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Why Me

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  1. Just pitching in here to endorse Krow36's recommendation of the Bogleheads forum. It's a great resource. Some of the folks who respond there are genuine tax specialists. The IRS once sent me a scary letter claiming, to my astonishment, that I owed a five-figure sum on a previous year's return. It turned out that this was because of an IRA rollover that had been mischaracterized by a broker as a distribution. The experts at Bogleheads talked me through it, told me what documentation I needed to gather and what language to use to communicate (by mail) with the IRS. I mailed the recommended letter and documentation and the IRS wrote back declaring the matter resolved and that I owed zero. You may end up hiring someone to help with this, but I'd definitely go to the Bogleheads first. Lay out as many specifics of your situation as possible; they'll ask the right questions and give you good advice.
  2. The headline of the article is misleading: employees can opt-out under this proposal, so nobody is being required by law to save in this scenario. (I suppose one could say most employees--and employers--are "forced" to contribute to Social Security, though.) Opt-in by default seems like a clear improvement on the current situation, which leaves so many unprepared to fund a comfortable retirement. I agree with Thaler in the article, when he says a 3% contribution is probably too low; he suggests 6% as a default starting point, which can be adjusted if problems emerge. People sometimes can't spare a penny for savings and may not be able to meet basic expenses with their current income. But among those who get a regular paycheck as an employee with benefits like a retirement plan, many (the majority, I'm guessing) can get by with 2, 3 or 5% less in their take-home pay without major sacrifice, just as they manage to make due now after taxes are deducted from each check.
  3. Why Me


    I, also, have never heard of such an arrangement. Perhaps you should contact TIAA and ask them to explain before taking other action. CUNY benefits offices might also be a resource. We'd be interested to hear what they say, too.
  4. There are many ways to set up a retirement portfolio (using Vanguard funds, for example) that will regularly deposit income into a checking account. An annuity could make sense, but you need to consider the whole picture when deciding how to set this up and whether an annuity is a good option for all or part of the lump sum. Does she need (or already have) a fund set aside for unexpected expenses? Does it matter to her whether she leaves money to others? If her house sale involved a move, are her future housing expenses covered by the Social Security payments? Could she accept some variation in her monthly income (this would allow more to be safely withdrawn from a portfolio that has a stock component)? Etc. Your question falls a bit outside the usual 403b advice doled out here. You might consider also posting this question on the Bogleheads forum, where you'll be sure to find people with experience making decisions like the one facing you and your mom. The more specifics of the situation you can offer, the better the advice you can expect.
  5. PS: Here's a view that dissents from Bogle, suggesting that Social Security (again, I assume any pension would be treated the same way) should be viewed not as a bond asset but as income, and that asset allocation should be determined, in part at least, by one's need for portfolio-based income (in combination with that coming from other sources). https://paulmerriman.com/social-security-asset/
  6. Kudos on getting the 457 option! I feel your pain about the two funds with separate annual fees. As you say, those fees are not devastating to your savings, so if you want to pay a little extra to serve as a good example to others, go for it. I'd use the fees as motivation to contribute more--push the amount of your paycheck contributions a little further than your comfort zone. A few years from now, you'll have more than 50k in both accounts, and the effect of those fees will have diminished accordingly.
  7. Bogle advised that the present value of Social Security be considered as part of one's "bond" allocation. I don't have a specific reference for this offhand; I think he discusses it in his "Little Book," and there's a good chance you could find him talking about it in one of his many interviews that are archived on You Tube. I don't recall whether he specifically extended that principal to include state pensions, but it seems logical to me that pensions would be considered the same way, so long as there is good reason to believe that they will pay out for life. This is a topic that investing hobbyists like to disagree about, I'm sure you'll find threads putting forward different approaches to pension income if one were venture into the Bogleheads board. Of course nobody knows the future, but FWIW, my 2¢ on the future of Social Security and pensions: barring outright collapse of the US government (very unlikely, though it seems closer to the realm of possibility after our encounter with Trumpism than it did in prior years), I think that you can count on some version of Social Security being there in twenty, fifty or a hundred years. The pols may nibble at it— higher contribution rates, tax the benefits more heavily, "full" retirement age creeps up, COLA becomes less generous—but the basic benefit is overwhelmingly likely to persist. State pensions are more vulnerable, in a few states in particular (if memory serves, New Jersey, Kentucky and Illinois have severe funding issues). Like you, Scott, I'm expecting a pension in California, CalStrs as opposed to CalPers but I'm guessing their situations parallel each other pretty closely. Under Gov. Jerry Brown a few years ago, California made changes that erode benefits a little and help out the solvency of the pensions a lot. (This included significantly increased contributions from both employers and employees and changes that effectively reduced benefits for those who entered the system after a certain date.) I'm confident that the pension will be there--in California's case, I believe that the state constitution mandates the state to guarantee pension payments, even if that means diverting funds from other government priorities. So barring collapse of the state government, the pension should remain, subject to being nibbled at as I described above.
  8. If you want some safe fixed income in your retirement mix, 2% is well above average these days, I'd take that option seriously. Otherwise, I'd just put up with the Nationwide fees for 8 years (or less if you turn 59 1/2 before then) to fatten your tax-favored nestegg. I don't know anything about backdoor Roths, but if you are planning to convert from a traditional to a Roth, in many cases there is a period of a few years after retiring and before RMDs are required when your taxable income is reduced--that is a good time to make the conversions and potentially pay less tax than you might during your peak earning years.
  9. The administration fee is obnoxious but not devastating. The tax benefits of either a traditional or Roth 403b/457b are likely to greatly outweigh the cost of those fees. You need to look at your overall financial situation when making this decision, but as a rule of thumb I'd say maxing out the retirement accounts is the best move for retirement money. Separately, if you want money for emergencies or expected pre-retirement expenses (e.g. house down payment or remodeling costs, car purchase, international vacation, help for a relative) you might additionally start a taxable non-retirement account (and in that case, consider a less volatile asset allocation than 100% stocks, so the money is there when you need it).
  10. My system has schools first FCU as the TPA and Nationwide is, obnoxiously, the only 457 fund provider option (though read on...). Nationwide takes a large admin fee on top of the fund expenses: the fee is .65 % per year, if memory serves, though you should check that as I'm no longer contributing there. There is one other option through the Schools First FCU 457: something called a DCP or share certificate, which is very much like a bank CD but pays a better rate than current CDs (though these days I'm sure the rate on a new certificate is pretty low, like everyplace). That is a decent fixed-asset alternative you can fund within the 457, and you completely avoid Nationwide and their fees--talk to a schoolsfirst rep about that if you are interested. I don't think there are any Roth options in that 457 plan. If you decide to contribute excess (above the 403b limit) funds to the 457, be aware that the 457 regs have changed, so that you can now roll that 457b money over into a conventional IRA after age 59 1/2, even when still employed (I did this), and you can still continue to make contributions to the Nationwide account after the rollover. So there is a way to escape the Nationwide fees once you reach that age.
  11. The deal with factors is that if you are persuaded by the research and you want to try it, you need to commit to that allocation no matter what. Factors are "expected" to outperform in the long haul, but they can underperform the total market for stretches of twenty years or more. I think it's ok to "tilt," (I do a bit of that, am sticking with it but don't advise others do it), but your returns will be much more affected by the amount you contribute, the ratio of stocks v bonds and being smart about taxes. At your age, if you contribute steadily and a little more than your comfortable limit until 65, you should be in great shape, with or without a small cap or value fund.
  12. It actually looks like the SP 500 fund has an expense ratio of .04 percent, which is consistent with their retail funds. If there are no "administrative" or "management" or "bookeeping" or "wrap" charges, you're in excellent shape. But you need to search; chances are good that AIG wants a bit more from you within a 403b account. Did you ask the agent about this?
  13. Watch out! The insurance salesperson is motivated sell you an insurance product that profits the insurance salesperson. This is almost never the best choice for you. (They may also offer mutual funds inside some kind of advisory wrapper that gives them a commission which effectively comes out of your investments.) Can you follow up here with some of the suggestions above--screen captures of the website, answers to the question about 457b availability, etc.? You are likely to get a better deal if you can completely avoid the salesperson. This could have a meaningful impact on your eventual retirement nestegg.
  14. You raise good points, Scott. There's no doubt that psychological struggles are a HUGE part of dealing with money, work, pretty much everything. And, unless you were lucky enough to have financially sophisticated parents, the whole idea of navigating the adult world of work and money is baffling. So it makes sense to address emotions and personal history as foundational when discussing financial planning. My frustration is with the form this often takes, touted by people who strike me as hucksters rather than knowledgeable and ethical counselors: Dave Ramsey, Suze Orman and Robert Kiyosaki come to mind. There is useful advice sprinkled in, but there is whole a lot of dubious stuff surrounding it (which often leads to money in the pocket of the speaker). Ramsey, for example, tells people to pay off of their credit card debt (good advice), to never again own a credit card again (dubious unless they can't learn to manage it), not to carry a mortgage (dubious), to invest with his recommended high-fee network of "financial advisors" (terrible advice, and I'll bet Ramsey gets kickbacks) and woozy claims about the financial guidance of Jesus and the Bible, which I'm afraid I also view cynically as a way for him to get customers. As to my quickly sketched "5 point plan," I certainly hope that is understood as a rough outline of an approach to saving based on my experience, not a source of shame. Over the years I've had five-figure credit card debt (some as high as 24% interest!), periods of un- or underemployment when I really couldn't save much of anything after paying the rent, I've made foolish investments, blown career opportunities, had unexpected expenses, etc. That's life, hopefully one has learned from the experiences. I still maintain that "Save what you can" doesn't provide guidance: "I can't save anything" seems like a fair answer, and in the long run that answer will lead to an unpleasant end. Obviously, if one is in the midst of a personal financial crisis, health, food and housing come before saving. And I know that we have an unusually large number of people in crisis now, during the pandemic. Likewise, many people scratch by in low-income jobs even in "good" times, though I would still encourage those folks to develop the habit of saving, even if the amounts are tiny at the moment. But most of the time and for most people who are likely to come to a message board like this one, they have an above--poverty income and are planning for their future. I believe such folks are well advised to make a habit of saving and investing right off the top, and in amounts that are almost certainly in excess of the "starter" amounts that many employers suggest (3-6%). (This is especially true for the great majority who do not expect a substantial pension, as some long-career teachers and school employees can.) So I hope my savings percentage target (an arbitrary ballpark figure, not a scientifically determined amount) doesn't make anyone feel they are failing because they aren't yet meeting it. I do know what you mean about shaming in the current financial discussions online. I have noticed this among some of the leading lights of the FIRE movement (e.g. Mr. Money Moustache), who speak as if any spending beyond that required for a spartan DIY rural existence represents a moral failing. And yes, a consistent income (never mind a pension) is increasingly the exception. In my view, that makes the need for salting away a large percentage of one's "lumpy" income (some of it in a rainy-day fund) that much more important.
  15. Indeed, credit card scams are very common. I’ve had to close down cards because of that several times over the years. It’s a pain, but the card companies are good about absorbing the expense of fraudulent charges, at least. The worst scammers call up elderly people to trick them out of their life savings, which they really do lose. Despicable.
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