Jump to content

whyme

Members
  • Content Count

    388
  • Joined

  • Last visited

Community Reputation

0 Neutral

1 Follower

Recent Profile Visitors

504 profile views
  1. Yes, it is worth remembering that the strong gains this year are partly due to the fact that the market took a (relatively shallow) dive late last year. My portfolio was down 5% or so for calendar 2018.
  2. Of course these returns could plunge (or jump) in the next month, but so far, that "wow!" rings true. My 75 stock/25 bonds and cds portfolio is up 17.4% through the end of November.
  3. My 2¢: I think that if your are deciding within a range of how much to save/invest for retirement, you should pick the higher number, or even push it a little further. Even 30% or more is not too much, if you can manage it without depriving yourself of a decent standard of living and an available emergency fund. Not only will the larger eventual nestegg allow for much more security and flexibility during retirement, getting used to living at a lower level of spending will make it easier to continue (or even increase) your "lifestyle" during your retirement years. You'll get the immediate benefit of lower income tax payments, too. I think the widespread fretting over Social Security is overdone: short of the US government collapsing, it is very unlikely to be slashed or go away. It could be eroded a bit, though: more SS income becoming taxable, for example. The slow rise of the "full retirement" age that has been going on for years is effectively a benefit cut, but not a draconian one. It is hard to imagine any scenario in which congress pulls the plug on Social Security benefits. Congress does have a tendency to put things off until the last possible moment; I expect at some point when it feels like a crisis they will enact some combination of tax increases and minor benefit cuts (probably by continuing to raise the eligibility age or cutting benefits to people with substantial income from other sources) to keep it stable for years to come. The NJ pension system, on the other hand, does have a reputation for being in trouble (I read an article listing it as the least-funded of all the state plans about a year ago) so I don't know how much you can count on there. I hope the NJ pols are able to build it back to solvency (which seems to be happening here in California, via higher contributions from all parties and a slightly less favorable pension promise for those hired after a certain year).
  4. Thanks, Steve, for reminding me that moving to a lower-cost area doesn't always mean a huge cultural dislocation. Palm Springs is a nice town! And LA is still within reach.
  5. No doubt about it, some states are more affordable than others, and some countries (e.g. Thailand or Panama) are more affordable than anyplace in the US. But I'd like to know what percentage of people actually relocate in retirement, I'll bet it is small. I live in one of the highest cost areas (Los Angeles), but I do not expect to move. It's home (plus I greatly value the city's amenities: museums, concerts and such). Anybody here who has moved or is planning to move in order to make your dollars go further?
  6. Thanks, Tony. That makes sense: low fee index funds alone aren't of much value building a nest egg without a substantial and consistent savings rate over a long period of time; it would be unfortunate if someone came away with the idea that low costs alone will solve their retirement problem. But it's hard to know how much of that "holistic" advice to include when someone asks for advice on a specific question; we also run the risk of making the situation seem so complicated that people don't engage retirement savings at all, or run into the clutches of some insurance salesman or broker offering "free" "financial advice." It may be that we put too little emphasis on the size of the contribution people should make, maybe because that's a hard thing to generalize about, given people's varying family circumstances, participation in pension plans, etc.
  7. I'm not quite sure what you're saying here, Tony, about the message we are sending. I'm all for learning about investing and navigating the financial services industry by reading Bogle, Malkiel and others. Such authors will help an investor to realize why they should invest in the recommended fashion and provide encouragement to "stay the course" in the face of bear markets and the siren songs of financial marketing. But I don't see the problem with suggesting a specific course to someone wanting to invest their current 403b funds more effectively. Am I missing something in your critique? The regulars here all know the principles that make for a high probability of success in a retirement portfolio: regular contributions, broad diversification, buy and hold (little or no trading), minimize costs. Anyone can get started--and even make it to retirement--with this advice without having to evaluate different views on such matters as factor weighting or target date fund construction or even indexing vs active funds or single stocks: as you know, many (most, I'd venture) people don't have the inclination to make investing a topic of study, they just want to avoid big mistakes with their retirement money. I feel like we're offering Lori a straightforward plan that she can implement now without further research which will give her the benefit of long term compounding at substantially lower cost than her current arrangement.
  8. One caveat about Fidelity: they are the best choice UNLESS you find yourself investing in their many high-cost funds. They make this easy to do, as they have a very long list of funds, many with very similar names, so you have to take care when selecting where your investments are sent. This just applies to set-up; once that is in place, you won't have any ongoing issue. Fidelity offers excellent ultra-low cost index funds in their 403b, including Total Market Index (FSKAX), International Index Fund (FSPSX) and U.S. Bond Index Fund (FXNAX). A portfolio made up of just those three funds would be great. This is easy, but it does require you to make a couple of decisions: 10% bonds, 20%, 40%? What proportion of US vs international stocks? You may also need to check in every couple of years and rebalance to adjust the proportion of shares in each fund you want. The standard advice is to prefer few or zero bonds when decades from retirement, then increase the percentage of bonds (which are less volatile than stocks) as one gets closer to retirement age. You can get sound advice about your portfolio allocation here. It may sound daunting, but it is ultimately very simple. You can also pick an all-in-one target date fund, which will cost noticeably more (about 4 times as much) but is still a reasonable choice if you don't want to make those choices. Just make sure it is a Fidelity Freedom INDEX fund (the expense ratio--fees- will be about .12%) as opposed to a Fidelity Freedom fund, which will cost about four times as much as the index-based fund. Rule of thumb: reject any fund with a expense ratio above .15%, or any transaction that involves an advisory fee.
  9. You're right that fee for service makes much better sense, but I gather that many (a majority of?) folks are more comfortable when they don't have to write a check, or they buy the Ken Fisher line about "we do better when you do better" as a reasonable basis for hefty AUM fees. So they'll pick the ultimately far more costly option, because they don't see the cost they are paying. As to the future: I think what Ric Edelman is talking about in that article is that professional financial advice needs to be comprehensive, not just about investment. I would add that it should be completely decoupled from brokers. The good news is that on the investment side, I think we'll soon see robo advisers that will manage a perfectly sound portfolio for near-zero cost. (I read that Vanguard is going to introduce a robo advice service at .15% aum fee, and it is easy to imagine that cost driven down further amid competition from Schwab, Fidelity and others.) The word needs to get out that financial planning is not about buying or managing the right stocks or funds: it is about managing your whole financial life: family and work situation, health issues, insurance, tax planning, estate planning, decisions about when to retire and how much to withdraw in retirement, etc. And maybe includes some "stay the course" counselling in rough markets. But portfolio building should be a very small (and low or no cost) part of that process. As to teachers—and all workers, really—I hope future politics will allow for development of a universal, transportable tax-privileged retirement account with strong, ultra-low-cost, easy to understand investment options, something like "TSP for all." Seems fair and practical to me, though the brokerage and insurance industry would fight it to the death.
  10. Quite possibly this is just my quirk, but I'm finding it a bit discouraging to scroll past five "pinned" posts before getting to any new messages on the board these days. This is especially true when accessing the site by smartphone—the pinned posts take up the entire screen. Anyone else have the same reaction? If so, perhaps the pinned posts could be consolidated to just one or two.
  11. I have the same reaction as Steve and MNgopher. What does that enrollment letter actually say, in full? If you were actively enrolled for six months, money would have been deducted from your check for six months, and that should still be in the account. It sounds as if you made some initial move to set up the plan, but didn't complete the process. Have you asked the people at "Principal" how it looks from their end?
  12. Hi. As you can tell, those of us reading this are having trouble understanding what sort of agreement/plan you had with your employer. The letter that says your are "enrolled at 4%"--does it describe the plan? Enrolled in what? 4% of what? Where did the money come from, where was it invested? Was it a 4% deduction from your salary? 403(b) plans are typically based around deductions from your paycheck that are invested in the account (there are usually options about where to invest that money that you need to complete as well). If you are also paying into a pension program, the 403(b) is typically 100% funded by deductions from your income. If there's no pension plan, you may have an arrangement similar to many 401k accounts in the private sector, where the employer matches your contribution up to some limit (could be 4%). But that is a match to your contributions from salary -- you get zero from the employer if you contribute zero from your paycheck. I think you really need to figure out what happened here--what you were led to believe, what changed. Have you asked the benefits office at your (former?) employer for clarification? I think we could be more helpful if you were to do that and relay to us what they tell you. My fear is that you had the option of a 403b with an employer match, but you never completed setting up the account so you got none of that benefit. In that case, take it as a lesson learned and a motivator to research how retirement savings work these days. It is a shame that Americans are expected to take so many actions, make so many decisions and navigate so many sales pitches when saving for retirement, but that is the current reality: if you don't learn about saving for retirement, you will lose out. PS: After posting this I noticed that you wrote "My employer states I was dropped because I never enrolled." This seems consistent with my fear outlined above.
  13. Just seeing this thread now. If it's not too late to jump in: Ottakee, in my view you don't need to fret about the investing choices in this account, just consistently fund it (that .5% fee is obnoxious, but such charges—and worse—are very common in the 403b world). All the investment options you are considering are reasonable. You are starting with zero in this account and expect to retire in about 15 years. At that point (or at age 59 1/2, whichever comes first) you should roll these funds into an IRA account to get rid of that added fee. (It probably makes sense to open an IRA at Vanguard, so that you can eventually consolidate your accounts in one place.) Individual index funds are the most cost efficient, but I wouldn't hesitate to go for a single Target Date fund if you are attracted to the simplicity and automatic rebalancing that comes with that. The cost difference is probably less than one tenth of a percent per year--over fifteen years or less in an account with four-figure annual contributions, that expense ratio won't make a meaningful difference in your retirement nest egg. It sounds as though you are doing really well--do I understand correctly that you will be paying into a pension system for about 45 years? Pension plans vary, but that could mean a substantial guaranteed retirement income. If it is large enough (or if you also qualify for Social Security), you may not need to touch much of the the 403b/IRA money for income. I would consider your overall financial picture (include projected pension income) when deciding on your stock vs bond allocation for the long term. But get started funding this new account now, with pretty much any diversified Vanguard fund--you can always make changes or additions at a later date. The amount of money you are putting to work is ultimately more important than the nuances of fund types and fees.
  14. True that some would object for ideological "small government" reasons, others because they represent the entrenched players (often attached to direct financial support for their campaigns), but it isn't clear to me that such opposition would be anything like universal on the right. In 2014, Marco Rubio promoted expansion of TSP availability to those who don't have access to existing 401k-type plans. Not exactly your universal TSP/automatic enrollment proposal, Ed, but I think that is a piece of evidence that (some percentage of) conservatives would embrace (some version of) expanding TSP access. Even right wingers who want "right to work" (i.e., union busting) laws and who want to dismantle or privatize social security seem ok with privately owned tax-privileged retirement accounts.
  15. I think the data is clear that people in general save more when the process is automated and by default. (Or mandatory, as in the case of pension contributions.) So that probably needs to be taken into account when reforming the current mess. The ideas here for simplifying and opening up the tax-privileged retirement options, e.g. anybody can direct the full maximum into an IRA, or making the TSP a universally available default plan, are sensible and workable. They would be politically very popular, I think, across most if not all of the ideological/cultural divides in the US. The problem is the money that the existing financial services industry will use to pay lobbyists to stop such changes, to fund friendly congresspeople and to launch misleading fear-based advertising campaigns (think of the TV ads against the fiduciary advisor rule). As with so many other issues, the corruption of democracy by the current funding system (essentially, legalized bribery) stands in the way of reforms that are unambiguously in the interest of the citizenry at large.
×
×
  • Create New...