403(b)/general advice for first post-residency job
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403(b)/general advice for first post-residency job
Hi there,
I’m a physician who just finished residency (3 weeks ago). I’m very cash poor, and quite debt high. I’m not exactly keen on investing anything at this point in my career in lieu of paying off debt, but my new job takes a mandatory deduction of 6.5% of my salary for an “optional retirement program, ORP”, for which they match at about 6.5%. (It also offers a “Teachers retirement system”, but the vestment period is much longer, and it has other disadvantages, leading me to prefer the ORP.)
Through my research so far, index investing seems like one of the more reasonable options, and I have found this site including the forums to be very helpful in learning some basics, so I come asking for further assistance. The only investing I have ever done is put 5-5.5k in a Roth IRA for the past 3 years based on some very limited research that I did while busy with other things.
The ORP offers various annuities, which seem like unattractive options. The other ORP option lies under the 403(b)(7) “custodial” account code, and allows investment in mutual funds. At my particular institution, both are offered from five approved providers:
AIG VALIC
Fidelity
ING
Lincoln Financial Group
TIAA-CREF
From among these providers, the following indexed funds are available:
Ticker, Provider fund name, Gross expense ratio, Turnover
AIG VALIC
VINIX Vanguard Institutional Index Institutional 0.04% 5.0%
PESPX Dreyfus Mid Cap Index 0.50% 10.0%
DISSX Dreyfus Small Cap Stock Index 0.50% 21.0%
DIISX Dreyfus International Stock Index 0.60% 23.0%
Fidelity
FXSIX Spartan 500 Index Fund - Institutional Class 0.05% 4.0%
FSEVX Spartan Extended Market Index Fund - Fidelity Advantage Class 0.07% 14.0%
FSIVX Spartan International Index Fund - Fidelity Advantage Class 0.17% 2.0%
ING
For ING, every single “Index” offering, even those tabulated underneath the “Mutual Fund Programs:” heading, seem to be annuities. For example, the “ING Russell (TM) Large Cap Index Portfolio - Class I”, listed under mutual funds on their info sheet (http://goo.gl/DuAd2U), (seems to actually be the “Voya Russell Large Cap Index” as listed by Morningstar; IIRLX) is described by Bloomberg as “a variable annuity incorporated in the USA.” Maybe I’m missing it here, but this is where I’m at with ING.
Lincoln Financial Group
NINDX Columbia Large Cap Index Z 0.20% 3.0%
NMPAX Columbia Mid Cap Index Z 0.20% 14.0%
NMSCX Columbia Small Cap Index Z 0.20% 15.0%
VDMIX Vanguard Developed Markets Index Inv [still available? not on Morningstar..] 0.20% unknown turnover
TIAA-CREF
TISPX TIAA-CREF S&P 500 Index Fund - Institutional Class 0.06% 4.0%
TCIEX TIAA-CREF International Equity Index Fund - Institutional Class 0.07% 3.0%
TISBX TIAA-CREF Small-Cap Blend Index Fund - Institutional Class 0.16% 17.0%
NMPAX Columbia Mid Cap Index Fund - Z Class 0.42% 14%
So, as you can see, I am interested primarily index funds with the lowest expense ratios. Of these I have listed, they are all by far amongst the lowest of the fees of all the options that I have (including the multitude of non-indexed options). My question for this forum is: What am I missing? Are there hidden fees associated with a “custodial” account? Is AIG VALIC going to stick me with some hidden fees that Fidelity isn’t? And vice versa? Is one “provider” company better than the others? More shady? And should I perhaps be more open-minded than just interested in index funds? What other things have I not taken into account? Tax repercussions?
I appreciate any responses or relevant references, thank you.
I’m a physician who just finished residency (3 weeks ago). I’m very cash poor, and quite debt high. I’m not exactly keen on investing anything at this point in my career in lieu of paying off debt, but my new job takes a mandatory deduction of 6.5% of my salary for an “optional retirement program, ORP”, for which they match at about 6.5%. (It also offers a “Teachers retirement system”, but the vestment period is much longer, and it has other disadvantages, leading me to prefer the ORP.)
Through my research so far, index investing seems like one of the more reasonable options, and I have found this site including the forums to be very helpful in learning some basics, so I come asking for further assistance. The only investing I have ever done is put 5-5.5k in a Roth IRA for the past 3 years based on some very limited research that I did while busy with other things.
The ORP offers various annuities, which seem like unattractive options. The other ORP option lies under the 403(b)(7) “custodial” account code, and allows investment in mutual funds. At my particular institution, both are offered from five approved providers:
AIG VALIC
Fidelity
ING
Lincoln Financial Group
TIAA-CREF
From among these providers, the following indexed funds are available:
Ticker, Provider fund name, Gross expense ratio, Turnover
AIG VALIC
VINIX Vanguard Institutional Index Institutional 0.04% 5.0%
PESPX Dreyfus Mid Cap Index 0.50% 10.0%
DISSX Dreyfus Small Cap Stock Index 0.50% 21.0%
DIISX Dreyfus International Stock Index 0.60% 23.0%
Fidelity
FXSIX Spartan 500 Index Fund - Institutional Class 0.05% 4.0%
FSEVX Spartan Extended Market Index Fund - Fidelity Advantage Class 0.07% 14.0%
FSIVX Spartan International Index Fund - Fidelity Advantage Class 0.17% 2.0%
ING
For ING, every single “Index” offering, even those tabulated underneath the “Mutual Fund Programs:” heading, seem to be annuities. For example, the “ING Russell (TM) Large Cap Index Portfolio - Class I”, listed under mutual funds on their info sheet (http://goo.gl/DuAd2U), (seems to actually be the “Voya Russell Large Cap Index” as listed by Morningstar; IIRLX) is described by Bloomberg as “a variable annuity incorporated in the USA.” Maybe I’m missing it here, but this is where I’m at with ING.
Lincoln Financial Group
NINDX Columbia Large Cap Index Z 0.20% 3.0%
NMPAX Columbia Mid Cap Index Z 0.20% 14.0%
NMSCX Columbia Small Cap Index Z 0.20% 15.0%
VDMIX Vanguard Developed Markets Index Inv [still available? not on Morningstar..] 0.20% unknown turnover
TIAA-CREF
TISPX TIAA-CREF S&P 500 Index Fund - Institutional Class 0.06% 4.0%
TCIEX TIAA-CREF International Equity Index Fund - Institutional Class 0.07% 3.0%
TISBX TIAA-CREF Small-Cap Blend Index Fund - Institutional Class 0.16% 17.0%
NMPAX Columbia Mid Cap Index Fund - Z Class 0.42% 14%
So, as you can see, I am interested primarily index funds with the lowest expense ratios. Of these I have listed, they are all by far amongst the lowest of the fees of all the options that I have (including the multitude of non-indexed options). My question for this forum is: What am I missing? Are there hidden fees associated with a “custodial” account? Is AIG VALIC going to stick me with some hidden fees that Fidelity isn’t? And vice versa? Is one “provider” company better than the others? More shady? And should I perhaps be more open-minded than just interested in index funds? What other things have I not taken into account? Tax repercussions?
I appreciate any responses or relevant references, thank you.
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Re: 403(b)/general advice for first post-residency job
I would do Fidelity. Seems like you found three stock options. Do they have a low expense bond fund?
Where is your Roth housed (vanguard, fidelity, etc)?
Have you found the white coat investor website yet? He posts here as emergency doc. Lots of good info on his website regarding student loan options, insurance etc
Where is your Roth housed (vanguard, fidelity, etc)?
Have you found the white coat investor website yet? He posts here as emergency doc. Lots of good info on his website regarding student loan options, insurance etc
Re: 403(b)/general advice for first post-residency job
Welcome to the forum!
FYI, it seems Fidelity keeps your employer match in Fidelity Cash Reserves until it vests after your first year on the job. Not sure if there's similar special treatment with the other vendors (?).
FYI, it seems Fidelity keeps your employer match in Fidelity Cash Reserves until it vests after your first year on the job. Not sure if there's similar special treatment with the other vendors (?).
TIAA-CREF also offers TIAA Traditional. Your available contract is currently paying 3.5%; withdrawal limited to 10 annual installments.texaspapas wrote:TIAA-CREF
TISPX TIAA-CREF S&P 500 Index Fund - Institutional Class 0.06% 4.0%
TCIEX TIAA-CREF International Equity Index Fund - Institutional Class 0.07% 3.0%
TISBX TIAA-CREF Small-Cap Blend Index Fund - Institutional Class 0.16% 17.0%
NMPAX Columbia Mid Cap Index Fund - Z Class 0.42% 14%
AIG Valic also offers Schwab Personal Choice Retirement Account (PCRA) under "Other Options." More here. Might be worth asking whether there's an extra fee to use it (and whether you could buy ETFs through it). See Schwab Commission-free ETFs:texaspapas wrote:AIG VALIC
VINIX Vanguard Institutional Index Institutional 0.04% 5.0%
PESPX Dreyfus Mid Cap Index 0.50% 10.0%
DISSX Dreyfus Small Cap Stock Index 0.50% 21.0%
DIISX Dreyfus International Stock Index 0.60% 23.0%
p.s. I found your other options based on the ING link you shared.Multi-Cap Core (SCHB) 0.04%
Core Bond (SCHZ) 0.06%
etc.
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Re: 403(b)/general advice for first post-residency job
Hey guys, thanks for the responses!!
MooseandBear:
Why Fidelity and not AIG with the Vanguard fund (it’s slightly cheaper)? As for low expense bond fund, Yes, Fidelity has the option of Vanguard Total Bond Market Index Fund Signal Shares (VBTSX), with an expense ratio of 0.08% (next highest bond fund at 0.27%). Why do you ask?
My Roth is housed in Vanguard.
And yes, I found white coat investor blog yesterday while on this site. I spent 3+ hours reading the various articles on his site, fantastic information resource on a lot of topics (“live like a resident” for example, made me feel much better about how all these people are asking me why do I live in crappy apartment, etc.) but unfortunately doesn’t quite cover what I’m looking into. That’s great to know that he posts as emerg doc too, I will search that user name and read his posts.
The529guy:
Yeah, I had read that about the cash reserves and Fidelity. I believe it is the same for most providers at least because as a resident I was for one year with a particular “pay source” that had a matching set up through TIAA-CREF, and because I didn’t meet the vestment period I had to figure out what they had done with the money, and that was it.
The link regarding TIAA-CREF and paying 3.5% seems to be about annuities… Is the fund that I was referencing an annuity? At any rate, 3.5% doesn’t seem optimal.
And regarding the PCRA, that’s a great suggestion. I will try to find out about any additional fees with that, as well as I can. I did however, already talk to the AIG “local rep”, and seems really set on putting me in a “Guided portfolio service” thing, which doesn't sound like the right thing for me. At any rate, the whole PCRA/ETF option looks fantastic at a glance, but now I’ll have to dig in a bit.
And you found better options through the ING link? I can’t see them, not low cost, index-type funds anyways...
Thanks so much for the suggestions guys, keep ‘em coming if you think of anything else.
Best.
MooseandBear:
Why Fidelity and not AIG with the Vanguard fund (it’s slightly cheaper)? As for low expense bond fund, Yes, Fidelity has the option of Vanguard Total Bond Market Index Fund Signal Shares (VBTSX), with an expense ratio of 0.08% (next highest bond fund at 0.27%). Why do you ask?
My Roth is housed in Vanguard.
And yes, I found white coat investor blog yesterday while on this site. I spent 3+ hours reading the various articles on his site, fantastic information resource on a lot of topics (“live like a resident” for example, made me feel much better about how all these people are asking me why do I live in crappy apartment, etc.) but unfortunately doesn’t quite cover what I’m looking into. That’s great to know that he posts as emerg doc too, I will search that user name and read his posts.
The529guy:
Yeah, I had read that about the cash reserves and Fidelity. I believe it is the same for most providers at least because as a resident I was for one year with a particular “pay source” that had a matching set up through TIAA-CREF, and because I didn’t meet the vestment period I had to figure out what they had done with the money, and that was it.
The link regarding TIAA-CREF and paying 3.5% seems to be about annuities… Is the fund that I was referencing an annuity? At any rate, 3.5% doesn’t seem optimal.
And regarding the PCRA, that’s a great suggestion. I will try to find out about any additional fees with that, as well as I can. I did however, already talk to the AIG “local rep”, and seems really set on putting me in a “Guided portfolio service” thing, which doesn't sound like the right thing for me. At any rate, the whole PCRA/ETF option looks fantastic at a glance, but now I’ll have to dig in a bit.
And you found better options through the ING link? I can’t see them, not low cost, index-type funds anyways...
Thanks so much for the suggestions guys, keep ‘em coming if you think of anything else.
Best.
Re: 403(b)/general advice for first post-residency job
I'd choose Fidelity as the provider.
First it's only 0.01% cheaper. That's not a big deal. Second Fidelity's other funds are also cheaper, much cheaper than AIG's other options at 0.50%. And Extended Market is easier to use than separate Mid Cap/Small Cap funds. Roughly 80% large caps (500 Index) plus 20% mid/small caps (Extended Market) makes up the total US stock market.texaspapas wrote:Why Fidelity and not AIG with the Vanguard fund (it’s slightly cheaper)?
Because most people on this board recommend at least 10% bonds in a retirement portfolio. 20% would be even better. Total Bond Market is an excellent bond fund.As for low expense bond fund, Yes, Fidelity has the option of Vanguard Total Bond Market Index Fund Signal Shares (VBTSX), with an expense ratio of 0.08% (next highest bond fund at 0.27%). Why do you ask?
You could use this for international because Spartan International is only developed markets. It'll do but it's not optimum. Total International at Vanguard also includes emerging markets, small caps, and Canada.My Roth is housed in Vanguard.
Re: 403(b)/general advice for first post-residency job
I would second the Fidelity option. My experience with AIG Valic was bad. When you want to move the money they will ding you. May be they have changed their stripes. My 2 Cents worth.
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Re: 403(b)/general advice for first post-residency job
Thanks again guys for the responses, very helpful.
Duckie, a quick couple questions:
Do you recommend 10-20% bonds even though I’m really early in the process, like literally, I’ve got a handful of years worth of cash in the Roth, nothing else at all…?
And is there any difference in “performance” of the Fidelity Spartan 500 and the Vanguard Institutional Index that I should take into consideration?
Dbltrbl:
That’s interesting that you would say that. A family member of mine, unfortunately not savvy enough to tell me the details, also had a very negative experience with AIG Valic. She says that her whole workplace abandoned them as a provider because of such poor satisfaction.
Also, just generally another question: I have a high debt burden, quite high, all at 6.8% interest. Am I on the right track thinking that I should prioritize keeping my lifestyle expenses very low and paying off very large chunks of this for the quickest pay down possible? I believe I am going to shoot for a 4-5 year total payoff, which I believe will save me 30-40 thousand or so dollars over adhering to a 10-15 year pay off… I will have to continue to live fairly spartan to do that, but I'm used to it and it seems the only way...
Duckie, a quick couple questions:
Do you recommend 10-20% bonds even though I’m really early in the process, like literally, I’ve got a handful of years worth of cash in the Roth, nothing else at all…?
And is there any difference in “performance” of the Fidelity Spartan 500 and the Vanguard Institutional Index that I should take into consideration?
Dbltrbl:
That’s interesting that you would say that. A family member of mine, unfortunately not savvy enough to tell me the details, also had a very negative experience with AIG Valic. She says that her whole workplace abandoned them as a provider because of such poor satisfaction.
Also, just generally another question: I have a high debt burden, quite high, all at 6.8% interest. Am I on the right track thinking that I should prioritize keeping my lifestyle expenses very low and paying off very large chunks of this for the quickest pay down possible? I believe I am going to shoot for a 4-5 year total payoff, which I believe will save me 30-40 thousand or so dollars over adhering to a 10-15 year pay off… I will have to continue to live fairly spartan to do that, but I'm used to it and it seems the only way...
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Re: 403(b)/general advice for first post-residency job
OP,
To get an all around total view of your situation and the best advice, please post in the format recommended here. My signature does not have the URL working but you can copy paste to get to that format post and provide your info in that way. That will help everyone to provide a good picture advice.
To get an all around total view of your situation and the best advice, please post in the format recommended here. My signature does not have the URL working but you can copy paste to get to that format post and provide your info in that way. That will help everyone to provide a good picture advice.
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Re: 403(b)/general advice for first post-residency job
Niceguy, thanks for the tip, wasn't aware of the format. I have included it below:
Emergency funds: Down to two months currently. Just did interstate move/relocation, working, but don't get paid until next month. Kind of pinched right now.
Debt: School loans, consolidated. 160k at 6.8% No other loans/mortgages/etc/credit card debt.
Tax Filing Status: Single. No kids.
Tax Rate: I will be in 28% federal bracket this year total, but additionally, for previous half of year I will have New York State/New York City taxes as well, which will be approximately 10%.
State: Just moved back to Texas 3 weeks ago (couldn’t have come soon enough!! no offense to New Yorkers..)
Age: 34
Desired Asset allocation: I’m not sure about this… Was thinking I would just plug away putting stuff in a domestic stock index fund for a couple years, then diversify later. Not planning to touch it for long time.
Desired International allocation: Have not yet seriously considered this, but am starting to look into it.
Current retirement assets: $15,500 invested in Roth IRA with Vanguard, currently worth around 19. That’s it, nothing else.
Contributions (pending):
6.5% of my salary (6.5 is mandatory, but I will contribute more as able and as paying off debt goes) to a 403b fund or funds that I haven’t yet selected. The sooner I decide, the sooner my vestment period starts, and there is a 6.5% employer matching that disappears if I don’t vest. I may not stay with this position for long term so I am trying to make a selection sooner rather than later.
Questions:
1. Does my very early/near term strategy of contributing only to domestic stock index funds need reconsideration/adjustment? I would modify this on a yearly basis after getting more established... Does my focus on paying off debt initially make sense?
2. Are there hidden fees / contractual pitfalls among the 403b providers that I may not know about?
3. What are the best options among the 403b funds of those I have listed?
4. Is any of the fund providers listed in my OP better/more shady than any of the others?
Emergency funds: Down to two months currently. Just did interstate move/relocation, working, but don't get paid until next month. Kind of pinched right now.
Debt: School loans, consolidated. 160k at 6.8% No other loans/mortgages/etc/credit card debt.
Tax Filing Status: Single. No kids.
Tax Rate: I will be in 28% federal bracket this year total, but additionally, for previous half of year I will have New York State/New York City taxes as well, which will be approximately 10%.
State: Just moved back to Texas 3 weeks ago (couldn’t have come soon enough!! no offense to New Yorkers..)
Age: 34
Desired Asset allocation: I’m not sure about this… Was thinking I would just plug away putting stuff in a domestic stock index fund for a couple years, then diversify later. Not planning to touch it for long time.
Desired International allocation: Have not yet seriously considered this, but am starting to look into it.
Current retirement assets: $15,500 invested in Roth IRA with Vanguard, currently worth around 19. That’s it, nothing else.
Contributions (pending):
6.5% of my salary (6.5 is mandatory, but I will contribute more as able and as paying off debt goes) to a 403b fund or funds that I haven’t yet selected. The sooner I decide, the sooner my vestment period starts, and there is a 6.5% employer matching that disappears if I don’t vest. I may not stay with this position for long term so I am trying to make a selection sooner rather than later.
Questions:
1. Does my very early/near term strategy of contributing only to domestic stock index funds need reconsideration/adjustment? I would modify this on a yearly basis after getting more established... Does my focus on paying off debt initially make sense?
2. Are there hidden fees / contractual pitfalls among the 403b providers that I may not know about?
3. What are the best options among the 403b funds of those I have listed?
4. Is any of the fund providers listed in my OP better/more shady than any of the others?
Re: 403(b)/general advice for first post-residency job
Annuities are not evil. 3.5% on savings is good. What is your bank paying on a savings account? OK, I am cheating. TIAA Traditional is not a savings account in the sense that you can't get your money immediately, but it is a savings account in the sense that it only goes up, never down.
Note that a 403(b) is an annuity. Here is the law. Read the title.
Note that a 403(b) is an annuity. Here is the law. Read the title.
OK, I am cheating again. Section 403(b)(7) says you can use a custodian for things like mutual funds, but only because the law says they are to be treated as if they were annuities.26 U.S. Code § 403 - Taxation of employee annuities
You should also get the IRS publication about 403(b)s, pub 571, and read the title.(7) Custodial accounts for regulated investment company stock
- (A) Amounts paid treated as contributions
- For purposes of this title, amounts paid by an employer described in paragraph (1)(A) to a custodial account which satisfies the requirements of section 401 (f)(2) shall be treated as amounts contributed by him for an annuity contract for his employee if ...
I have a 403(b) at TIAA-CREF, and every penny is in one of their annuity accounts. I don't use their mutual funds; I have a taxable account at Vanguard for that.Tax-Sheltered Annuity Plans (403(b) Plans)
For Employees of Public Schools and Certain Tax-Exempt Organizations
Re: 403(b)/general advice for first post-residency job
I'm not sure that you've listed all of the expense ratio or just the fund ER.
VALIC, ING and Lincoln are notorious for adding on: 12B-1, administrative fees, maintenance fees and other wrap fees. This often pushes total ER in excess of 1.5%
TIAA-CREF and Fidelity are both good options.
VALIC, ING and Lincoln are notorious for adding on: 12B-1, administrative fees, maintenance fees and other wrap fees. This often pushes total ER in excess of 1.5%
TIAA-CREF and Fidelity are both good options.
Re: 403(b)/general advice for first post-residency job
It would be better to take Duckie's advice and invest 20-30% of your stock portfolio in international (in your Roth). Also, whether you choose 100% stock or 10-20% in bonds is a toss-up. If I were you, I'd probably forego bonds for the time being, assuming you have the fortitude to ignore any market drop.texaspapas wrote: Questions:
1. Does my very early/near term strategy of contributing only to domestic stock index funds need reconsideration/adjustment?
Absolutely! You are to be commended for holding off on upscaling your lifestyle. You're doing everything right.Does my focus on paying off debt initially make sense?
Just the ones mentioned above. Choose Fidelity or TIAA-CREF.2. Are there hidden fees / contractual pitfalls among the 403b providers that I may not know about?
See Duckie's response. The Spartan funds are excellent.3. What are the best options among the 403b funds of those I have listed?
See other posters above.4. Is any of the fund providers listed in my OP better/more shady than any of the others?
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Re: 403(b)/general advice for first post-residency job
Okay guys, thanks for the responses. Seeing more as I’m writing back to initial ones.
Sscritic:
But don’t annuities “add on layer of fees”? Seems like every where I look there’s someone saying something to that effect…
And yes, after reading IRC 403(b)(7), I now know that there is by law someone who is the “custodian” of my account and my funds. Is that custodian, say in the example of the Vanguard Institutional Index Institutional (VINIX) used above, AIG VALIC? And although I’m reassured by Midmoder’s and others’ comments on sticking with Fidelity or TIAA-CREF, I’m still somewhat confused...
Which brings me to the next question re: Dutch:
Yes, I’m not sure if I’m including all the fees: 0.04/0.05% seem to be too good to be true… I called and spoke to the Valic “rep”, and he assured me that “Oh no, there’s not other fees of any sort…” but after reading what’s on here I’m skeptical… Really, I’m not sure if I know fully how to check what fees they are charging…
In that line, please see this link: http://goo.gl/nvnoKP (prospectus for Fidelity Spartan 500 Index as linked from my available plan) It goes through the fee structure including “management fee”, “distribution and/or Service (12b-1) fees”, “other expenses”, and “total annual operating expenses”, but they all add up to 0.05%… If this it, then I’m totally okay with that.
To recap what I think I’ve learned so far in this thread:
1. Of my choices, I will go with either Fidelity or TIAA-CREF, most probably Fidelity due to more attractive fund options.
2. I should give consideration to putting 20-30% of my contributions towards international equities, and possibly another 10% or so towards bonds
3. I should continue with my rapid debt payoff strategy, living as modestly as possible, and in that vein, white coat investor blog a great resource.
4. There are some other interesting options out there, such as the Schwab Personal Choice Retirement Account, however at this point in the process for me seems to be a little more advanced than I’m ready for…
5. Despite my interest in only mutuals and not annuities, by law my 503b contributions are part of an annuity (even though they are technically considered mutual fund shares, they are held within a “custodial” account by some intermediary)…
6. I’m still not sure to what extent I might be miscalculating the amount of fees associated with my choices. The only way to really tell may be to start the process and see what happens. I believe I should largely be free to change the funds if not the providers at a later date…
Sscritic:
But don’t annuities “add on layer of fees”? Seems like every where I look there’s someone saying something to that effect…
And yes, after reading IRC 403(b)(7), I now know that there is by law someone who is the “custodian” of my account and my funds. Is that custodian, say in the example of the Vanguard Institutional Index Institutional (VINIX) used above, AIG VALIC? And although I’m reassured by Midmoder’s and others’ comments on sticking with Fidelity or TIAA-CREF, I’m still somewhat confused...
Which brings me to the next question re: Dutch:
Yes, I’m not sure if I’m including all the fees: 0.04/0.05% seem to be too good to be true… I called and spoke to the Valic “rep”, and he assured me that “Oh no, there’s not other fees of any sort…” but after reading what’s on here I’m skeptical… Really, I’m not sure if I know fully how to check what fees they are charging…
In that line, please see this link: http://goo.gl/nvnoKP (prospectus for Fidelity Spartan 500 Index as linked from my available plan) It goes through the fee structure including “management fee”, “distribution and/or Service (12b-1) fees”, “other expenses”, and “total annual operating expenses”, but they all add up to 0.05%… If this it, then I’m totally okay with that.
To recap what I think I’ve learned so far in this thread:
1. Of my choices, I will go with either Fidelity or TIAA-CREF, most probably Fidelity due to more attractive fund options.
2. I should give consideration to putting 20-30% of my contributions towards international equities, and possibly another 10% or so towards bonds
3. I should continue with my rapid debt payoff strategy, living as modestly as possible, and in that vein, white coat investor blog a great resource.
4. There are some other interesting options out there, such as the Schwab Personal Choice Retirement Account, however at this point in the process for me seems to be a little more advanced than I’m ready for…
5. Despite my interest in only mutuals and not annuities, by law my 503b contributions are part of an annuity (even though they are technically considered mutual fund shares, they are held within a “custodial” account by some intermediary)…
6. I’m still not sure to what extent I might be miscalculating the amount of fees associated with my choices. The only way to really tell may be to start the process and see what happens. I believe I should largely be free to change the funds if not the providers at a later date…
Re: 403(b)/general advice for first post-residency job
I suspect that you work for the UT system like me. I also went with the ORP option and currently have an account at Fidelity. I have been very happy with their mutual funds. You may also have the option of having more fund choices through the BrokerageLink program, but you may not need to (as there are very good index funds available in the ORP).
Re: 403(b)/general advice for first post-residency job
TIAA-CREF annuities do have fees, but they are not added on in the sense of being hidden. Most of the annuity accounts have expense ratios on the order of 0.40%.texaspapas wrote: Sscritic:
But don’t annuities “add on layer of fees”? Seems like every where I look there’s someone saying something to that effect…
Because they are annuities, they do have mortality charges, but they aren't that large.
The administrative expenses are a little high, and there are 12b-1 fees (Vanguard funds have no 12b-1 fees), but you are not talking 1.0% or anything like that. Here is one example from the prospectus:CREF also deducts a mortality and expense risk charge to guarantee that CREF participants transferring funds to TIAA for the immediate purchase of lifetime payout annuities will not be charged more than the rate stipulated in the CREF contract.
Code: Select all
Investment Advisory Expenses 0.115%
Administrative Expenses 0.240%
Distribution Expenses (12b-1) 0.095%
Mortality and Expense Risk Charges 0.005%
Acquired Fund Fees and Expenses 0.000%
Total Annual Expense Deductions 0.455%
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Re: 403(b)/general advice for first post-residency job
Kircheis: You got me pegged, and thanks for the input. I think after all that I've read and heard here, I'm definitely gonna go with Fidelity.
Sscritic: Thanks so much for the additional information. And you’re right, less than half a percent is still great, considering that you're getting good products and that's all you’re in for.
Sscritic: Thanks so much for the additional information. And you’re right, less than half a percent is still great, considering that you're getting good products and that's all you’re in for.
Re: 403(b)/general advice for first post-residency job
The529guy wrote:p.s. I found your other options based on the ING link you shared.
No better ING options. Just saying that I looked up your other UT providers (Fidelity, TIAA-CREF, etc.) based on that link.texaspapas wrote:And you found better options through the ING link? I can’t see them, not low cost, index-type funds anyways...
Re: 403(b)/general advice for first post-residency job
Yes. It's not how early in the process you are, it's how old you are and how soon you'll retire. And although you are early in the process you are late to the game.texaspapas wrote:Do you recommend 10-20% bonds even though I’m really early in the process, like literally, I’ve got a handful of years worth of cash in the Roth, nothing else at all…?
There is no difference. They both track the same index.And is there any difference in “performance” of the Fidelity Spartan 500 and the Vanguard Institutional Index that I should take into consideration?
You have no desired AA so based on your age I'll recommend 80% stocks, 20% bonds, with 30% of stocks in international. That breaks down to 56% US stocks, 24% international stocks, and 20% bonds. This AA will do for a few years. By the end of 2014 you could have:
403b at Fidelity -- $5K -- 21%
17% (FXSIX) Spartan 500 Index Fund Institutional Class (0.05%)
4% (FSEVX) Spartan Extended Market Index Fund Advantage Class (0.07%) <-- Roughly 80% large caps (500 Index) plus 20% mid/small caps (Extended Market) makes up the total US stock market.
Roth IRA at Vanguard -- $19K -- 79%
35% (VTSMX) Vanguard Total Stock Market Index Fund Investor Shares (0.17%)
24 % (VGTSX) Vanguard Total International Stock Index Fund Investor Shares (0.22%)
20% (VBMFX) Vanguard Total Bond Market Index Fund Investor Shares (0.20%)
By the end of 2015 you could have:
403b at Fidelity -- $23K -- 48%
22% (FXSIX) Spartan 500 Index Fund Institutional Class (0.05%)
6% (FSEVX) Spartan Extended Market Index Fund Advantage Class (0.07%)
20% (VBTSX) Vanguard Total Bond Market Index Fund Signal Shares (0.08%)
Roth IRA at Vanguard -- $25K -- 52%
28% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.05%)
24% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.14%)
My comments:
- After you get situated keep the bonds in the 403b and the international at Vanguard.
- This puts the international at Vanguard because TISM is better than Spartan International.
- This has 30% of stocks in international because Vanguard has found between 20% and 40% of stocks in international to be the "sweet spot". See the discussion and the Vanguard paper link. Vanguard splits the difference and uses 30% in their Target Retirement and LifeStrategy funds.
- You have a lot of debt, but you need to fill all your tax-sheltered space each year.
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Re: 403(b)/general advice for first post-residency job
Ah yes, eventually figured out this was what you meant. Thanks for the input and for looking around for me, I appreciate it.The529guy wrote:
No better ING options. Just saying that I looked up your other UT providers (Fidelity, TIAA-CREF, etc.) based on that link.
Thanks for explaining this in more detail, and for the included links, reading them now. This above is what I will shoot for exactly over the first 2-3 years at least.Duckie wrote:
My comments:
After you get situated keep the bonds in the 403b and the international at Vanguard.
This puts the international at Vanguard because TISM is better than Spartan International.
This has 30% of stocks in international because Vanguard has found between 20% and 40% of stocks in international to be the "sweet spot". See the discussion and the Vanguard paper link. Vanguard splits the difference and uses 30% in their Target Retirement and LifeStrategy funds.
You have a lot of debt, but you need to fill all your tax-sheltered space each year.
Something to think about.
Of note, they had all the new employees meet with a Financial Advisor today as part of orientation, a guy from ING. He brought donuts and handed out "swag" bags. Many of those present were very happy to have somebody to ask questions of, and it seemed like he was going to make a good business out of the room (probably 1/4 MDs, rest administrative/nursing). I cannot say how glad I am to have advice like I've gotten here on this thread. It's really invaluable to me, thanks a lot everyone, I really appreciate it. Any additional comments keep 'em coming, I will keep checking. I like reading about this too, so links are great!
Re: 403(b)/general advice for first post-residency job
Just out of curiosity, do you have any other retirement vehicles available? DCP, TSA, and/or ARP?
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Re: 403(b)/general advice for first post-residency job
Yes, TSA and DCP available. Why do you ask?Kircheis wrote:Just out of curiosity, do you have any other retirement vehicles available? DCP, TSA, and/or ARP?
Re: 403(b)/general advice for first post-residency job
Were you going to participate in those too? You can have all of those accounts at Fidelity.texaspapas wrote:Yes, TSA and DCP available. Why do you ask?Kircheis wrote:Just out of curiosity, do you have any other retirement vehicles available? DCP, TSA, and/or ARP?
Also, the ORP may have an income limit above which you can no longer contribute. Ask if there is an ARP that you can contribute to above the limit (it's a 457f account, but it's still worth it because of the match).
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Re: 403(b)/general advice for first post-residency job
I want to... Here's the issue: I haven't received a paycheck yet, and so not sure how much I will actually be getting after taxes, etc. I want to see real numbers on that, then calculate and adopt a fairly aggressive debt pay-down strategy. After settling on a debt pay-down strategy, and saving a modest emergency fund, I'll then start to work on how much I can put into other retirement savings. Does that seem reasonable?Kircheis wrote: Were you going to participate in those too? You can have all of those accounts at Fidelity.
Also, the ORP may have an income limit above which you can no longer contribute. Ask if there is an ARP that you can contribute to above the limit (it's a 457f account, but it's still worth it because of the match).
Waiting for real numbers might seem simplistic to you guys, (can you just calculate it?)... but I'm not confident I can accurately compute my take home pay after deductions/taxes because I'm not sure what bracket they're gonna deduct based on (and plus for half this year I was still a resident--in a place with state/city income taxes of all places... And I'm also still deciding on whether to opt-in for employer-sponsored life/disability insurance--both significant expenses). So the short answer to your question is Yes, but still trying to settle in financially a little before doing so... it seems I have more time to decide about those than the others. If there is an income limit to contribution, I'll have to figure it out sooner. Is there income limit where you're at?
Re: 403(b)/general advice for first post-residency job
I think that sounds like a great plan. I can't argue against saving up an emergency fund or paying down loans, especially if you have private loans and/or loans with >5% interest...texaspapas wrote: I want to... Here's the issue: I haven't received a paycheck yet, and so not sure how much I will actually be getting after taxes, etc. I want to see real numbers on that, then calculate and adopt a fairly aggressive debt pay-down strategy. After settling on a debt pay-down strategy, and saving a modest emergency fund, I'll then start to work on how much I can put into other retirement savings. Does that seem reasonable?
Waiting for real numbers might seem simplistic to you guys, (can you just calculate it?)... but I'm not confident I can accurately compute my take home pay after deductions/taxes because I'm not sure what bracket they're gonna deduct based on (and plus for half this year I was still a resident--in a place with state/city income taxes of all places... And I'm also still deciding on whether to opt-in for employer-sponsored life/disability insurance--both significant expenses). So the short answer to your question is Yes, but still trying to settle in financially a little before doing so... it seems I have more time to decide about those than the others. If there is an income limit to contribution, I'll have to figure it out sooner. Is there income limit where you're at?
As for the ORP, my institution does have an income limit. Yours might too, but you probably do not have to worry about it if you started working on 7/1/2014. I didn't hit the limit my first year as an attending. The limit will reset on 1/1/2015, so you may need to worry about it next year.
Re: 403(b)/general advice for first post-residency job
A response from someone with over 20 years with Valic--My personal preference is TIAA-CREF, but anything is preferable over VALIC
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Re: 403(b)/general advice for first post-residency job
It's amazing to me that even with my fairly limited experience looking into this the consistently negative impressions people have of VALIC. Needless to say, I won't be going with them. Even though they have the absolute cheapest individual fund, overall their available funds are generally higher fee, and there is just so much antipathy out there for them as a group that I feel I should avoid them. I was googling about them, and interestingly it appears that they received the third highest payout of all the bailout recipients. And yet they still are a generally higher-fee fund option with a reputation for poor satisfaction?? Go figure I guess.caseycup wrote:A response from someone with over 20 years with Valic--My personal preference is TIAA-CREF, but anything is preferable over VALIC
And Kircheis: I don't even have a single private loan, never have... but still interest rate 6.8... Assuming you graduated before me you probably got out before the rate went up? I was kind of on the cusp, the wrong side of the cusp I guessKircheis wrote:I can't argue against saving up an emergency fund or paying down loans, especially if you have private loans and/or loans with >5% interest...
Re: 403(b)/general advice for first post-residency job
That's great that you don't have any private loans. I did graduate before the rates went up significantly (which was a huge help).texaspapas wrote: And Kircheis: I don't even have a single private loan, never have... but still interest rate 6.8... Assuming you graduated before me you probably got out before the rate went up? I was kind of on the cusp, the wrong side of the cusp I guess
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Re: 403(b)/general advice for first post-residency job
Yeah despite paying 1/3 plus of my take home pay for four years of residency, pay off now is still higher than when I went in... ugh. But I signed up for it so I shouldn't moan too much... Plus maybe I'll invest in some debt later on to make myself feel better!Kircheis wrote:texaspapas wrote: That's great that you don't have any private loans. I did graduate before the rates went up significantly (which was a huge help).
Re: 403(b)/general advice for first post-residency job
If you have been able to save that much of your paycheck for loan repayment during residency, I suspect that you should be able to pay down the loan pretty quickly. I am going to congratulate you early on your first attending paycheck!texaspapas wrote: Yeah despite paying 1/3 plus of my take home pay for four years of residency, pay off now is still higher than when I went in... ugh. But I signed up for it so I shouldn't moan too much... Plus maybe I'll invest in some debt later on to make myself feel better!
I know that you are still waiting to figure out your take home pay situation, but once you got that figured, I recommend that you try to do some or all of the following:
1) ORP with pretax money (then the ARP with posttax money if there is an income limit)
2) DCP (pretax money)
3) TSA (can be either pretax or posttax as a Roth) - I asked about which is better on this blog before. The sense I got from the various answers was that the pretax was likely better (to decrease taxable income) and do the Backdoor Roth to have some retirement savings in Roth space.
4) Backdoor Roth IRA (which I learned how to do from this blog and from the white coat investor's blog)
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Re: 403(b)/general advice for first post-residency job
So this is a great prioritization list... I've been researching the background behind it for a couple days. (I've also sent my benefits people an email asking about income limits but they haven't gotten back to me yet.)Kircheis wrote:texaspapas wrote:
I know that you are still waiting to figure out your take home pay situation, but once you got that figured, I recommend that you try to do some or all of the following:
1) ORP with pretax money (then the ARP with posttax money if there is an income limit)
2) DCP (pretax money)
3) TSA (can be either pretax or posttax as a Roth) - I asked about which is better on this blog before. The sense I got from the various answers was that the pretax was likely better (to decrease taxable income) and do the Backdoor Roth to have some retirement savings in Roth space.
4) Backdoor Roth IRA (which I learned how to do from this blog and from the white coat investor's blog)
One question though: Any reason for the preference of the DCP over the TSA? Seems like the TSA might be more portable at a glance, but the 457 lacks custodial account requirement... Any thoughts on this?
And the Backdoor Roth is a great idea. I'm wondering... depending on how much debt I want to pay down, I may want to just sock money into all of the above options pre-tax until I get myself below the income threshold for a regular Roth contribution. Either way, for whatever reason I just really like the idea of keeping up contributions to the Roth, and after reading about it on here and white coat, I will do it via backdoor if necessary.
And... while on whitecoat investor looking up backdoor Roth stuff, I saw an ad for student loan refinancing... I was perplexed, had never heard of it, but then found an article with a really helpful comments section about it. Apparently this may be just the right time for me to do that as well... Anyways, that site is hugely helpful in general.