Ask the Grumpies: Roll over 403(b) to new employer or not?

Amanda asks:

We moved [to a new job in a new state].  Although I continue to have access to TIAA-CREF in my new job and matching contributions that are comparable, the fund selections aren’t identical.  For instance, I have access to a small cap index fund with a slightly (.06% vs .05%) lower fee structure at my prior job (and with similar 5-10 year returns). Obviously new contributions have to follow my new employers plan. But what about the previous contributions? Should I roll over and combine funds, even though the fund isn’t QUITE AS good as before (but very close)? Or not? Why or why not?

Standard disclaimer:  We are not financial advisors.  We do not have fiduciary responsibility.  Consult with a fee-only advisor or do your own research before making any major financial decisions.

You actually have three options, not two.

  1. You can keep things as they are
  2. You can rollover into your new employer’s 403(b)
  3. You can rollover into an IRA

All of these have pros and cons (but probably not major pros and cons).

Keeping things as they are (option 1) means that you’ll have more accounts, more clutter, more chances of losing paperwork or having your loved ones deal with hassle later on in your life should you cede financial decision-making prior to emptying the account.  But the fees are lower, which makes it more attractive than your new employer.  And if you make the switch now, you’re the one who will have to deal with hassle.  Make sure that they don’t have additional fees for people who are no longer working at the company– if they do, then definitely don’t choose the first option.

Rolling over into the new employer’s 403(b) (option 2):  The sole benefit to doing this is that you would have less clutter.  Everything would be in one place.  If you die suddenly, nobody has to go looking for passwords to a second account.  If you hate having multiple accounts, then go ahead and consolidate.  You’ll be paying for the privilege, but not that much.  (Less, in fact, than I pay to use Target Date funds instead of rebalancing manually.)

Rolling over to an IRA (option 3) means you could just put everything in Vanguard along with any taxable funds and IRAs/IRA-Roths you already own.  Your fees would be low.  However, having a large traditional IRA could cause complications should you ever want to convert some of your traditional IRA to a ROTH or if you want to start making contributions to a backdoor Roth.

Grumpy Nation, what would you do in Amanda’s case?

Adventures with tea

At Christmas I got an excellent teapot and DH got himself an electric kettle (for his coffee habit).

One great thing about this teapot is that it has a large mouthed bucket filter.  My previous adventures with loose-leaf tea have involved balls of various kinds and sizes which are pain to fill and a worse pain to clean.  With this teapot I just scoop out two tablespoons of tea (one for the pot and one for me), fill with hot water, and then dump out the solids into the compost when I’m done.  The dishwasher will take care of any lingering tea residue.

I don’t drink caffeine on a regular basis (because when I need it for migraines I really need it, also withdrawal is a harsh mistress), but I do like herbal tea.  It turns out a lot of loose leaf tea is better than a lot of teabags, which has given me a new appreciation for even teas that I like in bag form (for example, mint). I’m still not that crazy about roobios (I overdid it on roobios teabags when it came out and have not yet recovered) and straight ginger tea reminds me of morning sickness (since constantly drinking it was the only thing that would keep me from throwing up early on with both kids).

I went to a great cafe in The City where the nice lady at the counter recommended hibiscus mint, which mixes my two favorite teas together.  She even gave me some loose tea to take home even though they don’t sell loose tea.  On a later City trip I went to an actual tea shop and got bags of different teas, some of which I wasn’t crazy about and gave to DH and some of which I really liked.  They have a great mint, but they didn’t carry hibiscus by itself, only in mixes, so I couldn’t recreate hibiscus mint. (The lady there suggested trying the Mexican grocery chain for hibiscus, but we didn’t make it to one.)  And, sadly, their rose bud tea seems to have been contaminated with something I’m allergic to (which could be any number of things, like grass or any number of tree pollens)– I love rose, but I don’t love hives.

I tried the teashop in our town, but they only had mixes and their teas were kind of stale and unexciting.  :(  I would be surprised if they stay in business, especially with competition from several excellent boba tea places that just opened.

I ordered some hibiscus from amazon, thinking I was getting 4 oz for $10 and actually got a pound.  It’s ok, but not great– misses the tart bite I like most from hibiscus.  It makes a pretty decent iced tea though.  I gave 4 oz to one of my colleagues who makes tea in her office, but 12 oz is still a lot to go through!

On one of my recent conference trips, I stopped at Teavana and really like the box of citrus tea blends that I picked up.  They mix quite nicely with the hibiscus as well.  Generally I’ll do one steeping of just their citrus blend and add a tablespoon of hibiscus to the second steeping.

I considered going to the rishi tea site and ordering a bunch of samplers from their loose herbal teas (along with another pack of mint), but before doing that, I impulse bought a 3 month subscription to Tea Runners for DH.  It’s supposed to be 3 regular teas and 1 herbal tea, but our first packet was 4 regular teas, including a tea that combines the two things DH hates most in tea– Lavender and Bergamot (he really hates Earl Grey).  (He also dislikes chicory and believes that fruit and meat should never be combined in a savory dish, but that’s the extent of his food dislikes– he’s pretty easy-going.)  So that was a bit of a disappointment.  I may yet do a rishi order.

I like mixing the teas together to make new flavor combinations.

DH sometimes makes his own chai from (Penzey‘s) spices, and I’ve seen other suggestions for homemade herbal teas, but I haven’t gone that route yet.

So:  Tea, when you need something warmer or less fizzy than La Croix.

Do you drink tea?  What kind do you like?  Where do you get it?

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There really is a big difference between comfortable middle class income and upper middle class income

One of the things that annoyed me about some advice for working women is the insistence that if you were making more than 100K you should just buy all the things that make life easier, with an underlying current of it being ridiculous if you didn’t.  The person giving this advice, of course, has a husband who makes substantially more than 100K on top of her own 100K+ income.

During our brief time when DH and I were both employed full-time and we were making upper-middle-class $$ (remember all those irritating posts on “what should we do with this extra money now that we’ve maxed out our 401K” etc.), it became really easy to see why when you’re making that much it is easy to believe that just spending money is the solution.  When you’re making upper-middle-class incomes for long enough (and don’t go crazy with spending on really big ticket items) you really can just say yes to everything.  You don’t have to worry about having a large precautionary cushion because in the case of an emergency, next month’s income will refill the gap, or maybe the month after that.  The answer is always, “yes, we can afford that — even if the roof falls in tomorrow, we’ll be fine.”

But now we’re back to having a comfortably middle-class income on my income alone.  Technically we’re in the long unpaid summer, so we have 0 income, but even with DH employed I saved up for the unpaid summer in case he lost his job (and in this case we saved a bit more than that because we knew there was going to be a layoff… and we, you know, had extra money after maxing out retirement).  And now if we want to spend randomly large amounts of money on something, we have to think about it.  We can have some of the things but not all the things.

So… we could get a new car, that’s in our emergency fund (recall mine is 12 years old and has been having regular issues, DH’s is 11 years old but seems fine), but we couldn’t do that and renovate the kitchen, unless we wanted to sell stocks, at which point we’d be depleting our secondary emergency fund.  So, technically, we could have both, but potentially sacrificing our future security for wants.  And since we spend close to my take-home pay when I have income, it would take a while to replenish our emergency funds without cutting back.  We could buy a refrigerator even though the old one isn’t broken and/or I could see a dermatologist to get skin-tags removed and/or hire a personal trainer and/or have someone else fix our sprinkler system and/or eat out every day and etc. etc. etc. on top of all the things we already spend money on but we can’t do all of those things without dipping into savings or cutting down on our tax-advantaged savings.  We have to make choices that involve money, not just time or desire.

We have to think about where on the need/want spectrum something is.  And thinking about that takes effort.  It’s easiest to default to “no” unless something is important or the cost truly is low.  And yes, sometimes it is worth it to pay for help– DC2 is still in daycare even with DH laid off.  But that doesn’t mean that decisions are obvious and easy.

This is true even if we’re still spending a little bit under what we earn, because we can’t predict emergency expenses in the future.  When the gap between earnings and spending is really large, the emergencies aren’t that important.  When the gap is small, those emergencies could set you back, so ironically, you need a larger emergency fund when you earn less than when you earn more (assuming similar spending).  And it’s harder to refill that emergency fund with a smaller gap, meaning you have to cut back more on spending when you’ve got an emergency.  But most likely, the spending that you’re cutting back on is stuff you wanted less than any new thing or service that you think you might want but haven’t purchased yet.

So no, I’m not saying that people making 100K shouldn’t buy things that make their lives easier.  Just that when you’re making 2 or more times 100K, it’s nothing to say “are you crazy, why wouldn’t you buy that?” Purchasing “that” is a bagatelle in comparison to income.  But when you make less, you have to prioritize and not just on really expensive luxuries.

I’m also not saying that 100K is nothing!  It’s a comfortable income in most of the country (yes, you probably do need a bit more to comfortably support a family in some coastal cities, though probably not as much as most people who complain will tell you) that pays for all of your needs, lots of retirement savings, and lots of wants.  But not all the wants.

Link love

There’s no evidence that immigrants hurt any American workers.

I dunno, seems to me like 10K is pretty cheap to hire a collaborative ghost writer.

I have been having skin problems after showering ever since DH replaced the shower filter (and I didn’t have them on my recent trip).  I am considering getting a whole house filter– we think it’ll be about 2K to buy a 10-year system + professional installation.  Any thoughtsThis is what our water tastes like without filtering, though we do have a kitchen sink filter in addition to the shower filter.

An updated study empirically showing what has been empirically shown before but now in a newer and different context:  Mortgage deductions don’t encourage homeownership, just bigger houses.

The value of a liberal arts education.

Class, relationships, and money

http://delagar.blogspot.com/2017/08/its-streak.html?m=1

My vote is Ghost Pee, but do you know what this mystery liquid could be?

I love how Gabourey Sidibhe talks about books

Martha Wells recommends books.

This is great

So many little video clips of Grandpa Mason

Check out the table of contents, page 11, and footnote 3.  Heck, just read the entire thing.

Ask the grumpies: Should we rent out our house that hasn’t sold?

Amanda asks:

We moved (and we are renting in our new town halfway across the country).   Our house isn’t sold yet and the “summer season” in a university town is coming to an end.  We’d like to be buying a new house in our new town in the winter/spring.

In the meantime, we are pondering whether we should try to rent the old house or not.  The cost of the house (interest on the mortgage, taxes, insurance, utilities and lawn care) ~= $9000 to hold for a year.  We think we could rent for a little less than our total mortgage + escrow payment.  What other issues am I missing as I think about pros/cons?  How would you set up the “math problem” for this decision?

Ugh– not a fun situation to be in.  I hope someone sweeps in this August so you don’t have to make the rental decision.

The main thing to think about:

How much do you hate hassle?  vs. How much do you need/want the 9K/year?

All of my sub-thinkings are basically in the form of how to deal with the hassle should you decide to rent.

  1. Are there any good managerial companies in the area that you trust to take care of things for you?
  2. How would you react if the tenants trash the place or fail to pay?
  3. What are the eviction laws in your old place?
  4. Who can you rent to– anybody or just single families?
  5. Are you thinking of doing a short-term or long-term rental?  (If it’s short-term, then, since you’re moving from a university town, you may be able to use sabbatical homes or your local university website to rent out to a temporary academic).

You may also want to think about how much you would be willing to lower your house price.  Staging it may also be worth some effort.

Here’s a Washington post article on the “math”— it goes into all the literal costs of renting.  Note especially what it says about capital gains taxes if you’ve lived in the place 2 out of 5 of the previous years.  Though this cbs news article talks about the tax advantages to rental depreciation.  This blogpost has a few more things to consider.

I guess you could set up a math problem with expected probability and expected utility, but you don’t actually know what the probabilities are.  It would probably be some dynamic model where you have some probability of selling each month and that right-hand-side would have to collapse to being less than 9000 for you to not rent it out.  Probably too complicated to actually be practical.

Grumpy Nation– Can you be more help to Amanda?  How would you make this decision?  What would you consider?  Any stories about renting/selling/etc.?

In which #1 and #2 discuss Billy the Bookcase

#1: I bought a bookcase and a floor lamp.

#2: Exciting. Well, the bookcase is exciting. Bookcases are full of adventure, similar to boxes.

#1: Billy the bookcase says hello.

#2: Hello, Billy!

#1: Billy is currently downstairs in DH’s car, but we will bring him up in a bit. He’s too much for me to handle on my own. :-)

#2: Ha!

#1: I mean, he’s even taller than DH.

#2: ooh

#1: 79″ bay-bee

[Time passes]

#1: Billy is having a lie-down in the living room until I rearrange my bedroom a bit to fit him in (hah)

#2: Oh my.

#1: bow chicka bow-bow

[More time passes]

#1: last night I made Billy :-)

#2: I’m not sure if that sound vaguely sinister or vaguely dirty. I’m going to go with sinister given your Hogwarts house. Billy is now part of the Slytherin Mafia. Billy is like your accountant now– he does the books.

#1: I screwed him up against the wall.

#2: Oh jeez.

#1: Later I’ll fill him up.

Show us pics of your books, Grumpeteers.  We’ll drool in appreciation!

 

In which we fix the 15 year old fridge again rather than buying a new one

I’m not sure if this was the right decision or not.  Our 15 year old fridge is making whiny noises again.  It last did this (and apparently worse) 3 years ago and DH replaced the freezer fan and everything was fine until just now.  It’s a pretty quick fix involving buying a replacement fan and other bracket stuff, unscrewing a couple of screws, unplugging a few things, then reassembling with the new stuff.

We initially bought this fridge as our own personal fridge when we were working as graduate resident assistants in graduate school.  As such, we did not have much money and bought the cheapest model full-sized fridge at Home Depot (or possibly Lowes).  It is enormously surprising that it has lasted this long.  (Or maybe not so surprising– the newest version of this model is Sweet Home’s top choice for cheap fridges.)

The freezer fan parts cost $70 including shipping.  The replacement fridge we were scoping out costs $800 (on summer sale– regularly it cost $900) and is a little bigger than our current model.  Replacing our current model with a similar GE would cost $500 (on summer sale– regularly costs $600).  Despite DH not having any income, we can easily handle the replacement costs (unlike, say, getting a new car which would put a real dent in the emergency fund and could potentially affect when DH needed to find a new job or when we needed to cut back on spending).

Also of interest to us is the effect of a new purchase on the environment.  New refrigerators are more energy efficient than old refrigerators.  But we’d probably get a slightly larger one than what we have now, and a lot of energy goes into actually making a new fridge.  So what’s the most environmentally friendly option, I don’t know.

So… some folks would tell us not to be ridiculous and to buy a new unit when the old one starts giving us problems since we can afford it.  Others would suggest that we keep repairing it until the repairs get beyond our capabilities.  I’m not sure what’s right.  I don’t like the hassle of dealing with a dicey fridge, but the track record of repairs so far isn’t too bad.  Who is to say that a new fridge wouldn’t be giving us problems in 3 years… not to mention that 3 years is kind of a long time– if I could be sure that my next car problem wasn’t going to happen for another 3 years, I would be ecstatic about keeping my little Hyundai.

Though to be honest, I’m not even sure if I’d be replacing the refrigerator if DH was working and we had more money than we knew what to do with.  We tend not to replace things until we have to.  I guess we didn’t have stupidly large amounts of income long enough for that habit to change, or maybe that kind of ingrained habit never changes.

How do you decide to replace an appliance?