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Getting Started With Investing

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My wife and I are looking to start with a Roth IRA or a 403b. However, I am not sure which to start first. I make around $41,000/yr. and my wife makes around $40,000/yr. Just looking for opinions, I read the article on 403b.

 

Also, in setting-up a 403b, I saw a retirement mutual fund with an initial minimum investment of $1,000, but we do not have that available. Is this amount a must before we can start investing in this particular fund? Lastly, with little to no money available for an initial minimum investment, does anyone know of any retirement funds with low/no minimums? Any recommended readings and/or web-sites?

 

Thanks for your guidance!!!

Rick

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Hi Rick,

Welcome to this board. You have made a good start by asking questions. Keep asking as it is your money.

 

It is possible to open a 403b without a $1000 minimum. Just avoid companies with high fees. Stick with companies like Vanguard and TIAA-CREF if they are available to you. If you are unsure, then post the name of the companies that are available to you, and someone here will be able to guide you.

 

Since both you and your wife make around $80,000 together, you need to look at your budget to be able to save more money. Whatever your goals are, you won't be able to make them unless you are able to save a good bit of your income.

 

Another good website beside 403bwise to visit is www.morningstar.com for the discussion board there, especially the Vanguard Diehard Forum.

 

Some books to consider are the ones by John Bogle, Larry Swedroe, and William Bernstein. Avoid the magazines that tell you the latest 100 tips. That stuff is investing .

 

Investing is really easy: just save as much as you can, diversify your money, and give it time to grow. Best Wishes.

 

Joe

 

 

 

 

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Rick,

 

Do you have a 403b at work? Do they have a match? Do you have a 457 (Deferred compensation) plan? Do you have children and what is your approximate age(s)?

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We have no children yet--hopefully within the next year. I am 33 and my wife is 27. We both have a 403b at work, no match, and no 457. What is a 457?

 

We are saving to build a house in 4 years (around $8,000 saved), recently paid off $15,000 in credit card debt, car will be paid off in June--that's about it.

 

I came across a Fidelity Retirement Fund, FFFFX. It seemed pretty good (low fees and a positive return). Any thoughts on this one? Many Vanguard Retirement Funds seem to require a $1,000 minimum. Any thoughts on these diversified retirement funds?

 

With our 403b, I was looking to find a Diversified Retirement Fund and have such a fund make up our 403b. Is this recommended?

 

Thanks for your guidance Joe and gadfly!!!!!

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Hi,

 

Which 403b options are available through your employer, i.e. which companies? The answer, as Joe mentioned will not be that difficult, but everyone's situation is different and that is what we need to find out.

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gadfly,

 

The TSA vendors that are available are Emory Philips and Lincolcn Investments. Are approved vendors capable of buying into a particular company (i.e., Vanguard and Fidelity) for us? Do we need such a vendor? And, how will a particular vendor make money from us?

 

Thanks again!!!

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Hi,

 

Others will add their opinions and have more experince than me, but the dialogue is good. You appear to be locked in to high cost providers. This means that by the time you add up all the costs (the actual costs of the annuities they force you into AND the costs they charge you for basically acting as a "go-between"), it will probably be in the 3% range. Remember, 3% over 30 years reduces you investment by 45%. These companies will further limit your flexibility by charging you a strict fee (surrender charge) is you attempt take you money somewhere else once it has been deposited with them. The system exists to pay for the boats and summer homes of the agents who earn commission streams from your hard earned dollars.

 

My shoot from the hip reaction is to say the hell with them and go for a Roth, but then you miss the immediate tax savings that comes from pre-tax savings.

 

Is there anyone here who thinks that he should say 'the hell with high cost annuities" and just go to the Roth AND buy a home and pay it down?

 

Sorry, I'm in a bad mood because just yesterday I received an e-mail from a vendor who has been trying to get into my school inder false pretenses. They must think we were born yesterday. THis one said he just wanted to talk to the teachers about liability. Usually it is pizza. I calculate the price of one piece of pizza at about $13,000 in lost investment over 30 years.

 

If anyone thinks you Union endorsed products are bargains...think again!

 

We'll talk more later...have to go.

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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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3% is high, but also look for companies that wave the fee once your account reaches a certain value.

 

The reason fees are not always bad is that you receive what you pay for. In TIAA-CREF, you do not pay the fees, but you do not have access to a lot of quality fund choices. That is reality, and I know many will argue that point. Some good reputable companies charge an administrative fee, but your money is being invested with some of the best money managers available (Fidelity, Janus, Morgan Stanley, Putnam, Oppenheimer, etc.).

 

Another piece of advice when investing in a 403(b). Never go with a fixed account if you have more than 7 years until you retire. Period. Get in the market, and continue to contribute through the ups and downs. By using dollar cost averaging, a down-swing in the market is not always "bad". Consider this example:

If you invest $100 a month and that buys 1 share of a fund, when the market drops, you will buy more shares with the same $100. Let's say the market goes way down and $100 now buys you 2 shares. When the market rebounds, which it historically does, you will now have 2 shares worth $200 that you bought for $100. Pretty nice, huh? If you are worried about running your account straight into the ground, remember to have your assets properly allocated (bonds, LC stocks, S/M stocks). Again, this goes back to having enough quality choices...don't always assume administrative charges are a bad thing.

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Hi,

It sounds like you do not have any good choices for your 403b. I have TIAA-CREF available to me so I don't have that problem. You might try to get TIAA-CREF to sign on to your district as they are expanding in the K-12 market. They are an excellent company. It is possible with TIAA-CREF to do Scott Burn's Couch Potato Portfolio using the Equity Index Fund and the Bond Fund. You can search for information on this on Google. There is nothing wrong with the Couch Portfolio. It is a very easy way to invest.

 

Without a good company to go with, I would use a combination of the Roth IRA for tax-inefficient funds (funds that pay out a lot in dividends and capital gains) and tax-efficient funds (like the Vanguard Total Market Index) for my taxable accounts. The lack of a 403b does not mean that you cannot invest in the market. You just need the discipline to pay yourself first out of your paycheck. Best Wishes.

 

Joe

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I appreciate everyones' responses, but I am still confused. So, if someone could please walk me through this scenario.

 

First: I am looking to meet with a 403b vendor.

Second: He/she will let me know what funds I can use to set-up my 403b.

Third: If the fund is a low expense fund (i.e., Vanguard), then this would be a good fund for my 403b.

Fourth: I have a voluntary withdraw form completed from my employer.

Fifth: I start contributing each pay to the 403b.

 

Is this a typical sequence in setting-up a 403b?

Do I need a 403b vendor to set-up a 403b account? Can I use a discount broker?

If I need the 403b vendor, how are they paid?

 

Remember, I am new to all this.

 

Thanks again!!!!

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Hi,

I have just found your website and it seems I may have come a little late . I have begun a 403b account this year with a variable annuity (AIG_VALIC). I have invested $5,500 and plan to invest as much more as possible this year and the years to come. I now realize, even though I am happy to be finally investing, I may have indeed put my money in the wrong vehicle. The annuity vs. the custodial acct. Can anyone suggest the best thing for me to do going forward? Thanks, LRR

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Guest Guest

First: I am looking to meet with a 403b vendor.

Second: He/she will let me know what funds I can use to set-up my 403b.

Third: If the fund is a low expense fund (i.e., Vanguard), then this would be a good fund for my 403b.

Fourth: I have a voluntary withdraw form completed from my employer.

Fifth: I start contributing each pay to the 403b.

 

Thanks again!!!!

 

 

 

Hi,

I am rather new to this too, so I don't have any expert advice to give. But I have found the 403(b)WiseGuide book and the articles on thes web site to be very helpful in better understanding how 403(b) plans work.

 

You mentioned in an earlier post that Emory Philips and Lincoln Investments are the two approved vendors at your work. I know nothing about their plans but they may, as you suggest, have some of the Vanguard funds listed in their choice of funds. The Valic plan that is available to me has several Vanguard funds. The problem is the fees the vendor charges in addition to the Vanguard fees. Even just a 1% additional fee can eat up a large proportion of your earnings.

 

Also, before having a long talk with one of the vendors, you might want to see if your can obtain a prospectus from each one and study it closely before listening to their sales pitch.

 

Good luck,

Hal

 

 

 

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Guest Guest_Joel

This thread is so useful because it makes crystal clear that the employer HAS ABSOLUTLEY NO INVOLVMENT EXCEPT FOR REMITTING THE INVESTMENT CHECK.

 

The ee should not be left to swim in a sea of sharks in order to find out that no-load funds + investor education = peace of mind and larger accumulations.

 

As I have repeatedly said the er has to get into the game in a meaningful way---and until that critical involvement happens the broad majority of 403b participants will be eaten up by the sharks.

 

HOW DO WE ENSURE THAT HR 3718 IS NOT USED BY THE 403b SHARKS TO INFLICT HARM ON ALL THE PUBLIC EMPLOYEES IN THIS NATION RATHER THAN JUST EES OF PUBLIC SCHOOL DISTRICTS?? HR 3718 DOES NOT CHANGE SECTION 403(b) IN ANY WAY EXCEPT TO SAY ALL PUBLIC EMPLOYEES (OTHER THAN FEDERAL) ARE ELIGIBLE FOR A 403(b) ARRANGEMENT.

 

I CAN JUST see the following reality...A HIGH COST 403(b) provider has been the powerhouse in public school district for 25 years---is it not logical, if not a forgone conclusion, to conclude that the municipal government that is a part of will use the same high cost 403(b) provider for its workforce?

 

Peace,

Joel

 

 

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