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Ted Leber

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  1. Bill, Good to read your wise advise. I have always been one who valued your service to 403(b)Wise readers. I say: If only the buyer would spend more time/effort trying to understand the costs vs the benefits. But alas, its seems many folks just throw up there hands and say this is beyond me. It's not. But it takes an understanding that most teacher/investors who are investing in variable annuities are giving away almost half of their nestegg to fees after a 40-year investing career. So I suggest teachers need to take a hard second look at their priorities. I recommend teachers find a fee-only adviser. Ted
  2. BN, this might help... Business Wire reported on Jan 28, 2004: More than 50% of non-retired adult Americans have either saved less than $10,000 toward retirement(36%) or haven't even begun saving(16%). 62% of Americans have never estimated how much they will need for retirement. 70% of Americans have saved less than $50,000 or are not saving at all. They simply aren't accumulating sufficient assets to meet their long-term retirement needs. "Clearly, too many Americans are operating in the dark..." said Pam Moret, executive VP for Thrivent Financial for Lutherans. [Ted Leber opines: Another wake-up call ! Is anyone being aroused? But savers who steadily and methodically set aside even modest dollars for retirement will be winners in their golden years. Starting early is a key. Automatically increasing the amount saved as income increases is a key. Setting up an asset allocation plan--say 50% in a no-load, low cost Total Stock Market Index Fund and 50% in a no-load low cost Total Bond Market Index fund is a key. Sticking to your plan is a key, i.e., stay the course. Not procrastinating is a key. http://www.choosetosave.org will help you estimate your savings needs. This outstanding website has more than 120 different tips and financial calculators. Also I have some seen some "raw" data that is more than 3 years old by now that indicated a vast majority of teachers were investing less than $300 per month into their 403(b). FYI: $329 will grow to $1 milion in 30 years only if you are counting on 12% annual returns. And counting on 12% is not wise. If you count on 6% annual returns, it would take closer to $1,000 a month to grow $1 million in 30 years. Those who are late starters--those with say a 20 year horizon the figure is closer to $2,205/month. And those who are a sleeping at the switch would need to invest $6,155/month for 10 years to grow a million. Hard to swallow, but 'dems the facts. Ted
  3. May I suggest that you should be a long term investor if you are investing in a retirement account and you are pushing a rope if you think it is appropriate to watch the clock tic tock tic tock. The question you have to ask yourself is: what am I going to do with this performance information anyway? Am I going to sell if the market goes down? Am I going to increase my contributions if the market goes down? I think not. So here's what I think is valuable. Set your goals. Set your asset allocation. Increase the amount you invest with every pay increase. Try to get your school system to go with a percentage of income system contribution rather than a dollar amount, so you over come the tendency to do nothing. Using a percentage of income contribution will keep you a step ahead. Rebalance every year. Look for the Quarterly WSJ Special edition that comes out usually within a week after the end of each quarter. That is more than enough information. You can check Barron's weekly, but again for what purpose? Oh yes, take your kids fishing more often ;-) Ted
  4. Dan, Bless you... It's a tough road...but there is a market...but I've always thought there was a market for motivating teachers to "rise up with the facts and demand" better defined contribution plans. Shows you what I know. I've lost contact with Alan Feigenbaum, author of "Raising Financially Savvy Children," published by Parent's Guide Press at publisher@marspub.com Perhaps you'd want to co-author with Alan a title " Raising Financially Savvy Teachers." ;-) Later, Ted
  5. Ted Leber

    Hr 3718

    Joel, I always want you on my side in a street fight. Why do you think the folks we try to help here will not take up the banner and just make it happen ! After all, it is their future. Perhaps, someday... Cheers, Ted
  6. Gerry and all others, The fight is worth it...continue to try to gather others on your side...and press on ! You are the ones who elect your school board; the the school board decides your fate. But I dare say they have never spent 30 minutes trying to understand the impact of their ignorance on your financial future...sad...so what is the message? Continue to be a good lobbiyist for the cause. Ted
  7. Joel, Of course you are right... some fun...Give a person a fish and you feed them for a day; teach a person to use the Internet and they won't bother you for weeks... Ted
  8. I screwed up...and by reversing the "about 36 and 6 percent" figures... This is from CNN/Money...but do go to http://www.savingforcollege.com It's true that your family's income makes a big difference in qualifying you for most aid. But savings matter as well. Some critics maintain that schools punish those who, regardless of income, have scrimped and saved to pay for college. But schools have become much more sensitive when taking savings into account. It does not pay for parents to forgo saving money for college in the hope of receiving more aid. It is important, however, to find savings tools that will not hamper your ability to get more aid. Most important, don't shortchange your retirement savings to save for college. The financial aid formula also assumes you can contribute "discretionary net worth," which is no more than 5.6 percent of your total net worth. And if you are older than 45, you will get an asset protection allowance as well, presumably because you need to use your savings for retirement. Your child's assets are a different story. Any money in your child's name is assessed at least a 35 percent rate. That's why it almost never pays to put savings in your child's name if you want to qualify for aid. And if you are considering opening a 529 savings account, proceed with caution. These savings plans, available in most states, allow earnings to grow tax-free starting in 2002 (many states award a tax deduction for contributions as well). The tax benefits of 529 plans are unmatched. Right now, however, it is unclear how 529 savings plans will be treated for financial aid purposes. In the past, earnings were categorized as the student’s income and, as such, reduced aid. Now that earnings are not subject to taxes, there is a chance that 529 plans will have no effect on aid. That’s the best-case scenario. On the flip side, these plans could be treated more harshly than they were in the past. Joe Hurley, founder of Savingforcollege.com expects the Department of Education to offer some guidance on this subject this summer, before parents start applying for 2002/2003 financial aid. Even if 529 withdrawals do affect aid, you don't have to skip the accounts altogether. Just make sure you only stash enough for the final year or two in the 529 account. Take out the biggest chunk to pay for senior year (when you no longer need to worry about qualifying for financial aid), and then the rest for junior year. In the student's first years of college, you may only want to withdraw a few thousand dollars or so, depending on your income. Ted ps (keep researching...)
  9. fly and others, Colleges all use their own criterion for determining the amount of financial aid they will provide. If you try to game the system, you may just end up guessing wrong for the specific college your children actually attend. That said: most advice that I read says that money tied up in your mortgage isn't counted against you when financial aid is determined; money tied up in retirement plans isn't counted against you either. But money in cash/CDs/taxable accounts is counted against you at about 36% where money in a child's account is counted against them at about 6%. Parent's generally have to decide if they should divert some of the "36%" money to the "6%" pot. And that decision has to be done far enough ahead of time or else gamers can get caught missing cutoff deadlines. Indeed you should continue your research and then come back and post your findings/resources. Joel has provided you the URL for the best resource I know of. Ted
  10. I'd think you'd be delighted to be working for an employer that want to actually contribute to your 403(b) over and above what you yourself contribute. Any kind of matching funds is money from heaven. Make sure you get it if offered by contributing up to at least the amount they match. What do you see wrong with your employer rewarding employees for their long service? Is there another way you'd like to reward employees? Surely your employer is using a "years of service" in the formula for the amount they are going to provide you when you retire? Ted
  11. Sounds as if the world is your oyster. Call up Vanguard or TIAA CREF and get the papers they will accept so your school district will send them direclty your money as a payroll deduction to your 403(b). Lacking the ability to do that, just start a Roth IRA with a no-load, low cost mutual fund. I'd suggest you think in terms of creating an emergency fund first and them read up on investing. Mutual Funds for Dummies is a great for newbies to begin. We were are dummies at the beginning--so don't take the title personally. Ted
  12. It will happen; it is happening--because 457 is a much wiser way to go than 403(b). The RFP route would ensure that the employer gets involved and does its duty in the best interest of their employees. The 403b allows the employer to stand back and allow their employers to be handled by the "good old boy network." And that network serves the best interest of the salesforce--not the employee. Sure some agents provide basic advice--but their advice isn't always in the best interest of the teacher. Too many districts believe that and agent holding the hand of the teachers is better than sending the teachers to a decent reading list and and a few good books and a few good websites. And too many districts hide behind the hold harmless agreements that only serve the status quo. Decision-makers are confortable with the status quo. We all know that; It's been that way for a very long ago. Tune into what Steve is saying about Los Angles. But the battle is a long slog Once again, I maintain that the numbers presented in a mountain chart to the teachers and others/the unions/the school boards/the voters should win the day. But so far, most teachers haven't tuned in and have fail to understand the power of protesting this terribly costly system. The loser is the teachers' stardard of living in retirement at the end of a 40 years of investing. A loss of almost 50% is just too much. Once the numbers are out there, everyone should be able to agree. Let's give the doityourselfers and no-load, low-cost option. Ted Ted
  13. My feeling is that your school district and tons of others continue to be hiding behind some ASBO "white paper" that says: avoid all risks that you don't need to take. Yet the school districts take risks everyday in other areas. It is up to you and your peers to pressure the Business Office and the HR Department and the elected school officials to understand that requiring a Vanguard to sign such a hold harmless agreement is not in the best interests of the school district. Work the numbers. There are number of teachers investing say an average of $300 a month....for 40 years (a full career) say at 8% minus 2% or 2.25% or 2.5% of 3% for fees. The numbers are so very large that any fair minded person(Board member) should flinch in wonderment: "What have I wrought!" in the name of our teachers. It's a sad day every day that this continues. So vote with your feet. Try to find a position in another school district. [Easier said, than done, I know.] School Boards should be using their 403(b)/457 plans as recruiting and retention tools. But instead they foist upon you and others a high cost product that will crush your retirement lifestyle by about 50%. You can fight back by electing officials that care more about your economic plight than they do about some foolish ASBO white paper. Press On. Ted
  14. Gadfly is right on. 3% fees are way, way out of line. Don't even think twice about paying 3% fees....your strategy should be to avoid such a "bargain." And complain all the way to the top and on't stop until you get results. Why would anyone want to foist upon you a retirement investment that will render your nestegg worth only 45% when you need it? Send me an email and my return email I'll return the academic data that demonstrates why shouldn't consider paying 3%; you can share it with your peers and arrange a sit-in until your school board does its duty--which is to give you a better deal by giving you low cost options. Seek out a no-load, low fee alternative... e.g., Vanguard and TIAA-CREF. Avoid your current 403(b) in this case--like the plague. Indeed, save 10-15 percent of your income, so you have an emergency fund and so you can make a downpayment on a house...and get rid of all the credit card debt you can. Say to yourself: If I can't pay for this with cash, I can't afford it--yet. ;-) Ted tmleber1@comcast.net
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