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Everything posted by EdLaFave

  1. Thanks everybody. This market has been insane! Now that I hit this milestone, I think I'll go back to not peeking for the next year or so...I don't even want to know how many times I'll have to recross this threshold. Not so fast my friend! I got taken to the cleaners by Schwab, Merrill Lynch, and then individually selected actively managed funds. I touched the proverbial stove three times before I did my own research. I hope others learn from that lesson. I can just imagine that pain. Absolutely brutal. No kidding. I got into the housing market at the bottom of the crash. My entire investing career has been one giant bull market. I managed to graduate with degree that is highly valuable nowadays and wasn't affected by the financial crisis. Lots of luck went into this and as always, I'm mentally bracing for the inevitable crash.
  2. Hey Steve, I think you'd benefit from reading my Investing 101 page here. Your goal is to own the entire stock market (international and domestic), that gives you diversification. Your goal is to own enough bonds so that when stocks crash, as they inevitably will, your portfolio doesn't drop to a level so low that you can't sleep or you do something foolish, that gives your protection from yourself. Your goal is for your portfolio to have rock bottom costs, that gives you maximum returns. To achieve those goals you have three options: Build a 3 fund portfolio (VTSAX, VTIAX, and VBTLX). Buy a target date fund (contains those same funds under the covers, but increases your bond holdings over time). Buy a life strategy fund (contains those same funds under the covers, but keeps the bond holdings constant over time). Here are the rules: If you didn't spend your entire paycheck on living expenses, immediately invest the rest. When you make a new investment, buy the funds that move you back to your desired asset allocation. Notice: Neither of these rules require you to know what the market is doing or what your funds are doing (hint: they're performing exactly in line with the market). Bonus: If you went with a LifeStrategy or TargetDate fund then you don't even have to concern yourself with Rule #2 because the fund will do that for you! Subtext: Give up the wildly incorrect belief that you can use past performance data or current events to predict the market. Stop it! See rule #1 above. Buy stock every paycheck, no exceptions. They're managing the fees they extract from you to fund their lifestyle. Nobody can predict the market. Fund managers sell people on the notion that they can pick the best stocks. Advisors sell people on the notion that they can pick the best fund managers and pick the best time to switch back and forth between stocks and bonds. Nobody can predict the market. Nobody is looking after your account. The "advisor" really serves two purposes, to give you the illusion that somebody smart is protecting you and to give you somebody to blame when you lose money in the next bear market. Neither purpose leaves you with more money. You can handle it. Own the entire market, own enough bonds so you don't do something foolish, and stick with your plan until you retire (no exceptions for market conditions or the latest BitCoin fad). You should not use an advisor because of fees and their proclivity for market timing. There are vendors other than Vanguard that offer really low fees (Fidelity for instance), but unless you go with a self-directed account (i.e. no advisor) then you're going to get killed on fees. ...in this post I've really only given you the conclusions, but I'm happy to give you the underlying data, logic, and philosophy behind these conclusions.
  3. My portfolio exceeded a million dollars for the first time today! Combine that with the equity I have in my house and I should be able to rely on a 3% withdrawal rate to safely live out the rest of my days without having to earn another dollar or be directly dependent on anybody else. Thirteen years ago when this all began, I imagined I'd be joyful and celebratory, but I'm far more ambivalent. I'm just really tired; the grind has absolutely taken its toll. It has cost me relationships and in many ways it has done its very best to disconnect me from the things that make me human. On the happier side, I recognize how lucky I am to have the opportunities I have in front of me. I suppose I'll spend the rest of the night reflecting on just how awesome that is. I almost can't believe this is real. ...I'll largely keep this story to myself, but posting it on the internet is a really nice release.
  4. That admin fee places the state run 457b behind elite plans like Vanguard and Fidelity 403b/457b, but ahead of mid-tier plans like Aspire and miles ahead of bad actors like AXA, PlanMember, etc.
  5. What district are you in? Your state run 457b is here apparently you can call 877-644-6457 for help. The funds and fees are listed here. You can build a fully diversified portfolio with these three funds: Vanguard Institutional Index (0.02% net expense ratio) Vanguard Total Bond Market Index (0.03% net expense ratio) Vanguard International Index (0.07% net expense ratio) Or you can use their target date funds ("LifePath"), which have the exceptionally low expense ratio of 0.06%. I couldn't find any other fees and if there aren't any then this is an exceptionally great plan to invest in.
  6. As long as the receiving 403b vendor is on your district’s list of approved vendors, then you can absolutely transfer money from another 403b into it. Doing so is common, so I’m surprised by the reaction you got.
  7. I believe this is what you need https://www.aspireonline.com/docs/default-source/form-library/403(b)(7)-application-and-agreement.pdf, but I'm not sure if a different form is needed for the self-directed because this paperwork talks about an advisor. Let us know when you figure it out.
  8. If you were in OCPS then the worst case scenario (which you probably aren't in) would cost you 6%, which equates to $4,200. However, I'd have to know more about how they assess surrender fees and the particulars of your specific account. I believe in Orange County (FL) AXA will charge a 6% fee in you pull money out in the first five years, 5% for the sixth year, 4% for the seventh year, and so on. However, I don't know exactly how they apply that time measurement, there are a few possibilities: It could be based on when the account was opened. So regardless of when each contribution was made, when the account exceeds the 10 year threshold the surrender fee drops to 0%. It could be based on when each contribution was made. So a contribution you made 11 years ago would be subject to a 0% fee whereas a contribution you made today would be subject to a 6% fee. ...but even if it is on a per-contribution basis it is further complicated: Do they let you specify which contribution you're cashing out? Do they force you to withdraw the most recent contribution first (and therefore pay the highest fees)? If you own mutual funds in the account then there is something called a "distribution", in most cases that distribution is automatically reinvested by purchasing more shares. Would those reinvestments be treated as a brand new contribution and start at the beginning of the fee schedule, year 0, 6% fee? How is profit/appreciation treated? Could you pull out the profit and pay 0% fees because you haven't touched the original balance? There are just so many possibilities for how they've specifically implemented this fee schedule and because of that I can't give you a definitive answer. Personally this is what I would do: Immediately redirect new contributions to a low cost plan. Understand that the annual fees of AXA are so high (the management fee alone is 0.9% and the fund fees range from 0.61% – 1.45%) relative to what you get if you average the 6% surrender fee over the full ten year window (it comes to 0.6%/year if you don't account for the opportunity cost of not having that upfront fee invested in the market). So the back of the envelope calculation suggests it may be in my interest to pay the surrender fees because they're low relative to the annual fees (again the opportunity cost of being invested in the market is an unknown). However, perhaps there is room for optimization. For example, if your surrender fee would drop from 1% to 0% tomorrow then you would clearly wait to rollover those funds, but if it wouldn't drop to 0% until Dec 1, 2020, then you would roll it over now. Spend a minimal amount of time trying to figure out the exact details of the AXA surrender fee schedule so I could optimize my withdraw strategy and spend a little bit of time with the more accurate detailed equations I laid out above. If I can't get a clear picture, then just pull everything out and be done with it. If I can get a clear picture, then optimize my withdrawal strategy.
  9. Well this is my opinion: It is worth explicitly stating that this back of the envelope calculation is an oversimplification. I pretended as if you "owe" AXA 1% every year after the rollover and I picked that number because every year the AXA surrender fees drop by 1%. However, as we all know you wouldn't be paying AXA that 1% each year, you'd have to pay in full up front. Let's try to bit a more accurate and look at the worst case. Pretend you literally just dumped all your money into AXA and all of it faces a 10% withdraw penalty. Staying at AXA Forever 1 year = Principal * (1 + market return - 1.75%) 2 year = 1 year * (1 + market return - 1.75%) ... N year = N-1 year * (1 + market return - 1.75%) Leaving AXA Now 1 year = Principal * (90%) * (1 + market return - 0.063%) 2 year = 1 year * (1 + market return - 0.063%) ... N Year = N-1 year * (1 + market return - 0.063%) Leaving AXA After 1 year 1 year = Principal * (1 + market return - 1.75%) 2 year = 1 year * (90%) * (1 + market return - 0.063%) 3 year = 2 year * (1 + market return - 0.063%) ... N Year = N-1 year * (1 + market return - 0.063%) Leaving AXA After 2 years 1 year = Principal * (1 + market return - 1.75%) 2 year = 1 year * (1 + market return - 1.75%) 3 year = 2 year * (90%) * (1 + market return - 0.063%) 4 year = 3 year * (1 + market return - 0.063%) ... N Year = N-1 year * (1 + market return - 0.063%) ...and on and on the pattern goes, you could do the same math to see what things look like each year for "Leaving AXA After N Years". This kind of thing is what spreadsheets were built for. Somebody should make a spreadsheet and report back the results, I'm going to predict leaving right away is the superior option.
  10. I'm not sure about 403b to 457b rollovers, it wouldn't surprise me if that isn't allowed, but I don't have the time to google it. If not she could rollover the 403b to either NEA DirectInvest or Aspire. Then for new contributions she could choose between those two 403b plans and the state 457b. She is lucky she has good options 🙂
  11. Adrienne, I documented Aspire here and I documented Security Benefit's NEA DirectInvest here. Using NEA DirectInvest you can build the same diversified portfolio but you'll save roughly 0.145% per year in fees. If you assume a 6% return and 3% inflation, then that fee is enough to pilfer away 4.83% of your inflation adjusted profit after one year. As time compounds to 30 years it strips you of 6.33% of your inflation adjusted profits. You'd do fine with Aspire, but I would never voluntarily give up 5-6% of my inflation adjusted profits. Aspire has self-directed plans, which don't have advisors and they have managed plans which do have advisors. The only Aspire plan anybody should use is the self-directed plan. Really, the only plan anybody should use (Aspire or otherwise) is a self-directed plan. Again, I would recommend against Aspire because you have lower cost options. I documented the AXA plan here (that should help you get a grasp of the plan). I can't remember exactly how they handle their surrender fees. If you've had the account for a full 10 years then is all of it free of surrender fees, does the fee schedule apply to each contribution, does the fee schedule apply to each dividend reinvestment too? So the details are a bit fuzzy, but generally speaking, if I had a block (or all) of money whose surrender fee was set to drop by 1% in a couple months then I'd probably hold on until that happens. I'd gladly pay a 1%/year surrender fee to stop AXA from charging me 1.75%/year in order to get into Security Benefit NEA DirectInvest because they charge me 0.063%. The math is easy, if you stay with AXA you pay 1.75% and if you leave then you pay 1.063% (0.063% from NEA DirectInvest and 1% due to the AXA surrender fee). Since 1.063% < 1.75%, it is best to leave. I agree with Krow. I didn't do the work to see the additional fees the NY State 457b charges, but it is going to be quite similar to Security Benefit's NEA DirectInvest. A good tie-breaker is that the state 457b is ethical while SecurityBenefit (despite NEA DirectInvest being great) is an ethical nightmare. In 2020 you can contribute 19.5k to a 403b, another 19.5k to a 457b, and yet another 6k to an IRA. This is true regardless of who (Aspire for instance) these accounts are with.
  12. Vanguard is the easy choice, I documented their plan here. If you eventually max out your IRA and your Vanguard 403b then you'll have to start looking at 457b plans, but that is probably an issue for another day. I don't know the fee structure of Kades-Margolis, but I can safely assume it is more expensive than Vanguard. So I'd be VERY surprised if it wasn't in your best interest to roll it over to Vanguard. A load is just a sales fee that goes to the marketers that sold you that product. It is not indicitive of a better product. In fact, the best products (total market index funds) do not have loads. I discuss this and other fundamental concepts in my Investing 101 page here.
  13. I'll save the discussion on Roth vs Traditional (you're right that having a pre-tax pension is one factor that favors Roth investing). However, one thing a lot of fans of Roth IRAs seem to overlook is the fact that you're often able to contribute to 403b and 457b plans with a Roth as well. Just wanted to throw that out there. I'm assuming this pension prediction (91% of your salary) is based on the current state of the pension fund? A lot can change in 30+ years, but let's assume his assumption is gospel. In retirement the typical person is free of several expenses (kids, large house, retirement savings, etc) and then you can add SS income on top of that savings (although some teachers don't get SS). If I were guaranteed those savings and that income , I'd feel entirely comfortable living on just that. Therefore, my ability to take risk in my other accounts would skyrocket, but the advisor is acting as if the opposite is true. The logic just doesn't add up. Yes you should open a 403b or 457b with Fidelity or Vanguard. I documented the Vanguard plan here and the Fidelity plan here. You should pick an asset allocation (split between stocks and bonds) that you can live with, you should max out all of your tax advantaged accounts if possible (IRA, 403b, 457b, HSA, etc), and then you should invest in a taxable account. You don't need to do anything fancy, in fact doing so will probably hurt you. You can read my Investing 101 page here. If the market crashes when you go to retire then that's fine (clearly suboptimal, but fine) because you shouldn't be retiring until you have enough money to sustain such an event. Depending on how soon you retire and your preferred asset allocation, I'd personally feel comfortable with somewhere around 25x-33x annual expenses (and I won't be getting a pension). Of course people will tell you that by the time you're getting ready to retire you should shift to hold more bonds, which would offset a potential stock market drop...of course the other side of that coin is that switching to more bonds decreases your expected returns, which means you'll have to save up a larger portfolio before retiring, which means you'll have to work longer (the exact thing you're afraid of if the market crashes with a stock heavy portfolio right before retirement). Krow addressed this well already, but let me add a couple points: People fall into a logical fallacy where they imagine their money in boxes (IRA vs 403b) and then they treat those boxes differently. In reality, you should think of your entire portfolio as a single unit. Do all of the pieces add up to match your risk tolerance? If the target date fund matches your risk tolerance then great, you're good to go in both accounts. People often confuse complexity with effectiveness/diversification. The target date fund basically owns all of the publicly traded stocks and bonds (minor exceptions of course). Don't let the fact that it is a single fund obscure the fact that a target date fund is fully diversified. Don't let the fact that there are all of these exotic investments that you/everybody probably can't fully understand obscure the fact that a target date fund is incredibly effective. Advisers like to make you believe they can save you from the down side and capture the up side. It is pure fantasy. When the stock market crashes, we all suffer. When the stock market soars, we all celebrate. An adviser will however use your fear to put money into their pockets. Pick a bond allocation that will allow you to live through (sleep well, not make foolish decisions like selling or stopping contributions, etc) the several stock market crashes you'll face in life.
  14. Mike, if you can provide this info krow will have you covered.
  15. SS will still be there and the solutions to increase its solvency are so simple. Did you know wealthy people only pay SS tax on their first $132,900 of income? Complete solvency can be obtained by doing things like eliminating the absurdity of rich people paying a lower effective rate than regular folks and perhaps asking rich people to pay a higher effective rate like we do for federal income taxes. I hate the conventional “wisdom” that you should save % of your income. Often times is way too low and it gives people an excuse to not save as much as they can. You never know what life will throw at you, save as much as you can, reject materialism, and maximize your earning capability. How’s that for conventional wisdom?
  16. Just to restate the obvious, there are actually two questions at play: What types of accounts can 403b accounts be rolled into? We all know you can roll 403b accounts over when employment is terminated, but are there loopholes associated with simultaneously having multiple employers or simultaneously running your own business? The answers for #1 are obtained very easily. I'm not sure about #2. My gut tells me that you have to terminate employment regardless of whether you're working another job or running your own business. Please report back if you find a definitive answer. I suspect the answer may depend on the plans the district negotiated with the vendors...but I also think those agreements are pretty uniform across the country.
  17. I feel comfortable emphasizing fees because: I think everybody understands that the amount of money they save (or don't save) is critical. I think most people perceive excessive fees to be small because 2% isn't a "big" number, when in reality we know it steals more than half of your real investment returns. Fees are the #1 predictor of returns. The formula is simple: Invest in total market index funds with fees somewhere between 0% - 0.17% (roughly). Invest in international and domestic stocks (pick a split and stick with it). Invest in enough bonds so that when stocks go down you don't do something stupid. Reject consumerism and materialism. Take the excess money from each paycheck and buy more investments regardless of what the market is doing. Never sell until you need money in retirement. Reject the fantasy that you can predict anything in the short to medium term when it comes to the stock market.
  18. whyme is 100% correct. If you want to read just a little bit more about those very topics then check out the Investing 101 page I wrote.
  19. Fidelity is arguably the best plan in the nation, with Vanguard being the only competition. If I were in your situation, I’d absolutely rollover the existing 403b to Fidelity. I documented their plan here.
  20. It looks like you'll need to be in the top 5% of earners to hit this goal and if you're at the bottom of that window then you better live in a cheap part of the country. https://www.investopedia.com/personal-finance/how-much-income-puts-you-top-1-5-10/
  21. The phrasing around FIRE drives me nuts. Was hard work and sacrifice at play, maybe? Was there a bigger factor in saving a million dollars in five years? Absolutely, otherwise we’d have a lot more millionaires running around.
  22. Thanks Steve, I actually just emailed them today. Hopefully, I'll hear back soon.
  23. Just echoing the previous responses. I documented Security Benefit’s NEA DirectInvest plan here. I documented the specific steps I had to go through to enroll here. Blindly investing in something you don’t understand is a great way to be taken advantage of. So I’m going to assume you also want to understand investing. Please read the Investing 101 page I wrote and come back with some questions. It is a quick read that explains the heart of what you need to know, the only thing it doesn’t cover is the types of accounts that exist.
  24. This is the docile attitude that allows the 403b/457b mess to persist. One of the greatest Americans to ever live taught us very plainly that, "Power concedes nothing without a demand. It never did and it never will." OCPS (FL) didn't "want" to add Vanguard and Fidelity when I initially ask and they certainly didn't feel like they "needed" to. However, they relented when I refused to drop the issue. This is just how power dynamics work. If you're quiet and accepting, you'll be taken advantage of.
  25. In my experience it takes the same amount of effort to add any vendor. So choosing to add a vendor that is inferior to Vanguard and Fidelity is not a wise decision. Adding Vanguard and Fidelity to OCPS (FL) was in no way more difficult than it would have been to add Aspire. There is nothing unrealistic about accomplishing this, at all. ...if in some districts adding vendors takes varying amounts of difficulty, then it wouldn't be wise to begin with the inferior choice. Start with the best and work your way down from there.
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