Author Topic: Should I move my investments? And expense ratios?  (Read 3879 times)

I'm a red panda

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Should I move my investments? And expense ratios?
« on: April 13, 2015, 09:25:33 AM »
I have my 403bs with TIAA-Creff, so when it came time to invest after-tax money, I chose them too. (Husband has 401k with another company- I think Prudential, and he doesn't like their interface at all, so we didn't pick them. That was how the decisions was made.)

I've been reading here about Vanguard. And it looks like index funds are the way to go- does it make sense to move all my after-tax money from TIAA-Cref to Vanguard, or to just put future money there? 



Can someone also explain the difference between gross/net expense ratios?
My current equities with TIAA-Cref have expense ratios of
1.31%/0.98%
1.04%/0.92%
0.46%/0.46%
and the bond fund is 0.92%/0.75%

I don't know how to interpret the two different numbers.


seattlecyclone

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Re: Should I move my investments? And expense ratios?
« Reply #1 on: April 13, 2015, 09:30:29 AM »
I think the net expense ratio is really what matters, but I'm not 100% sure on that. Regardless, 1% is higher than you should pay when you have a choice of funds. You can find perfectly great equity funds at Vanguard for 0.1% or less. Fidelity's Spartan funds are also a fine choice and Schwab has some low-cost index options as well, but I happen to prefer Vanguard.

forummm

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Re: Should I move my investments? And expense ratios?
« Reply #2 on: April 13, 2015, 09:53:13 AM »
TIAA-CREF used to be a great option. Then they decided to mimick the for-profit companies. Their fees are high for a bunch of funds (and their CEO makes a lot of money). But they do have a few funds that have lower fees. You might not be able to get the lowest fees though, due to not having a lot of money and not getting the institutional rate. You'll have to see what's available to you. But I've seen 403b funds available with fees that are very close to Vanguard for a few, and then much more expensive for other funds. You have to look at each option available.

You can also max out both your 403b and your husband's 401k. Make use of all that tax-advantaged savings. It's like an instant ~35% raise.

forummm

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Re: Should I move my investments? And expense ratios?
« Reply #3 on: April 13, 2015, 09:54:53 AM »
But for your taxable funds, I would just move things to Vanguard, especially if you don't have a lot of capital gains built up yet. You'll save a lot over the long run.

And now that I think of it, why do you have taxable savings if you haven't even maxed out your husband's 401k yet? You're leaving a lot of money on the table. Most people should prioritize their tax-advantaged savings accounts first before moving to taxable accounts.

I'm a red panda

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Re: Should I move my investments? And expense ratios?
« Reply #4 on: April 13, 2015, 10:03:15 AM »
You can also max out both your 403b and your husband's 401k. Make use of all that tax-advantaged savings. It's like an instant ~35% raise.

We do that already. That's why we have taxable accounts.

Just that the decision to use TIAA-Creff for after-tax accounts was because we didn't like Prudential. It wasn't really a well reasoned decision with other options chosen.  I did look at expense ratios when picking the particular funds we invested in, but again- they weren't well reasoned decisions just "that doesn't look so bad".

Using TIAA-Cref for the 403b and Prudential for the 401k, I think is non-negotiable. I mean, you have to use what your employer offers, right?
« Last Edit: April 13, 2015, 10:05:35 AM by iowajes »

ecmcn

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Re: Should I move my investments? And expense ratios?
« Reply #5 on: April 13, 2015, 10:14:23 AM »
Yeah, you're stuck with the 401k. Don't forget about IRAs, too.

wrt your original question, I'd put new money into Vanguard. Moving the old money depends on how much in capital gains taxes you're going to have to pay and how long you plan on leaving it in there.

I map scenarios like this out in Excel. For example, say you had $10k in TIAA-Cref with $1k of that gains that you'd be taxed 15% on if you took it out. Moving it would mean you'd only be depositing $9150 in Vanguard (10000-(1000*0.85)), so if you assume you get the same market returns in both funds Vanguard will take some time to catch back up. It would take 11 years in my scenario (using the .98% ER vs. VTSAX's .05% ER, with a 7% rate of return). That's a long time, but MMM is fond of pointing out that 10 years should be your *minimum* time horizon for making these sorts of decisions. After 30 years the difference is $68k in Vanguard vs. $57k in TIAA-Cref - the effect magnifies at longer horizons.

I'm a red panda

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Re: Should I move my investments? And expense ratios?
« Reply #6 on: April 13, 2015, 10:22:39 AM »
Yeah, you're stuck with the 401k. Don't forget about IRAs, too.

wrt your original question, I'd put new money into Vanguard. Moving the old money depends on how much in capital gains taxes you're going to have to pay and how long you plan on leaving it in there.

We both have roth IRAs that are maxed. Is it worth it to also have a traditional? 
I'm a bit clueless about money to be quite honest.

Hmm- I need to go into TIAA-Cref to look at how much is capital gains, but we've only been at this for about a year, so it shouldn't be too much yet. Mostly I just finally convinced myself hoarding cash was really a loss.  I had been doing CDs for awhile, but they just suck now so it isn't worth it. 

forummm

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Re: Should I move my investments? And expense ratios?
« Reply #7 on: April 13, 2015, 10:40:25 AM »
You can also max out both your 403b and your husband's 401k. Make use of all that tax-advantaged savings. It's like an instant ~35% raise.

We do that already. That's why we have taxable accounts.

Just that the decision to use TIAA-Creff for after-tax accounts was because we didn't like Prudential. It wasn't really a well reasoned decision with other options chosen.  I did look at expense ratios when picking the particular funds we invested in, but again- they weren't well reasoned decisions just "that doesn't look so bad".

Using TIAA-Cref for the 403b and Prudential for the 401k, I think is non-negotiable. I mean, you have to use what your employer offers, right?

I see. I misunderstood what your original post meant.

ecmcn

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Re: Should I move my investments? And expense ratios?
« Reply #8 on: April 13, 2015, 12:07:20 PM »
We both have roth IRAs that are maxed. Is it worth it to also have a traditional? 
I'm a bit clueless about money to be quite honest.

I don't think "We both have roth IRAs that are maxed" and "I'm a bit clueless about money" are compatible statements, esp if your  401k/403b is maxed also. Great job!

For the most part think of IRA as Roth *or* Traditional, not both. It mostly depends on your income - as you make more your ability to use Traditional goes away and you can only do Roth, until you make so much not even that's an option. Of course it's actually more complicated, because it's based on your MAGI (Modified Adjusted Gross Income), whether you have a 401k/403b, etc. Talk to someone who's familiar with your taxes (spouse, accountant, etc) if you really want to look into tweaking this, but a 401k and Roth IRA combination are pretty typical for people on this forum.

Vanguard has a great web site, btw. Also I many people link their accounts to Personal Capital, which also has a great interface and shows you everything together.

I'm a red panda

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Re: Should I move my investments? And expense ratios?
« Reply #9 on: April 13, 2015, 12:18:39 PM »

I don't think "We both have roth IRAs that are maxed" and "I'm a bit clueless about money" are compatible statements, esp if your  401k/403b is maxed also. Great job!


Well, I know not to spend it on stupid stuff, which means I have extra left over :)

I think I've convinced my husband to look into Vanguard for the next time we move money from the savings account into investments.  I think we also need to start doing a monthly purchase on auto-pay, but for now we just do it when we have an extra 5 or 10k sitting around over what we like to keep liquid in the bank account.