Long Time Reader - How Am I Doing?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
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Topic Author
jtinsession
Posts: 14
Joined: Thu Jul 02, 2020 5:51 pm

Long Time Reader - How Am I Doing?

Post by jtinsession »

Hi, everyone! While I don't think I'd obtain some of the wealth that is in these forums, I admire and respect all of your opinions and advice. I've been a long-time reader, and have applied what I've learned from you all to myself!

I'm a 30-year-old HS teacher and coach in NJ. I just finished up my 8th year teaching and 7th year coaching HS basketball. I also coach club basketball on the side. While I love my parents, I've been on my own in terms of figuring out my own personal finances besides the obvious. I just wanted to post my statistics and ask the board how am I doing at this moment regarding my retirement/savings and what I could do better as recommended by those here.

Income: Teacher Salary (everything included): $ 72,061 gross
HS Coaching: $3,800 gross
Club Basketball: It varies so I wouldn't want to count it, but a soft number would be $6,000 net yearly

Assets
House (just closed in April) - I live with my fiance (2 years), house/deed in my name (as I paid all DP/closing). We have thought about having her mom live with us in which should would contribute $500/mo. in "rent"
Car (paid in full)
Teacher Pension/SS
Roth IRA - Vanguard Target Date 90% stocks/10% bonds (2060 fund) - $19,397.18
403(b) - Vanguard Target Date Fund 90% stocks/10% bonds (2060 fund) - $2,985.51
Ally Savings: $7,506.64 (use this as an emergency fund/savings)

Note: The reason for the 403(b) is I transferred my funds from AXA (I know... I learned!)

Misc.
No undergrad debt
Have Masters... Paid in cash (20K cost - graduated 2018)
Have 0% CC debt that I will pay off in time (used to furnish house) - $6,414.92

Questions:
1. Should I convert my 403b to my Roth IRA? Just want to make sure I am taking advantage of taxable/nontaxable accounts, something I still need help learning.
2. I try to max out my Roth IRA yearly, but paying off my Masters and saving for a house hurt this for some time. At this point, is what I have enough?

Don't shoot the noobie! Thanks, everyone!
ebeb
Posts: 51
Joined: Sat Dec 23, 2017 2:18 pm

Re: Long Time Reader - How Am I Doing?

Post by ebeb »

Try to plug these numbers into a online retirement calculator and see what is the result. Also open a brokerage account say Vanguard and contribute regularly to say a S&P 500 fund after maximizing your Roth or 401k/403b contributions as compounding will really help in the next 30 years. For example the 10,000 I invested in 1997 in VFINX is now about 50000, I only wish I had invested more then :D
Last edited by ebeb on Thu Jul 02, 2020 7:10 pm, edited 1 time in total.
75% VOO | 25% BND
tashnewbie
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Re: Long Time Reader - How Am I Doing?

Post by tashnewbie »

What are your annual expenses? Expected pension?
Topic Author
jtinsession
Posts: 14
Joined: Thu Jul 02, 2020 5:51 pm

Re: Long Time Reader - How Am I Doing?

Post by jtinsession »

ebeb wrote: Thu Jul 02, 2020 6:58 pm Try to plug these numbers into a online retirement calculator and see what is the result. Also open a brokerage account say Vanguard and contribute regularly to say a S&P 500 fund after maximizing your Roth or 401k/403b contributions as compounding will really help in the next 30 years. For example the 10,000 I invested in 1997 in VFINX is now about 50000, I only wish I had invested more then :D
I tried the Vanguard retirement calculator, but I need to understand some of the things it is asking about. I will look into it!

Can you explain what type of brokerage account I could open and what type of S+P500 fund would work? Thanks!
Topic Author
jtinsession
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Re: Long Time Reader - How Am I Doing?

Post by jtinsession »

tashnewbie wrote: Thu Jul 02, 2020 7:08 pm What are your annual expenses? Expected pension?
An idea of my pension (using the state calculator) is $67,073.80 per year, or $5,589.48 per month (didn't count for salary at that time; used today's numbers)

Annual expenses: $28,152 ($2,346/mo.) (used my budget expenses x 12)
ebeb
Posts: 51
Joined: Sat Dec 23, 2017 2:18 pm

Re: Long Time Reader - How Am I Doing?

Post by ebeb »

jtinsession wrote: Thu Jul 02, 2020 7:13 pm I tried the Vanguard retirement calculator, but I need to understand some of the things it is asking about. I will look into it!

Can you explain what type of brokerage account I could open and what type of S+P500 fund would work? Thanks!
Call up Vanguard they always help if you open an account. There is only one type of Vanguard account called Vanguard Brokerage account which will handle all your assets/funds. There is only one Vanguard 500 Index Fund Investor Shares(VFINX) or if you prefer ETF go with VANGUARD S&P 500 ETF(VOO).
75% VOO | 25% BND
retired@50
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Re: Long Time Reader - How Am I Doing?

Post by retired@50 »

ebeb wrote: Thu Jul 02, 2020 8:20 pm
jtinsession wrote: Thu Jul 02, 2020 7:13 pm I tried the Vanguard retirement calculator, but I need to understand some of the things it is asking about. I will look into it!

Can you explain what type of brokerage account I could open and what type of S+P500 fund would work? Thanks!
Call up Vanguard they always help if you open an account. There is only one type of Vanguard account called Vanguard Brokerage account which will handle all your assets/funds. There is only one Vanguard 500 Index Fund Investor Shares(VFINX) or if you prefer ETF go with VANGUARD S&P 500 ETF(VOO).
I believe the active ticker symbol for the Vanguard 500 Index fund is VFIAX - for Admiral Shares. The investor class is no longer applicable since they lowered the investment minimum to $3,000 for Admiral shares.

Regards,
This is one person's opinion. Nothing more.
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ruralavalon
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Re: Long Time Reader - How Am I Doing?

Post by ruralavalon »

Welcome to the forum :) .

jtinsession wrote: Thu Jul 02, 2020 6:21 pmQuestions:
1. Should I convert my 403b to my Roth IRA? Just want to make sure I am taking advantage of taxable/nontaxable accounts, something I still need help learning.
Probably not. What is your tax bracket, both federal and state?

jtinsession wrote: Thu Jul 02, 2020 6:21 pm2. I try to max out my Roth IRA yearly, but paying off my Masters and saving for a house hurt this for some time. At this point, is what I have enough?
How much do you contribute annually to your employer's 403b plan? Does your employer also offer a 457 plan? What funds are offered in the plans? Please give fund names, tickers and expense ratios.

Here are calculators you can use to assess the range of possible outcomes at various levels of contributions:
1) www.firecalc.com; and
2) www.i-orp.com.

jtinsession wrote: Thu Jul 02, 2020 7:25 pm
tashnewbie wrote: Thu Jul 02, 2020 7:08 pm What are your annual expenses? Expected pension?
An idea of my pension (using the state calculator) is $67,073.80 per year, or $5,589.48 per month (didn't count for salary at that time; used today's numbers)

Annual expenses: $28,152 ($2,346/mo.) (used my budget expenses x 12)
In addition to that pension will you be eligible for Social Security?

Will your employer's 403b plan or 457 plan permit Roth contributions?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Topic Author
jtinsession
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Re: Long Time Reader - How Am I Doing?

Post by jtinsession »

ruralavalon wrote: Thu Jul 02, 2020 8:32 pm Welcome to the forum :) .

jtinsession wrote: Thu Jul 02, 2020 6:21 pmQuestions:
1. Should I convert my 403b to my Roth IRA? Just want to make sure I am taking advantage of taxable/nontaxable accounts, something I still need help learning.
Probably not. What is your tax bracket, both federal and state?

Would need to look into further. Based on research, I would be in 22% federal bracket. Not sure about the state.
jtinsession wrote: Thu Jul 02, 2020 6:21 pm2. I try to max out my Roth IRA yearly, but paying off my Masters and saving for a house hurt this for some time. At this point, is what I have enough?
How much do you contribute annually to your employer's 403b plan? Does your employer also offer a 457 plan? What funds are offered in the plans? Please give fund names, tickers and expense ratios.

I don't. Since I don't receive a match, I felt it was best to forego the 403Bb and push all my retirement savings into a Roth IRA, as I prefer my earnings to not be taxed and honestly, that was what was preferred here. I know AXA seems to be my school's preferred vendor. I don't believe my district offers its own 403b/457 plan. I will ask again to clarify.

Here are calculators you can use to assess the range of possible outcomes at various levels of contributions:
1) www.firecalc.com; and
2) www.i-orp.com.

Thank you!

jtinsession wrote: Thu Jul 02, 2020 7:25 pm
tashnewbie wrote: Thu Jul 02, 2020 7:08 pm What are your annual expenses? Expected pension?
An idea of my pension (using the state calculator) is $67,073.80 per year, or $5,589.48 per month (didn't count for salary at that time; used today's numbers)

Annual expenses: $28,152 ($2,346/mo.) (used my budget expenses x 12)
In addition to that pension will you be eligible for Social Security?

Will your employer's 403b plan or 457 plan permit Roth contributions?
From my understanding, I will be eligible for SS. I am not sure about the latter question.
KA0400
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Re: Long Time Reader - How Am I Doing?

Post by KA0400 »

I’m a long-time lurker but follow BH principles faithfully.

My only comment is about the $500/month in rent you may get from the fiancés mom living with you; there’s a saying that all money ain’t good money and nothing can add strain to a relationship more than a parent under your roof and presumably in your business. And since it’s her parent your in a 2 on 1 situation is push comes to shove. I’d find another way to help her mom out that doesn’t involve her crowding space in your soon-to-be/new marriage, unless her situation is so dire that living with you is the only option.

I speak from experience. Best of luck congrats on the solid start! :sharebeer
Sahara
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Re: Long Time Reader - How Am I Doing?

Post by Sahara »

Congratulations on your progress! As a retired teacher, I can share a little perspective.

I retired last year and my pension and part-time work meet my financial needs. I have tax-deferred funds in my 403b and tax-free funds in my Roth IRA to manage other expenses as I move forward.

With your income, I don’t think you'll be able to contribute enough to the 403b to stay in the 12% bracket (40,125). Rough calculation: Income 81,861 - standard deduction 12,400 = 69,462 taxable income.

It’s not clear whether your 403b is from the current school district. 

As others have suggested, I would find out whether your district offers a 403b or 457 through vendors other than AXA. And whether there is a Roth 403b option.

If there is a Roth 403b option at your current district and you want to invest more than the 6,000 per year allowed in a Roth IRA, you will be able to invest more via the Roth 403b.

If you move in that direction you might also be able to transfer the 19,500 into that account for simplicity. <<EDIT>> I'm not suggesting you convert this, just hold it with the same investment company.

Finally, there are a few threads relative to teachers you may find of interest if you haven't already seen them.

viewtopic.php?f=1&t=318473&p=5335697#p5335697

viewtopic.php?p=5327520#p5327520
Last edited by Sahara on Fri Jul 03, 2020 8:10 am, edited 1 time in total.
trufflepig
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Re: Long Time Reader - How Am I Doing?

Post by trufflepig »

While I don't think I'd obtain some of the wealth that is in these forums,
When considering wealth, don't underestimate the value of your potential pension. A back of the napkin estimate would be that someone w/o a pension would need about 1.5m in savings to purchase a SPIA to match your potential pension.
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ruralavalon
Posts: 19705
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Re: Long Time Reader - How Am I Doing?

Post by ruralavalon »

jtinsession wrote: Thu Jul 02, 2020 6:21 pmTeacher Pension/SS
Roth IRA - Vanguard Target Date 90% stocks/10% bonds (2060 fund) - $19,397.18
403(b) - Vanguard Target Date Fund 90% stocks/10% bonds (2060 fund) - $2,985.51
Ally Savings: $7,506.64 (use this as an emergency fund/savings)

jtinsession wrote: Thu Jul 02, 2020 8:53 pm
jtinsession wrote: Thu Jul 02, 2020 6:21 pm2. I try to max out my Roth IRA yearly, but paying off my Masters and saving for a house hurt this for some time. At this point, is what I have enough?
ruralavalon wrote:How much do you contribute annually to your employer's 403b plan? Does your employer also offer a 457 plan? What funds are offered in the plans? Please give fund names, tickers and expense ratios.
I don't. Since I don't receive a match, I felt it was best to forego the 403Bb and push all my retirement savings into a Roth IRA, as I prefer my earnings to not be taxed and honestly, that was what was preferred here. I know AXA seems to be my school's preferred vendor. I don't believe my district offers its own 403b/457 plan. I will ask again to clarify.
The contribution limit for an IRA is pretty low, just $6k annually. Just $6k annually may not be enough. A 403b has a much higher employee contribution lilimit, $19.5k annually.

Current 403b plan.
What other vendors besides AXA are available in your current 403b plan?

Please see this forum discussion, "Lincoln Investments, 'participant directed platform' ".

Even without an employer match, it is good to contribute to a 403b plan if good funds with low expense ratios are offered. In your 22% tax bracket, the tax deduction is very valuable. You should skip using the 403b plan only if the funds offered have very high expense ratios.

What funds are offered offered in your current 403b plan? Please give fund names, tickers and expense ratios.

I notice that you use Vanguard Target Date Fund (2060 fund) in your 403b account. So there are some good funds offered.

Or is that 403b from a prior job?

Even without an employer match, ordinarily it's better to contribute the annual maximum allowed to all available tax-advantaged accounts as a priority ahead of investing in a taxable brokerage account.

Here is a general account funding priority that often works well for many people (when there is no employer match, no high interest debt, and no HSA use):
1) Contribute the maximum to an IRA, traditional or Roth (or backdoor Roth technique), depending on eligibility and personal circumstances,
2) Contribute the maximum employee contribution to the work-based plan, including an After-tax 401(k) if available,
3) Contribute to a taxable investing account,
Wiki article "Prioritizing Investments".

Will the current 403b plan permit Roth contributions?


Taxable account.
About how much (in dollars) do you believe that you might be able to contribute annually to investing (total, all accounts)?

If you need a taxable brokerage account then open the account at a low cost provider like Vanguard, Fidelity or Schwab. My personal preference is Vanguard.

In a taxable account use the only very tax-efficient stock index funds. Wiki article "Tax-efficient Fund Placement".

Examples of very tax-efficient stock index funds include:
1) Vanguard Total Stock Market Index Fund (VTSAX) of the ETF (VTI); and
2) Vanguard Total International Stock Index Fund (VTIAX) or the ETF (VXUS).
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Topic Author
jtinsession
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Re: Long Time Reader - How Am I Doing?

Post by jtinsession »

ruralavalon wrote: Fri Jul 03, 2020 9:48 am
jtinsession wrote: Thu Jul 02, 2020 6:21 pmTeacher Pension/SS
Roth IRA - Vanguard Target Date 90% stocks/10% bonds (2060 fund) - $19,397.18
403(b) - Vanguard Target Date Fund 90% stocks/10% bonds (2060 fund) - $2,985.51
Ally Savings: $7,506.64 (use this as an emergency fund/savings)

jtinsession wrote: Thu Jul 02, 2020 8:53 pm
jtinsession wrote: Thu Jul 02, 2020 6:21 pm2. I try to max out my Roth IRA yearly, but paying off my Masters and saving for a house hurt this for some time. At this point, is what I have enough?
ruralavalon wrote:How much do you contribute annually to your employer's 403b plan? Does your employer also offer a 457 plan? What funds are offered in the plans? Please give fund names, tickers and expense ratios.
I don't. Since I don't receive a match, I felt it was best to forego the 403Bb and push all my retirement savings into a Roth IRA, as I prefer my earnings to not be taxed and honestly, that was what was preferred here. I know AXA seems to be my school's preferred vendor. I don't believe my district offers its own 403b/457 plan. I will ask again to clarify.
The contribution limit for an IRA is pretty low, just $6k annually. Just $6k annually may not be enough. A 403b has a much higher employee contribution lilimit, $19.5k annually.

Current 403b plan.
What other vendors besides AXA are available in your current 403b plan?

I asked this years ago, and Vanguard and Fidelity were on the list, so I chose Vanguard. I asked HR last night to confirm and see list again.

Please see this forum discussion, "Lincoln Investments, 'participant directed platform' ".

Even without an employer match, it is good to contribute to a 403b plan if good funds with low expense ratios are offered. In your 22% tax bracket, the tax deduction is very valuable. You should skip using the 403b plan only if the funds offered have very high expense ratios.

What funds are offered offered in your current 403b plan? Please give fund names, tickers and expense ratios.

I notice that you use Vanguard Target Date Fund (2060 fund) in your 403b account. So there are some good funds offered.

Or is that 403b from a prior job?

No, it's not from a prior job. It's from AXA that I moved to Vanguard. I then took what I had and put it in a Roth IRA. I have that small amount sitting just to keep the account open, but may move it all to my Roth.

Even without an employer match, ordinarily it's better to contribute the annual maximum allowed to all available tax-advantaged accounts as a priority ahead of investing in a taxable brokerage account.

Here is a general account funding priority that often works well for many people (when there is no employer match, no high interest debt, and no HSA use):
1) Contribute the maximum to an IRA, traditional or Roth (or backdoor Roth technique), depending on eligibility and personal circumstances,
2) Contribute the maximum employee contribution to the work-based plan, including an After-tax 401(k) if available,
3) Contribute to a taxable investing account,
Wiki article "Prioritizing Investments".

Will the current 403b plan permit Roth contributions?


Taxable account.
About how much (in dollars) do you believe that you might be able to contribute annually to investing (total, all accounts)?

If you need a taxable brokerage account then open the account at a low cost provider like Vanguard, Fidelity or Schwab. My personal preference is Vanguard.

In a taxable account use the only very tax-efficient stock index funds. Wiki article "Tax-efficient Fund Placement".

Examples of very tax-efficient stock index funds include:
1) Vanguard Total Stock Market Index Fund (VTSAX) of the ETF (VTI); and
2) Vanguard Total International Stock Index Fund (VTIAX) or the ETF (VXUS).
Thank you for your breakdown and forum links! I will be going through those!
mortfree
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Re: Long Time Reader - How Am I Doing?

Post by mortfree »

Ditto on the MIL

Have her pay utilities that add up to around $500.

Electric
Cable/internet
Water? Trash? Sewer? (Location dependent)
Other
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ruralavalon
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Re: Long Time Reader - How Am I Doing?

Post by ruralavalon »

jtinsession wrote: Fri Jul 03, 2020 11:05 am
ruralavalon wrote:What other vendors besides AXA are available in your current 403b plan?
I asked this years ago, and Vanguard and Fidelity were on the list, so I chose Vanguard. I asked HR last night to confirm and see list again.
That is great news.

If Vanguard is your current 403b provider then I suggest contributions to your 403b account as a priority ahead of contributions to a taxable account.

About how much (in dollars) do you believe that you may be able to contribute annually to investing (total, all accounts)?

Will your current 403b plan permit Roth contributions?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Sahara
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Re: Long Time Reader - How Am I Doing?

Post by Sahara »

jtinsession wrote: Thu Jul 02, 2020 8:53 pm I prefer my earnings to not be taxed
You want to prioritize taxation of your income above taxation of earnings. This is why people often recommend that you consider the asset allocation for all your accounts as one. Thus, you place your slower growing funds (ie: bonds) in your tax deferred accounts and your faster growing funds (ie: stock) in tax free accounts.

It is helpful to make an estimate or prediction of your tax rate in retirement. If you are going to be in a lower tax bracket in retirement when you take the money out of the 403b, you prioritize the tax deferred vehicles available to you now. You don’t pay 22% on the income from your job now, you pay 12% on the income from the 403b later. Does that make sense?
Topic Author
jtinsession
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Re: Long Time Reader - How Am I Doing?

Post by jtinsession »

Sahara wrote: Fri Jul 03, 2020 5:36 pm
jtinsession wrote: Thu Jul 02, 2020 8:53 pm I prefer my earnings to not be taxed
You want to prioritize taxation of your income above taxation of earnings. This is why people often recommend that you consider the asset allocation for all your accounts as one. Thus, you place your slower growing funds (ie: bonds) in your tax deferred accounts and your faster growing funds (ie: stock) in tax free accounts.

It is helpful to make an estimate or prediction of your tax rate in retirement. If you are going to be in a lower tax bracket in retirement when you take the money out of the 403b, you prioritize the tax deferred vehicles available to you now. You don’t pay 22% on the income from your job now, you pay 12% on the income from the 403b later. Does that make sense?
So essentially, the tax bracket is based on income and age. As I get older, I will be in a lower tax bracket (although I will be making the most money per year I would have ever made). I should contribute to my 403b now since I am in a higher tax bracket, and stop funding my Roth IRA until I get older. Correct? Now I feel like I've done this all backwards. :?
Topic Author
jtinsession
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Re: Long Time Reader - How Am I Doing?

Post by jtinsession »

ruralavalon wrote: Fri Jul 03, 2020 11:13 am
jtinsession wrote: Fri Jul 03, 2020 11:05 am
ruralavalon wrote:What other vendors besides AXA are available in your current 403b plan?
I asked this years ago, and Vanguard and Fidelity were on the list, so I chose Vanguard. I asked HR last night to confirm and see list again.
That is great news.

If Vanguard is your current 403b provider then I suggest contributions to your 403b account as a priority ahead of contributions to a taxable account.

About how much (in dollars) do you believe that you may be able to contribute annually to investing (total, all accounts)?

Will your current 403b plan permit Roth contributions?
Can you explain your last question? Thanks!
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ruralavalon
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Re: Long Time Reader - How Am I Doing?

Post by ruralavalon »

jtinsession wrote: Mon Jul 13, 2020 8:54 pm
ruralavalon wrote: Fri Jul 03, 2020 11:13 am
jtinsession wrote: Fri Jul 03, 2020 11:05 am
ruralavalon wrote:What other vendors besides AXA are available in your current 403b plan?
I asked this years ago, and Vanguard and Fidelity were on the list, so I chose Vanguard. I asked HR last night to confirm and see list again.
That is great news.

If Vanguard is your current 403b provider then I suggest contributions to your 403b account as a priority ahead of contributions to a taxable account.

About how much (in dollars) do you believe that you may be able to contribute annually to investing (total, all accounts)?

Will your current 403b plan permit Roth contributions?
Can you explain your last question? Thanks!
Traditional contributions to a 403b are tax deductible, and withdrawals in retirement are taxed as ordinary income.

Some 403b plans (not all) permit Roth contribitions, there is no tax deduction but withdrawals are tax free. To find out if Roth contributions are permitted you need to read the plan documents, or talk to HR, or both.

Roth contributions to a 403b would probably be good, if eligible for a significant pension in addition to Social Security. TFB blog post, "Most TSP Participants Should Switch to the Roth TSP".
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Sahara
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Re: Long Time Reader - How Am I Doing?

Post by Sahara »

jtinsession wrote: Mon Jul 13, 2020 8:53 pm
Sahara wrote: Fri Jul 03, 2020 5:36 pm
jtinsession wrote: Thu Jul 02, 2020 8:53 pm I prefer my earnings to not be taxed
You want to prioritize taxation of your income above taxation of earnings. This is why people often recommend that you consider the asset allocation for all your accounts as one. Thus, you place your slower growing funds (ie: bonds) in your tax deferred accounts and your faster growing funds (ie: stock) in tax free accounts.

It is helpful to make an estimate or prediction of your tax rate in retirement. If you are going to be in a lower tax bracket in retirement when you take the money out of the 403b, you prioritize the tax deferred vehicles available to you now. You don’t pay 22% on the income from your job now, you pay 12% on the income from the 403b later. Does that make sense?
So essentially, the tax bracket is based on income and age. As I get older, I will be in a lower tax bracket (although I will be making the most money per year I would have ever made). I should contribute to my 403b now since I am in a higher tax bracket, and stop funding my Roth IRA until I get older. Correct? Now I feel like I've done this all backwards. :?
No. The tax bracket is based on income.

As those without a pension age, they may not have significant investments, therefore their income may decrease and their tax bracket may decrease.

As you age, and you receive a pension and you receive social security and you have to take distributions from your 403B --- therefore your income will increase and your tax bracket will increase.

To illustrate:

Mark Megacorp is single, age 67.
Mark Megacorp’s expenses now and in retirement are $60,000.
Mark Megacorp earns $100,000 per year.
Mark Megacorp contributes 26,000 to his 401K and takes the standard deduction.
Mark Megacorp is in the 22% tax bracket.
(100,000 - 26,000 - 12,400 = 61,600)

Mark Megacorp retires at age 70. He takes 30,000 per year from his 401K and receives 30,000 per year from social security. He takes the standard deduction for seniors. Mark Megacorp is in the 12% tax bracket.
(30,000 + 13,850 <taxable portion of his SS - 13,850> - 14,050 = 29,800)
When Mark put his money in the 401K he decreased the Federal Income tax he pays on that money by 10% :happy

Tom Teacher is single, age 55.
Tom Teacher’s expected expenses now and in retirement are $60,000.
Tom Teacher earns $100,000 per year.
Tom Teacher contributes 26,000 to his 403b and takes the standard deduction.
Tom Teacher is in the 22% tax bracket while working.
(100,000 - 26,000 - 12,400 = 61,600)

When Tom Teacher retires his pension is $60,000 per year. He is in the 22% tax bracket.
(60,000 - 12,400 - 47,600)

At age 70, Tom Teacher receives social security of 30,000 per year. He is in the 22% tax bracket.
(60,000 + 25,500 <taxable portion of his SS = 25,500> - 14050 = 71,450)

If Tom Teacher has significant money in the 403b at age 72, he will be required to take distributions.
Let's say Tom Teacher takes 15,000 per year from his 403b. Now he is entering the 24% tax bracket.
(60,000 + 15,000 + 25,500 <taxable portion of his SS = 25,500> - 14050 = 86,450)
Tom Teacher put money in the 403b while in the 22% bracket and is taking it out in the 24% bracket :oops:

A second illustration:
Roth IRAs were not in existence when I started teaching. I contributed enough to my 403b to stay in the 12% tax bracket until that was no longer possible. Once Roth IRAs came into play I also contributed to a Roth IRA.

Once firmly in the 22% tax bracket, I switched the 403b contributions to Roth and continued the Roth IRA contributions as well.

I did not contribute the max to the pre-tax 403b because the RMDs would have increased my income beyond the 22% bracket after age 70 (now 72) due to combined income of RMD, pension, and social security. I’ll be in the 22% bracket for life or until legislative changes take effect which looks likely in 2026. I like having some tax-deferred money because it may still be deductible if used for medical expenses as I age.

The above explains why Ruralavalon suggests you inquire about the Roth option for the 403b at your employer. My district had a list of 403b providers. I used Vanguard/Newport Group for my 403b but they did not have a Roth option. I had to use another firm to contribute to a Roth 403b.

If you have no more than $6,000 per year to invest, you don't need the Roth 403b. But if you want to invest more than the $6,000 allowed, the Roth 403b is probably your best option.

The first question you might want to ask yourself is what your financial needs will be in retirement. It's likely that your pension and social security will cover your expenses. However, retirement is a long way off and you never know. So the sensible thing to do is create a little nest egg with discretionary income. Good problems to have!
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arcticpineapplecorp.
Posts: 6449
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Re: Long Time Reader - How Am I Doing?

Post by arcticpineapplecorp. »

jtinsession wrote: Thu Jul 02, 2020 6:21 pm Questions:
Should I convert my 403b to my Roth IRA? Just want to make sure I am taking advantage of taxable/nontaxable accounts, something I still need help learning.

I try to max out my Roth IRA yearly, but paying off my Masters and saving for a house hurt this for some time. At this point, is what I have enough?
1. what are the total expenses of your 403b and the target date fund in your 403b?
i.e., there's an expense ratio for the target date fund AND there may be administrative/operating fees of the 403b.

In order to know whether you should switch, we'd need to know what the costs of the 403b are (so we can compare them to what they'd be in the Roth).

2. do you get an employer match in your 403b? If you do, it would be more advantageous to contribute at least enough to get the full employer match rather than contribute to the Roth IRA. That doesn't mean you shouldn't contribute to a Roth IRA. It means you get the full employer match first, then whether you keep contributing (if able) or contribute to 403b or contribute instead (if able) to a Roth IRA depends upon the fees of each account (403b vs IRA and which is more advantageous).

see here:
https://www.bogleheads.org/wiki/Priorit ... nvestments

3. you need to know (or we do) what your pension and social security will/might be at retirement to reverse engineer the problem. You need to provide what your pension will be at the pension's normal retirement age and you should look up how much you'll get from SS (at SSA.gov. you'll need to create an account and look at how much you'd get if you take SS early, full retirement age, or delayed credits). Then and only then can we start to figure out what other income you might need at retirement to supplement a shortfall of income in retirement and then can figure out how much you'd need to contribute yearly to achieve your goal of having enough at retirement to supplement pension and SS if needed.

4. there are other issues of course, like:
when are you planning on getting married,
what does your fiance do for work
what debts she has
savings she has,
do you plan to have kids and if so, when,
is your fiance on the same page financially speaking with you or not, etc...

that factor in to financial matters, so perhaps you can give additional information on these issues as well if it might impact you/your finances/ability to save, etc.

welcome to the group.
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
Sahara
Posts: 179
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Re: Long Time Reader - How Am I Doing?

Post by Sahara »

jtinsession wrote: Thu Jul 02, 2020 8:53 pm
ruralavalon wrote: Thu Jul 02, 2020 8:32 pm Welcome to the forum :) .

jtinsession wrote: Thu Jul 02, 2020 6:21 pmQuestions:

I don't. Since I don't receive a match, I felt it was best to forego the 403Bb and push all my retirement savings into a Roth IRA, as I prefer my earnings to not be taxed and honestly, that was what was preferred here. I know AXA seems to be my school's preferred vendor. I don't believe my district offers its own 403b/457 plan. I will ask again to clarify.

An idea of my pension (using the state calculator) is $67,073.80 per year, or $5,589.48 per month (didn't count for salary at that time; used today's numbers)

Annual expenses: $28,152 ($2,346/mo.) (used my budget expenses x 12)
In addition to that pension will you be eligible for Social Security?

Will your employer's 403b plan or 457 plan permit Roth contributions?
From my understanding, I will be eligible for SS. I am not sure about the latter question.
I believe he provided a bit of this earlier and thought it might be helpful to have in one place.
Topic Author
jtinsession
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Re: Long Time Reader - How Am I Doing?

Post by jtinsession »

ruralavalon wrote: Tue Jul 14, 2020 10:05 am
jtinsession wrote: Mon Jul 13, 2020 8:54 pm
ruralavalon wrote: Fri Jul 03, 2020 11:13 am
jtinsession wrote: Fri Jul 03, 2020 11:05 am
ruralavalon wrote:What other vendors besides AXA are available in your current 403b plan?
I asked this years ago, and Vanguard and Fidelity were on the list, so I chose Vanguard. I asked HR last night to confirm and see list again.
That is great news.

If Vanguard is your current 403b provider then I suggest contributions to your 403b account as a priority ahead of contributions to a taxable account.

About how much (in dollars) do you believe that you may be able to contribute annually to investing (total, all accounts)?

Will your current 403b plan permit Roth contributions?
Can you explain your last question? Thanks!
Traditional contributions to a 403b are tax deductible, and withdrawals in retirement are taxed as ordinary income.

Some 403b plans (not all) permit Roth contribitions, there is no tax deduction but withdrawals are tax free. To find out if Roth contributions are permitted you need to read the plan documents, or talk to HR, or both.

Roth contributions to a 403b would probably be good, if eligible for a significant pension in addition to Social Security. TFB blog post, "Most TSP Participants Should Switch to the Roth TSP".
Ah, makes sense. So if I wanted to move some Roth contributions over to a 403b to reduce my taxable income. It would be under Vanguard. Will have to look up.
Sahara
Posts: 179
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Re: Long Time Reader - How Am I Doing?

Post by Sahara »

Yes, if you mean you would contribute to the current, tax deferred 403b instead of a Roth IRA. Yes, that would reduce your taxable income.

If you contribute to a Roth 403b in addition to a Roth IRA, you increase the amount of money you can contribute to Roth (since you are limited to $6,000 in the Roth IRA and allowed up to $19,500 in a 403b). That would not decrease your taxable income.

If you provide the taxable income and tax deferred contributions from your 2019 Federal income tax form 1040, someone here will be able to help you calculate whether tax deferred contributions would be advantageous in your situation and how much you should contribute to attain the most tax advantage if that is the case.
Topic Author
jtinsession
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Re: Long Time Reader - How Am I Doing?

Post by jtinsession »

Sahara wrote: Tue Jul 14, 2020 1:16 pm
jtinsession wrote: Mon Jul 13, 2020 8:53 pm
Sahara wrote: Fri Jul 03, 2020 5:36 pm
jtinsession wrote: Thu Jul 02, 2020 8:53 pm I prefer my earnings to not be taxed
You want to prioritize taxation of your income above taxation of earnings. This is why people often recommend that you consider the asset allocation for all your accounts as one. Thus, you place your slower growing funds (ie: bonds) in your tax deferred accounts and your faster growing funds (ie: stock) in tax free accounts.

It is helpful to make an estimate or prediction of your tax rate in retirement. If you are going to be in a lower tax bracket in retirement when you take the money out of the 403b, you prioritize the tax deferred vehicles available to you now. You don’t pay 22% on the income from your job now, you pay 12% on the income from the 403b later. Does that make sense?
So essentially, the tax bracket is based on income and age. As I get older, I will be in a lower tax bracket (although I will be making the most money per year I would have ever made). I should contribute to my 403b now since I am in a higher tax bracket, and stop funding my Roth IRA until I get older. Correct? Now I feel like I've done this all backwards. :?
No. The tax bracket is based on income.

As those without a pension age, they may not have significant investments, therefore their income may decrease and their tax bracket may decrease.

As you age, and you receive a pension and you receive social security and you have to take distributions from your 403B --- therefore your income will increase and your tax bracket will increase.

To illustrate:

Mark Megacorp is single, age 67.
Mark Megacorp’s expenses now and in retirement are $60,000.
Mark Megacorp earns $100,000 per year.
Mark Megacorp contributes 26,000 to his 401K and takes the standard deduction.
Mark Megacorp is in the 22% tax bracket.
(100,000 - 26,000 - 12,400 = 61,600)

Mark Megacorp retires at age 70. He takes 30,000 per year from his 401K and receives 30,000 per year from social security. He takes the standard deduction for seniors. Mark Megacorp is in the 12% tax bracket.
(30,000 + 13,850 <taxable portion of his SS - 13,850> - 14,050 = 29,800)
When Mark put his money in the 401K he decreased the Federal Income tax he pays on that money by 10% :happy

Tom Teacher is single, age 55.
Tom Teacher’s expected expenses now and in retirement are $60,000.
Tom Teacher earns $100,000 per year.
Tom Teacher contributes 26,000 to his 403b and takes the standard deduction.
Tom Teacher is in the 22% tax bracket while working.
(100,000 - 26,000 - 12,400 = 61,600)

When Tom Teacher retires his pension is $60,000 per year. He is in the 22% tax bracket.
(60,000 - 12,400 - 47,600)

At age 70, Tom Teacher receives social security of 30,000 per year. He is in the 22% tax bracket.
(60,000 + 25,500 <taxable portion of his SS = 25,500> - 14050 = 71,450)

If Tom Teacher has significant money in the 403b at age 72, he will be required to take distributions.
Let's say Tom Teacher takes 15,000 per year from his 403b. Now he is entering the 24% tax bracket.
(60,000 + 15,000 + 25,500 <taxable portion of his SS = 25,500> - 14050 = 86,450)
Tom Teacher put money in the 403b while in the 22% bracket and is taking it out in the 24% bracket :oops:

A second illustration:
Roth IRAs were not in existence when I started teaching. I contributed enough to my 403b to stay in the 12% tax bracket until that was no longer possible. Once Roth IRAs came into play I also contributed to a Roth IRA.

Once firmly in the 22% tax bracket, I switched the 403b contributions to Roth and continued the Roth IRA contributions as well.

I did not contribute the max to the pre-tax 403b because the RMDs would have increased my income beyond the 22% bracket after age 70 (now 72) due to combined income of RMD, pension, and social security. I’ll be in the 22% bracket for life or until legislative changes take effect which looks likely in 2026. I like having some tax-deferred money because it may still be deductible if used for medical expenses as I age.

The above explains why Ruralavalon suggests you inquire about the Roth option for the 403b at your employer. My district had a list of 403b providers. I used Vanguard/Newport Group for my 403b but they did not have a Roth option. I had to use another firm to contribute to a Roth 403b.

If you have no more than $6,000 per year to invest, you don't need the Roth 403b. But if you want to invest more than the $6,000 allowed, the Roth 403b is probably your best option.

The first question you might want to ask yourself is what your financial needs will be in retirement. It's likely that your pension and social security will cover your expenses. However, retirement is a long way off and you never know. So the sensible thing to do is create a little nest egg with discretionary income. Good problems to have!
So essentially, the more I contribute to my 403b, the more I reduce my taxable income because I am "removing" my income to fund my 403b. Mental gymnastics.
A quick Google search yields the following - $40,126 to $85,525 is the 22% bracket. I'm firmly in the 22% bracket at $72K gross as a teacher. My club sports job I am a 1099 that makes less than 10K a year (it varies). But to stay at that 22% bracket, I should start investing some money to my 403b.

To be honest, I would be able to invest only the 6K for now. I would use Vanguard for my 403b.

Thanks again! I do want to be secure in retirement, and I just want to make sure I am on the right path currently and in the future. Turning 30 and closing on a house this year with speed that up 10 fold, lol.
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mrspock
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Re: Long Time Reader - How Am I Doing?

Post by mrspock »

jtinsession wrote: Thu Jul 02, 2020 7:25 pm
tashnewbie wrote: Thu Jul 02, 2020 7:08 pm What are your annual expenses? Expected pension?
An idea of my pension (using the state calculator) is $67,073.80 per year, or $5,589.48 per month (didn't count for salary at that time; used today's numbers)

Annual expenses: $28,152 ($2,346/mo.) (used my budget expenses x 12)
I know you might think you won’t achieve the wealth like others on here, but consider that it would take a $1.9m Boglehead portfolio to yield $67k/yr at 3.5% SWR. If you factor that in, along with your investing along the way — you will effectively achieve the wealth others have on here. Don’t sell yourself short!

It would not surprise me if you make $100k/yr (2020 dollars) easy in retirement between the pension and investing. Not too shabby at all.
Topic Author
jtinsession
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Re: Long Time Reader - How Am I Doing?

Post by jtinsession »

arcticpineapplecorp. wrote: Tue Jul 14, 2020 1:31 pm
jtinsession wrote: Thu Jul 02, 2020 6:21 pm Questions:
Should I convert my 403b to my Roth IRA? Just want to make sure I am taking advantage of taxable/nontaxable accounts, something I still need help learning.

I try to max out my Roth IRA yearly, but paying off my Masters and saving for a house hurt this for some time. At this point, is what I have enough?
1. what are the total expenses of your 403b and the target date fund in your 403b?
i.e., there's an expense ratio for the target date fund AND there may be administrative/operating fees of the 403b.

In order to know whether you should switch, we'd need to know what the costs of the 403b are (so we can compare them to what they'd be in the Roth).

2. do you get an employer match in your 403b? If you do, it would be more advantageous to contribute at least enough to get the full employer match rather than contribute to the Roth IRA. That doesn't mean you shouldn't contribute to a Roth IRA. It means you get the full employer match first, then whether you keep contributing (if able) or contribute to 403b or contribute instead (if able) to a Roth IRA depends upon the fees of each account (403b vs IRA and which is more advantageous).

see here:
https://www.bogleheads.org/wiki/Priorit ... nvestments

3. you need to know (or we do) what your pension and social security will/might be at retirement to reverse engineer the problem. You need to provide what your pension will be at the pension's normal retirement age and you should look up how much you'll get from SS (at SSA.gov. you'll need to create an account and look at how much you'd get if you take SS early, full retirement age, or delayed credits). Then and only then can we start to figure out what other income you might need at retirement to supplement a shortfall of income in retirement and then can figure out how much you'd need to contribute yearly to achieve your goal of having enough at retirement to supplement pension and SS if needed.

4. there are other issues of course, like:
when are you planning on getting married,
what does your fiance do for work
what debts she has
savings she has,
do you plan to have kids and if so, when,
is your fiance on the same page financially speaking with you or not, etc...

that factor in to financial matters, so perhaps you can give additional information on these issues as well if it might impact you/your finances/ability to save, etc.

welcome to the group.
1. 2060, fee is 0.15% - ticker VTTSX. I figured I can withstand more in stocks as I am young. I currently have this in my Roth IRA, and can choose this for my 403b.


2. I dont

3. SS - $2,417 a month if retire at 67.
An idea of my pension (using the state calculator) is $67,073.80 per year, or $5,589.48 per month (didn't count for salary at that time; used today's numbers)

4. Not sure. We are coming on two years engaged. I just bought the house, so we have pushed back the wedding talk. I am 30, she is 28. I would say by the time I am 35 would like to be married, kids soon around then if all works out. She is a recruiter, has about 15K in her 401K (she has a 6% match). She does have some debts as she is paying back - a 401K loan, 14K in a personal loan, 9K in 0% CC (15 mos. from today), and 24K in student loans. I am pretty frugal, although I will splurge on myself once a year or so. I was lucky enough to move back home after college, paid off my student loans and paid my master's degree in cash. Not to get tmi, after college my fiance had to rent an apartment to support her/her mom as dad left prior to her graduating + mom making min. wage. She admits she made some mistakes during that time and has been forthcoming with me through the years. She is trying to work on her debts. She will say she is a spender but has gotten much better than before. She gets all of this though - helped me understand expense ratios when I had no idea (she helped me ditch AXA), understands taxes as she worked for ADP at one time. Kids, probably be when I am 35-38 (we want two) and we have the same long-term goals for ourselves financially, just take different paths to get there.
Topic Author
jtinsession
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Re: Long Time Reader - How Am I Doing?

Post by jtinsession »

mrspock wrote: Wed Jul 15, 2020 7:04 pm
jtinsession wrote: Thu Jul 02, 2020 7:25 pm
tashnewbie wrote: Thu Jul 02, 2020 7:08 pm What are your annual expenses? Expected pension?
An idea of my pension (using the state calculator) is $67,073.80 per year, or $5,589.48 per month (didn't count for salary at that time; used today's numbers)

Annual expenses: $28,152 ($2,346/mo.) (used my budget expenses x 12)
I know you might think you won’t achieve the wealth like others on here, but consider that it would take a $1.9m Boglehead portfolio to yield $67k/yr at 3.5% SWR. If you factor that in, along with your investing along the way — you will effectively achieve the wealth others have on here. Don’t sell yourself short!

It would not surprise me if you make $100k/yr (2020 dollars) easy in retirement between the pension and investing. Not too shabby at all.
Thanks! I guess when you don't see actual numbers (I need to see if there is a portal - I am sure there is) you think you don't have enough. Just need to keep going with my investing!
Sahara
Posts: 179
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Re: Long Time Reader - How Am I Doing?

Post by Sahara »

With an income of 72,000 teaching + 3800 coaching + 6000 club basketball as your initial post states, your taxable income is around 69,400 (81,800 - 12,400 standard deduction)

You will not breach the 22% bracket until you have another 16,126 in income and you can’t contribute enough in the 403b to drop yourself into the 12% bracket so in my opinion there’s no strong need to use the tax deferred 403b.

You don’t have more than 6,000 to invest so in my opinion there is no strong reason to use a Roth 403b.

It seems like for now you should keep doing what you are doing until either your income brings you to the top of the 22% bracket or you have more than 6,000 per year to invest.

You do want to look at your fees in the 403b. You state that you moved it from AXA to Vanguard. Mine (Vanguard/Newport Group) had a $5 per month fee and low expense ratios. You won’t do much better than that but digging into the details of your investments and the expenses is always a good exercise.
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arcticpineapplecorp.
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Re: Long Time Reader - How Am I Doing?

Post by arcticpineapplecorp. »

yes definitely check for all fees. not just expense ratio but any administrative fees. I have a low exp ratio (.08%) but have a $25 annual administrative fee on top. If you figure that as a percentage of expenses it's quite large on a low balance (like you have in 403b) but much smaller if your balance is larger.

didn't list your mortgage and total monthly spending. do you have money leftover to invest in besides in the Roth IRA?

I wouldn't convert the 403b unless you want to pay 22% tax on the amount converted. That's what you'd be looking to pay. Though sometimes it's ok to convert if the value dropped. So let's say the $2985 in 403b dropped by 30% (like earlier this year. source: http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D) you'd have only had to pay 22% tax on $2089 instead of on $2985. That could've saved you $197 in tax. But that opportunity is now gone. In 2008 or 2009 when the market went down I converted from a trad IRA to a Roth IRA and saved a bunch in taxes that way.

But if the fees are as low as you say in 403b you should look at whether you can lump sum in your vacation pay into the 403b when you retire (I plan to, and sick leave too). So that might be a reason to hold onto it. Not to mention, hopefully you'll add to it as the years go on and you get raises, etc, right?

Is your fiance getting that 6% match? If she's not, she really should (I know she's got the other debts she's working on, but that match is more important).

in terms of how you're doing, are you looking to see how much the money in your Roth IRA and 403b would be worth in X number of years at an assumed growth rate and additional contributions just to Roth IRA?
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
Topic Author
jtinsession
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Re: Long Time Reader - How Am I Doing?

Post by jtinsession »

Sahara wrote: Wed Jul 15, 2020 8:09 pm With an income of 72,000 teaching + 3800 coaching + 6000 club basketball as your initial post states, your taxable income is around 69,400 (81,800 - 12,400 standard deduction)

You will not breach the 22% bracket until you have another 16,126 in income and you can’t contribute enough in the 403b to drop yourself into the 12% bracket so in my opinion there’s no strong need to use the tax deferred 403b.

You don’t have more than 6,000 to invest so in my opinion there is no strong reason to use a Roth 403b.

It seems like for now you should keep doing what you are doing until either your income brings you to the top of the 22% bracket or you have more than 6,000 per year to invest.

You do want to look at your fees in the 403b. You state that you moved it from AXA to Vanguard. Mine (Vanguard/Newport Group) had a $5 per month fee and low expense ratios. You won’t do much better than that but digging into the details of your investments and the expenses is always a good exercise.
Thanks! Have to check for that monthly fee.
utvolfan
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Re: Long Time Reader - How Am I Doing?

Post by utvolfan »

A few things I have learned from being a "teacher family":
***Consider what age you are eligible to retire as this affects your savings plan!! Consider what age you can collect your pension!!

1.You are contributing X% to the pension fund as is your employer. You probably don't get a match on deferred compensation such as the 403b, 401k or 457. So fund the Roth IRA first because contributions could also be tapped at any age and as a bridge to SS and possibly even your pension. You may not think it now but you might not want to teach for 40+ years!

2. Check out NJ's deferred compensation program. HR may not be able to tell you much but they should be able to give you some info. After funding the ROTH, fund a 457b if your state has that offered. It could be a ROTH version where you pay taxes now or a regular account where you pay the taxes when you withdrawal. The good thing about the government 457 is it can be accessed when you separate service which means at any age. I have friends who started at 22 and taught for 30 years, and retiring at 52 they had access to the 457. (In my state we have the 457 and a 401k in our state deferred compensation program) Usually the 401k can't be accessed until 59 1/2 unless you retire at 55, then you can start withdrawals without penalty early. Otherwise you would have to set up withdrawals under the 72T plan.

3. Find out at what age you can collect your pension. We can collect immediately upon retiring if employed before 2013 in my state. But for those hired 2013 or after their "age + 30 must equal 90" which means a teacher starting at age 22 would have to teach for 38 years before they can collect their pension. They can retire after 30 years at age 52 but can't get the pension $$ until they meet the rule of 90. So you must have money saved to live on to bridge the gap unless you plan to have another career. That is where the ROTH and 457 and even a taxable account comes in to play. I can not stress this enough!!

4. Realize that you will often read about people on this site who pay very little in taxes. You will always have that pension income (and it is a great problem don't get me wrong!) so you can't really reduce your taxes. 85% of your SS will be taxed more than likely unless the thresholds are raised significantly. Then eventually RMDs. Our pensions will be 100% survivor to each other which is awesome but when one of us eventually has to file SINGLE, it will be a huge tax increase. But the pension is worth alot in savings and hopefully our states won't go belly up! We contribute 9% of our salary here and someone with a masters plus coaching with your experience would be making about a total of about $44k. After contributing 9% to the pension fund and another $6k to ROTH it doesn't leave much for a person to be able to defer if they are the breadwinner in the family. Save what you can and still have a life! Your club coaching can be your ROTH money :D
GMT-8
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Re: Long Time Reader - How Am I Doing?

Post by GMT-8 »

Hi,

Jumping in here, also from a coaching / PE teacher family. My wife filed this week for SS.

Unless you are having SS deductions taken from your Teacher pay, you will not get SS when you retire. If your school district is public you are considered a government employee and WEP (Windfall Elimination or double-dipping Provision) applies.

If you declare your outside coaching income as a business and pay self-employment taxes that should count. If it’s not declared it won’t add to your SS earnings.

My wife taught about 15 yrs early in her career at the YMCA and a private college. Then she moved to a public school district for 20 yrs. She is getting a nice pension from the school district, but her SS is based solely on those years of work in the 70’s and 80’s and reduced by WEP down to $400. It’s still welcome but insignificant.

Don’t take anyone’s word for it, check your pay stub or ask your employer before including it in your financial planning.

BTW - stay healthy! Your job is not easy and it gets much harder as you age. Out here in sunny Calif PE teachers burn out from stress, suffer throat issues from yelling, skin issues from exposure, and joint problems from running, jumping, falling, etc. It’s not a desk job, for sure.

Best of luck to you, coach.

GMT

PS - I agree on avoiding the mother-in-law housing if you possibly can
Topic Author
jtinsession
Posts: 14
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Re: Long Time Reader - How Am I Doing?

Post by jtinsession »

arcticpineapplecorp. wrote: Wed Jul 15, 2020 8:28 pm yes definitely check for all fees. not just expense ratio but any administrative fees. I have a low exp ratio (.08%) but have a $25 annual administrative fee on top. If you figure that as a percentage of expenses it's quite large on a low balance (like you have in 403b) but much smaller if your balance is larger.

didn't list your mortgage and total monthly spending. do you have money leftover to invest in besides in the Roth IRA?

I wouldn't convert the 403b unless you want to pay 22% tax on the amount converted. That's what you'd be looking to pay. Though sometimes it's ok to convert if the value dropped. So let's say the $2985 in 403b dropped by 30% (like earlier this year. source: http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D) you'd have only had to pay 22% tax on $2089 instead of on $2985. That could've saved you $197 in tax. But that opportunity is now gone. In 2008 or 2009 when the market went down I converted from a trad IRA to a Roth IRA and saved a bunch in taxes that way.

But if the fees are as low as you say in 403b you should look at whether you can lump sum in your vacation pay into the 403b when you retire (I plan to, and sick leave too). So that might be a reason to hold onto it. Not to mention, hopefully you'll add to it as the years go on and you get raises, etc, right?

Is your fiance getting that 6% match? If she's not, she really should (I know she's got the other debts she's working on, but that match is more important).

in terms of how you're doing, are you looking to see how much the money in your Roth IRA and 403b would be worth in X number of years at an assumed growth rate and additional contributions just to Roth IRA?
My monthly spending is about $2,346 including my half of the mortgage ($2,605). Between finishing building my 6 mo. emergency fund and trying to max my Roth, I don't at this time.

Great idea dumping the vacation pay and sick into the 403b! Didn't think of that. I will def. at to it - I started teaching right at 22; 8 more years until I'm at top of the chart.

Yes, she is getting that 6% match. She will not change that. I thought of telling her to stop to really pay the debts off, but decided against it. She also has a stock plan that she uses as her savings that she tries to build then put towards her debt.

When I asked how I am doing, I just wanted an idea of am I at a good place - do I not have enough in my roth, savings, etc. at 30.
Topic Author
jtinsession
Posts: 14
Joined: Thu Jul 02, 2020 5:51 pm

Re: Long Time Reader - How Am I Doing?

Post by jtinsession »

GMT-8 wrote: Thu Jul 16, 2020 8:38 am Hi,

Jumping in here, also from a coaching / PE teacher family. My wife filed this week for SS.

Unless you are having SS deductions taken from your Teacher pay, you will not get SS when you retire. If your school district is public you are considered a government employee and WEP (Windfall Elimination or double-dipping Provision) applies.

If you declare your outside coaching income as a business and pay self-employment taxes that should count. If it’s not declared it won’t add to your SS earnings.

My wife taught about 15 yrs early in her career at the YMCA and a private college. Then she moved to a public school district for 20 yrs. She is getting a nice pension from the school district, but her SS is based solely on those years of work in the 70’s and 80’s and reduced by WEP down to $400. It’s still welcome but insignificant.

Don’t take anyone’s word for it, check your pay stub or ask your employer before including it in your financial planning.

BTW - stay healthy! Your job is not easy and it gets much harder as you age. Out here in sunny Calif PE teachers burn out from stress, suffer throat issues from yelling, skin issues from exposure, and joint problems from running, jumping, falling, etc. It’s not a desk job, for sure.

Best of luck to you, coach.

GMT

PS - I agree on avoiding the mother-in-law housing if you possibly can
Thanks! I just checked my paystub again - I do have SS deductions, which I am glad to confirm.

My club coaching I am a 1099 - not sure how that affects SS?

Yes! Agree on staying healthy. Truly enjoy what I do once I step foot inside the classroom or gym. All the other stuff, not so much. Sometimes I do wish of moving over to sunny CA someday! Thanks for your input again!
User avatar
arcticpineapplecorp.
Posts: 6449
Joined: Tue Mar 06, 2012 9:22 pm

Re: Long Time Reader - How Am I Doing?

Post by arcticpineapplecorp. »

jtinsession wrote: Sat Jul 18, 2020 10:28 am Great idea dumping the vacation pay and sick into the 403b! Didn't think of that. I will def. at to it - I started teaching right at 22; 8 more years until I'm at top of the chart.
yeah, this is a good one. If all goes according to plan when I retire, between my vacation time and sick pay (percentage of total but up to 311 days) I'll have an entire year's worth (at final salary) to dump into my 457b plan. That's like a 12 month severance--all tax deferred mind you (if put into trad 457b rather than Roth 457b

I can't tell you the number of my coworkers who blow their vacation and sick time as soon as they get it. These are also the same people who are not good savers.

I had a coworker who was getting ready to retire and he had sick and vacation time that he hadn't used that would be paid out. I told him to set up his 457b so that it could be directed there (to lessen taxes). He thought about it, but didn't do it. He got a larger check with his sick and vacation pay, but had to pay taxes (and potentially at a higher tax bracket depending upon the amount of total income received between sick and vacation pay). Instead he could have invested it tax deferred in the 457b and slowly drew it out (with gains) over the next 30 years of his life. :oops:
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
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