Author Topic: What to do with my money?  (Read 16479 times)

Catica

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Re: What to do with my money?
« Reply #50 on: March 20, 2018, 01:39:23 PM »
By the way I just checked with TIAA about the fees and they told me that I am not assessed any fees by TIAA in connection with my retirement accounts. But the the investments within my accounts are subject to expenses, which I can see when I log in to my account. 

wenchsenior

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Re: What to do with my money?
« Reply #51 on: March 20, 2018, 02:28:48 PM »
I would advise not going without health insurance.  Being 'healthy' is a false confidence. Most of the catastrophic health bills that have happened in my circle of friends (and to me) happened out of the blue, and often when we were previously healthy (or had an unknown health condition that had not shown symptoms prior to the health emergency).  These included knee surgery (after being side-swiped by a passing bike), multiple arm surgeries and rehab (hit by a car while biking to work), reconstructive wrist surgery after a fall, paraplegia (after an unidentified minor bacterial infection settled in the spine and ate the bone), unexpected stroke around age 45, thyroid cancer (also around age 45), autoimmune thyroid disease (about of the third of the people I know) that requires life long medication, cervical cancer and hysterectomy (as we now know caused by a virus and thus not preventable for those of us not vaccinated prior to sexual activity), endometriosis resulting in hysterectomy, etc etc.  With the possible exception of the stroke (she was a nonsmoker, but perhaps her risk even that young might have been increased by lack of enough exercise), none of these were caused by unhealthy lifestyle or were preventable, but were just random luck of the draw.

Don't take that risk.  Don't compromise your financial future on that kind of gamble...it could destroy all of your other frugal efforts almost overnight.  I'm so thankful I learned that lesson at 19.

MDM

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Re: What to do with my money?
« Reply #52 on: March 20, 2018, 02:47:07 PM »
So, what do I do with the money that I have in 403B?  When I log in to my TIAA Cref account online I see two different plans, the one the employer contributes to and the one I contribute to (TDA). 
So from now on, I should not contribute to TDA?  I should open an account with Vanguard instead?  I see that I have a choice of Fidelity,  Vanguard and TIAA CREF for my TDA plan.  Should I just switch from TIAA CREF to Vanguard?
For investment choices within a given plan, presenting your situation using the format suggested by Asking Portfolio Questions - Bogleheads.org is worth doing.  We need to understand your options in order to provide specific ideas.

Quote
As far as HSA goes, I have a decent medical plan and will be able to continue that plan when I'm retired at 55.  Does HSA still make sense to me?
Depends how decent.  Might be worth putting your numbers into a couple of comparison tools, e.g., Health Savings Account (HSA) vs. Traditional Health Plan and the 'HDHP Analysis' tab of the case study spreadsheet.
Hi MDM, by "what do I do with the money that I have in 403B" I didn't mean what investment choices I should make within a given plan but more of like do I keep the money I have in it or do I transfer them to some other type of account.
Yes, keep the current 403b balance there for now.

See Took Your Advice, Need MORE: you may find it worthwhile to do what that person did with the "investment order" steps: document what you are or aren't doing for each of them.

Quote
As for HSA, what is considered decent?  I put the numbers into those calculator tools but I have no idea what my health expense will be when I'm old.  Right now, I have no health expense.  I see a doctor when I don't feel well, like I might have a cold or something, every 2-3 years or so.  I go to the dentist for cleaning 2x a year.  But I don't know my health will be later in life.  But health insurance is mandatory, so what choice do I have?
A reasonable assumption is that health expenses will increase as you age.  But that is secondary to the cost/benefit analysis you can do for current health costs.  When you put the numbers into those calculator tools for your current situation, what answers do you get?

wenchsenior

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Re: What to do with my money?
« Reply #53 on: March 20, 2018, 04:19:09 PM »
I would advise not going without health insurance.  Being 'healthy' is a false confidence. Most of the catastrophic health bills that have happened in my circle of friends (and to me) happened out of the blue, and often when we were previously healthy (or had an unknown health condition that had not shown symptoms prior to the health emergency).  These included knee surgery (after being side-swiped by a passing bike), multiple arm surgeries and rehab (hit by a car while biking to work), reconstructive wrist surgery after a fall, paraplegia (after an unidentified minor bacterial infection settled in the spine and ate the bone), unexpected stroke around age 45, thyroid cancer (also around age 45), autoimmune thyroid disease (about of the third of the people I know) that requires life long medication, cervical cancer and hysterectomy (as we now know caused by a virus and thus not preventable for those of us not vaccinated prior to sexual activity), endometriosis resulting in hysterectomy, etc etc.  With the possible exception of the stroke (she was a nonsmoker, but perhaps her risk even that young might have been increased by lack of enough exercise), none of these were caused by unhealthy lifestyle or were preventable, but were just random luck of the draw.

Don't take that risk.  Don't compromise your financial future on that kind of gamble...it could destroy all of your other frugal efforts almost overnight.  I'm so thankful I learned that lesson at 19.


EDIT because apparently I misread "health expense" as "health insurance".  Maybe I need a nap? Carry on.

Catica

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Re: What to do with my money?
« Reply #54 on: March 20, 2018, 09:12:33 PM »
So, what do I do with the money that I have in 403B?  When I log in to my TIAA Cref account online I see two different plans, the one the employer contributes to and the one I contribute to (TDA). 
So from now on, I should not contribute to TDA?  I should open an account with Vanguard instead?  I see that I have a choice of Fidelity,  Vanguard and TIAA CREF for my TDA plan.  Should I just switch from TIAA CREF to Vanguard?
For investment choices within a given plan, presenting your situation using the format suggested by Asking Portfolio Questions - Bogleheads.org is worth doing.  We need to understand your options in order to provide specific ideas.

Quote
As far as HSA goes, I have a decent medical plan and will be able to continue that plan when I'm retired at 55.  Does HSA still make sense to me?
Depends how decent.  Might be worth putting your numbers into a couple of comparison tools, e.g., Health Savings Account (HSA) vs. Traditional Health Plan and the 'HDHP Analysis' tab of the case study spreadsheet.
Hi MDM, by "what do I do with the money that I have in 403B" I didn't mean what investment choices I should make within a given plan but more of like do I keep the money I have in it or do I transfer them to some other type of account.
Yes, keep the current 403b balance there for now.

See Took Your Advice, Need MORE: you may find it worthwhile to do what that person did with the "investment order" steps: document what you are or aren't doing for each of them.

Quote
As for HSA, what is considered decent?  I put the numbers into those calculator tools but I have no idea what my health expense will be when I'm old.  Right now, I have no health expense.  I see a doctor when I don't feel well, like I might have a cold or something, every 2-3 years or so.  I go to the dentist for cleaning 2x a year.  But I don't know my health will be later in life.  But health insurance is mandatory, so what choice do I have?
A reasonable assumption is that health expenses will increase as you age.  But that is secondary to the cost/benefit analysis you can do for current health costs.  When you put the numbers into those calculator tools for your current situation, what answers do you get?
The calculator compares High Deductible Health Plan (HDHP) with a Health Savings Account.  What is High Deductible Health Plan (HDHP)?  And I don't understand what numbers I'm supposed to put in for HSA as I don't have one. 

MDM

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Re: What to do with my money?
« Reply #55 on: March 20, 2018, 09:23:28 PM »
The calculator compares High Deductible Health Plan (HDHP) with a Health Savings Account.  What is High Deductible Health Plan (HDHP)?  And I don't understand what numbers I'm supposed to put in for HSA as I don't have one.
Try googling HDHP.  See Publication 969 for the IRS language.

If you don't have an option to get an HDHP, then you can't get an HSA, so just skip that step. :)

Catica

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Re: What to do with my money?
« Reply #56 on: March 20, 2018, 09:33:48 PM »
The calculator compares High Deductible Health Plan (HDHP) with a Health Savings Account.  What is High Deductible Health Plan (HDHP)?  And I don't understand what numbers I'm supposed to put in for HSA as I don't have one.
Try googling HDHP.  See Publication 969 for the IRS language.

If you don't have an option to get an HDHP, then you can't get an HSA, so just skip that step. :)
I don't have HDHP.  I'm assuming so because I don't have to meet any deductible.

Here is the investment order and what I'm doing:

0. Establish an emergency fund to your satisfaction  -  done         
1. Contribute to your 401k up to any company match - I've been contributing 5% but since there is no company match, I should be contributing $0, is that right?
2. Pay off any debts with interest rates ~5% or more above the 10-year Treasury note yield.  I have no debt     
3. Max HSA - can't get HSA since I don't have HDHP       
4. Max Traditional IRA or Roth (or backdoor Roth) based on income level - not doing this because I know nothing about it, so that's my next step I guess?
5. Max 401k (if 401k fees are lower than available in an IRA, or if you need the 401k deduction to be eligible for a tIRA, swap #4 and #5) how do I know if my 403B fees are lower, what are IRA fees?, what's tIRA?         
6. Fund a mega backdoor Roth if applicable. Not sure what that is so not doing this       
7. Pay off any debts with interest rates ~3% or more above the 10-year Treasury note yield.           
8. Invest in a taxable account and/or fund a 529 with any extra. Again, what's that?           
« Last Edit: March 20, 2018, 09:35:27 PM by Catica »

MDM

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Re: What to do with my money?
« Reply #57 on: March 20, 2018, 09:55:04 PM »
1. Contribute to your 401k up to any company match - I've been contributing 5% but since there is no company match, I should be contributing $0, is that right?
Yes.

Quote
4. Max Traditional IRA or Roth (or backdoor Roth) based on income level - not doing this because I know nothing about it, so that's my next step I guess?
Yes.  If you already have money with Fidelity, Schwab, or Vanguard, open an IRA there.  Otherwise pick one - there are supporters and detractors of each.  Google "open an IRA at _____" for each, to see what is needed.

Quote
5. Max 401k (if 401k fees are lower than available in an IRA, or if you need the 401k deduction to be eligible for a tIRA, swap #4 and #5) how do I know if my 403B fees are lower, what are IRA fees?, what's tIRA?
You will have to ask your 403b provider for the "expense ratios" for your investments.  Fidelity, Schwab, and Vanguard will show the expense ratios for their funds on their web sites.  "Expense ratio" and "fee" are more or less synonymous here.  See Expense ratios - Bogleheads.  tIRA is short for traditional IRA.

Quote
8. Invest in a taxable account and/or fund a 529 with any extra. Again, what's that?
Google 529 plan.

Catica

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Re: What to do with my money?
« Reply #58 on: March 20, 2018, 10:01:14 PM »
1. Contribute to your 401k up to any company match - I've been contributing 5% but since there is no company match, I should be contributing $0, is that right?
Yes.

Quote
4. Max Traditional IRA or Roth (or backdoor Roth) based on income level - not doing this because I know nothing about it, so that's my next step I guess?
Yes.  If you already have money with Fidelity, Schwab, or Vanguard, open an IRA there.  Otherwise pick one - there are supporters and detractors of each.  Google "open an IRA at _____" for each, to see what is needed.

Quote
5. Max 401k (if 401k fees are lower than available in an IRA, or if you need the 401k deduction to be eligible for a tIRA, swap #4 and #5) how do I know if my 403B fees are lower, what are IRA fees?, what's tIRA?
You will have to ask your 403b provider for the "expense ratios" for your investments.  Fidelity, Schwab, and Vanguard will show the expense ratios for their funds on their web sites.  "Expense ratio" and "fee" are more or less synonymous here.  See Expense ratios - Bogleheads.  tIRA is short for traditional IRA.

Quote
8. Invest in a taxable account and/or fund a 529 with any extra. Again, what's that?
Google 529 plan.
4. I do not have money with Fidelity, Schwab, or Vanguard. 
5. I know what my fees are I just don't know how to compare them to Fidelity, Schwab, or Vanguard.
8.  529 plan is future college costs, why would I invest in that?

jmwagner5

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Re: What to do with my money?
« Reply #59 on: March 20, 2018, 10:02:24 PM »

Here is the investment order and what I'm doing:

4. Max Traditional IRA or Roth (or backdoor Roth) based on income level - not doing this because I know nothing about it, so that's my next step I guess?
6. Fund a mega backdoor Roth if applicable. Not sure what that is so not doing this       
8. Invest in a taxable account and/or fund a 529 with any extra. Again, what's that?         

Hi Catica and welcome!  Let me start by saying congrats on diving into this and great job at having no debt and already having a healthy cushion of savings!  I'm going to dive into a couple of your questions from above to see if I can help you out like some of these other fine folks have done.

4.  A Roth IRA is an investment account that is invested with after-tax dollars that is allowed to grow tax-free so long as you do not remove any gains from the account before age 59.5.  As was pointed out earlier you can put in $5500 in 2018 according to IRS limits.  It is important to note that your contributions to a Roth IRA are always available without any penalties or taxes. 

A backdoor Roth is converting 401k or 403b money into a Roth IRA.  This conversion is different from a contribution in that it is not subject to the $5500 annual limit and does not have an income limit like a traditional Roth IRA would.  It is called a backdoor Roth because it gives people who do not normally have access to a Roth IRA (ie. high income earners) a way to get money into an investment account that they normally do not have access too.

6. A mega backdoor Roth works like the backdoor Roth above but features After-Tax contributions into your 401k (or 403b in your case).  I would not recommend worrying as much about that at this point in time.  You have to be fully maximizing your 403b to really dive into this.

8. A 529 plan is an investment account that is strictly used to help pay for college/educational related expenses.  The investment options work very similar to your retirement account (an index fund for instance) but the money is designated for educational use instead of retirement.  It is typically an account that parents will open up for their kids and invest in over the next 18-22 years so they have long-term compound growth to work with for paying secondary education. 

Hope this helps!

jmwagner5

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Re: What to do with my money?
« Reply #60 on: March 20, 2018, 10:03:35 PM »

8.  529 plan is future college costs, why would I invest in that?

If you had children who would eventually be going to college.

MDM

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Re: What to do with my money?
« Reply #61 on: March 20, 2018, 10:14:29 PM »
4. I do not have money with Fidelity, Schwab, or Vanguard. 
5. I know what my fees are I just don't know how to compare them to Fidelity, Schwab, or Vanguard.
8.  529 plan is future college costs, why would I invest in that?
4. OK. Pick one.  You will have excellent choices at any of the three.  E.g., see Fidelity, Vanguard or Schwab? I need to choose. - Bogleheads.org, or fidelity schwab vanguard - Google Search.

5. Once you have an account, you can look at the fund fees.  Or, look at the ones suggested in Three-fund portfolio - Bogleheads. You can look at those funds without opening an account.  E.g., see vtsmx - Google Search: the expense ratio is 0.15%.

8. If you don't want to, don't.  Remember, these are generic recommendations. :)

ILikeDividends

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Re: What to do with my money?
« Reply #62 on: March 21, 2018, 12:24:11 AM »
I have been happily with Schwab for more than 30 years; mortgages, taxable investment accounts, retirement accounts -- the whole nine yards.  I would never go anywhere else.  In fairness, I have no experience with Fidelity or Vangaurd, so I couldn't, in good conscience, say that one is better than the other.

I would say that, if in doubt, go with Schwab.  They are an ethical and honest banker/broker who has made a business leading the pack in lowering fees, and they excel in solid executions of trades.  And with a full suite of no-commission, low expense index funds available, I have had not even the slightest temptation to sample their competition.

I invite anyone else to evangelize their experiences with different brokers.  I have no agenda here, and I receive no compensation for my expressed opinion.
« Last Edit: March 21, 2018, 12:36:10 AM by ILikeDividends »

GOFU

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Re: What to do with my money?
« Reply #63 on: March 21, 2018, 05:47:14 AM »
I have been happily with Schwab for more than 30 years; mortgages, taxable investment accounts, retirement accounts -- the whole nine yards.  I would never go anywhere else.  In fairness, I have no experience with Fidelity or Vangaurd, so I couldn't, in good conscience, say that one is better than the other.

I would say that, if in doubt, go with Schwab.  They are an ethical and honest banker/broker who has made a business leading the pack in lowering fees, and they excel in solid executions of trades.  And with a full suite of no-commission, low expense index funds available, I have had not even the slightest temptation to sample their competition.

I invite anyone else to evangelize their experiences with different brokers.  I have no agenda here, and I receive no compensation for my expressed opinion.
My experience with Vanguard over 20+ years has been the same as this description for Schwab. (Except I have no experience with mortgages at Vanguard, if they even offer them.) As your account balances grow at Vanguard they actively offer you opportunities to lower your costs, such as converting to preferential funds with lower expense ratios (Admiral funds). Vanguard has a basic driving principle that pervades their site, their advice and their offerings: buy and hold at the lowest possible cost. There is also a substantial body of learning material there, but you don't have to own their funds to take advantage of that.  I have no connection or interest in Vanguard except as a fund owner.

I haven't been a customer of Fidelity or Schwab. One thing to consider is that at Vanguard as a fund owner you are part owner of the company. Aside from Vanguard fund owners themselves, there is no other owner or company taking profits, however small the percentage. Schwab and Fidelity are owned by someone else so there must be a profit margin built in for them. I don't know how or how much that might impact investments held with them. 

It is probably more important to get started than to spend substantial time fretting over which of these you are going to choose.

CorpRaider

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Re: What to do with my money?
« Reply #64 on: March 21, 2018, 05:58:46 AM »
Catica, you seem like you might want some personal help/interaction.  In that case, maybe pick Fidelity or Schwab depending upon which has an office most convenient to you.

Catica

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Re: What to do with my money?
« Reply #65 on: March 21, 2018, 06:24:56 AM »

Here is the investment order and what I'm doing:

4. Max Traditional IRA or Roth (or backdoor Roth) based on income level - not doing this because I know nothing about it, so that's my next step I guess?
6. Fund a mega backdoor Roth if applicable. Not sure what that is so not doing this       
8. Invest in a taxable account and/or fund a 529 with any extra. Again, what's that?         

Hi Catica and welcome!  Let me start by saying congrats on diving into this and great job at having no debt and already having a healthy cushion of savings!  I'm going to dive into a couple of your questions from above to see if I can help you out like some of these other fine folks have done.

4.  A Roth IRA is an investment account that is invested with after-tax dollars that is allowed to grow tax-free so long as you do not remove any gains from the account before age 59.5.  As was pointed out earlier you can put in $5500 in 2018 according to IRS limits.  It is important to note that your contributions to a Roth IRA are always available without any penalties or taxes. 

A backdoor Roth is converting 401k or 403b money into a Roth IRA.  This conversion is different from a contribution in that it is not subject to the $5500 annual limit and does not have an income limit like a traditional Roth IRA would.  It is called a backdoor Roth because it gives people who do not normally have access to a Roth IRA (ie. high income earners) a way to get money into an investment account that they normally do not have access too.

6. A mega backdoor Roth works like the backdoor Roth above but features After-Tax contributions into your 401k (or 403b in your case).  I would not recommend worrying as much about that at this point in time.  You have to be fully maximizing your 403b to really dive into this.

8. A 529 plan is an investment account that is strictly used to help pay for college/educational related expenses.  The investment options work very similar to your retirement account (an index fund for instance) but the money is designated for educational use instead of retirement.  It is typically an account that parents will open up for their kids and invest in over the next 18-22 years so they have long-term compound growth to work with for paying secondary education. 

Hope this helps!
4. Why would would anyone want Roth IRA?
8. I do not have kids

Catica

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Re: What to do with my money?
« Reply #66 on: March 21, 2018, 06:25:30 AM »
4. I do not have money with Fidelity, Schwab, or Vanguard. 
5. I know what my fees are I just don't know how to compare them to Fidelity, Schwab, or Vanguard.
8.  529 plan is future college costs, why would I invest in that?
4. OK. Pick one.  You will have excellent choices at any of the three.  E.g., see Fidelity, Vanguard or Schwab? I need to choose. - Bogleheads.org, or fidelity schwab vanguard - Google Search.

5. Once you have an account, you can look at the fund fees.  Or, look at the ones suggested in Three-fund portfolio - Bogleheads. You can look at those funds without opening an account.  E.g., see vtsmx - Google Search: the expense ratio is 0.15%.

8. If you don't want to, don't.  Remember, these are generic recommendations. :)
4. How different is that from what I already have with TIAA?
8. It's not that I don't want to, I just don't understand why I should want to.
« Last Edit: March 21, 2018, 06:28:39 AM by Catica »

Catica

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Re: What to do with my money?
« Reply #67 on: March 21, 2018, 06:35:55 AM »
Thanks everyone for all the help and suggestions.  This is what I am still confused about.

1. Why would I not want to contribute to my 403b?
2. How is my TIAA TDA account different from Vanguard, Fidelity, Schwab?  Fees???  How can I compare the fees if there aren't exactly the same investment options at each of these institutions?
3. I still don't understand why I would open HSA if I already have a health plan which is mandatory any way.  I don't understand the calculators to compare HSA to traditional health plan, as in order for me to plug in the numbers I need to know HSA deductibles, contributions etc. If I don't have HSA I don't know any of these numbers.

Thanks

CorpRaider

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Re: What to do with my money?
« Reply #68 on: March 21, 2018, 07:18:10 AM »
If you follow through his order, you will probably get back to the 403/401 account, if you save enough.  I think he preferences the IRA first because of greater flexibility and generally lower costs.

You compare the expense ratios of the funds offered (or the ones you are likely to select).  One thing to note is that if you have all your money in a cash/guaranteed investment contract type account, there may not be any fee/expense to you since you are giving them access to cash and they can invest in other higher return stuff and keep the difference; similar to a bank deposit.

So, for example, if you were going to move the cash to a target date fund, you would look at the info for that fund and there will be an expense ratio.  TIAA is not, in my observation, generally a leader on low costs.  I often cite them as evidence for the fact that Vanguard's mutual structure is not a panacea for maintaining low costs.

Catica

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Re: What to do with my money?
« Reply #69 on: March 21, 2018, 04:07:07 PM »
If you follow through his order, you will probably get back to the 403/401 account, if you save enough.  I think he preferences the IRA first because of greater flexibility and generally lower costs.

You compare the expense ratios of the funds offered (or the ones you are likely to select).  One thing to note is that if you have all your money in a cash/guaranteed investment contract type account, there may not be any fee/expense to you since you are giving them access to cash and they can invest in other higher return stuff and keep the difference; similar to a bank deposit.

So, for example, if you were going to move the cash to a target date fund, you would look at the info for that fund and there will be an expense ratio.  TIAA is not, in my observation, generally a leader on low costs.  I often cite them as evidence for the fact that Vanguard's mutual structure is not a panacea for maintaining low costs.
"If you follow through his order, you will probably get back to the 403/401 account, if you save enough".  What do you mean I'll go back to it?
I can tell my employer to put my money in Vanguard TDA or Fidelity TDA instead of TIAA, is that the same as opening a separate account with them on my own?

MDM

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Re: What to do with my money?
« Reply #70 on: March 21, 2018, 04:16:35 PM »
General comment, from What Is a TDA Retirement Plan?:
Quote
TDA retirement plans often are referred to by other names. They may be called a Tax Sheltered Annuity, or TSA, which denotes that the tax deferral aspect of the plan provides a tax shelter for participants. It may be called a 403(b) plan, which denotes the tax code used to identify these plans when compared to 401(k) or 457 retirement accounts. TDAs in a 403(b) plan may be identified because they will have an annuity as the primary investment option rather than mutual funds.

Unless informed otherwise, the highlighted portion of the quote is probably a good assumption wherever "TDA" is seen in this thread.

Rob_bob

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Re: What to do with my money?
« Reply #71 on: March 21, 2018, 08:05:05 PM »
Catica, after not looking at this thread for a couple of days and now looking over your new questions and the replies I am going to say you will be driving yourself crazy trying to digest all the answers from different people in a jigsaw puzzle fasion.

Way near the beginning of the thread I answered some of your question and I have seen you ask the same question several times to be answered by other people and you still don't fully grasp the replies.

What you really need to do is make an appointment with an hourly fee fiduciary financial planer.  Sit down with one person ,face to face, and ask your questions.  They will be able to look at your accounts and options and explain everything to you.  I believe this is the only way you will get your questions answered in an easy to digest manner.

Go here to find an adviser in your area.

https://www.napfa.org/

Catica

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Re: What to do with my money?
« Reply #72 on: March 22, 2018, 04:57:39 AM »
General comment, from What Is a TDA Retirement Plan?:
Quote
TDA retirement plans often are referred to by other names. They may be called a Tax Sheltered Annuity, or TSA, which denotes that the tax deferral aspect of the plan provides a tax shelter for participants. It may be called a 403(b) plan, which denotes the tax code used to identify these plans when compared to 401(k) or 457 retirement accounts. TDAs in a 403(b) plan may be identified because they will have an annuity as the primary investment option rather than mutual funds.

Unless informed otherwise, the highlighted portion of the quote is probably a good assumption wherever "TDA" is seen in this thread.
OK. I get it.  TDA in my case = 403b.  What I don't get is why what I see different plans when I look at my TIAA account.  The money the employer contributes to my account goes into DEFINED CONTRIBUTION RETIREMENT PLAN and the money I contribute go to TAX-DEFERRED ANNUITY PLAN.  Why is that? what's the difference? And would I be better off if I told my employer to send my contributions to Vanguard rather than TIAA? 

MDM

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Re: What to do with my money?
« Reply #73 on: March 22, 2018, 05:07:23 AM »
OK. I get it.  TDA in my case = 403b.  What I don't get is why what I see different plans when I look at my TIAA account.  The money the employer contributes to my account goes into DEFINED CONTRIBUTION RETIREMENT PLAN and the money I contribute go to TAX-DEFERRED ANNUITY PLAN.  Why is that? what's the difference?
That's a great question for whoever generates the statements with those labels.  Otherwise, no way to determine if those are merely arbitrary and confusing labels, or if there is real meaning behind them.

Quote
And would I be better off if I told my employer to send my contributions to Vanguard rather than TIAA?
Maybe.  To understand better, we would need to see the list of your investment options using the format suggested in https://forum.mrmoneymustache.com/investor-alley/what-to-do-with-my-money-89254/msg1939276/#msg1939276.

Catica

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Re: What to do with my money?
« Reply #74 on: March 22, 2018, 05:34:00 AM »
Catica, after not looking at this thread for a couple of days and now looking over your new questions and the replies I am going to say you will be driving yourself crazy trying to digest all the answers from different people in a jigsaw puzzle fasion.

Way near the beginning of the thread I answered some of your question and I have seen you ask the same question several times to be answered by other people and you still don't fully grasp the replies.

What you really need to do is make an appointment with an hourly fee fiduciary financial planer.  Sit down with one person ,face to face, and ask your questions.  They will be able to look at your accounts and options and explain everything to you.  I believe this is the only way you will get your questions answered in an easy to digest manner.

Go here to find an adviser in your area.

https://www.napfa.org/
Hi Rob_bob, you are right this is a jigsaw puzzle that is driving me crazy but as much as I'm trying to educate myself (even though it might seem to people here that I'm not because I ask the same questions over and over) the information is confusing.  Perhaps I was hoping someone would specifically give me responses that would apply to my situation rather than generic advice.  All of this investing, personal finance, saving for retirement, different plans, loopholes, schemes to get your money out sooner etc. is very hard for people who are not in a financial field.  I could ask why do we have a system that is so hard to grasp for majority of the people?  How can it be for people if most people can't grasp it.  Perhaps that's one of the reasons a lot of people are left out with nothing when it's time for them to retire and they need to slave for the rest of their lives.  I'm really trying to learn and if I'm asking the same questions over and over it's not because I'm trying to annoy all of you it's because I really don't understand. For example, I still don't understand why opening IRA with Vanguard is better than having my employer send my TDA contributions to Vanguard, and I don't believe anyone gave me a straight answer (edit to say that MDM posted an answer to this very question while I was typing this).  I don't want to sound like I'm complaining and demanding that someone addresses every concern of mine, as I very much so appreciate every advice everyone has given me on this thread so far, but I'm just trying to clarify few basic things before my brain can move forward and consider other things such as HSA, 457 plans etc.  I want to thank everyone who has taken the time to respond to my questions, and I'm sorry I'm so stupid and don't get it. 
« Last Edit: March 22, 2018, 05:39:57 AM by Catica »

wenchsenior

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Re: What to do with my money?
« Reply #75 on: March 22, 2018, 07:39:07 AM »
Catica, take a deep breath and chill.  You sound a little like me when I first started thinking about personal finance back when I was in my late 20s and only recently out of grad school.  I happened to get a job as admin asst with a financial planner, and realized that I was now surrounded by jargon I didn't understand, and taking client phone calls that I had no idea how to answer or even what they were asking me about.  I was immediately distressed to realize I was almost 30 and bone-ignorant of all this stuff.

In my case, the answer was easy.  I just went to B&N and bought a book (an actual physical book, not the internet) that was essentially about personal financial planning for dummies.  I mean, it wasn't technically that book (which I think is available), but it was a bare bones basic guide. 

In your case, you are trying to learn every detail and term etc before taking any action. But there really isn't any need for that.  You are in a very good place financially, so there's no need for you to create so much artificial stress for yourself. 

If I were you, I would go back to the investment order list posted at the top of this thread.  Figure out which step you are on RIGHT NOW.  Learn about and then take action on ONLY that step.  It's much easier to learn and absorb information in small chunks, and that way as you will feel a sense of accomplishment with each step that will make you feel calmer, and motivate you.  Then move on to the next step.  Stop worrying so much about terminology and details that pertain to later steps until it's time to tackle those.

Catica

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Re: What to do with my money?
« Reply #76 on: March 22, 2018, 09:17:56 AM »
OK. I get it.  TDA in my case = 403b.  What I don't get is why what I see different plans when I look at my TIAA account.  The money the employer contributes to my account goes into DEFINED CONTRIBUTION RETIREMENT PLAN and the money I contribute go to TAX-DEFERRED ANNUITY PLAN.  Why is that? what's the difference?
That's a great question for whoever generates the statements with those labels.  Otherwise, no way to determine if those are merely arbitrary and confusing labels, or if there is real meaning behind them.
That's my point, I don't know if these labels are something that's a common knowledge to everyone here and it's me who just I doesn't understand or if it's something that just makes everyone even more confused!

Quote
And would I be better off if I told my employer to send my contributions to Vanguard rather than TIAA?
Maybe.  To understand better, we would need to see the list of your investment options using the format suggested in https://forum.mrmoneymustache.com/investor-alley/what-to-do-with-my-money-89254/msg1939276/#msg1939276.
Ok, I followed the format you posted in that message and here is what I've got:
Emergency funds: right now $40K since itís in a savings account, but want to make it more like $10K and invest the $30K into something
Debt: $0
Tax Filing Status: Single
Tax Rate: 22% Federal, 5.1% State
State of Residence: MA
Age: 41
Desired Asset allocation: No idea
Desired International allocation: No idea

Current retirement assets

Taxable
I donít have any %, I have $30K in savings account
xx% cash (for investing Ė do not include emergency funds)
xx% fund name (ticker symbol) (expense ratio)
xx% stock company name (ticker symbol)

401k
NONE

Roth IRA at Vanguard
NONE

Rollover IRA at Schwab
NONE

403b
xx% fund name (ticker symbol) (expense ratio) - Where do I find this??????
Company match? Flat 9.5%, no matching

SIMPLE IRA at Fidelity
NONE

IRA at Vanguard
NONE

Total of All Accounts Together (not each account individually) should equal 100%.

Contributions

New annual Contributions

$9300 403b


Available funds

Funds available in 403(b)
Fund Name: CREF Money Market Account (R3), Ticker symbol: QCMMIX, Expense ratio: 0.23%
Fund name: CREF Stock Account (R3), Ticker symbol: QCSTIX,  Expense ratio: 0.32%
Fund name: TIAA Real Estate Account, Ticker symbol: QREARX, Expense ratio: 0.85%
Fund name: TIAA-CREF International Equity Fund (Institutional), Ticker symbol: TIIEX, Expense ratio: 0.49%
Fund name: TIAA-CREF Lifecycle Index Retirement Income Fund (Institutional), Ticker symbol: TRILX, Expense ratio: 0.10%
Fund name: TIAA-CREF Mid-Cap Value Fund (Institutional), Ticker symbol: TIMVX, Expense ratio: 0.41%
Fund name: TIAA-CREF S&P 500 Index Fund (Institutional), Ticker symbol: TISPX, Expense ratio: 0.06%

Rob_bob

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Re: What to do with my money?
« Reply #77 on: March 22, 2018, 04:33:05 PM »
One reason the answers you are getting are somewhat generic is because all  company retirement plans are not the same inside.  Not all 401k's have the same investments inside available.  You have a 403b correct?  Those are for teachers and charitable non profits and the like.  You asked if it would be better if your employer sent your contributions to Vangaurd rather than TIAA.  I would ask you the question can your employer send contributions to Vangaurd, is that an option?  Probably not. That would be a reason to open an IRA with Vangaurd or Schwab or Fidelity.  When you open your own account you pick exactly what you want to have in it.

You did say your employer contributions go into a Defined Contribution Plan.  That is just a label,  we don't know what that money is invested into.  It could be a stock fund, it could be a money market paying 0.15% you will have to find out what that is and does your employer have to put the money there, can they put it in one of the other options?  You said your contributions are going into a Tax Deferred Annuity Plan.  Annuities are not "investments" they are insurance products.  They usually have high fee's and low returns.  They take the place of a pension where they say they will guarantee to pay you $xxx per month for the rest of your life.  Most often with no inflation adjustment so the value/purchasing power, of the dollars paid to you will decrease over the years.  You need to ask what the terms of that Annuity are.

You did list some options in your account.  I would put money into the S&P 500 Index Fund, symbol TISPX, say 80-85% and then the International Equity TIIEX, the remaining 15-20%.

Catica

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Re: What to do with my money?
« Reply #78 on: March 22, 2018, 05:28:47 PM »
One reason the answers you are getting are somewhat generic is because all  company retirement plans are not the same inside.  Not all 401k's have the same investments inside available.  You have a 403b correct?  Those are for teachers and charitable non profits and the like.  You asked if it would be better if your employer sent your contributions to Vangaurd rather than TIAA.  I would ask you the question can your employer send contributions to Vangaurd, is that an option?  Probably not. That would be a reason to open an IRA with Vangaurd or Schwab or Fidelity.  When you open your own account you pick exactly what you want to have in it.
Yes, it is an option.  I can have them send money to Fidelity, Vanguard or TIAA.  I decide.  So far I had them send the money to TIAA but I can easily change it.

You did say your employer contributions go into a Defined Contribution Plan.  That is just a label,  we don't know what that money is invested into.  It could be a stock fund, it could be a money market paying 0.15% you will have to find out what that is and does your employer have to put the money there, can they put it in one of the other options?  You said your contributions are going into a Tax Deferred Annuity Plan.  Annuities are not "investments" they are insurance products.  They usually have high fee's and low returns.  They take the place of a pension where they say they will guarantee to pay you $xxx per month for the rest of your life.  Most often with no inflation adjustment so the value/purchasing power, of the dollars paid to you will decrease over the years.  You need to ask what the terms of that Annuity are.
OK, I will ask

You did list some options in your account.  I would put money into the S&P 500 Index Fund, symbol TISPX, say 80-85% and then the International Equity TIIEX, the remaining 15-20%.
I listed the funds my money is in, not what is available to me.  There are way more options in my account.  The ones I listed are the ones I have money in.

Catica

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Re: What to do with my money?
« Reply #79 on: March 22, 2018, 05:30:47 PM »
Catica, take a deep breath and chill.  You sound a little like me when I first started thinking about personal finance back when I was in my late 20s and only recently out of grad school.  I happened to get a job as admin asst with a financial planner, and realized that I was now surrounded by jargon I didn't understand, and taking client phone calls that I had no idea how to answer or even what they were asking me about.  I was immediately distressed to realize I was almost 30 and bone-ignorant of all this stuff.

In my case, the answer was easy.  I just went to B&N and bought a book (an actual physical book, not the internet) that was essentially about personal financial planning for dummies.  I mean, it wasn't technically that book (which I think is available), but it was a bare bones basic guide. 

In your case, you are trying to learn every detail and term etc before taking any action. But there really isn't any need for that.  You are in a very good place financially, so there's no need for you to create so much artificial stress for yourself. 

If I were you, I would go back to the investment order list posted at the top of this thread.  Figure out which step you are on RIGHT NOW.  Learn about and then take action on ONLY that step.  It's much easier to learn and absorb information in small chunks, and that way as you will feel a sense of accomplishment with each step that will make you feel calmer, and motivate you.  Then move on to the next step.  Stop worrying so much about terminology and details that pertain to later steps until it's time to tackle those.
Yes, I went back to the investment order and I'm on HSA.  I'm currently reading about it and trying to figure out how this could be beneficial to me.

Catica

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Re: What to do with my money?
« Reply #80 on: March 22, 2018, 05:37:25 PM »
If I wanted to lower my tax rate for 2017, can I still contribute to some account so it would count for last year? 

robartsd

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Re: What to do with my money?
« Reply #81 on: March 22, 2018, 05:40:13 PM »
Funds available in 403(b)
Fund name: TIAA-CREF Lifecycle Index Retirement Income Fund (Institutional), Ticker symbol: TRILX, Expense ratio: 0.10%
Fund name: TIAA-CREF S&P 500 Index Fund (Institutional), Ticker symbol: TISPX, Expense ratio: 0.06%
These are the two funds I'd focus on in a TIAA 403(b). TISPX holds the 500 largest companies on the US stock market. TRILX holds a mix of stocks (including international) and bonds (about 40% stocks and 60% bonds). How you want to balance between the two depends on how much you want to maximize growth vs. how much you want to protect against loss. If you decided you want about 80% stocks and 20% bonds (a common ratio for aggressive growth) in this account, you could have 1/3 of the value allocated to TRILX and 2/3 of the value allocated to TISPX. 1/2 allocated to each would net about 70% stocks and 30% bonds. 1/3 TISPX and 2/3 TRILX would net about 60% stocks and 40% bonds (a common moderate growth ratio).

It is unusual for employers to offer a choice of institutions for employer sponsored retirement plans. In Vanguard you'd likely have access to Vanguard Total Stock Market Index Fund (ER 0.04%), Vanguard Total Bond Market Index Fund (ER 0.04%), Vanguard Total International Stock Market Index Fund (ER 0.11%), and Vanguard Total International Bond Market Index Fund (ER 0.11%). Allowing you more flexibility in choosing your balance between stocks and bonds as well as choosing your balance of domestic vs. international exposure AND saving you bit on investment expense ratios (I listed expense ratios for Admiral Class Shares of these funds - a 403(b) is likely to have access to the slightly better expense ratios of Institutional Class Shares).

You said your contributions are going into a Tax Deferred Annuity Plan.  Annuities are not "investments" they are insurance products.
It looks like this is just a label that TIAA uses for the investment account that holds your contributions (but an annuity may be the default choice for investments in such plans if you haven't specified something else). In either case you want to know what actual investments are held in both these accounts and how much you can direct the actual investments (usually you have near total control within the range of choices listed).

Yes, it is an option.  I can have them send money to Fidelity, Vanguard or TIAA.  I decide.  So far I had them send the money to TIAA but I can easily change it.
You may be able to choose where the money goes moving forward, but still not be able to rollover what's already been sent to TIAA into your Vanguard account. If a rollover is allowed, there may be some extra fees involved to do it - which may or may not be worthwhile depending on the investment options you want to use. If I was starting out with those options, I'm pretty sure I'd choose Vanguard, but if I had already established an account elsewhere I'd have to do more research before deciding to rollover.

If I wanted to lower my tax rate for 2017, can I still contribute to some account so it would count for last year? 
If you have not maxed out your 2017 IRA contributions you can still make them. Traditional IRA contributions are tax deductible (subject to MAGI limits). The 2017 IRA contribution limit is $5500 per person.

Catica

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Re: What to do with my money?
« Reply #82 on: March 22, 2018, 05:49:10 PM »
Funds available in 403(b)
Fund name: TIAA-CREF Lifecycle Index Retirement Income Fund (Institutional), Ticker symbol: TRILX, Expense ratio: 0.10%
Fund name: TIAA-CREF S&P 500 Index Fund (Institutional), Ticker symbol: TISPX, Expense ratio: 0.06%
These are the two funds I'd focus on in a TIAA 403(b). TISPX holds the 500 largest companies on the US stock market. TRILX holds a mix of stocks (including international) and bonds (about 40% stocks and 60% bonds). How you want to balance between the two depends on how much you want to maximize growth vs. how much you want to protect against loss. If you decided you want about 80% stocks and 20% bonds (a common ratio for aggressive growth) in this account, you could have 1/3 of the value allocated to TRILX and 2/3 of the value allocated to TISPX. 1/2 allocated to each would net about 70% stocks and 30% bonds. 1/3 TISPX and 2/3 TRILX would net about 60% stocks and 40% bonds (a common moderate growth ratio).
Are you saying that I should not contribute to the other funds I'm currently contributing?
It is unusual for employers to offer a choice of institutions for employer sponsored retirement plans. In Vanguard you'd likely have access to Vanguard Total Stock Market Index Fund (ER 0.04%), Vanguard Total Bond Market Index Fund (ER 0.04%), Vanguard Total International Stock Market Index Fund (ER 0.11%), and Vanguard Total International Bond Market Index Fund (ER 0.11%). Allowing you more flexibility in choosing your balance between stocks and bonds as well as choosing your balance of domestic vs. international exposure AND saving you bit on investment expense ratios (I listed expense ratios for Admiral Class Shares of these funds - a 403(b) is likely to have access to the slightly better expense ratios of Institutional Class Shares).
My employers does offer a choice

Yes, it is an option.  I can have them send money to Fidelity, Vanguard or TIAA.  I decide.  So far I had them send the money to TIAA but I can easily change it.
You may be able to choose where the money goes moving forward, but still not be able to rollover what's already been sent to TIAA into your Vanguard account. If a rollover is allowed, there may be some extra fees involved to do it - which may or may not be worthwhile depending on the investment options you want to use. If I was starting out with those options, I'm pretty sure I'd choose Vanguard, but if I had already established an account elsewhere I'd have to do more research before deciding to rollover.
I didn't mean that I want to rollover what was sent to TIAA, I meant that I can have them send the contributions going forward.  But I don't know if that's wise.

If I wanted to lower my tax rate for 2017, can I still contribute to some account so it would count for last year? 
If you have not maxed out your 2017 IRA contributions you can still make them. Traditional IRA contributions are tax deductible (subject to MAGI limits). The 2017 IRA contribution limit is $5500 per person.
I don't have an IRA account.  Perhaps it's time to open it?

Rob_bob

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Re: What to do with my money?
« Reply #83 on: March 22, 2018, 07:15:58 PM »
Have you filled your 2017 taxes yet?  If you have then you can't make tax deductible contributions for 2017, well I suppose you could file an amended return to do it.

Catica

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Re: What to do with my money?
« Reply #84 on: March 22, 2018, 07:26:02 PM »
Have you filled your 2017 taxes yet?  If you have then you can't make tax deductible contributions for 2017, well I suppose you could file an amended return to do it.
I have not.  Should I open Vanguard IRA ASAP?

Rob_bob

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Re: What to do with my money?
« Reply #85 on: March 22, 2018, 08:01:06 PM »
Have you filled your 2017 taxes yet?  If you have then you can't make tax deductible contributions for 2017, well I suppose you could file an amended return to do it.
I have not.  Should I open Vanguard IRA ASAP?

If you want a tax deductible account in addition to the 403b then yes.  If you have enough income to max out the 403b then you would want an IRA for more retirement saving options.

Catica

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Re: What to do with my money?
« Reply #86 on: March 22, 2018, 08:16:18 PM »
Have you filled your 2017 taxes yet?  If you have then you can't make tax deductible contributions for 2017, well I suppose you could file an amended return to do it.
I have not.  Should I open Vanguard IRA ASAP?

If you want a tax deductible account in addition to the 403b then yes.  If you have enough income to max out the 403b then you would want an IRA for more retirement saving options.
Ok, I'm confused, again.  Are you saying I should max out my 403b before I contribute to an IRA?  Looking at investment order recommended to me, I should be contributing $0 if my employer doesn't do any matching. 

MDM

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Re: What to do with my money?
« Reply #87 on: March 22, 2018, 08:59:24 PM »
Looking at investment order recommended to me, I should be contributing $0 if my employer doesn't do any matching.
Correct, for step #1.

But there are steps #4 and #5.  Have you looked at those?  It seems you have been reading only step #1 when it comes to using the 403b...?

Without knowing your tax situation now, and an estimate of what it will be in retirement, we can't give good advice on whether you should use traditional or Roth.  See the links in the investment order post about that topic for self-study, or share more about current income and pension eligibility.

Might also be worthwhile to look at the 'Basic Terms' tab in the case study spreadsheet.  May or may not be helpful.

The expense ratios in your 403b appear good.  In that case, it doesn't much matter whether you fund an IRA before a 403b or vice versa - steps #4 and #5 blur together into "step 4.5" or whatever name one chooses.

robartsd

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Re: What to do with my money?
« Reply #88 on: March 23, 2018, 09:16:21 AM »
I would open an IRA at Vanguard. If you want to contribute to reduce 2017 taxes, this is the only path available that I am aware of. You can sign up online (there might have a form or two that you may need to get notarized and send back). You could contribute up to $11,000 in it right away ($5,500 for 2017 before April 16, 2018 plus $5,500 for 2018). If you sign up for most communication to be electronic Vanguard charges no fees to maintain the IRA account.

If you do move your 403(b) to Vanguard, my guess is that it would provide slightly better investment options (Institutional class shares instead of Admiral class shares) so generally you'd probably want to maximize it before your IRA; but a Admiral shares in an IRA at Vanguard beat your TIAA 403(b) options. As noted in MDM's investment order step 4 (max IRA) and step 5 (max 401k/403b/457) are pretty interchangeable so if you can't max all of them you might as well choose the one with the best investment options/lowest fees. As individuals can choose their IRA provider on their own, they can often find an IRA with better options than their employer selected plans.

Catica

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Re: What to do with my money?
« Reply #89 on: March 23, 2018, 10:08:34 AM »
Looking at investment order recommended to me, I should be contributing $0 if my employer doesn't do any matching.
Correct, for step #1.

But there are steps #4 and #5.  Have you looked at those?  It seems you have been reading only step #1 when it comes to using the 403b...?

Without knowing your tax situation now, and an estimate of what it will be in retirement, we can't give good advice on whether you should use traditional or Roth.  See the links in the investment order post about that topic for self-study, or share more about current income and pension eligibility.

Might also be worthwhile to look at the 'Basic Terms' tab in the case study spreadsheet.  May or may not be helpful.

The expense ratios in your 403b appear good.  In that case, it doesn't much matter whether you fund an IRA before a 403b or vice versa - steps #4 and #5 blur together into "step 4.5" or whatever name one chooses.
Yes, I did look at step #4 and #5.  It confused me because of step #1 but I get it now.  My current income is $80322.  How do I find out about pension eligibility? Yes, I looked at basic terms in that spreadsheet. Helpful

alanB

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Re: What to do with my money?
« Reply #90 on: March 23, 2018, 10:18:23 AM »
All of this investing, personal finance, saving for retirement, different plans, loopholes, schemes to get your money out sooner etc. is very hard for people who are not in a financial field.  I could ask why do we have a system that is so hard to grasp for majority of the people?  How can it be for people if most people can't grasp it.  Perhaps that's one of the reasons a lot of people are left out with nothing when it's time for them to retire and they need to slave for the rest of their lives.

I think you are absolutely correct, though I don't think that is the main factor.  If I had to rank the primary reasons why people stay slaves to the system:

1) Most income is spent right away
2) "Saved" money is actually used for deferred spending (not invested)
3) Poor choice of investments
4) Lack of understanding of how much money is needed to retire
5) Investments are not tax-efficient (did not follow the Investment Order referenced over and over here)

The loopholes are what separate the very wealthy from the slightly wealthy, not the wealthy from the masses.  Even with your claims of ignorance you are still easily on track for retirement.  Good luck and keep learning! :)

robartsd

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Re: What to do with my money?
« Reply #91 on: March 23, 2018, 10:36:27 AM »
How do I find out about pension eligibility?
Someone (probably in HR) can tell you about what is available from your employer. They are usually familiar with the basic features of the available plans, eligibility requirements, and sign-up documents - they are not usually experts at all plan features/rules, but can provide the documents that go over all the details. IRS rules for each plan type can be found on their website. IRS rules specify contribution limits, qualified withdraws, and penalties for non-qualified withdraws.

Catica

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Re: What to do with my money?
« Reply #92 on: March 23, 2018, 10:42:51 AM »
I would open an IRA at Vanguard. If you want to contribute to reduce 2017 taxes, this is the only path available that I am aware of. You can sign up online (there might have a form or two that you may need to get notarized and send back). You could contribute up to $11,000 in it right away ($5,500 for 2017 before April 16, 2018 plus $5,500 for 2018). If you sign up for most communication to be electronic Vanguard charges no fees to maintain the IRA account.

If you do move your 403(b) to Vanguard, my guess is that it would provide slightly better investment options (Institutional class shares instead of Admiral class shares) so generally you'd probably want to maximize it before your IRA; but a Admiral shares in an IRA at Vanguard beat your TIAA 403(b) options. As noted in MDM's investment order step 4 (max IRA) and step 5 (max 401k/403b/457) are pretty interchangeable so if you can't max all of them you might as well choose the one with the best investment options/lowest fees. As individuals can choose their IRA provider on their own, they can often find an IRA with better options than their employer selected plans.
The question now would be whether contributing $5500 to my Vanguard IRA (if I decide to open it) would actually lower my taxes. 
Whether to rollover my 403b to that new IRA would be a separate question I think. And another question is whether to have my employer send my future contribution to Vanguard rather than TIAA. 

MDM

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Re: What to do with my money?
« Reply #93 on: March 23, 2018, 10:50:27 AM »
My current income is $80322.  How do I find out about pension eligibility? Yes, I looked at basic terms in that spreadsheet. Helpful
For a single filer, $80K/yr - whether that is gross (before any deductions), Adjusted Gross Income (AGI; last line of the first page of Form 1040), or taxable (line 43 of form 1040) - puts you in the 22% bracket.  That probably means traditional contributions would be better for you.  No problem doing so in a 403b.

For an IRA, your contribution is fully deductible only if your MAGI calculation for traditional IRA purposes (see https://www.irs.gov/publications/p590a#en_US_2017_publink1000230489) is less than a certain amount.  For 2017, that amount is $62,000.  For 2018, that amount is $63,000.  See IRA Deduction Limits | Internal Revenue Service.  Now we need to know exactly what that $80322 is: gross, AGI, taxable, or...?

Your situation may be a good example of when "if you need the 401k deduction to be eligible for a tIRA deduction, swap #4 and #5" applies to the investment order.

For pension eligibility, ask your company benefits department.

Catica

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Re: What to do with my money?
« Reply #94 on: March 26, 2018, 03:59:40 AM »
All of this investing, personal finance, saving for retirement, different plans, loopholes, schemes to get your money out sooner etc. is very hard for people who are not in a financial field.  I could ask why do we have a system that is so hard to grasp for majority of the people?  How can it be for people if most people can't grasp it.  Perhaps that's one of the reasons a lot of people are left out with nothing when it's time for them to retire and they need to slave for the rest of their lives.

I think you are absolutely correct, though I don't think that is the main factor.  If I had to rank the primary reasons why people stay slaves to the system:

1) Most income is spent right away
2) "Saved" money is actually used for deferred spending (not invested)
3) Poor choice of investments
4) Lack of understanding of how much money is needed to retire
5) Investments are not tax-efficient (did not follow the Investment Order referenced over and over here)

The loopholes are what separate the very wealthy from the slightly wealthy, not the wealthy from the masses.  Even with your claims of ignorance you are still easily on track for retirement.  Good luck and keep learning! :)
Thanks!

Catica

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Re: What to do with my money?
« Reply #95 on: March 26, 2018, 04:00:46 AM »
How do I find out about pension eligibility?
Someone (probably in HR) can tell you about what is available from your employer. They are usually familiar with the basic features of the available plans, eligibility requirements, and sign-up documents - they are not usually experts at all plan features/rules, but can provide the documents that go over all the details. IRS rules for each plan type can be found on their website. IRS rules specify contribution limits, qualified withdraws, and penalties for non-qualified withdraws.
OK, I found out that my employer doesn't offer a pension plan.

Catica

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Re: What to do with my money?
« Reply #96 on: March 26, 2018, 04:05:50 AM »
My current income is $80322.  How do I find out about pension eligibility? Yes, I looked at basic terms in that spreadsheet. Helpful
For a single filer, $80K/yr - whether that is gross (before any deductions), Adjusted Gross Income (AGI; last line of the first page of Form 1040), or taxable (line 43 of form 1040) - puts you in the 22% bracket.  That probably means traditional contributions would be better for you.  No problem doing so in a 403b.

For an IRA, your contribution is fully deductible only if your MAGI calculation for traditional IRA purposes (see https://www.irs.gov/publications/p590a#en_US_2017_publink1000230489) is less than a certain amount.  For 2017, that amount is $62,000.  For 2018, that amount is $63,000.  See IRA Deduction Limits | Internal Revenue Service.  Now we need to know exactly what that $80322 is: gross, AGI, taxable, or...?

Your situation may be a good example of when "if you need the 401k deduction to be eligible for a tIRA deduction, swap #4 and #5" applies to the investment order.

For pension eligibility, ask your company benefits department.
OK, I had my taxes done over the weekend.  I will get them by mail soon from my tax guy, so right now I can't see it what's on each line but putting max in an IRA account he said it lowered my taxes significantly.  So, I need to open an IRA.  What I gathered here is that I should go with Vanguard and invest in Total Stock Market Fund (VTSMX).  I would put $11000 ($5500 for 2017 and $5500 for 2018). Does this make sense?
« Last Edit: March 26, 2018, 04:07:47 AM by Catica »

Scortius

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Re: What to do with my money?
« Reply #97 on: March 26, 2018, 11:07:07 AM »
My current income is $80322.  How do I find out about pension eligibility? Yes, I looked at basic terms in that spreadsheet. Helpful
For a single filer, $80K/yr - whether that is gross (before any deductions), Adjusted Gross Income (AGI; last line of the first page of Form 1040), or taxable (line 43 of form 1040) - puts you in the 22% bracket.  That probably means traditional contributions would be better for you.  No problem doing so in a 403b.

For an IRA, your contribution is fully deductible only if your MAGI calculation for traditional IRA purposes (see https://www.irs.gov/publications/p590a#en_US_2017_publink1000230489) is less than a certain amount.  For 2017, that amount is $62,000.  For 2018, that amount is $63,000.  See IRA Deduction Limits | Internal Revenue Service.  Now we need to know exactly what that $80322 is: gross, AGI, taxable, or...?

Your situation may be a good example of when "if you need the 401k deduction to be eligible for a tIRA deduction, swap #4 and #5" applies to the investment order.

For pension eligibility, ask your company benefits department.
OK, I had my taxes done over the weekend.  I will get them by mail soon from my tax guy, so right now I can't see it what's on each line but putting max in an IRA account he said it lowered my taxes significantly.  So, I need to open an IRA.  What I gathered here is that I should go with Vanguard and invest in Total Stock Market Fund (VTSMX).  I would put $11000 ($5500 for 2017 and $5500 for 2018). Does this make sense?

Sounds great! Assuming you open a 'Traditional' IRA the 2017 contribution will lower your taxable income for last year by $5,500 and the 2018 contribution will do the same for this year.  If you're in the 2017 25% and the 2018 22% bracket, those contributions will give you immediate savings of $1,375 and $ $1,210 respectively, not counting any money they give you through investment gains. You may benefit even further if the reduction in your AGI makes you eligible for other tax credits, although that's more difficult to predict and not really worth getting into at this stage.

robartsd

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Re: What to do with my money?
« Reply #98 on: March 26, 2018, 11:10:41 AM »
OK, I had my taxes done over the weekend.  I will get them by mail soon from my tax guy, so right now I can't see it what's on each line but putting max in an IRA account he said it lowered my taxes significantly.  So, I need to open an IRA.  What I gathered here is that I should go with Vanguard and invest in Total Stock Market Fund (VTSMX).  I would put $11000 ($5500 for 2017 and $5500 for 2018). Does this make sense?
VTSMX is investor class shares (minimum $3,000 initial investment, 0.15% ER). If you're investing $10,000 or more you want admiral class shares (VTSAX - 0.04% ER). If your taxes were filled out with the maximum IRA contribution, then you do need to open that IRA and fund at least the $5500 for 2017 (funding all or part of the $5500 for 2018 is optional - it won't affect your 2017 taxes). If you're comfortable with putting away $11,000 for retirement right now, I'd go ahead and max 2017 and 2018 IRA right away.

Catica

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Re: What to do with my money?
« Reply #99 on: March 26, 2018, 05:18:23 PM »
My current income is $80322.  How do I find out about pension eligibility? Yes, I looked at basic terms in that spreadsheet. Helpful
For a single filer, $80K/yr - whether that is gross (before any deductions), Adjusted Gross Income (AGI; last line of the first page of Form 1040), or taxable (line 43 of form 1040) - puts you in the 22% bracket.  That probably means traditional contributions would be better for you.  No problem doing so in a 403b.

For an IRA, your contribution is fully deductible only if your MAGI calculation for traditional IRA purposes (see https://www.irs.gov/publications/p590a#en_US_2017_publink1000230489) is less than a certain amount.  For 2017, that amount is $62,000.  For 2018, that amount is $63,000.  See IRA Deduction Limits | Internal Revenue Service.  Now we need to know exactly what that $80322 is: gross, AGI, taxable, or...?

Your situation may be a good example of when "if you need the 401k deduction to be eligible for a tIRA deduction, swap #4 and #5" applies to the investment order.

For pension eligibility, ask your company benefits department.
OK, I had my taxes done over the weekend.  I will get them by mail soon from my tax guy, so right now I can't see it what's on each line but putting max in an IRA account he said it lowered my taxes significantly.  So, I need to open an IRA.  What I gathered here is that I should go with Vanguard and invest in Total Stock Market Fund (VTSMX).  I would put $11000 ($5500 for 2017 and $5500 for 2018). Does this make sense?

Sounds great! Assuming you open a 'Traditional' IRA the 2017 contribution will lower your taxable income for last year by $5,500 and the 2018 contribution will do the same for this year.  If you're in the 2017 25% and the 2018 22% bracket, those contributions will give you immediate savings of $1,375 and $ $1,210 respectively, not counting any money they give you through investment gains. You may benefit even further if the reduction in your AGI makes you eligible for other tax credits, although that's more difficult to predict and not really worth getting into at this stage.
Yes, I'm thinking of opening traditional IRA.  My tax guy already figured that in so I need to do it.   So I will contribute $11000 right away.  I still have about $20000 to invest in something.  I understand the difference between traditional and Roth but still don't know which one is better for me.  Does having both ever make sense?
« Last Edit: March 26, 2018, 05:32:26 PM by Catica »