[403(b) Fidelity or TIAA Cref allocation, and do I want one?]

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ai_3_us
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Re: EJ not [costing me as much as] others?

Postby ai_3_us » Tue Jan 10, 2017 10:13 pm

Bertie wrote:What asset allocation do you want, and does this portfolio provide that? It doesn’t look like you have any bonds (although I don’t know all of those funds, so maybe some include them). Is this what you want?

Assuming you want a 100% stock portfolio (and assuming you indeed don’t have any bonds in your portfolio), it looks like you have roughly a 64% US to 36% international split (I say roughly because your fund percentages in your original post add up to a bit less than 100%). If I read your original post correctly, over the past 5 years you've had an annualized return of 8.5%. Over the past 5 years Vanguard’s Total Stock Market Fund (Admiral) had an annualized return of 14.62%. Vanguard’s Total International Stock Fund (Admiral) had an annualized return of 5.5%. If you had a 64/36 split between those two funds, the annualized return would have been north of 11%.

Now this is probably an apples and oranges comparison because I suspect you do have some bonds buried in some of those funds, and my example doesn’t include any bonds (which would lower the 5-year return). But do you actually know what you own? Is the complexity of your portfolio really serving your needs? From the information you’ve given us, it seems like it’s hurting you, not helping you.


In fact I know that there are some bonds buried somewhere, but yes they are not easy to find which is frustrating. I agree, I think that at the very best my portfolio is performing on par with the indices (after fees). The fact that this is a best case scenario, the tax advantages mentioned herein, and the goal to simplify my portfolio has me eyeing a switch.

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Pajamas
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Re: EJ not [costing me as much as] others?

Postby Pajamas » Tue Jan 10, 2017 10:36 pm

ai_3_us wrote:I also realized that for some funds I gave the wrong ticker and hence the loads aren't quite right (similar fund names, different class) and in fact are lower than advertised originally. But I agree, I wouldn't be that surprised if something malicious along those lines was practiced.


Any time an adviser puts someone in funds with a front-end load, I consider it malicious because it puts the advisor's best interests over the client's interests.

Even if all the funds you listed were under the wrong name, just the fact that there are nineteen of them means something is wrong. Even if they were all no-load and low expense, I would think that the advisor put you in that many funds either to make it look like he is doing something or else because he himself doesn't know any better. Both of those reasons are bad. I can't think of any good reason for doing that.

You should be able to describe what you are invested in without having to look it up. I can write down the name of every stock and fund I have without looking. If you can't, your investments are too complicated. I think that even the people like Warren Buffett, Bill Gates, and Carlos Slim Helu could tell you what they are invested in fairly accurately, perhaps not down to the dollar but in a reasonably precise way in relation to their wealth.
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Re: EJ not [costing me as much as] others?

Postby FrugalInvestor » Tue Jan 10, 2017 10:39 pm

ai_3_us,

I am currently retired. I found Bogleheads about ten years ago and my finances have benefited hugely from the input, guidance and ideas that I've gained here. Had that same guidance been available when I was your age I can't imagine the magnitude of the positive impact on my finances.

You have a golden opportunity in front of you with no strings attached. Take it!

Respectively,

FrugalInvestor
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Re: EJ not [costing me as much as] others?

Postby ladybug » Tue Jan 10, 2017 11:28 pm

I'm envious of you. I did not start asking these questions until the age of 50 after many, many years of paying someone to manage our portfolio very similar to the way in which your grandfather's portfolio is being managed (mismanaged). It wasn't until I inherited some very hard earned money from my Father that I started questioning. After spending a few months educating myself here on this forum, and reading all of the books and links that have been suggested to you, did I feel confident enough to extricate myself from my advisor and move everything to Vanguard. You are the only one that will know when you are convinced and confident enough to pull the trigger. My advice is to keep on reading...the day is coming.

You have an incredible opportunity at a much earlier age......as you can see there are many, many brilliant members on this forum just waiting to help educate and help someone like you. Your Grandfather, like my Father, was probably a very, very hard worker and life-time saver. I know my Father is proud of the way I am now managing his hard-earned money and your Grandfather will be too.

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Re: EJ not [costing me as much as] others?

Postby lhl12 » Wed Jan 11, 2017 4:36 am

To answer a specific question which I don't believe has been answered yet:

Once a front end load has been paid, it is a sunk cost. It immediately reduces the value of your account at inception, but after that it has no impact. So, you can ignore any front end loads that you have already paid. The only thing that matters post-load is the net return of your fund (I.e. Net of its ER and overall portfolio advisory fee) as compared to its alternative at Vanguard (which will certainly have a lower ER and a lower portfolio advisory fee if any).

For any capital that has not YET paid a front end load (either by switching or reinvestment) then that is not a sunk cost and is something to be avoided at all costs.

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Re: EJ not [costing me as much as] others?

Postby cherijoh » Wed Jan 11, 2017 6:46 am

If you pay a 1% AUM this is based on your total account value NOT just on the earnings. This may not seem to be a big deal to you if the stock market returns double digits, but what happens if the return is barely positive or even negative for the year? You would be giving your advisor most of your return from the investment or even paying them out of your capital. Your advisor may claim that his advice is helping you avoid getting hit as badly in the downturn, but the index fund will bounce back when the market does - you will never see the money you paid out to your advisor for the AUM fee.

ai_3_us wrote:
Novine wrote:Let's say that all your money was invested at Vanguard paying no loads and much lower fees. If an EJ rep approached you today and asked you to move all your money to EJ, would you?


No, at least certainly not immediately. I would see what was offered and seek out more information, as I am doing right now. That direction is also biased since I would have to pay loads which have already been paid in this case.


The loads are a sunk cost. That should not be a consideration in whether you sell your fund and switch to VG. However, they are an important point with respect to the return you receive and whether or not you are getting value from you EJ relationship. If your rep says this fund earned x% vs an index earning y%, you need to understand the math.

A $1K investment in a VG index fund gives you a $1K starting investment. A $1K investment in an American fund with a 5.75% loan gives you a starting investment of $942.5. I guarantee any comparisons the EJ gives you is ignoring the load you paid and assumes that you start with the same amount in the account. (In addition, they may be doing a sleight of hand and ignoring the dividends you would have gotten from an index fund and just comparing your fund return to the raw index numbers).

This is similar for the capital gains tax issue. The EJ illustrations all assume that you reinvest dividends and capital gains. If this is a taxable account, then you are adding to your account by the amount of capital gains taxes each year (as someone else already posted). However, the real kicker comes after a period of good returns in the market. If OTHER investors decide to sell that fund then YOU can have huge capital gains distributions over which you have absolutely NO CONTROL. With an index fund, the only time you generate capital gains is when you actually sell your shares. This is a huge advantage in the long run, even if you may currently only be in the 15% marginal tax bracket. You might be interested in this article from Morningstar:

But big capital gains distributions are frequently a delayed reaction to strong investment performance, showing up a year or more after funds have posted a series of strong gains. And many active funds continue to lose assets at the expense of index funds and ETFs, and that has been one of the key factors contributing to mutual fund capital gains distributions in the recent past. Such redemptions often force managers to sell appreciated securities in an effort to raise cash to pay off departing shareholders. Those distributions, in turn, are distributed over the fund's shrunken base of shareholders, effectively magnifying the size of the distribution for a fund's remaining investors. Manager changes, whereby a new manager upends a long-standing portfolio of highly appreciated securities in favor of his own portfolio, are another frequent catalyst for outsized capital gains distributions. 

Indeed, many otherwise-solid mutual funds have proved quite tax-unfriendly over the years, making sizable capital gains distributions. And judging from still-sizable potential capital gains exposures--which reflect the percentage of a portfolio that consists of capital gains that haven't yet been distributed or taxed--there could be more distributions in the offing. For that reason, I've recommended that investors skip actively managed funds for their taxable accounts and opt for index products instead. 

For each fund, Morningstar.com features a suite of data to help investors assess the tax efficiency of holdings. Tax-cost ratios show what percentage of returns that investors in the highest tax bracket would have ceded to taxes over various trailing periods. Potential capital gains exposure provides a view of the gains embedded in a given portfolio and, therefore, depict what gains could be distributed if the securities are sold to meet redemptions or in the wake of a management change. 

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Re: EJ not [costing me as much as] others?

Postby cherijoh » Wed Jan 11, 2017 7:11 am

livesoft wrote:
ai_3_us wrote:
livesoft wrote:Well then you haven't been killed on taxes on cap gains distributions … yet. :) But you would've noticed on your tax returns that you didn't pay any taxes, so what's up with that?

That's a good question. Are they short term capital gains taxes? My only ordinary income is from my job, and it is $26,000/yr which means my tax rate is 15%.

So with $26,000 earned income you still showed another $30,000 or so in investment income, so you may not be in the 0% LTCG tax bracket. But you can reduce your taxable income by
$18,000 to 403(b)
$5,500 to Roth IRA
and improving the tax efficiency of your portfolio.


Come on Livesoft- you know better than that!! A contribution to a Roth IRA does NOT reduce your taxable income!

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Re: EJ not [costing me as much as] others?

Postby livesoft » Wed Jan 11, 2017 7:13 am

cherijoh wrote:Come on Livesoft- you know better than that!! A contribution to a Roth IRA does NOT reduce your taxable income!

Not this year, but in the future. ;)
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Re: EJ not [costing me as much as] others?

Postby JamesSFO » Wed Jan 11, 2017 8:17 am

[accidental dup]
Last edited by JamesSFO on Wed Jan 11, 2017 8:18 am, edited 1 time in total.

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Re: EJ not [costing me as much as] others?

Postby JamesSFO » Wed Jan 11, 2017 8:18 am

ai_3_us wrote:...I think that at the very best my portfolio is performing on par with the indices (after fees)...


Your portfolio return of ~7.5% well underperformed a simple VG Total Stock/VG Total Intl portfolio last year not sure how you think it is performing on par. :confused

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Re: EJ not [costing me as much as] others?

Postby Dottie57 » Wed Jan 11, 2017 8:25 am

Pajamas wrote:
ai_3_us wrote:I also realized that for some funds I gave the wrong ticker and hence the loads aren't quite right (similar fund names, different class) and in fact are lower than advertised originally. But I agree, I wouldn't be that surprised if something malicious along those lines was practiced.


Any time an adviser puts someone in funds with a front-end load, I consider it malicious because it puts the advisor's best interests over the client's interests.

Even if all the funds you listed were under the wrong name, just the fact that there are nineteen of them means something is wrong. Even if they were all no-load and low expense, I would think that the advisor put you in that many funds either to make it look like he is doing something or else because he himself doesn't know any better. Both of those reasons are bad. I can't think of any good reason for doing that.

You should be able to describe what you are invested in without having to look it up. I can write down the name of every stock and fund I have without looking. If you can't, your investments are too complicated. I think that even the people like Warren Buffett, Bill Gates, and Carlos Slim Helu could tell you what they are invested in fairly accurately, perhaps not down to the dollar but in a reasonably precise way in relation to their wealth.


I think Knowing What You Are Invested In is extremely important. I bet there is a LOT of duplication of holdings in all those funds which makes them riskier without the knowledge of risk.

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Re: EJ not [costing me as much as] others?

Postby ICMoney » Wed Jan 11, 2017 8:26 am

OP, once you are convinced that maxing out your 403b is the way to go (I'll pile on with other posters in support of this, so you can start shifting your assets to be more tax efficient), I would suggest starting another thread listing out your 403b investment options to seek advice on which may be good to select. Those plans can have some real dogs of investment options but there are many on this forum who are good at finding prudent 403b investment choices.

That is really what many are recommending you do - shifting your assets over time to be tax efficient, even if you have to live off a small portion of this account during your low earning years.

As others have said, way to go for seeking advice on how to preserve your great-grandfather's financial legacy!

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Re: EJ not [costing me as much as] others?

Postby meowcat » Wed Jan 11, 2017 2:14 pm

ai_3_us wrote:
I think that at the very best my portfolio is performing on par with the indices (after fees)

Some of the brightest minds on this board have told you otherwise and after 3 pages of non biased feedback you continue to believe this. No one here has an agenda except to see you learn and succeed. The reality is, EJ is raking you over the coals and will be making more money from your portfolio than you will. You are young. Get out while you can and chalk it up to experience.
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ai_3_us
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Re: EJ not [costing me as much as] others?

Postby ai_3_us » Wed Jan 11, 2017 2:58 pm

meowcat wrote:
ai_3_us wrote:
I think that at the very best my portfolio is performing on par with the indices (after fees)

Some of the brightest minds on this board have told you otherwise and after 3 pages of non biased feedback you continue to believe this. No one here has an agenda except to see you learn and succeed. The reality is, EJ is raking you over the coals and will be making more money from your portfolio than you will. You are young. Get out while you can and chalk it up to experience.


Hi meowcat and thank you for your feedback. I am guessing you have not read the conversation thoroughly or you would see that this is certainly not the case. I came here interested in switching, I have been responsive of and appreciated useful feedback (this post does not count as such) and am still planning on making a switch, which I have been keen to mention many times. But thank you for the feedback.

ai_3_us
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Re: EJ not [costing me as much as] others?

Postby ai_3_us » Wed Jan 11, 2017 3:14 pm

bloom2708 wrote:Once your eyes are open to the fees you are paying you cannot close them.

You are in the denial phase at this point. That is ok. I was there as well. I escaped less than 2 years at EJ with a good "life lesson".

My parents choose to stay at EJ. They don't want to make their advisor "feel bad". Yet they feel bad knowing they are buying him a new car in fees each year and skimming $250k or more off their portfolio value over the next 10+ years. Maybe more.

You have two options:

1. Stay the course knowing the fees will only increase as your portfolio increases.
2. Plan to move to Vanguard (or similar). Then work the plan.

Vanguard can do almost all of the leg work. I did give my EJ advisor a heads up (through email), but never met with him. I just said thank you for the service and told him I am graduating to the next level of investing. He didn't like it, but that was my last interaction on the subject. (You are terminated. Get to the chopper!)

Your Advisory Solutions funds will be cashed out. You might pay a $95 fee. You will make that back in one month at Vanguard in a low cost, broad based index fund 3 fund style portfolio.

Good luck!


bloom278 (and maybe others), I wonder if you can help me with a few questions. I called Vanguard today with the hope that they could tell me exactly the difference I would pay in fees if I were to close my accounts at EJ and transfer over money vs. if I were to transfer my funds in-kind and close out the funds at Vanguard. I prefer the second option because it gets me away from the AUM fees asap and gives me time to think about how to redistribute money without getting out of the market for any period of time. The person on the phone directed me to the Vanguard webpage and told me to look at "FundAccess® Transaction Fee" under "Fees & Minimums" to understand the price of selling the funds at Vanguard. Each of my funds says "Up to $35". I consider this a negligible fee and if it is all I am paying then I will just transfer all funds in-kind to Vanguard. However, is this really the only fee? Given how others have discussed figuring out what to sell at Vanguard vs. what to sell at EJ I would expect the fee would be >$35. Is it wrapped up in the redemption fee, and does that vary from EJ to Vanguard?

Second, when looking this up I noticed that actually many of my funds were outperforming their index (according to the index Vanguard uses, these results are different when I compare to the index Morningstar uses, so I am not sure which to trust) but I am not sure if the "Average annual performance" as advertised by Vanguard is calculated before or after ER. Does someone know the answer to this?

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Re: EJ not [costing me as much as] others?

Postby Miriam2 » Wed Jan 11, 2017 3:15 pm

OP has many class A funds with front loads, which he already paid. After time, don't some class A funds turn into class C funds with continuing loads or class C fees? How would he know if this happened?

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Re: EJ not [costing me as much as] others?

Postby livesoft » Wed Jan 11, 2017 3:21 pm

Miriam2 wrote:OP has many class A funds with front loads, which he already paid. After time, don't some class A funds turn into class C funds with continuing loads or class C fees? How would he know if this happened?

No, that doesn't happen. Some class B funds with high expense ratios turn into class A funds after about 5 years when the high e.r. of the B shares reaches the front-end load of the A shares, but the conversion does not entail paying the load on A shares.
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Re: EJ not [costing me as much as] others?

Postby Jack FFR1846 » Wed Jan 11, 2017 3:36 pm

If Vanguard is shooing you to the web page rather than giving you an answer (my vanguard rep told me both vanguard cost to sell and the "from" place. It was cheaper in my specific case to sell at the "from" place), call Fidelity. Their index funds are similar to what Vanguard offers but doesn't trip all over itself when answering questions. I have accounts at Vanguard, Fidelity and Schwab.
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Re: EJ not [costing me as much as] others?

Postby bloom2708 » Wed Jan 11, 2017 4:25 pm

Advisory Solutions funds at EJ will have to be liquidated before transfer. You will pay some account closing fees at EJ ($95/account). There may be some very minor fees if you can transfer in kind to Vanguard and sell there.

Whatever the fees, you will likely make up all those fees in 1-2 months of not paying the higher fees/expense ratios at EJ.

If you exclude Vanguard for one interaction, that is your decision. I am very happy at Vanguard and know the fees will be low. Fidelity is a good option but know that they will attempt to get you in higher ER funds. Their index funds are very low cost. I think you should stick with Vanguard, but that is just my opnion.
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Re: EJ not [costing me as much as] others?

Postby livesoft » Wed Jan 11, 2017 4:38 pm

If one moves a large portfolio in-kind to Vanguard and then one will pay $35 to sell a fund at first. There would be no other fees.

However, one can do the following:

1. Do not sell all funds all at once. Instead sell $250,000 worth of funds for the minimum number of $35 fees. One will have to figure out the puzzle. For instance, if one has a fund with $260,000 in shares, then sell that fund and nothing else. It is possible that some of your funds are NTF funds with no transaction fee to sell, so sell those funds to get to $250,000 first. Note that NTF funds held less than 60 days since last purchase have a $50 fee to sell, so don't sell those. Wait until 60 days from last purchase has passed. I don't know if that includes any automatic reinvestment of dividends, but I would assume so until proven differently.

2. Take the money and buy Vanguard products. You will then be a Voyager status client. Confirm status before making any more sales.

3. Now sell the other funds. A Voyager status client pays $20 to sell transaction fee funds and not $35.

Vanguard fees web page: https://investor.vanguard.com/investing ... ommissions
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Re: EJ not [costing me as much as] others?

Postby livesoft » Wed Jan 11, 2017 4:51 pm

There are other nuances to selling and transfer.

If you sell at E-J, then they will be sending you a 1099-B next year. Will you remember all the details of your selling? Will E-J have the cost basis correct? If your account is closed, will they be receptive to answering your questions if they make mistakes? Will you keep good records? Have you kept good records?

If you transfer in-kind to Vanguard, then will they use ACAT? Will the records of your transactions and your cost basis information transfer over? If E-J messes up the transfer information, who will you get to fix this stuff?
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Re: EJ not [costing me as much as] others?

Postby ai_3_us » Wed Jan 11, 2017 5:42 pm

Thanks again for the wealth of information livesoft.
livesoft wrote:1. Do not sell all funds all at once. Instead sell $250,000 worth of funds for the minimum number of $35 fees. One will have to figure out the puzzle. For instance, if one has a fund with $260,000 in shares, then sell that fund and nothing else. It is possible that some of your funds are NTF funds with no transaction fee to sell, so sell those funds to get to $250,000 first. Note that NTF funds held less than 60 days since last purchase have a $50 fee to sell, so don't sell those. Wait until 60 days from last purchase has passed. I don't know if that includes any automatic reinvestment of dividends, but I would assume so until proven differently.

2. Take the money and buy Vanguard products. You will then be a Voyager status client. Confirm status before making any more sales.

3. Now sell the other funds. A Voyager status client pays $20 to sell transaction fee funds and not $35.

Vanguard fees web page: https://investor.vanguard.com/investing ... ommissions


According to the link you provided, Voyager status is only $50k. I currently have an account with $28k at Vanguard, so I would only have to sell $22k of mutual funds to get to this point. Depending on how this works out with what is most tax efficient, I may or may not go with this strategy. I have 19 funds so a $15 saving on each fund is nice but a $285 isn't the end of the world given I bleed $5k last year for an FA.


livesoft wrote:There are other nuances to selling and transfer.

If you sell at E-J, then they will be sending you a 1099-B next year. Will you remember all the details of your selling? Will E-J have the cost basis correct? If your account is closed, will they be receptive to answering your questions if they make mistakes? Will you keep good records? Have you kept good records?

If you transfer in-kind to Vanguard, then will they use ACAT? Will the records of your transactions and your cost basis information transfer over? If E-J messes up the transfer information, who will you get to fix this stuff?


I suppose I will just have to keep good records and bite the bullet. I will have to do this at some point if I plan on transitioning so I see no reason to delay it.


UPDATE: I spoke with a Vanguard adviser. He confirmed the $50k number for Voyager status and said that if I transferred everything over in-kind, I would be subject to the $20 sell transaction fee. There are 4 funds that Vanguard cannot accept that represent ~$5800 in gains that I will have to take. I can choose to offset this by liquidating some other funds: I have one with $7k in losses, one with $4k in losses, and one with $350 in losses. I can also take some of the gains since I might be at a 0% capital gains tax-rate, this I will need to look into more. Are the $5800 in gains added to my "taxable income" or does taxable income not include capital gains tax?

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Re: EJ not [costing me as much as] others?

Postby ai_3_us » Wed Jan 11, 2017 6:57 pm

cherijoh wrote:
livesoft wrote:
ai_3_us wrote:
livesoft wrote:Well then you haven't been killed on taxes on cap gains distributions … yet. :) But you would've noticed on your tax returns that you didn't pay any taxes, so what's up with that?

That's a good question. Are they short term capital gains taxes? My only ordinary income is from my job, and it is $26,000/yr which means my tax rate is 15%.

So with $26,000 earned income you still showed another $30,000 or so in investment income, so you may not be in the 0% LTCG tax bracket. But you can reduce your taxable income by
$18,000 to 403(b)
$5,500 to Roth IRA
and improving the tax efficiency of your portfolio.


Come on Livesoft- you know better than that!! A contribution to a Roth IRA does NOT reduce your taxable income!


It seems like I should be making Roth contributions to my 403(b) as I do my Roth IRA since I will almost certainly be in a higher tax bracket in retirement. But would these contributions reduce my taxable income? Are you guys suggesting a traditional 403(b)?

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Re: EJ not [costing me as much as] others?

Postby livesoft » Wed Jan 11, 2017 6:58 pm

You can fill out mock tax returns and see your own tax story. If you don't get your taxable income low enough to be in 15% marginal income tax bracket where you qualified dividends and LTCG are not taxed, then you will probably want to use a traditional 403(b) to make that happen. A Roth 403(b) will not help you make that happen.
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Re: EJ not [costing me as much as] others?

Postby livesoft » Wed Jan 11, 2017 7:04 pm

ai_3_us wrote:UPDATE: I spoke with a Vanguard adviser. He confirmed the $50k number for Voyager status and said that if I transferred everything over in-kind, I would be subject to the $20 sell transaction fee.

As written, that is NOT true. You must have $50K of Vanguard products to get Voyager status. Assets in non-Vanguard funds don't count towards that status, so until you get status, it will be more than $20 sell transaction fee.


There are 4 funds that Vanguard cannot accept that represent ~$5800 in gains that I will have to take. I can choose to offset this by liquidating some other funds: I have one with $7k in losses, one with $4k in losses, and one with $350 in losses. I can also take some of the gains since I might be at a 0% capital gains tax-rate, this I will need to look into more. Are the $5800 in gains added to my "taxable income" or does taxable income not include capital gains tax?

If it costs you less than $20 to sell a fund, then by all means, sell all those funds at your current firm. Realized gains and losses from selling are summed together and any net gain (or up to $3000 loss) is placed on Form 1040 page 1 and flows to Adjusted Gross Income and on to page 2 Taxable income.
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Re: EJ not [costing me as much as] others?

Postby ai_3_us » Wed Jan 11, 2017 7:12 pm

livesoft wrote:
ai_3_us wrote:UPDATE: I spoke with a Vanguard adviser. He confirmed the $50k number for Voyager status and said that if I transferred everything over in-kind, I would be subject to the $20 sell transaction fee.

As written, that is NOT true. You must have $50K of Vanguard products to get Voyager status. Assets in non-Vanguard funds don't count towards that status, so until you get status, it will be more than $20 sell transaction fee.


This is true, but he said he thinks he can make it work. I don't know if he is correct or not but I will verify the transaction fees before I make any sales. Worst case scenario is I can sell $22k in funds at $35 and get Voyager status for the next sales.

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Re: EJ not [costing me as much as] others?

Postby ai_3_us » Wed Jan 11, 2017 7:41 pm

livesoft wrote:You can fill out mock tax returns and see your own tax story. If you don't get your taxable income low enough to be in 15% marginal income tax bracket where you qualified dividends and LTCG are not taxed, then you will probably want to use a traditional 403(b) to make that happen. A Roth 403(b) will not help you make that happen.


Thanks for the advice. I have tried a few different mock tax returns but they don't seem to be giving me different numbers when I put in $18k or $0 contributions for the 403(b). Can't I also calculate my taxable income as: Salary + STCG + Ordinary dividents - 403(b) contributions?

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Re: EJ not [costing me as much as] others?

Postby livesoft » Wed Jan 11, 2017 7:44 pm

Can't I also calculate my taxable income as: Salary + STCG + Ordinary dividents - 403(b) contributions?

Not if you make Roth 403(b) contributions.
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Re: EJ not [costing me as much as] others?

Postby ai_3_us » Wed Jan 11, 2017 9:05 pm

livesoft wrote:
Can't I also calculate my taxable income as: Salary + STCG + Ordinary dividents - 403(b) contributions?

Not if you make Roth 403(b) contributions.


Yes of course, sorry. I meant traditional 403(b) contributions.

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Re: EJ not [costing me as much as] others?

Postby livesoft » Wed Jan 11, 2017 9:29 pm

You also have to add in LTCG to your income if you have any, so instead of typing STCG, you should've use simply CG.

And it is not clear if you understand that ordinary dividends are both non-qualified ordinary dividends and qualified ordinary dividends. Or, if you like, there are ordinary non-qualified dividends and ordinary qualified dividends.
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Re: EJ not [costing me as much as] others?

Postby ai_3_us » Wed Jan 11, 2017 9:41 pm

livesoft wrote:You also have to add in LTCG to your income if you have any, so instead of typing STCG, you should've use simply CG.

And it is not clear if you understand that ordinary dividends are both non-qualified ordinary dividends and qualified ordinary dividends. Or, if you like, there are ordinary non-qualified dividends and ordinary qualified dividends.


Ah, see I thought that LTCG were taxed differently from my taxable income which decide my tax bracket. It is evident I need to sit down and understand this better before I make contributions to my 403(b). Is there a good resource you can point me to? Or perhaps I should talk with a CPA.

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Re: EJ not [costing me as much as] others?

Postby livesoft » Wed Jan 11, 2017 9:53 pm

irs.gov has lots of publications. Start with IRS Publication 17.
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Re: EJ not [costing me as much as] others?

Postby TIAX » Wed Jan 11, 2017 10:53 pm

ai_3_us wrote:
livesoft wrote:
ai_3_us wrote:UPDATE: I spoke with a Vanguard adviser. He confirmed the $50k number for Voyager status and said that if I transferred everything over in-kind, I would be subject to the $20 sell transaction fee.

As written, that is NOT true. You must have $50K of Vanguard products to get Voyager status. Assets in non-Vanguard funds don't count towards that status, so until you get status, it will be more than $20 sell transaction fee.


This is true, but he said he thinks he can make it work. I don't know if he is correct or not but I will verify the transaction fees before I make any sales. Worst case scenario is I can sell $22k in funds at $35 and get Voyager status for the next sales.

How quickly does Vanguard give you Voyager status? You may need to call once you have 50k in Vanguard funds and have them change your account to Voyager before you make subsequent trades.

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Re: EJ not [costing me as much as] others?

Postby meowcat » Thu Jan 12, 2017 7:30 am

ai_3_us wrote:
meowcat wrote:
ai_3_us wrote:
I think that at the very best my portfolio is performing on par with the indices (after fees)

Some of the brightest minds on this board have told you otherwise and after 3 pages of non biased feedback you continue to believe this. No one here has an agenda except to see you learn and succeed. The reality is, EJ is raking you over the coals and will be making more money from your portfolio than you will. You are young. Get out while you can and chalk it up to experience.


Hi meowcat and thank you for your feedback. I am guessing you have not read the conversation thoroughly or you would see that this is certainly not the case. I came here interested in switching, I have been responsive of and appreciated useful feedback (this post does not count as such) and am still planning on making a switch, which I have been keen to mention many times. But thank you for the feedback.

ai_3-us, I apologize if my post contained nothing constructive. My feedback was simply pointing out the fact that, after 3 pages of responses from the board, you continued to believe that Edward Jones really isn't that bad (it is). Although, reading further posts it appears that you might finally be getting it. Good luck.
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403(b) Fidelity or TIAA Cref allocation, and do I want one?

Postby ai_3_us » Mon Jan 16, 2017 10:20 pm

Update:

Thanks to the good advice of people here, my EJ funds are currently being transferred to Vanguard, a move I feel confident about. Many have suggested that I maximize my 403(b) contributions and sell off taxable funds periodically for living expenses. Note: my 403(b) offers no matching from my employer. I have two questions: one regarding how I should set up my retirement accounts and another regarding what funds I should invest in if I do set up a 403(b). Both questions are stated at the end, first here's my (updated) information.

Emergency funds: ~$2000. I have a steady job right now and am not very concerned with an emergency.
Debt: $0.
Tax Filing Status: Single
Tax Rate: 15%-25% Federal, 0% State. I give a range because I am currently in the process of switching from EJ to Vanguard which means I will have to sell off some mutual funds. I hope to take losses (and invest in my 403(b), see question 1 below) to keep me in the 15% bracket. I should remain in the 15% tax bracket following a selling and transferring of funds.
State of Residence: WA
Age: 25
Desired Asset allocation: 90% stocks / 10% bonds
Desired International allocation: 20-25% of stocks (Though I am not sure about this, suggestions?)

My current portfolio is mid six figures, primarily in taxable mutual funds which are currently being transferred to Vanguard index funds. About 2% of my current portfolio is in a Roth IRA.

Current retirement assets

Taxable -- Vanguard
98%--
This is currently undecided as I make the move to Vanguard. I will probably do a 90/10 stocks/bonds allocation. I will do a 4-fund portfolio holding 56% Total Market (+ a small-value tilt), 27% International, 7% REIT, and 10% Total Bonds.
% cash (for investing – do not include emergency funds)

My Roth IRA at Vanguard

1% Vanguard Target Retirement 2055 (VFFVX) (0.16%)

My Roth IRA at Edward Jones (currently being transferred in-kind to Vanguard) [/b]
1%FRANKLIN MUTUAL GLOBAL DISCOVERY FUND CL A (TEDIX) (1.25%) -- I will probably sell this and buy VFFVX listed above.

My 403(b) either through Fidelity or TIAA CREF
Company does NOT match.

Contributions

New annual Contributions
$18000 to my 403b (assuming it can be determined that this is the best bet for me).
$5500 to my IRA/Roth IRA (assuming it is determined that this is best in my scenario).
I have no new taxable contributions at this time.

Available funds -- My contribution can be split in any way between Fidelity and TIAA CREF and in traditional or Roth format.

Funds available in my Fidelity 403(b)
All Vanguard Institutional Target Retirement Funds. Most notably: Vanguard Target Retirement 2055 (VIVLX) (0.1%)
Harbor Capital Appreciation Fund Institutional Class (HACAX) (0.65%)
Vanguard FTSE Social Index Fund Institutional Shares (VFTNX) (0.12%)
Vanguard Institutional Index Fund Institutional Plus Shares (VIIIX) (0.02%)
T. Rowe Price Institutional Large Cap Value Fund (TILCX) (0.57%)
Vanguard Mid-Cap Index Fund Institutional Shares (VMCIX) (0.07%)
Lord Abbett Developing Growth Fund Class I (LADYX) (0.76%)
Vanguard Small-Cap Index Fund Institutional Shares (VSCIX) (0.07%)
DFA U.S. Targeted Value Portfolio Institutional Class (DFFVX) (0.37%)
American Funds EuroPacific Growth Fund® Class R-6 (RERGX) (0.5%)
Vanguard Developed Markets Index Fund Institutional Shares (VTMNX) (0.07%)
Vanguard Developed Markets Index Fund Institutional Shares (DFEVX) (0.66%)
Vanguard Emerging Markets Stock Index Fund Institutional Shares (VEMIX) (0.12%)
Cohen & Steers Institutional Realty Shares (CSRIX) (0.76%)
PIMCO Real Return Fund Institutional Class (PRRIX) (0.58%)
PIMCO Total Return Fund Institutional Class (PTTRX) (0.47%)
Vanguard Total Bond Market Index Fund Institutional Shares (VBTIX) (0.05%)
Vanguard Short-Term Bond Index Fund Institutional Shares (0.06%)
PIMCO Foreign Bond (Unhedged) Fund Institutional Class (PFUIX) (0.52%)
I also have an option for "BrokerageLink" which doesn't seem helpful for me since I don't want a brokerage account.

Funds available in my TIAA-CREF 403(b):
Variable Annuity Investments:
CREF Bond Market Account (R3) (QCBMIX) (0.35%)
CREF Equity Index Account (R3) (QCEQIX) (0.26%)
CREF Global Equities Account (R3) (QCGLIX) (0.37%)
CREF Growth Account (R3) (QCGRIX) (0.31%)
CREF Inflation-Linked Bond Account (R3) (QCILIX) (0.28%)
CREF Social Choice Account (R3) (QCSCIX) (0.32%)
CREF Stock Account (R3) (QCSTIX) (0.38%)
TIAA Real Estate Account (QREARX) (0.89%)

And Three fixed annuity investments:
TIAA Traditional Annuity - Group Supplemental Retirement Annuity
TIAA Traditional Annuity - Retirement Annuity
TIAA Traditional Annuity - Supplemental Retirement Annuity

I have read good things about the TIAA Real Estate Account on other threads here, but I am curious to see if people think it's a good fit for me or if there is something more attractive.

Questions:
1. As has been suggested to me, I was going to make $18k in contributions to a traditional 403(b) as I sell off my EJ mutual funds and buy Vanguard index funds to offset my gains (for the 2017 tax year). However, once I have completed all of my desired transfers should I begin contributing to a Roth 403(b) (as opposed to a traditional) and sell off taxable funds for living expenses? Also, should I be contributing to a Traditional IRA (instead of to the Roth) during this time to offset an additional $5.5k? This was not something suggested above but seems logical.

2. Which of these funds would be good for me? It appears that much of the enticing things Fidelity has to offer I can also find in my Vanguard accounts. Also, if I hold TIAA Real Estate should I count this as part of my REIT holdings for realignment purposes in the future or as a different category?

Thank you
Last edited by ai_3_us on Mon Jan 16, 2017 10:35 pm, edited 1 time in total.

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Re: EJ not [costing me as much as] others?

Postby LadyGeek » Mon Jan 16, 2017 10:31 pm

ai_3_us - I merged your post into your first thread. In order to give appropriate advice, it's best to keep all the information in one spot. Additionally, the members who've helped you before will have the thread show up in Your posts, so they'll be able to help you again.

I retitled the thread and edited your first post so readers will know that you've posted an updated portfolio. (You can change the thread title further by editing the Subject: line in Post #1. Also, you can edit the post content in Post #1 if you want.)
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Re: EJ not [costing me as much as] others?

Postby ai_3_us » Mon Jan 16, 2017 10:36 pm

LadyGeek wrote:ai_3_us - I merged your post into your first thread. In order to give appropriate advice, it's best to keep all the information in one spot. Additionally, the members who've helped you before will have the thread show up in Your posts, so they'll be able to help you again.

I retitled the thread and edited your first post so readers will know that you've posted an updated portfolio. (You can change the thread title further by editing the Subject: line in Post #1. Also, you can edit the post content in Post #1 if you want.)


Thank you, I wasn't sure how to go about posting something new, but this seems right. I appreciate your help.

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Re: [403(b) Fidelity or TIAA Cref allocation, and do I want one?]

Postby ai_3_us » Wed Jan 18, 2017 9:00 pm

There is another update: It appears I may be eligible for a government 457(b) with an annual administrative fee of 0.1283%. This fund has targeted retirement plans as well as a Domestic Large Cap Index Fund, Global Equity Index Fund, US Small Cap Value Equity Index Fund, and Emerging Market Equity Index fund. I will probably add this on top of a 403(b) if needed to bring my income for the year down if need be. Is there any reason I should favor a 403(b) or 457(b) to the other?


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