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Everything posted by whyme

  1. Just saying amen to the other comments. Disgusted to see 5.50% "class A" sales loads on top of expensive funds and an advisory fee. This sort of sales arrangement was standard in past decades, but should never occur in the present: in my opinion, it should be illegal. Get your colleague away from this "advisor" now. There's no need for an advisor for these purposes, as others have said. But if she (or you) still feel the need for an advisor, make sure the person is a fiduciary who does not accept any commissions or sales fees. An hourly charge for services would be the best arrangement.
  2. Omar, you're in good shape. Vanguard is a fine option. (Calstrs Pension2 is also a decent choice if you want a "stable value" fund option. ) I want to second Ed's comments about the fact that you don't need a financial advisor to set this up (you may want to hire somebody down the road who can help with overall financial planning: insurance, wills, etc., but responsibly investing in a 403b is simple and you'll end up with more money by doing it yourself, even though there's a whole industry telling you otherwise). Vanguard charges a flat annual fee ($60?) to hold your 403b account; otherwise, the fund costs are very low. That is probably your best option if you expect to build up a 403b account of any size. Vanguard is also an excellent place to consolidate all of your accounts in retirement, so you'll have a head start on that (assuming Vanguard maintains its character). Your 70/30 three-fund plan sounds good to me. Increasing your contribution rate is also very good. You should aspire to "max out" the 403b.
  3. Krow and Ed are right on. Two small additions: 1. You may be able to get that list of vendors online, then you can come back here with it, avoiding the sales pitch. The list should show up if you follow "retirement" links on your credit union's website: maybe there'll be different links for 403b and 457. 2. You should also check whether your state has a government-sponsored option. Not all states have these, but where they exist they are often excellent.
  4. I'm pretty sure you are paying an additional fee to use the self-directed option ($50 year? I'm not sure). It's true that Fidelity, so long as you limit yourself to index funds, would cost a bit less: they charge just $20/year custodial fee, on any amount of assets. But the main key to success is what you are doing: consistently investing substantial amounts. You can fuss over the details if you want, but you'll be fine with your existing set up. Fidelity, Vanguard, Pension2, index funds, maxing out... that is an excellent recipe.
  5. Many retirees are in trouble because they tapped their retirement funds before retirement. People need to be educated to the idea of building wealth for the long term. (Obviously, "old" is relative, and there are those who plan to retire at 40 because they are unusually rich or unusually frugal, but for them, too, the need is for this money to stay put until a slow draw down--over decades--begins in retirement.) An emergency fund for potential current expenses should be amassed separately. If you meet the income requirements to have a Roth IRA in addition to your district retirement account, that might be a reasonable place to build a tax-free asset that could be pulled out in a pinch, but only if you aren't counting on it to fund your retirement years.
  6. ScottO: Just reading this now, but if it isn't too late: Why do you feel compelled to use the self-directed option in Calstrs Pension2? I no longer have a Pension2 account, but as I recall they offer a substantial selection of low cost options, including many Vanguard funds. I can't understand why the added cost and complexity of a self-directed brokerage window would be desirable in this case. Though Pension2 is imperfect and it would be nice to get rid of that .25% fee, it is one of the better 457 offerings available. PS: I envy your access to Pension2 in a 457 account. My district has a good selection of 403b offerings, but we are stuck with only the high-priced (most funds end up near 1.00% annually once their vig is included) Nationwide plan on the 457 side.
  7. whyme

    2019 Returns

    Thanks very much, Steve. Yes, I'm happy and excited to see the portfolio grow at this rate after so many years. Congratulations on your engagement news!
  8. whyme

    2019 Returns

    With my usual caveat that a calendar year is a very short-term measurement from which one can't really draw any conclusions: yep, this was an unusually good year for the portfolio. The increase of my 75/25 portfolio for the year is approximately 20%. This was the first year when the increase in portfolio value exceeded my gross salary for the year. I hope to be able to report that in coming years as well...
  9. Of course you are correct, Tony, that a portfolio of index funds at Vanguard or Fidelity (or index ETFs from Schwab, iShares or State Street for that matter) would be wildly superior to the high-cost insurance products and managed funds peddled to so many 403b holders. But I don't think we're having an argument at all, just a low-key conversation about changes at Vanguard and cost-cutting competition. We're assuming that fund costs do matter and that we are making DIY choices about our portfolios. I know that doesn't apply to everybody; the range of decent options in most 403b or 457 plans is quite limited. I don't think we're confusing or discouraging newcomers by chatting about this here, I certainly hope we are not doing so.
  10. I'm with you, Ed. Bogle had few if any peers when it comes to lucidity and wisdom. As to Vanguard's current management and loss leaders... I notice that today Vanguard has zeroed out commissions for stock and option trading, obviously in response to competition from Schwab, etc. So I guess we can't rule out zero ER funds from them, or free toaster ovens for opening an account, or whatever they think they need to do to preserve their market share. PS: https://www.cnbc.com/2020/01/02/low-fee-pioneer-vanguard-finally-joins-the-crowd-by-dropping-stock-commissions-to-zero.html
  11. Thanks for that info about the Fidelity funds performance. I suspect we’ve heard or read many of the same Bogle interviews. As I interpret him, he was against anything that promoted trading (this was his problem with ETFs).
  12. I'm not sure what you are including in "all that stuff," but if you mean actively managed funds, Vanguard always had those. Bogle took pride in their low costs (to date, Vanguard active funds are low cost compared to practically any other active funds on the market) and sober management techniques, including minimizing turnover and otherwise focusing on long-term results. There are other money-making add-ons post-Bogle, though, including a large fleet of paid portfolio advisors and a much larger overall number of funds. I believe that you are correct, Ed, about Vanguard's structure and philosophy re: each fund being self sustaining, so they are unlikely to offer loss leaders. (As we've discussed before, Fidelity is structured like a trap, they make it difficult to avoid high cost products and services once you are through the door.) I guess it's a matter of opinion whether funds charging a few basis points per year compete effectively with the ZERO funds. It remains to be seen whether the Fidelity funds actually do as well as the Vanguard equivalents: I think they use different indexes, and I'm guessing some behind-the-scenes stuff (such as securities lending) might make a difference at the fractional-point level.
  13. You are correct. According to the article linked below, the average U.S. retirement age (as of 2017) is about 60, the median is 62. Retirement planners advise working extra years beyond basic readiness, and those without a plan say they will work until they drop, but circumstances (health, family responsibilities or workplace changes) often make it impossible to work at a full-wage job as we age. https://dqydj.com/average-retirement-age-in-the-united-states/
  14. No problem on the repost, Tony! One thing that seems increasingly clear about Vanguard: they want their clients to move away from traditional funds and toward ETFs. Now they've built in a web tool to identify opportunities to transfer eligible funds to ETFs. It looks as if their ETF fees are going to continue to be a bit lower than those of many of the equivalent traditional funds. (I guess it is less costly for Vanguard to manage ETFs, though it is slightly more trouble for investors to rebalance or make regular investments in them.) Best wishes to all here for a healthy and prosperous year ahead.
  15. Kudos, Ed, thanks for sharing the good news with us.
  16. Interesting article, though the basic story is an old one. SchoolsFirst is the third-party-administrator for my community college district. While their 403b offers an absurdly long list of mostly terrible options, it does currently include some good ones, including Fidelity, Vanguard and CALSTRS Pension2, for those who do the homework to learn about them. But for the 457 offerings (and I've heard employees talk about the advantages of the 457 after meeting with SchoolsFirst representatives), the only option is Nationwide. Aside from the premium "ProAccount" mentioned in the article (I have no experience with that), even the least costly Nationwide options are much more expensive than anything from Fidelity, etc. Nationwide tacks on its own substantial administrative fees on their "low cost" options such as Vanguard funds. Nationwide's fees, by the way, are buried in their descriptive material and difficult to find or decipher, even for a relatively motivated investor such as myself. Really disappointing that a teacher-focused credit union doesn't better support the interests of teachers. PS: I just checked a recent quarterly statement from the Nationwide 457. They have a dedicated section for administrative fees, which they present as $0.00. They don't direct any attention to the confusingly named "net asset fee" which is tacked on to every fund on top of the "gross expense ratio." In most cases, the "net asset fee" is .44%. This is down from the last time I checked one of these, when it was .69%. Bottom line is that nothing costs less than .5%, and many fund choices are above 1% annual cost. "ProAccount" adds an additional .6% on top of those figures.
  17. 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.
  18. 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.
  19. 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).
  20. 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.
  21. 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?
  22. 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.
  23. 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.
  24. 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.
  25. 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.
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