Jump to content

Recommended Posts

I glad I just found this page and need to do some more reading. My question (scenerio); recently changed districts (New York) that provided me with OMNI choices that include: Vanguard Fiduciary Trust, Fidelity Management Trust Co., Roth- Axa Equitable, Roth-Fidelity Management, Roth-Mutual/Plan Member, Roth -Voya Financial (Nat) along with 20 other companies. From my brief reading of this site, it looks like Vanguard is the recommended company?? These are some of my initial questions and I would really appreciate any input. I can answer most education questions, but finance is not my area.  I am about 10 years from retirement and have two kids yet to go to college with little to no savings for that, but would like to pay for as much college as I can.  I have a little over 200 grand in Brighthouse Financial 403B from my previous job. It seems that similar recommendations are to roll that over into a traditional IRA and start a new 403B with my new company. I would like to contribute the max to my 403B. 

1. What is the best thing to do with the 200+ Grand?

2. Which investment company is the most recommended for the new 403B?

3. Is it possible to split the max contribution into both Roth and 403B? I'm aiming for $19,000.  (Combined married income is over 200 Grand, so I read somewhere I can't do that?)

4. If Vanguard is the preferred way, which funds are recommended with my profile?  

5.  If the Traditional IRA is recommend for the old money, does anyone have specific fund recommendations?

6. Any recommendations for college saving funds. HS Junior and 8th grader. I also have a very large monthly mortgage payment until about retirement age. 

I do understand that your input is your personal opinions and welcome all input. And I'm sure I may have more questions in the near future, any help is truly appreciated.  

 

image.png.5af3a08188f34d2ef79b3e91075632fe.png

image.png

image.png

image.png

image.png

image.png

image.png

image.png

image.png

image.png

image.png

image.png

image.png

image.png

image.png

image.png

image.png

image.png

image.png

image.png

Share this post


Link to post
Share on other sites
On 7/17/2019 at 9:06 PM, NYAdmin said:

it looks like Vanguard is the recommended company??

I'm not sure how to break the tie between Vanguard and Fidelity. I'll let you decide.

Vanguard is documented here.

Fidelity is documented here.

On 7/17/2019 at 9:06 PM, NYAdmin said:

recommendations are to roll that over into a traditional IRA and start a new 403B with my new company

There may be corner cases where that is sub-optimal, but generally that is the right decision because you have total control over an IRA, whereas a 403b is up to the whims of your employer.

On 7/17/2019 at 9:06 PM, NYAdmin said:

1. What is the best thing to do with the 200+ Grand?

I don't understand the question. I assume you're asking what type of account you should move your 200k (from an old employer's 403b) to? I think you've already answered your own question.

On 7/17/2019 at 9:06 PM, NYAdmin said:

2. Which investment company is the most recommended for the new 403B?

Vanguard or Fidelity, pick what feels good to you.

On 7/17/2019 at 9:06 PM, NYAdmin said:

3. Is it possible to split the max contribution into both Roth and 403B? I'm aiming for $19,000.  (Combined married income is over 200 Grand, so I read somewhere I can't do that?)

It is very common to use the word "Roth" as if it fully describes an account. It does not. Tax advantaged accounts (401k, 403b, 457b, IRA, etc.) come in two variants: Roth and Traditional. Please ask questions if you don't understand that. I assume you're asking if half of your 403b contribution can be Traditional and half can be Roth...yes that is allowable. Is it advisable? Well, you haven't provided enough information to say...again ask questions if that's what you're getting at.

IRAs have income contribution limits whereas other tax advantaged accounts (401k, 403b, 457b) do not. Some people make too much to directly contribute to a Roth IRA. However, Congress wrote the law in a fairly ridiculous way that allows those folks to contribute to a Roth IRA indirectly through something that has come to be known as a "backdoor Roth contribution".

On 7/17/2019 at 9:06 PM, NYAdmin said:

4. If Vanguard is the preferred way, which funds are recommended with my profile?  

You haven't told us much about you, so I can't answer that really. I think you're going to want to read my Investing 101 page.

Your main decision is to decide what percentage of your portfolio should be in bonds. I personally do that by recognizing that stocks can drop by 50% fairly quickly and take many years to recover...then I ask myself how much of my portfolio I can financially and emotionally afford to lose. If you would do something foolish like selling stocks during a crash if you lost 50% of your portfolio then guess what, you can't handle a 100% stock portfolio. If you can only handle losing 25% of your portfolio then you need a 50% stock and 50% bond portfolio.

Once you know what stock/bond split is appropriate for you (something only you can answer, by the way). Then picking the funds is easy. If you want to save a little bit of cash in fees then you invest in what's known as the 3 Fund Portfolio...if you don't mind paying a little extra to not have to manage anything at all (3 fund portfolio takes hours per year to manage) then you can go with an all-in-one fund (fixed allocation or target date).

In the Vanguard/Fidelity links I gave you, I point out the funds to use. In the Investing 101 link I gave you, I describe all of this in detail. Ask questions.

...all my comments are in regard to your entire portfolio as a whole. Each account does not have to be a stand-alone portfolio if you will. Ask questions.

On 7/17/2019 at 9:06 PM, NYAdmin said:

5.  If the Traditional IRA is recommend for the old money, does anyone have specific fund recommendations?

Very generally speaking, it doesn't matter what account type you have, my fund recommendations will be the same.

However, bond funds in a taxable account can generate "large" tax bills (especially for somebody in a high tax bracket). I'd also like to put my highest performing assets in the account that is guaranteed to never be taxed (Roth accounts) so I'd avoid putting bonds in those accounts (Roth).

So there are exceptions to the rules, but I can't give comprehensive input because you haven't laid out your entire financial situation.

On 7/17/2019 at 9:06 PM, NYAdmin said:

6. Any recommendations for college saving funds. HS Junior and 8th grader. I also have a very large monthly mortgage payment until about retirement age.

It seems like you've really grabbed onto the idea that some funds are "better" in one type of account than others, but as a general rule of thumb (with a few caveats) that isn't how this works. You build a fully diversified portfolio with rock bottom costs (in short that means, you buy total market index funds). Then you buy those funds in the accounts where they're the cheapest and/or most tax efficient. You view your portfolio as the summation of all of those accounts.

Yes, you apparently will spend money on your kids college, but it doesn't come from a single fund...it comes from your portfolio as a whole. You may do some mental accounting to imagine it coming from a particular source, but that's essentially a fallacy (one lots and lots of people fall into).

Share this post


Link to post
Share on other sites

...also, if you have access to a 457b, then take advantage of that too. You can put 19k in a 403b and another 19k in a 457b.

Share this post


Link to post
Share on other sites

Welcome to the forum, NYAdmin. Just out of curiosity, can you share with us how you came across 403bwise? 

As an administrator, you have the potential to exert influence over other administrators who evidently do not understand finance like they do education, just like you self-described. Though you will hopefully discover that it is a lot easier to understand than you think. If only administrators could explain the pitfalls of 403b plans to those in charge of choosing the plans, it could do wonders for the balance sheets of themselves, hundreds of teachers and staff members too. 

Share this post


Link to post
Share on other sites

At Moe Money- The answer to your question was that I stumbled upon this site as I was trying to figure out what to do with 403B options with my new employer.

At EdLaFave- Thanks for the input. So, I guess I answered my own question #1 and will invest in an IRA. Can I just go to any financial institution to do this (example, I have an existing account with Schwab) or is using a company such as Vanguard easier? I do not have the ability to manage the money myself.

Also, Ed. I looked at your recommended reading and am wondering about your statement that the Three Fund Index takes hours per year to manage. I think I'd go with 50% Total Stock, 25% Total International and 25% Bond.  What is there to manage? Can't I just declare my funds, then let the sit? 

Also, it looks like my husband also has a percentage money from his 401K invested in Vanguard's Total Bond and Total International as well as a bunch of other Vanguard Funds. Is it not wise to both have money going into the same fund? Any thoughts, thanks. 

Share this post


Link to post
Share on other sites
29 minutes ago, NYAdmin said:

Can I just go to any financial institution to do this (example, I have an existing account with Schwab) or is using a company such as Vanguard easier?

You can basically use any institution you want. I have an all Vanguard portfolio so I opened mine with Vanguard. I believe some institutions charge fees if you buy another institution’s funds through them (again, not something I’ve had to deal with). The bogleheads have documented how to build a three fund portfolio with funds from various institutions.

34 minutes ago, NYAdmin said:

am wondering about your statement that the Three Fund Index takes hours per year to manage. I think I'd go with 50% Total Stock, 25% Total International and 25% Bond.  What is there to manage? Can't I just declare my funds, then let the sit? 

So the reason it takes a few hours per year to manage is because you need to keep those funds in the right proportion to each other. When your portfolio is small this means putting new money into the funds that are “low” and when your portfolio is large it means occasionally selling what you have too much or to buy what you have too little of. If you wanted to literally do nothing then a target date fund or a fixed allocation fund like Vanguard’s life strategy fund will handle that for you.

 

39 minutes ago, NYAdmin said:

Also, it looks like my husband also has a percentage money from his 401K invested in Vanguard's Total Bond and Total International as well as a bunch of other Vanguard Funds. Is it not wise to both have money going into the same fund?

Please read my blog post on investing in a marriage that hopefully will last, but may not. I wrote that before I got divorced and I’m happy it is something we considered.

To answer your question directly, owning a fund in multiple accounts is fine, owning a fund in a single account is fine. That isn’t what matters.

Let’s assume you won’t get divorced. You and your husband should decide on an asset allocation that works best for you two. You should view your entire portfolio as the summation of each account and buy funds in each account based on how cheap it is. Suppose everything in your husband’s 401k is expensive except bonds, you’d want to keep your bonds there (as much as possible), which would mean your other accounts would have to be more stock heavy in order to reach your overall desired asset allocation.

...if your husband has a bunch of funds that either means he is betting on specific sectors/asset classes, which I wouldn’t do, or his account is needlessly complicated, which I also wouldn’t do. It isn’t a huge sin, but it is something to consider. 

Share this post


Link to post
Share on other sites
On 8/12/2019 at 5:31 PM, EdLaFave said:

If you wanted to literally do nothing then a target date fund or a fixed allocation fund like Vanguard’s life strategy fund will handle that for you.

I think Ed gave you plenty of information that is highly accurate and correct

I think you should take a very close look at Vanguard Life Strategy Funds. They come in different allocations and are self managed so you can let them sit and you won't have to worry about rebalancing or diversification. I'm in one of them myself. They will cost you slightly more since they require extra work on the part of Vanguard to keep things balanced but they pretty much have the same index funds you would own if you set up a 3-4 fund index fund portfolio. Ed is a do it your-self kind of guy but he has good knowledge and is comfortable with what he is doing. If you feel the least bit timid about handling details by your self than its hard to beat the Life Strategy funds at Vanguard.

https://investor.vanguard.com/mutual-funds/lifestrategy/#/

 

Tony

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

×
×
  • Create New...