Portfolio Review: Early 30s (401k, 457b, 403b)

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Topic Author
Bayoufrogg
Posts: 39
Joined: Mon Apr 03, 2017 12:05 pm

Portfolio Review: Early 30s (401k, 457b, 403b)

Post by Bayoufrogg »

Hello,

My wife and I have been daily readers of the bogleheads site for a while now. We started with minimal knowledge but have learned a lot from this site so far. We are hoping for some direction while we continue to learn about our investments. Ive already seen that this is a very wise and helpful bunch, so we would like to just say thanks in advance for any advice!

Ages: 33 and 32
State of Residence: Louisiana
Combined Salary: 205k

My wife has been teaching public school for the last 10 years. I finished grad school 3.5 years ago. We paid off my 120k in student loans in 1.5 years and have been fully funding my 401k for the last two years. I put 18k in and my employer puts an additional 14k (for now). My wife pays a mandatory 8% into the Louisiana teachers retirement system, but also has access to two more accounts(403b & 457b: no matches). She is not allowed to contribute to social security.

We bought a larger home and recently paid off 28% of the loan to dump PMI. Going forward, we would like to step it up and fully fund one of her optional retirement accounts. We expect to be in a much lower tax bracket in retirement and are trying to make the best use of our account options.

Our Goals
1.) keep maxing my 401k
2.) max her 457b (no penalty for early withdrawal – she may retire early)
3.) $2500 for each into a roth in lieu of a 529 (prefer not to have the constraints of
the 529).
4.) consolidate the best options from each of our accounts to make one large portfolio.
5.) evaluate our progress in another 6 months and decide if we then feel comfortable paying down more on our mortgage or
start funding her 403b.

Emergency Fund:
-6 months in Capital One savings
Debt:
-Car loan: 9k left @ 3.5%
-Mortgage: 255K @ 3.5% for 30 years (valued @ 330k)
Tax Filing Status:
-MFJ
Tax rates:
Fed – 28% (Marginal); 15% (Effective)
State – 4.2% (Effective)
Children:
1 very new little guy

Desired Asset Allocation:
85:15 (30 of total equities in international)
(I am open to any input on TIPS, REITs, etc given my options below)


CURRENT HOLDINGS
A.) My 401k ascensus/regions(75k) [add 0.3% to my 401k expense ratios for recordkeeping fees]

70% in Vanguard Target Retirement 2040 Inv (VFORX) (0.16%)
30% in Vanguard Wellington Inv (VWELX) (0.26%)

B.) My Roth @ Merrill lynch from previous job (10k)
100% American Cap INC BLDR (CAIBX) (0.6%)

C.) Our New Roths @ vanguard (5k)
10% in Vanguard Target Retirement 2060 Investor CL (VTTSX)

D.) Wifes 403b
Midland National Flexible Premium Deferred Annuity – MNL Capstone
Monthly, Fixed Premiums: $67.00
Monthly “Bonus”: $6.7
Total Accumulation Value: $4750
Im fairly certain we want to reallocate the monthly premiums to something
else, but we are fairly ignorant of the rules. I do know it has a 14 year
surrender period. It was issued in January 2012.

E.) Wifes 457b
$0 (will fully fund at 18k starting this year)


AVAILABLE PLANS/FUNDS:
BOTH my 401k and her 457b have an option for SDBA through TD Ameritrade. We are unsure if this is a good option for us vs the “core funds” in our plans.

My 401K:
Recordkeeping Costs: 0.20% for funds in SDBA through TDAmeritrade (+TDA fees)
0.30% for investments in “core funds”+ all dividend payouts kept by plan administrator for administrative costs

Dodge & Cox International Stock Fund (DODFX) 0.64
Vanguard 500 Index Inv (VFINX) 0.16%
Vanguard Windsor II INV (VWNFX) 0.33%
Vanguard Small-Cap Index INV (NAESX) 0.20%
Vanguard Total Bond Market Index Inv (VBMFX) 0.16%
Vanguard Wellington Inv (VWELX) 0.26%
Vanguard Health Care Inv (VGHCX) 0.36%
Vanguard Total Intl Stock Index Inv (VGTSX) 0.18%
Vanguard Target Retirement 2015 Inv (VTXVX) 0.14%
Vanguard Target Retirement 2020 Inv (VTWNX) 0.14%
Vanguard Target Retirement 2030 Inv (VTHRX) 0.15%
Vanguard Target Retirement 2040 inv (VFORX) 0.16%
American Funds AM CAP R5 (RAFFX) 0.42%
Goldman Sachs Small Cap Value Instl (GSSIX) 1.01%
Wells Fargo Precious Metals INSl (EKWYX) 0.89%
PIMCO Real Return Instl (PRRIX) 0.58%
Vanguard Mid-Cap Index Inv (VIMSX) 0.20%
Vanguard Prime Money Market Inv (VMMXX) 0.16%
PowerShares DB Gold Trust ETF : Market Price (DGL) 0.75%
PowerShares DB Gold Trust ETF: NAV (DGL) 0.75%
Invesco Real Estate Fund R5 (IARIX) 0.87%
Invesco Intl Small Company Fund R5 (IEGIX) 1.19%
Vanguard High Yield Corp Inv (VWEHX) 0.23%
AB small cap growth adv (QUAYX) 1.02%
American Funds EuroPacific Gr R6 (RERGX) 0.50%
Lord Abbett Short Duration Income I (LLDYX) 0.40%
Metropolitan West Total Return Bond I (MWTIX) 0.44%
BlackRock U.S. Opp Port Insl (BMCIX) 1.20%
JPMorgan Mid Cap Value Class (FLMVX) 0.95%


Her 457b:

Louisiana State Deferred Compensation Program
Can utilize all “core funds” or a mix of core and SDBA through TDAMERITRADE

COSTS:
Core Funds: $2.70/Quarter + Expense Ratios
$15/Quarter (only if using SDBA)
Minimum $2500 in "core funds". No max for amount in SDBA.

Optional Managment Option:
$0.125 per $1000 in account
Advised Assets by national "Empower Retirement"

CORE Funds

Fund (Ticker) (Net/Gross Expense Ratio %)

Lifepath Index 2045 Fund J (0.17)
Lifepath Index 2040 Fund J (0.16)
Principle Diversified Real Asset R6 (0.9/1.0)

International
American Funds EuropacificGrowth R6 (RERGX) (0.5)
Blackrock Total International excl. U.S. Ind K (BDOKX) (0.11/0.46)

Large Cap
Blackrock Total Stockmarket Ind K (BKTSX) (0.04/0.2)
MFS Core Equity (MRGKX) (0.72)

Bonds
Blackrock U.S. Total Bond Index K (WFBIX) (0.05/0.09)
Prudential Total Return Bond Q (PTRQX) (0.43)

Fixed
Stable Value Fixed Income Fund (N/A) (0.19)

Her 403b:
Many poor annuity options OR
Security Benefit mutual funds (may use NEA/Direct Investment in the future if we decide to fund her 403b)



Questions:
1.) Any suggestions for combining our plans into one portfolio given our desired asset allocation and plans?
2.) Should we make use of the TD Ameritrade SDBAs or stick with the core funds?
3.) Where do we begin with the annuity in her 403b?
4.) Thoughts on Merrill Lynch CAIBX roth? I didn’t know any better and paid the front load in 2013.
5.) Any other thoughts/suggestions?
Last edited by Bayoufrogg on Tue Apr 25, 2017 8:56 am, edited 3 times in total.
krow36
Posts: 2470
Joined: Fri Jan 30, 2015 5:05 pm
Location: WA

Re: Portfolio Review: Early 30s (401k, 457b, 403b)

Post by krow36 »

Bayoufrogg, welcome to the forum!
His 401k
Vanguard TR 2040
His Roth IRA at ML, move to Vanguard
His Roth IRA at Vanguard
Vanguard TR 2040
Her Roth IRA at Vanguard
Her 403b
Stop contributing to the annuity. How much is the surrender fee? Start an account with Security Benefit’s Direct Invest and contribute as much as possible. Use TSM, TISM and Interm-term Bond Index. Transfer the annuity funds to the Direct Invest account.
Her 457 with LA state 457
I would use the 3 Blackrock Total funds, but the Life Path Index funds are OK.

I think an 80:20 AA would be preferable. Rebalance in her 403b or 457 accounts, either once a year, or if stocks go >85 or <75.
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CyclingDuo
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Re: Portfolio Review: Early 30s (401k, 457b, 403b)

Post by CyclingDuo »

The only benefit I see to the voluntary 403b is the money is being taken out pre-tax, so this is lowering your reported income. Because of the expense of the product, it's too bad she got hooked up in an expensive annuity in her 403b.
:oops:

We would pull the plug on those 403b annuity contributions ASAP. Weigh the options of just letting the $4750 grow into whatever it will over the years without adding any more to it until the surrender period is up (14 years, right?), or find out how much you would surrender if you swapped that annuity over to the lowest cost funds that are available within the MF option of the 403b. Do you really need to be funding this voluntary 403b as an investment option for retirement?

However, if the ER fees are super high and limited in choice even for the mutual funds - I would certainly fully fund her ROTH IRA first before going back to the 403b contributions and using high expense funds. You didn't list the specific funds and their fees that are available within her 403b plan. Not to mention taxable account investing in lower cost funds as well as what we view a pertinent missing bucket in your overall portfolio.

Her mandatory pension contribution and the match from the school district for that, plus her 457b, and her Roth certainly seems to be enough (although you didn't mention her 457b balance, or the current projection of her pension monthly payouts as it stands right now during retirement). It appears at your ages you are well on your way, and perhaps should visit the trap of maybe over-investing in retirement funds. You will be socking away money for another 2 - 3 decades in your retirement, so we would suggest striving to find a balance that you are not over-investing (especially in high cost expensive options that will rob your returns).

What about investing in an education fund for the little one? What about building up your emergency fund just a bit more (call it a dry powder fund to take advantage of deep market swoons)? What about other goals on the horizon to invest for that involve non-retirement money? Home remodel, automobile(s), vacations, new furniture, new roof, landscaping project, the little one's hobbies 5 - 10 - 15 years from now, new furnace/AC, and on and on?

What percentage of your income combined is currently going into retirement funds?

• $32K for your 401k (your $18K contribution + employer match)
• She puts in 8% mandatory which I assume receives a 7% or so match for a total of 15% or her income (assuming it's something like $11 - $15K per year)
• 457b/ROTH's/403b

What's it all add up to as a total percentage of your income?

Life happens and comes along where you are going to need some investments in taxable accounts to dip into in order to finance things, as well as a well funded education fund for college. What about paying off that car loan?
"Save like a pessimist, invest like an optimist." - Morgan Housel | "Pick a bushel, save a peck!" - Grandpa
Topic Author
Bayoufrogg
Posts: 39
Joined: Mon Apr 03, 2017 12:05 pm

Re: Portfolio Review: Early 30s (401k, 457b, 403b)

Post by Bayoufrogg »

Thanks to both of you for the responses.

I will stop the annuity payments and look at the numbers on waiting out the surrender period vs paying the penalty and reinvesting.

Questions:

1.) Should we not consider the SDBA options on both accounts? Are there hidden costs we missed? Wouldnt this be cheaper, especially in my 401k plan? Downsides to the SDBA?

2.) We had been told to maximize our tax advantaged/deferred options before thinking about taxable accounts. Are we wrong here?
Topic Author
Bayoufrogg
Posts: 39
Joined: Mon Apr 03, 2017 12:05 pm

Re: Portfolio Review: Early 30s (401k, 457b, 403b)

Post by Bayoufrogg »

CyclingDuo wrote:What percentage of your income combined is currently going into retirement funds?
• $32K for your 401k (your $18K contribution + employer match)
• She puts in 8% mandatory which I assume receives a 7% or so match for a total of 15% or her income (assuming it's something like $11 - $15K per year)
• 457b/ROTH's/403b
What's it all add up to as a total percentage of your income?
22% of our gross income contributed by us. Add employer contributions and we will put 29% of our gross into retirement this year. Keep in mind that my wife is not eligible for social security. Her teachers retirement plan essentially "replaces" social security. We both would also like to retire early (her in 40s/me at least part time in 50s). We are trying to decrease our current tax liability and pad these accounts for later. We can draw from her 457b at any age.

Our contributions:
18k to my 401k
18k to her 457b
4k to her teachers retirement.
2500/person/year to roth (child education fund with options)

Employer contributions
14k to my 401k (likely to decrease to 6k in a few years)
NO MATCH to her teachers retirement. She puts in 8% (4k) and gets a monthly payout in 20-30 years, depending on when she wants to retire.

CyclingDuo wrote:You didn't list the specific funds and their fees that are available within her 403b plan. Not to mention taxable account investing in lower cost funds as well as what we view a pertinent missing bucket in your overall portfolio.
We dont have intentions of funding the 403b currently, but maybe in the future. I just listed it because its an option.

The 403b fund I listed, Security Benefits NEA/Direct Invest, is the only viable option for the 403b. The others are too expensive to mention.

I did not mention taxable accounts because we currently have none.

CyclingDuo wrote: What about investing in an education fund for the little one?
Doing this now with our ROTHs. I didnt like the contraints of the 529 plan.

CyclingDuo wrote:What about building up your emergency fund just a bit more (call it a dry powder fund to take advantage of deep market swoons)? What about other goals on the horizon to invest for that involve non-retirement money? Home remodel, automobile(s), vacations, new furniture, new roof, landscaping project, the little one's hobbies 5 - 10 - 15 years from now, new furnace/AC, and on and on?
Theres a comfotable amount of monthly income left over after budget and retirement is covered. Most of what is listed above shouldnt be an issue for us. I can always temporarily scale back some of the investment contributions if a unforeseen project arises and we dont have enough funds in savings to cover it.
CyclingDuo wrote:What about paying off that car loan?
The current tax break + compounding interest in the 457/403 seemed like a better deal than worrying about the low interest loan.
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Duckie
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Joined: Thu Mar 08, 2007 1:55 pm

Re: Portfolio Review: Early 30s (401k, 457b, 403b)

Post by Duckie »

Bayoufrogg wrote:My 401K:
Recordkeeping Costs: 0.20% for funds in SDBA through TDAmeritrade (+TDA fees)
0.30% for investments in “core funds”+ all dividend payouts kept by plan administrator for administrative costs
Ouch! If going through SDBA does the plan administrator keeps the dividends there, too?

The best options are:
  • Vanguard 500 Index Inv (VFINX) 0.16% -- Large caps, 80% of US stocks
  • Vanguard Mid-Cap Index Inv (VIMSX) 0.20% -- Mid caps, 6% of US stocks
  • Vanguard Small-Cap Index INV (NAESX) 0.20% -- Small caps, 14% of US stocks
  • Vanguard Total Intl Stock Index Inv (VGTSX) 0.18% -- Complete international stocks
  • Vanguard Total Bond Market Index Inv (VBMFX) 0.16% -- US bonds
  • or the Vanguard Target Retirement fund that comes closest to your AA
Her 457b:
The best CORE options are:
  • Blackrock Total Stockmarket Ind K (BKTSX) (0.04/0.2) -- Complete US stocks
  • Blackrock Total International excl. U.S. Ind K (BDOKX) (0.11/0.46) -- Complete international stocks
  • Blackrock U.S. Total Bond Index K (WFBIX) (0.05/0.09) -- US bonds
  • or the Lifepath fund that comes closest to your AA
Her 403b:
Many poor annuity options OR
Security Benefit mutual funds (may use NEA/Direct Investment in the future if we decide to fund her 403b)
If you do use NEA/Direct Investment in the future what are the options/costs?
Should we make use of the TD Ameritrade SDBAs or stick with the core funds?
Stick with the core funds.
Where do we begin with the annuity in her 403b?
Stop contributing. Find out when she will be allowed to remove at least some of the assets without penalty. Can they be rolled to the 457b or must they be withdrawn completely and taxes paid?
Thoughts on Merrill Lynch CAIBX roth? I didn’t know any better and paid the front load in 2013.
Sell and transfer the Roth IRA assets to either Vanguard or Fidelity,
Any suggestions for combining our plans into one portfolio given our desired asset allocation and plans?
The following example has an AA of 85% stocks, 15% bonds, with 30% of stocks in international. That breaks down to 60% US stocks, 25% international stocks, and 15% bonds. By the end of 2017 you could have something like:

His 401k -- $90K -- 70%
30% (VFINX) Vanguard 500 Index Fund Investor Shares (0.16% + 0.30% = 0.46%)
25% (VGTSX) Vanguard Total International Stock Index Fund Investor Shares (0.18% + 0.30% = 0.48%)
15% (VBMFX) Vanguard Total Bond Market Index Fund Investor Shares (0.16% + 0.30% = 0.46%)

Her 403b -- $5K -- 4%
4% (N/A) S&P 500 Index option (??%)

Her 457b -- $18K -- 14%
14% (BKTSX) BlackRock Total Stock Market Index Fund Class K (0.04%)

His Roth IRA at Vanguard -- $13K -- 10% <-- Includes rollover from Merrill Lynch.
10% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.05%)

Her Roth IRA at Vanguard -- $3K -- 2%
2% (VTSMX) Vanguard Total Stock Market Index Fund Investor Shares (0.16%)

Something to think about.
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CyclingDuo
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Re: Portfolio Review: Early 30s (401k, 457b, 403b)

Post by CyclingDuo »

Bayoufrogg wrote:
CyclingDuo wrote:What percentage of your income combined is currently going into retirement funds?
• $32K for your 401k (your $18K contribution + employer match)
• She puts in 8% mandatory which I assume receives a 7% or so match for a total of 15% or her income (assuming it's something like $11 - $15K per year)
• 457b/ROTH's/403b
What's it all add up to as a total percentage of your income?
22% of our gross income contributed by us. Add employer contributions and we will put 29% of our gross into retirement this year. Keep in mind that my wife is not eligible for social security. Her teachers retirement plan essentially "replaces" social security.

Surely she will still get spousal benefits, yes? 29% is a great chunk of your income indeed. $54K a year will add up quickly during the accumulation phase. As long as you have all of your other needs met and are not living beyond your means - that's great!

We both would also like to retire early (her in 40s/me at least part time in 50s). We are trying to decrease our current tax liability and pad these accounts for later. We can draw from her 457b at any age.

Our contributions:
18k to my 401k
18k to her 457b
4k to her teachers retirement.
2500/person/year to roth (child education fund with options)

Employer contributions
14k to my 401k (likely to decrease to 6k in a few years)
NO MATCH to her teachers retirement. She puts in 8% (4k) and gets a monthly payout in 20-30 years, depending on when she wants to retire.

Having lived through some severe bear markets, we only caution you that you will as well going forward. That may alter one's retirement plans when push comes to shove even though from this end of the spectrum - where it is nice to plan it all after the last 4-8 years - things look feasible.
CyclingDuo wrote:You didn't list the specific funds and their fees that are available within her 403b plan. Not to mention taxable account investing in lower cost funds as well as what we view a pertinent missing bucket in your overall portfolio.
We dont have intentions of funding the 403b currently, but maybe in the future. I just listed it because its an option.

The 403b fund I listed, Security Benefits NEA/Direct Invest, is the only viable option for the 403b. The others are too expensive to mention.

I did not mention taxable accounts because we currently have none.

That's where we would encourage growing a bucket for tax planning strategies in retirement.
CyclingDuo wrote: What about investing in an education fund for the little one?
Doing this now with our ROTHs. I didnt like the contraints of the 529 plan.

Nor did we. We used UTMA's for both of our children with individual stocks which grew enough to pay for undergraduate school, and now graduate school for one with enough leftover to pass on about $50K to each in a brokerage account to start their investing careers. Paid for a lot of summer camps, school supplies, and expenses along the way as well. If we were advising in today's dollars, having $175K - $200K+ built up for each child before their Freshman year in college is a great tool to send them out in life totally debt free, educated, and career bound. Of course, we made our kids work all through high school and college as well to contribute their share of what a hard earned buck can do.
CyclingDuo wrote:What about building up your emergency fund just a bit more (call it a dry powder fund to take advantage of deep market swoons)? What about other goals on the horizon to invest for that involve non-retirement money? Home remodel, automobile(s), vacations, new furniture, new roof, landscaping project, the little one's hobbies 5 - 10 - 15 years from now, new furnace/AC, and on and on?
Theres a comfotable amount of monthly income left over after budget and retirement is covered. Most of what is listed above shouldnt be an issue for us. I can always temporarily scale back some of the investment contributions if a unforeseen project arises and we dont have enough funds in savings to cover it.

It was practical advice and suggestion only from us based on our experiences to date.
CyclingDuo wrote:What about paying off that car loan?
The current tax break + compounding interest in the 457/403 seemed like a better deal than worrying about the low interest loan.

We can appreciate that when it comes to a mortgage. But a car? We'd rather own an asset that is appreciating, rather than depreciating when it comes to debt. It's typical Boglehead philosophy - cash only for cars. Again just a suggestion since you posted up your information. We're sure you'll make it all work out.
"Save like a pessimist, invest like an optimist." - Morgan Housel | "Pick a bushel, save a peck!" - Grandpa
krow36
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Joined: Fri Jan 30, 2015 5:05 pm
Location: WA

Re: Portfolio Review: Early 30s (401k, 457b, 403b)

Post by krow36 »

Have you considered using her 403b as well as his 401k, instead of maxing the 401k? The 401k has a great match but how much do you have to contribute in order to max the match? The SB Direct Invest sure does beat the 401k fee-wise.
Vanguard Total Stock Market Index ER 0.05%
Vanguard Total International Stock Index ER 0.14%
Vanguard Intermediate Term Bond Index ER 0.10%
Vanguard 500 Index ER 0.05%
Vanguard Growth Index ER 0.09%
Vanguard Mid Cap Index ER 0.09%
Vanguard Small Cap Index ER 0.09%
Vanguard REIT Index ER 0.12%
There's an annual fee of $35 for accounts of less than $50,000. A number of posters have confirmed that there are no hidden fees.
viewtopic.php?f=2&t=180418
Topic Author
Bayoufrogg
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Joined: Mon Apr 03, 2017 12:05 pm

Re: Portfolio Review: Early 30s (401k, 457b, 403b)

Post by Bayoufrogg »

Thanks Duckie, krow, and CyclingDuo for giving me some alternative perspectives. It is very much appreciated!

We are going to pay off the car loan, as Cycling Duo suggested. I will also look into UTMAs vs our Roth IRAs.

As krow suggested, we will attempt to fund my 401k only up to the match and utilize the 403b for the remainder of our contributions. Security Benefit is very difficult to deal with for her 403b plan, so I will just have to see if I can actually sneak the NEA/Direct Invest in there. One rep told me indirectly that its probably an option (after a lot of prying on my part) but every other rep says its not part of my plan. Its worth our time to try to fund it, given the costs. Worst case scenario = fully funding my 401k, like I am doing now anyways. Thanks again Krow for suggesting this mix.

Duckie wrote:
Bayoufrogg wrote:My 401K:
Recordkeeping Costs: 0.20% for funds in SDBA through TDAmeritrade (+TDA fees)
0.30% for investments in “core funds”+ all dividend payouts kept by plan administrator for administrative costs
Ouch! If going through SDBA does the plan administrator keeps the dividends there, too?
I contacted the plan administrator about this last week. I asked to see the agreement in writing and she is supposed to get back to me. Her response was that it was never more than a couple hundred dollars a year. Obviously, Id rather not pay those additional costs on top of my recordkeeping fees and expense ratios (especially when the SDBA has lower recordkeeping fees). I have yet to hear back from her, so I will inquire again today.
Topic Author
Bayoufrogg
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Joined: Mon Apr 03, 2017 12:05 pm

Re: Portfolio Review: Early 30s (401k, 457b, 403b)

Post by Bayoufrogg »

CyclingDuo wrote:Surely she will still get spousal benefits, yes?
Short answer is currently no.

She would be eligible for a 51% spousal benefit, but the government pension offset (GPO) reduces her 51% by an additional 2/3 of her pension. As long as the GPO stands, she will get no benefit.
krow36
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Location: WA

Re: Portfolio Review: Early 30s (401k, 457b, 403b)

Post by krow36 »

Bayoufrogg wrote:
As krow suggested, we will attempt to fund my 401k only up to the match and utilize the 403b for the remainder of our contributions. Security Benefit is very difficult to deal with for her 403b plan, so I will just have to see if I can actually sneak the NEA/Direct Invest in there. One rep told me indirectly that its probably an option (after a lot of prying on my part) but every other rep says its not part of my plan. Its worth our time to try to fund it, given the costs. Worst case scenario = fully funding my 401k, like I am doing now anyways. Thanks again Krow for suggesting this mix.
I guess the SB reps are correct that Direct Invest is not part of your plan, which is an annuity the rep has sold you. Because Direct Invest is an internet plan with no rep involvement, I don’t think the reps have a say in your using Direct Invest. If you look at the SB DI website and application form, you will find no mention of a local rep. Several other posters have established the account directly. Once the account is established by SB, you’ll have to put in a new salary reduction form (from your district or its TPA) with the new account number.
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CyclingDuo
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Re: Portfolio Review: Early 30s (401k, 457b, 403b)

Post by CyclingDuo »

Bayoufrogg wrote:
CyclingDuo wrote:Surely she will still get spousal benefits, yes?
Short answer is currently no.

She would be eligible for a 51% spousal benefit, but the government pension offset (GPO) reduces her 51% by an additional 2/3 of her pension. As long as the GPO stands, she will get no benefit.
Got it. Does GPO even wipe out all the FICA she paid from her wages during her high school and college days from W-2's doing part-time jobs? Not that high school and college students make that much, but both of our children have enjoyed some nice income via their part time jobs and internships through the high school and college years. Enough to have contributed a nice start via FICA.

The good news is that the FICA amount she is not having to pay now is being socked away into the other investment vehicles.
"Save like a pessimist, invest like an optimist." - Morgan Housel | "Pick a bushel, save a peck!" - Grandpa
Topic Author
Bayoufrogg
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Joined: Mon Apr 03, 2017 12:05 pm

Re: Portfolio Review: Early 30s (401k, 457b, 403b)

Post by Bayoufrogg »

CyclingDuo wrote:

Does GPO even wipe out all the FICA she paid from her wages during her high school and college days from W-2's doing part-time jobs?

Well, this is where the Windfall Elimination Provision (WEP) steps in to wipe out any payouts from previous jobs.

Many are calling the GPO/WEP the "Heroes' Penalty". Its clearly a penalty for our public servants and not an offset as the name suggests. A non-governmental worker with a private pension would NOT be penalized with the GPO/WEP.

GPO will also wipe out any of her widow's benefits as well.
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