in accounts with the lowest tax liability (i.e. your Roth account). Ideally your Roth IRA would have at least 2x what you'd want for an emergency fund. That would allow you to hold stock in a Roth and even in a huge crash (50%) you'd still have the necessary money available in your Roth IRA. In that case you could hold your bonds in another account like a Traditional IRA and if you ever removed stock from your Roth IRA you could simultaneously exchange bonds in the Traditional IRA for stocks, so it is as if you're selling bonds. However, the idea that you should hold bonds for your emergency fund is another game of mental accounting that gets you into trouble. Your portfolio should have an overall percentage of bonds such that you don't do something foolish and you can sleep at night. That percentage should be constant. If you only sold bonds during an emergency then you'd be making your portfolio more risky in a time of emergency. That isn't how asset allocation should be handled. Also, I would be extremely hesitant to give up tax-advantaged space for an emergency fund. I haven't done the math, but I'd be far more inclined to diligently tax loss harvest in my taxable account and later on be able to apply those losses to selling taxable shares to cover an emergency or even sell the most recently purchased taxable shares (i.e. shares with minimal gains or potentially shares with a loss) to cover an emergency. I haven't done the math, but my intuition suggests that is optimal.
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