Thank you!

Thank you everybody who have taken the time to drop me a line or two in the comments section.
Likewise thank you to those who are real writers and provide a great source of inspiration to writers wanna-be like me.
For all of you teachers out there, I hope you get to read some of my posts on investing opportunities for teachers and how important this is for us, teachers.

Make sure you become that seed of change in your district. Bring the topic up to your Union reps, band together and let’s bring this issue to the forefront of our negotiation tables.

We can’t continue letting predatory companies feasting on our savings.

If you want to know more on investing. I can’t recommend this book enough:

https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365/ref=sr_1_5?dchild=1&keywords=boggleheads&qid=1585497940&sr=8-5

https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365/ref=sr_1_5?dchild=1&keywords=boggleheads&qid=1585497940&sr=8-5

And of course, Podcasts are a great way to gain some hours of knowledge during the most mindless time of your day ; Driving! So tune to Paula Pant at:

Podcast

Thank you all for another great season of Life Slicing! See you next year!

https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365/ref=sr_1_5?dchild=1&keywords=boggleheads&qid=1585497940&sr=8-5

 

 

 

An opportunity of a life time!

Well, you don’t need me to tell you what is going on because about 7.8 billion people are glued to the news these days watching the spread of Covid-19. On the other hand, you also have the other side of these pandemic ravaging the work markets bringing down to their knees. This is history in the making. You just have to make sure that you are taking all cautionary measure to make sure you will end on the other side of the river to tell the story.

With that said, looking at this crisis in a cold blooded manner, you may have a great opportunity to advance your path towards retirement and financial freedom, or simply improve your finances.
Three weeks ago, the markets were still enjoying the largest returns in history as the result of a strong bull market. As the Covid-19 crisis landed on American soil the stock market has tumbled down drastically to levels of 30% loses; screen losses anyways as long as you don’t touch anything.
With the same token though, this crisis can also be an opportunity to strengthen your contribution to your 403B by putting more money in. Think about it! You would basically be buying everything at a tremendous discount of 30% off!
You love those 30% coupons from Kohl’s! Or the Starbucks “buy one, get one.” Why not take advantage of these great stock sale?
Will you lose money? Maybe. But in reality you don’t lose money until you sale. Otherwise it is only paper loses; a fluctuating number. Teachers are long term investors. They must be! You invest and leave the money there for 15-30 years and then you reap the benefits. In the meantime you should not care if the market crashes or not. Just make sure you are far away from companies like AXA, VAlic and the likes, with lots of hidden fees. Use Target Funds from Fidelity, Vanguard and Charls Schwab and you’ll be fine.

If you don’t have a 403B/401K plan this is a wonderful time to do it. Two or eight years down the road, you will remember this time like we remember 2008, and you will say “I am so glad I invested as much as I could” as you look at the Covid-19 crisis in the rear mirror.

This is also a great time to refinance your home and get an awesome rate for the next thirty years. I just refinanced my house at a 3.3%  for a 30 year fixed mortgage. I will be saving $200 a month! Or $2,400 a year! Even more impressive $72,000 at the end of my 30 year mortgage.

I have all the concerns we all have and my priority, of course, is my health and my family’s. I don’t want to come out as a jerk thinking about just money. I don’t. But money is the second concern for everybody after the virus; how are we going to survive this coming years financially.

After surviving 2008, I have realized that a crisis can also be an opportunity. Depending on how prepared you are, a crisis can be an opportunity or a real dramatic event that could jeopardize your life.

You are a Potential Millionaire

I really wish Unions took issue with our investment opportunities, as well as I wish we were all more financially educated. 

Many people think that it is just not a big deal; it’s not that we are going to become millionaires anyway! Some may say. Sadly, that is the same attitude that has gotten us in this hole to begin with. Our own ignorance has stripped our opportunities away. And yes, many of us has indeed the opportunity of becoming millionaires if we stopped living like the poor, who fantasizes a life of riches, with expensive cars, eating out at fancy restaurants, wearing designer’s clothes and bags, taking luxurious vacations, etc. And somehow we wonder how we never have enough to cover all we need. Well, how much do we need? How much do we want? How much is enough? Does “enough” even exist? Or does enough is simply a euphemism to always want more and more?

A simple exercise may be “enough” to put all this in perspective. Think about how many brand new cars we buy in our lives? Think about how we put ourselves in a self-inflicted situation where we are helpless before those car payments. Imagine, if instead of forcing yourself into car payments you decided to just invest that same amount of money into your future. 

According to a CNBC report the average car price has climbed up to about 36K; including interest, Bluetooth technology, GPS navigation to show you where the grocery store is, and cameras even inside of your trunk to monitor your cargo.

If instead of grinding your life away to make car payments you invest that price tag into, YES!- your 403B plan, you will have a very hefty amount of money over time and much better tax liability than what you have now. Not to mention that with the help of interest compound it will not take you a lifetime to get amass some serious wealth.

Anybody who manages to save  100K in a 403B plan, IRA account  or Roth IRA account will easily become a millionaire thirty years down the road without adding a dime after reaching 100K.

I know what you are thinking. “Well, but you need the 100K first.” Fair!
But hang on a second! If you are able to commit to a 36K car payment over teh span of 6 years, that should tell you that you are at least capable of saving 6k a year. Great! That is the limit for an IRA account.

Imagine what could happen if you continue adding to your stash of savings! 

But beware! You are not the only one who knows this. Predatory companies are fully aware of your possibilities and they want a cut. By charging you 1-2% more than reputable companies they can end up with 40% of your savings. Yep! It is not a typo. FORTY PER CENT!!!

Check this article by Vanguard where they explain the huge impact of a 2% fee. Imagine the impact of companies like AXA , which charges a total of 5-7%.

That is why we, teachers, need to get on board with this fight. This is not money we are getting for free. This is money from our paychecks, and we should have the right to demand better. If private companies can offer better options to their employees, so should school districts.

 

https://www.cnbc.com/2019/10/22/car-prices-are-rapidly-increasing-heres-why-thats-bad-for-americans.html

You are a Seed of Change

Some people are lucky enough to work in companies where the employer matches the employee’s contribution to their 401K. Unfortunately, WE, teachers, don’t have that. What we do have though is a system plagued with very crappy options for teachers to throw their money into a bottomless bag. Why? Because of the predatory and hidden fees of many of these companies that erode your savings  day by day like carpenter ants. 

These are the companies that promise to save you from any market downturn and guarantee the best return on your savings. Two cues that should make anybody run. Nobody can predict the market; not even Warren Buffet! 

If anybody, like let’s say, an AXA representative, or anybody charging more than 2% in fees, promises you guaranteed returns, make sure to walk away and as far as possible, without turning your back on the guy. Do you still have your wallet?

We, teachers, are long term investors. We actually need those downturns in the market, so our savings can buy more equities at a lower price. You can look at it as a Black Friday sale of sorts.

As you invest, through a reputable company like Fidelity, Vanguard or Charles Schwab, your better shot will be using index funds as your savings vehicle. What are those? Imagine index funds as bundles with tens or hundreds of different companies; large cap, small cap, mid-cap and everything else. Maybe focused on a sector of the economy like health, technology or maybe on all of them like a total market fund.

I know what you are thinking. I don’t understand the market, that’s too complicated.

The good news is that you don’t need to know anything. Reputable companies make it super easy for us. They have created index funds according to your retirement age. For example, if you are estimating your retirement in 2035 you can invest through Fidelity in their 2035 Target fund, which they call Freedom funds. Vanguard also has something similar. These are funds that rebalance themselves shifting their risk factor as you go through your working years to ensure that when you get to your target age your savings are solid against any market stumble.

The most important thing in your financial future is to make sure your district is offering the right investing vehicles. Educate yourself on the subject and share with others. We can all be a seed of change and we DO need changes. We can’t allow our 403B plans to become nothing more than an opportunity for predatory companies to make a buck.

How are your investing options in your school district?

How Do you Retire?

How do you figure out how much money you need to retire? Can you support your lifestyle with a fixed income that is 30% less than what you currently earn? If not, can you find some compromises, so that your yearly expenses are met by your retiree income? 

That is probably a good starting point; understanding that retirement is not only about financial goals but personal goals and expectations. If that morning latte at Starbucks can’t be replaced by homemade coffee you will have to plan on extra 1.8K a year. Likewise, if you can’t give up eating out because you are a “foodie,” well, you will have to plan for that. Some people can’t have the same car for more than 4 years before they drive a new one out of the dealer; how many more years do you have to work to afford those car payments? You get the idea.

A budget is not only an awesome tool to make sure that you do not spend more than what you earn; including credit cards. But also, a budget will give you a nice snapshot of what your yearly needs are. 

Maybe after keeping track of your budget for a year, you realize that it will be important for you to free yourself off your mortgage, because without it all you need is 30-40K to live a comfortable life. 

Did you know that your 403B plan could grant you that kind of income annually without you doing a thing? 

According to the study conducted by Trinity University, and known as The Trinity Study, if you invest 25 times the amount of your yearly expenses, you will be able to withdraw 4% of that amount every year without ever running out of money. The best though, is that your savings will very likely outlive you! In other words, you should not worry about depleting your savings.

This is known as the 4% rule. To illustrate, if you need 30K to cover a year of expenses you would need $750K saved and invested in the stock market; with a large portion in stocks.

I know it sounds like a lot of money, and it would probably be nearly impossible without the interest compound magic. But it’s definitely not impossible. 

Anybody thinking of an early retirement yet?

It’s Never Too Late or Too Early

One of the biggest mistakes I have ever made financially is not to plan my retirement earlier.  As a teacher, our options are limited for our investments. You can rely solely on your pension if you are entitled to one,  an luckily that will be there for you. However, by planning and using some basic math you may achieve a very comfortable retirement or even an early retirement. 

I know.  Nobody wants to retire early,  right? 

Imagine.  What would you do?  Sip coffee or tea all day? It sounds awfully boring. Go for walks with your significant other? With your dog? Maybe a cat?

Anyway,  here is the thing.  Most of us will get paid more than a million dollars during our productive life.  The question is how much of that do we actually keep? Can we keep more? Could we use what we keep on a daily basis as leverage to increase what we keep at the end? 

We definitely can, if we plan and set some financial goals for ourselves as soon as we start earning an income.  Unfortunately, most of the time we equate salary to the amount of things that we can buy. The more we earn, the more we want and buy.
I wish I would have told my younger self “don’t buy that brand-new car! Instead, fully fund your 403B plan.

But the question didn’t even pass through my mind. Retirement seemed like something so far away from my reality. How do you even figure out how much money do you need to retire? One million? Two millions? Is that even possible? What is enough?
What does retired really mean? All those questions are essential to plan your escape. That time when you decide to get off of the hamster wheel.

Luckily, it’s never too late, but it’s definitely never too early to plan ahead.

**More precise ideas tomorrow**

We Must Fight this One!!

Speaking of solid 403B plans. Here is where we all teachers are struggling and having a problem. Many districts, all across the country, are struggling in this area. Why? Because our 403B plans do not have a fiduciary responsibility with us, teachers. That list of providers your district is providing you with, it is not a list that has been screened, thinking these are the best options for people. That is how companies like AXA make their way into our turf, setting up appointments and talking a big talk about how great annuities are. 

We, teachers, need to take issue with this immediately. Bring it up to our union reps, and make a contractual issue where our benefits have been changed and reduced for the worse.

Folks, this is a real issue. Don’t believe me, just look it up. Many of these companies are under federal investigation. The WSJ has published several articles on the subject.

Something needs to be done. We need to demand better options for our investment opportunities. Our districts are not matching our contributions. It is our money and we should have a say about the options we want. This is not free money we are getting. Therefore, there should be no begging.

Please consider becoming a seed of change wherever you are. Talk to people in your district about it and fight for that change we all need in our 403B plans.

 

https://www.wsj.com/articles/new-york-state-officials-open-probe-on-403-b-sales-to-teachers-11570031322

No More Smoke and Mirrors

After understanding the magic of compound interest you may get eager and anxious to start saving. On your path of wealth accumulation you will find advisers and companies that for a seemingly low fee they promise the largest yields. They may even preface the old adage “you get what you pay for.” Implying that if you want larger yields than the market’s average you must invest you must also pay for the service. DO NOT!

Anybody promising better than average returns is most likely a talker. Someone that is selling you the idea of investing in products with hidden fees or simply high fees. You may hear fees ranging between 1.5% to 3%, which actually may sound like not much. But it is actually a lot when compared with funds offered by companies such as Fidelity and Vanguard, where funds may cost as low as 0.014% yearly. Fidelity has even some new funds where yo pay no fees whatsoever. They are called Zero index funds.

Fees erode your savings and the results can be  staggering.

Think about it. If you have $100,000 in your 403B, you may have to pay $14 a year to cover the fund’s expenses. Whereas, with one of those predatory companies selling you annuities or investing products with hidden fees, like AXA,  you may pay easily $2,500 or more.
If you are one those folks who says “I don’t know anything about the market!” Don’t worry. You don’t have to know much or anything at all, other than avoiding pesky fees and predatory advisers and companies.

What you really need is a solid 403B plan that gives you access to reliable companies. These companies offer target funds. What are they? Ready to go, balanced portfolios that re-balance themselves as you approach your time of sailing onto the sunset. In other words, if you are planning to retire, let’s say, in 2045, you will find a target fund 45. You just set up your automatic contribution with each paycheck and before you know it, you will see your savings growing exponentially.
If you are a teacher, don’t wait to set your wheels in motion. It’s never too late, but more importantly, it’s never too early.

A Magic Act

Why is your 403B plan so important? First, because our pensions are always in danger. Benefits for teachers have been demonized as well as reduced; especially for those young folks in Illinois labeled as Tier 2.

Your 403B plan can really be a great supplement to your pension or even a life saver if at any point your state decides to give up on you. Or maybe it doesn’t have to be that drastic. But it would be bad enough if your state started taxing your pension, or reduce your “cost of living yearly increase.” Any change after you have decided to hang the markers and Smartboard remote has the potential to wreck havoc if you don’t have any other source of income.

Where is the magic? You will see the magic once you start putting money away in your 403B plan. The government allows you to shove away up to $19,500  yearly before paying any taxes. By doing this, you also lower your taxable income, by placing you in tax bracket of lower income. 

Once you start funding your 403B plan the magic of compound interest will help you reach your goals. As I said previously, the average return in the market is 7%. Therefore, if you save this year, let’s say $10,000, next year you will have about $10,700, plus $10,000 you will save again, for a total of $20,700 plus 7% ($1,449) of that amount. Very quickly, you can start seeing every single dollar in your savings working for you 24/7.

If you managed to max out your plan for about 20 years, you will end with almost a million dollars after 20 years.

Your Money’s Gatekeeper

I am taking the opportunity of writing about this topic hoping to reach out to more fellow teachers and create awareness. My hope is that at some point our 403B plans make it to the news as a scandal; one of the biggest scams and rip offs to the people we claim to love and supposedly hold in high regard.

I will not go over what 403B plans are again, but if you are interested just read my previous post.

For a long time, districts have managed our 403B plans. However, and unfortunately, that is not the case anymore. Now many districts have passed the torch to the so called TPAs(Third party administrators). These are companies that make sure that districts are complying with all the rules and regulations demanded by IRS, since these are tax deferred accounts.

That doesn’t sound bad at all, right? Well, the problem is that many of these companies also act as a gate-keeper for sound investing firms. Let me explain.
Upfront, the TPA service provided to the district is not paid by the employee, at least not directly, but rather by the investing firms that offer mutual funds and index funds to the employees. I know, it is confusing, and confusion lends itself for shenanigans.
So, imagine a company such as Vanguard or Fidelity. They have been around for years and they offer great investing products at a very low cost. However, the TPA that works with your district might demand from Fidelity $30-$50 per employee that will have access to their service.
Fidelity, on the other hand may say, “well, we are not doing it because we have great products and we are not paying a gatekeeper to serve teachers or any other public employee.So, we are out!” 

With that, you, as an employee, lose your access to great investing opportunities.

Then the TPA that works for your district may come up with the argument that under their umbrella(Gatekeeper’s umbrella) they have great and diverse options. Which is where the problem starts.

One of the first options you may see in your district’s list is AXA. One of the companies, or the one company with the highest fees out there. It works more like an insurance company than an investing one. They offer annuities, which is basically what our pensions are. Very limited growth and very, I mean outrageous, high fees. They promise guaranteed growth as well as capped earnings. That guarantee is where they make their money and it also makes you poor.
There are people paying 5-6% in fees. Historically the market has had a return of almost 7% since inception, which would leave you with a minimal yearly growth. Taking in consideration that yearly inflation is around the 3% mark, draw your own conclusions. I will spare you the pain and I won’t mention anything about when the market doesn’t grow at all.

In other words, they are ripping us off.

Since I don’t want to get sued, here is my disclaimer:
I am not a professional and I have no idea what I am talking about. I am simply exercising my freedom of speech. If you need help with your finances, talk to a certified professional who promises to have a fiduciary responsibility to act in your best interest and behalf.