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Subject:  Re: Retirement planning Date:  4/8/2013  1:57 PM
Author:  sykesix Number:  71811 of 88828

A couple of questions: how do I educate myself best on ETFs? Do I need to trade them actively or just let them alone most of the time? Last, but not least, since interests are low, are Total Bond Market index funds a good idea? In truth, both Vanguard and Fidelity's pension calculators advise me to take those.

A last question: is it worth investing in mutual funds outside a pension plan? If not, I will then begin to transfer those mutual funds to my IRA as of 2014, I suppose. If I do, would I still be paying a fee if I invest in Vanguard's funds, say, in the context of an IRA or 403b?

Those are difficult questions to answer. I have accounts at both Fidelity and Vanguard (I'm not sure why, it just happened that way), and they are pretty equivalent. You can go to either website and find out all you need to know about ETFs and such. One thing I like about Fidelity is that they offer a Fidelity Visa card that rebates 2% of all purchases back into a linked Fidelity account. We run as many household purchases as possible on the card, then I use the proceeds to buy no commission ETFs. It is not a ton of money, but it is better than a stick in the eye. It comes out to a few hundred bucks a year that we wouldn't have otherwise.

The issue of where to put your money (inside the IRA or 403b vs. brokerage account) is hotly debated and I see a clear answer. But the main issues go like this: Your 403b and traditional IRA contributions give you a tax break right now. Then the proceeds are taxed as ordinary income. The traditional brokerage account gives you no tax break right now, but the proceeds are taxed as capital gains, and capital gains tax rates are typically lower than ordinary income tax rates. There are also rules about IRA distributions, which make them less flexible.

With me so far? :) My personal view is to go ahead and max the IRA and 403b and get the tax break right now, for the simple reason there is now way to know what your tax rate will be the future. Bird in the hand and all that. Not everyone agrees with that viewpoint.
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