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  1. We don't have all the information on the relative, but from the clues given: 1) charter school, 2) young with only a couple years experience, 3) no match, 4) less than perfect 403b vendor, 5) under $6K to invest annually......Roth IRA seems like the logical choice. She can start making tax deferred investments as her income rises.
  2. MNGopher

    Zero fee ETFs

    Many Vanguard funds are covered by a patent that lets them keep their funds more tax efficient than other companies. Bloomberg article about this. https://www.bloomberg.com/graphics/2019-vanguard-mutual-fund-tax-dodge/ I would guess not having shareholders, local offices, or a lot of advertising all help to keep costs low as well.
  3. Ferri interviewed Merriman in this episode of the Bogleheads podcast. https://bogleheads.podbean.com/e/episode-018-paul-merriman-host-rick-ferri/ I'm in the camp that the average investor doesn't need to "tilt". I mean it might work out better and it might not. I think the main thing is that if you decide to do it, you don't chase performance, by changing your tilt every few years, or you are bound to underperform the total market by doing this. You have to commit to it for your investing life, as Rick Ferri often says.
  4. Which is the greater amount? A. Your salary this year. B. Your annual pension income + 4% of your estimated 403B balance when you retire. If A is greater, you are likely better deferring taxes in a traditional 403B, so that you will pay taxes at a lower rate. If B is expected to be greater put the investments in some type of Roth account and pay the taxes this year. If A and B are too close to call, do half of each. This might be overly simplified, but I think it a good general guideline. PS: If you do work until age 75, you could probably take out more than 4% every year and never run out of money.
  5. If there is a bright side to being very poor in retirement (low income), it's that at least you can take money out of a traditional account at a very low tax rate! I don't think you're going to be as bad off as you think. Start upping your contributions to the maximum or near max and your accounts will start accumulating fast.
  6. Fidelity Security Life is not the "good" Fidelity. I think the Vanguard traditional 403B is your best plan. Your income now is probably greater than the combination of your state pension and your withdrawals from your own deferred account will be. If your tax bracket is higher now than it will be when you retire in your 70s (with no SS), then you are better off doing traditional and paying the taxes later at a lower rate. If there is a possibility that your retirement income will be higher than it is now, you could hedge the bet by contributing to a Roth IRA on your own. But if your retirement income is higher than it is now, you might want to rethink working until your mid 70s and retire sooner.
  7. Will you have a pension at some point? Will you have social security? (and how much?) The answer to these questions will help determine if you should do Roth or Traditional.
  8. https://www.wsj.com/articles/aig-unit-to-pay-20-million-to-settle-sec-probe-of-teacher-retirement-business-11595941081?st=450wa1z5z9qabty&reflink=article_imessage_share&fbclid=IwAR3gjMXHvOuGa9m8roP0njjLUzZ8bnELB7-p3o8-Vs1KWFepXKUVPFBhpZw Dan Otter posted this on the Facebook page, in case anyone hasn't seen it yet. Looks like a step in the right direction in placing some accountability on the insurance companies that prey on educators.
  9. MNGopher

    403b - 457

    This is a case of the IRS saving the OP from himself. There is absolutely no reason to buy individual stocks in a retirement account. If a person wants to play the market with expendable cash, then they can do that in a taxable account (still not recommended).
  10. I guess if you want to be completely accurate you should count your emergency fund as part of your asset allocation. Some people do and some don't...personal preference. I've heard people say they are 100% equities, with no bonds, yet they have 3 years of expenses in cash, so actually they aren't even close to 100% stock. As long as you're aware of what you actually have, either way is fine.
  11. ^ That is a good job of explaining the tax brackets, Ed. I think most people do err on the side of putting too much in Roth accounts. That's not to say there isn't a place for both, but during your peak earning years most should be going into traditional accounts IMO. While most teachers have a pension that will fill up the 0 and 10% space in retirement, most pensions will not fill up the 12% bracket, especially if you are MFJ tax status and your spouse doesn't have a pension. The best time to use Roth accounts are early in your career, or any year your income drops for whatever reason. Also many teachers will have a decade or more (about 13 years in my case) after retirement but before collecting Social Security when they can convert to a Roth up to the top of the 12% bracket. Putting money in a Roth during peak earning years is locking in your taxes at 22% (currently) and that can't be undone. There is a pretty good chance you will be able to take it out of traditional for expenses or convert it to Roth at a lower rate later, if you decide to defer it during high income years. If a saver does err on the side of contributing too much in a traditional account and ends up in a higher bracket in retirement, this would mean your investments did really well, and it's not really the worst problem to have.
  12. MNGopher


    I haven't heard much about people in the public sector being worried much about RMD's. What is your concern? Is it pushing you into a higher tax bracket? The IRS doesn't require that you spend your RMD. You can always reinvest it in a taxable account. In fact if you are still working as an adjunct professor after the age age of 72, you can still invest in a Roth IRA at any age as long as you have earned income.
  13. Whether you should be contributing to traditional (pre-tax) or Roth (post-tax) really comes down to comparing your tax bracket in the year you earned the money vs. your tax bracket in the year that you will withdraw the money in retirement. The latter, is of course an estimate. You're going to pay taxes one way or another. You just want to pay them when it's most beneficial for you to do so. General rule of thumb that I would recommend: If you are currently in the 10 or 12% bracket do all Roth. If in the 22% bracket favor the traditional contribution, but some of both is fine. In the 24% bracket or higher, max traditional before doing any Roth. As far as if tax brackets go up or down in the future, I agree with most people that they will probably go up, since we are at historically low rates that are currently set to expire in 2025. I don't really expect them to go up all that much though. The 12% bracket may revert back to 15 or so, and 22% may go to 25. These small changes in tax rates wouldn't affect my basic strategy for determining which type of account to contribute to.
  14. With a 3% withdrawal rate it seems like any portfolio will have pretty close to a 100% chance of success with anything more than half stocks, even for a 60 year retirement. It's interesting that you have a very aggressive asset allocation, yet you have a very conservative withdrawal rate. There is nothing wrong with that, since you know yourself and your risk tolerance. Your fears/concerns aren't volatility, because you know you aren't going to succumb to behavioral errors like panic selling. Your concerns, I would assume, are more longevity and maybe inflation. I think that this ties back to many people's responses to Tricia's original question; that your risk tolerance is a very personal decision based on a compromise of your own need, ability, and willingness to take risk. My biggest concern with your plan, Ed, would be sequence of return risk. I'm sure you have researched this and taken it in to consideration. If someone achieves FIRE status at a young age and pulls the trigger, the first 5-10 years of retirement becomes very important. A long bear market or a sharp drop with a stagnant recovery can put a FIRE plan at risk because you would be forced to sell depreciated stock for (possibly) many years, thus reducing the odds of success. On the other hand if the decade after you retire has above average returns, you will likely do very well, and could even increase your withdrawal rate and still not outlive your portfolio. Personally I'm at about 70/30 (65/35 if you count emergency and new vehicle fund as part of portfolio), with 2-3 years until retirement. I plan to stay somewhere between 60/40 and 50/50 in retirement. Full disclosure: my pension will keep me housed, fed, and the utilities on, so I am investing for the "wants" more than the needs. I plan to use some type of "variable withdrawal rate", starting at 4% but will adjust based on the economy.
  15. What final asset value are you targeting? What are you planning for a withdrawal rate?
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