The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: Gibbelstein on August 20, 2015, 10:34:42 AM
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Hello All,
My girlfriend and I recently started reading MMM and talking about it frequently in casual conversation and it has lead to some changes for both of us. So, thanks, MMM and thanks to the people I have been lurk-stalking on the forum for a while as well!
I recently was able to pay off my student loan, in part because of this site, and I also got a raise at work. I have been planning to open and start maxing out a 457 account with this 'extra' income, but now that I am looking at my options, I find I do not have the skills or experience to prioritize one choice over the other. The impression that I have is that neither of these is a bad choice, but every article I read seems to lead to more questions and I am no closer to choosing. Can any of you guys tell me what information you would weigh most heavily? Or which you would choose and why? Interestingly, both choices are offered with the same organization but offer different options. The biggest hint I have so far is "Vanguard good, high fees bad".
(For the record, I am 32 and my job also has a pension (starting @55 at the earliest). I would like to RE, but do not have a date yet. For now the plan is to throw as much money into this as possible and decide as I go. Any option has to be better than just blowing the cash as I get it, right?)
Option 1: CalSTRS
https://calstrspension2.voyaplans.com/einfo/fundinfo.aspx?cl=CALTIA&pl=401737PU&page=investment_informationfundinformation&domain=calstrspension2.voyaplans.com&s=mwvlrz2ot0uh3rige2okwfou&d=aac9faa6b2e8029740a3ce4ec5617340d7b283bd (https://calstrspension2.voyaplans.com/einfo/fundinfo.aspx?cl=CALTIA&pl=401737PU&page=investment_informationfundinformation&domain=calstrspension2.voyaplans.com&s=mwvlrz2ot0uh3rige2okwfou&d=aac9faa6b2e8029740a3ce4ec5617340d7b283bd)
Option 2: CalPERS
https://calpers.voyaplans.com/einfo/fundinfo.aspx?cl=calpers&pl=450001PU&page=investment_informationlatestfund&domain=calpers.accp.voyaplans.com&s=&d=3f60d2cdb2cf8c034a613e8c95f0f5b556fa0bbb (https://calpers.voyaplans.com/einfo/fundinfo.aspx?cl=calpers&pl=450001PU&page=investment_informationlatestfund&domain=calpers.accp.voyaplans.com&s=&d=3f60d2cdb2cf8c034a613e8c95f0f5b556fa0bbb)
The results I found by searching the forum seemed focused on 457 vs. 403b, rather than choosing an option within one. Any choices, advice, opinions, suggested reading, etc are all welcome. I don't like not knowing so much. =)
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Don't let perfect get in the way of good. Standard advice - choose your asset allocation and invest accordingly.
That being said, I'd personally go with the CalSTRS and use Vanguard total stock, and bond market funds and do a 3-fund portfolio. Then probably the international developed market fund since they don't have total international. I'm currently doing 55 (total stock)/25 (total international)/20 (total bond) in my IRAs, so that's the percentages I'd use here as well. You'll want to decide on an allocation that makes sense for you. Looks like you get institutional shares, so these funds are super cheap.
If you want something super simple, pick a CalPERS target retirement fund, but they are a bit costly - Er's in the 0.4-0.5% range.
If you want to get more familiar with stock market investing, read the stock series at http://jlcollinsnh.com/stock-series/ (http://jlcollinsnh.com/stock-series/)
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The Vanguard Institutional class funds in your CalSTRS lineup are great. They have lower expense ratios than you'll be able to get as an individual investor. Three-fund portfolios are a great place to start; you'll just need to decide what percentage of stocks and bonds you're most comfortable with.
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Check the fees on the Voya 457, Vanguard funds for my wife's Voya 457 include an additional .19% Expense Ratio for their kickback.
We use the Voya/TD SDBA (which is shown at the bottom of that page) and invest in commission free Vanguard ETFs.
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Thanks for the advice, folks. It's helpful to have confirmation that I'm choosing from among some decent options. Also, BBQ, thanks for the tip on the kickback. It would be helpful to make a decision knowing that kind of thing.
Chris
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Keep in mind that with a 457 plan you can withdraw money without the 10% penalty any time after you separate from your employer i.e. early retirement. For that reason alone, i preference a 457 above a 403, though, i max out both.
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Check the fees on the Voya 457, Vanguard funds for my wife's Voya 457 include an additional .19% Expense Ratio for their kickback.
We use the Voya/TD SDBA (which is shown at the bottom of that page) and invest in commission free Vanguard ETFs.
My wife has the option to set up her 457 through Voya, and they tack on a 0.75% expense ratio!
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Well, I finally got around to calling the Voya people and getting information on their fees (on their website, but not where I was looking for it, of course). It looks like the Admin fees are 0.25% (in addition to the ERs). So, not quite as good as .019%, but still better than 0.75%. So... yay? =)
BackyarBQ, can I ask you what prompted you to do the SDBA? Did it somehow lower your fees, or did it just give you more flexibility with the choices you could make? My current plan is to choose my own funds (as opposed to a target date situation) to keep the ERs low. I think I could definitely do a lot more research to get myself to a place where I am making informed decisions, if it lowers costs, but I like the potential mental bandwidth savings of a model like the one Dandarc proposed.
Which reminds me, dandarc, thank you for the link. I am making my way through it now.
Thanks again for the input, everyone. This forum has a lot to offer people looking to learn about this stuff.
Chris