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Liz A

Another Appreciative Newbie

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Hi all,

First off, I’ve been perusing this forum for several months, and passed on the website to a few young teachers that I work with. I hope it saves them so they don’t go down the path that most teachers, including myself, seem to go down when it comes to investing.

 

A little about my investing history:

 

I began contributing to my 403b @ 23, I’m currently 35. My original contributions began with a company called Conseco (AKA- an insurance company masquerading as a great place for a young, naive teacher to invest their money!) I invested blindly in this company for quite a few years until I realized how horrible annuities were- and just wanted out. I transferred what I could (avoiding surrender fees) into The Legend Group just to get into some mutual funds. I realize now that this was also a mistake because I didn’t do any research and my “advisor” certainly wasn’t doing anything for me other than lining her own pockets.

I’m 35 now and after 12 years of steady (and stupid) investing, I’m finally determined to get smart about my money. I’ve recently been reading a lot about investing, trying to get up to snuff. I realize now that my current funds with the Legend Group, which I thought were safe and well-managed, are eating me alive with high front load fees and high expenses. I’ve recently talked to my Legend Group Advisor who says that they are unable to offer me any funds with cheaper figures. Go figure. …Duped again.

Through it all, I’ve become wiser (403bwiser) and now need some advice from trusted individuals like those I see in this forum.

After some research, and from the urging of my husband, I’m now looking at transferring my money to TIAA-CREF, which recently became a provider offered by my employer. (Thank God for small miracles!)

So I’m wondering which funds from TIAA-CREF I should invest in. Would it be in my best interest in also starting a ROTH?

 

I currently have 36K in my account. My annual contribution to my account is $7200.

 

Can anyone pass on any words of wisdom about their experience with TIAA?

 

Thanks so much! I'm very grateful for this site.

 

Liz

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Hi all,

First off, I’ve been perusing this forum for several months, and passed on the website to a few young teachers that I work with. I hope it saves them so they don’t go down the path that most teachers, including myself, seem to go down when it comes to investing.

 

A little about my investing history:

 

I began contributing to my 403b @ 23, I’m currently 35. My original contributions began with a company called Conseco (AKA- an insurance company masquerading as a great place for a young, naive teacher to invest their money!) I invested blindly in this company for quite a few years until I realized how horrible annuities were- and just wanted out. I transferred what I could (avoiding surrender fees) into The Legend Group just to get into some mutual funds. I realize now that this was also a mistake because I didn’t do any research and my “advisor” certainly wasn’t doing anything for me other than lining her own pockets.

I’m 35 now and after 12 years of steady (and stupid) investing, I’m finally determined to get smart about my money. I’ve recently been reading a lot about investing, trying to get up to snuff. I realize now that my current funds with the Legend Group, which I thought were safe and well-managed, are eating me alive with high front load fees and high expenses. I’ve recently talked to my Legend Group Advisor who says that they are unable to offer me any funds with cheaper figures. Go figure. …Duped again.

Through it all, I’ve become wiser (403bwiser) and now need some advice from trusted individuals like those I see in this forum.

After some research, and from the urging of my husband, I’m now looking at transferring my money to TIAA-CREF, which recently became a provider offered by my employer. (Thank God for small miracles!)

So I’m wondering which funds from TIAA-CREF I should invest in. Would it be in my best interest in also starting a ROTH?

 

I currently have 36K in my account. My annual contribution to my account is $7200.

 

Can anyone pass on any words of wisdom about their experience with TIAA?

 

Thanks so much! I'm very grateful for this site.

 

Liz

 

Welcome to this forum Liz,

Congratulations on starting your retirement planning at a very young age. You will be happy, very happy you did 20-30 years from now and the "duped again" experience will only be a tiny blip on the radar screen. You are making corrections now.

As soon as TIAA CREF became available, I signed up with that great vendor for the last 6 years of teaching. Since you are still young, you can invest in their stock funds. Be sure to spread your money around with both domestic and international stock funds. I would suggest you have about 20-30% in a bond fund, approximately equal to your age.

For the Roth, since you can invest anywhere, I suggest Vanguard. I would invest Roth money the same way, mostly stocks but with a bond fund too. Vanguard's fees are less than TIAA CREF.

Take a look at TIAA CREF choices: https://www.tiaa-cref.org/public/index.html

Don't be afraid of the annuities in this vendor. There is nothing wrong with annuities with both Tiaa Cref and Vanguard. They act more like low cost mutual funds than any large insurance company.

Just to get started with your 403b, you might start with this portfolio:

 

1. Global Equities (means stocks): 35%

2. Equity Index (domestic stocks): 45%

3. Bond: 20%

 

Vanguard Real Estate Investment Trust (REIT) for your Roth IRA.

 

You have broad diversification with low fees. That's just to focus on where to put your money now. Later on, you MUST learn how to rebalance. That's the hard part. You will learn how the market works, the ups and downs. For all of these years, based on your message, you were in an annuity and you probably never experienced your money going down. This portfolio that I am suggesting is very basic just to get you started. I don't know anything about your risk tolerance. Only you can learn this and you must experience to trust that the broad economy will grow over long periods of time. There are two constants with investing: Uncertainty and growing economy. Pay no attention to any financial news channel, guru, financial adviser, manager and Wall Street who complains about uncertainty. Uncertainty will always be a factor with investing. In fact, its a good thing. Uncertainty provides the "risk premium" that no riskless annuity can give you: higher returns over long periods of time. If you want higher returns and be a more successful investor, you must take on some risk. That's where a plan that you are comfortable with and can stick with over good times and bad times. Sounds like you have a supportive husband and that's crucial.

 

Keep reading investing books: Dan Otter's book,"Teach and retire rich", William Bernstein's "Four Pillars of Investing" and any book by the absolutely great John Bogle, founder of Vanguard, who started indexing investing. You must know this great man. There is another investment forum called Bogleheads at boglehead.org. The leaders wrote two books, I suggest "Bogleheads Guide to Investing" by Larimore et.el.

 

Good luck,

Steve

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Definitely move to TIAA. Expenses are lower than the option you're currently in. Remember, we can't control the market, we can control expenses. Expenses are measured in mutual funds by the "expense ratio." Get familiar with this term. All mutual funds are invested in the market, thus over the long term they all deliver similar returns. The difference is what they are charging you-why pay a premium? Steve has outlined a nice balanced portfolio.

 

Your question about a ROTH depends on whether you could use a Traditional IRA to lower your taxes today. This will depend on your income. ROTHs are post tax contributions but are not taxed on either future growth or at time of withdrawal. Traditional IRAs allow you to take a tax deduction now and they grow tax free-but you pay tax on distributions-this sounds bad but you may be in a lower tax bracket when you are making your withdrawals-as you'll be retired. So you need to consider all this in making your decisions.

 

Finally, right now I would suggest short term bond funds for your Bond investments. Bonds prices and interest rates move in opposite directions. Interest rates can't go lower. Longer term bonds are more sensitive to changes in interest rates-that is, when rates go up, prices on long bonds fall more than those of short term bonds. This is measured by "duration." So if you want to impress people at a cocktail party, tell them you shortened the duration on your bond portfolio to protect the value from rising rates. Typically, we don't know which way rates are going to go but right now we do-so trust me and buy short term bonds, otherwise your investment could drop in value as rates rise.

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Definitely move to TIAA. Expenses are lower than the option you're currently in. Remember, we can't control the market, we can control expenses. Expenses are measured in mutual funds by the "expense ratio." Get familiar with this term. All mutual funds are invested in the market, thus over the long term they all deliver similar returns. The difference is what they are charging you-why pay a premium? Steve has outlined a nice balanced portfolio.

 

Your question about a ROTH depends on whether you could use a Traditional IRA to lower your taxes today. This will depend on your income. ROTHs are post tax contributions but are not taxed on either future growth or at time of withdrawal. Traditional IRAs allow you to take a tax deduction now and they grow tax free-but you pay tax on distributions-this sounds bad but you may be in a lower tax bracket when you are making your withdrawals-as you'll be retired. So you need to consider all this in making your decisions.

 

Finally, right now I would suggest short term bond funds for your Bond investments. Bonds prices and interest rates move in opposite directions. Interest rates can't go lower. Longer term bonds are more sensitive to changes in interest rates-that is, when rates go up, prices on long bonds fall more than those of short term bonds. This is measured by "duration." So if you want to impress people at a cocktail party, tell them you shortened the duration on your bond portfolio to protect the value from rising rates. Typically, we don't know which way rates are going to go but right now we do-so trust me and buy short term bonds, otherwise your investment could drop in value as rates rise.

 

 

 

Thank you Mark and Steve!

 

Do I need to speak to someone directly at TIAA-CREF, or can I manage my own account through their website?

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Definitely move to TIAA. Expenses are lower than the option you're currently in. Remember, we can't control the market, we can control expenses. Expenses are measured in mutual funds by the "expense ratio." Get familiar with this term. All mutual funds are invested in the market, thus over the long term they all deliver similar returns. The difference is what they are charging you-why pay a premium? Steve has outlined a nice balanced portfolio.

 

Your question about a ROTH depends on whether you could use a Traditional IRA to lower your taxes today. This will depend on your income. ROTHs are post tax contributions but are not taxed on either future growth or at time of withdrawal. Traditional IRAs allow you to take a tax deduction now and they grow tax free-but you pay tax on distributions-this sounds bad but you may be in a lower tax bracket when you are making your withdrawals-as you'll be retired. So you need to consider all this in making your decisions.

 

Finally, right now I would suggest short term bond funds for your Bond investments. Bonds prices and interest rates move in opposite directions. Interest rates can't go lower. Longer term bonds are more sensitive to changes in interest rates-that is, when rates go up, prices on long bonds fall more than those of short term bonds. This is measured by "duration." So if you want to impress people at a cocktail party, tell them you shortened the duration on your bond portfolio to protect the value from rising rates. Typically, we don't know which way rates are going to go but right now we do-so trust me and buy short term bonds, otherwise your investment could drop in value as rates rise.

 

 

 

Thank you Mark and Steve!

 

Do I need to speak to someone directly at TIAA-CREF, or can I manage my own account through their website?

 

 

Yes, you can manage your account.

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Hi all,

First off, I’ve been perusing this forum for several months, and passed on the website to a few young teachers that I work with. I hope it saves them so they don’t go down the path that most teachers, including myself, seem to go down when it comes to investing.

 

A little about my investing history:

 

I began contributing to my 403b @ 23, I’m currently 35. My original contributions began with a company called Conseco (AKA- an insurance company masquerading as a great place for a young, naive teacher to invest their money!) I invested blindly in this company for quite a few years until I realized how horrible annuities were- and just wanted out. I transferred what I could (avoiding surrender fees) into The Legend Group just to get into some mutual funds. I realize now that this was also a mistake because I didn’t do any research and my “advisor” certainly wasn’t doing anything for me other than lining her own pockets.

I’m 35 now and after 12 years of steady (and stupid) investing, I’m finally determined to get smart about my money. I’ve recently been reading a lot about investing, trying to get up to snuff. I realize now that my current funds with the Legend Group, which I thought were safe and well-managed, are eating me alive with high front load fees and high expenses. I’ve recently talked to my Legend Group Advisor who says that they are unable to offer me any funds with cheaper figures. Go figure. …Duped again.

Through it all, I’ve become wiser (403bwiser) and now need some advice from trusted individuals like those I see in this forum.

After some research, and from the urging of my husband, I’m now looking at transferring my money to TIAA-CREF, which recently became a provider offered by my employer. (Thank God for small miracles!)

So I’m wondering which funds from TIAA-CREF I should invest in. Would it be in my best interest in also starting a ROTH?

 

I currently have 36K in my account. My annual contribution to my account is $7200.

 

Can anyone pass on any words of wisdom about their experience with TIAA?

 

Thanks so much! I'm very grateful for this site.

 

Liz

 

 

Liz, I'm glad that my wife and I both have a Roth. We have been more aggressive in our Roths than in our 403b and 457 accounts and they have done well. I am looking forward to being able to supplement my retirement pension with tax-free withdrawals from the Roth. I actually started an IRA at 24 and my wife started one at about 28. We converted to a Roth (and paid the appropriate taxes) in 1998 I think. It was a bit of a tax hit to convert, but I'm glad we did it. Not many people have the foresight like you to start early.

 

Don't beat yourself up over mistakes. We have all made some of the same ones, and I know several people who are still blissfully unaware that there are better deals out there. You are the exception because you figured it out! I wish I had the same TIAA-CREF option as you. We have have paid thousands of dollars in fees over the years for one of our 403b's (ING) and right now we're still stuck.

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Hi Liz,

Good for you! A) for investing so young and B)for doing the research and realizing the rip-off. I wish I had started younger and read this board sooner! Anyway, Mark and Steve certainly know what they are talking about. But for me, I chose TIAA-Cref's target retirement funds for my 403b. It is simple and it rebalances based on your age and expected date of retirement. I just chose the fund closest to my retirement year and they do the rest. I don't have to worry about the stock/bond/cash ratio because it is done for me.

 

Also, because my kids are grown and I don't own a house, I maximize my 403b because I need the tax shelter right now. If I didn't need a tax shelter, I'd be maxing out a Roth every year for sure before I put a penny into a 403b. Lower fees and more control.

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