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Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
  • Time to sell or buy ?
    I'm starting a position in PSMM tomorrow, which along with JEPI and ESGV should hopefully make better use of cash in my 2 Fidelity retirement accounts. Seems like a better strategy than making short-term trades in FTANX and FASMX, for example.
  • Is it smart to for retirees to get out of the stock market entirely?
    Maybe add holding exposed to the stock market as one ages...rising equity glidepath.
    Should Equity Exposure Decrease In Retirement, Or Is A Rising Equity Glidepath Actually Better?
    should-equity-exposure-decrease-in-retirement-or-is-a-rising-equity-glidepath-actually-better
  • 50 Essential Retirement Statistics for 2020
    Before reading @bee 's comments, I had the same question: are these expenses for a household or for an individual? Bee observes that some categories don't add up, e.g. housing. (In housing, I'm not sure that they're supposed to - one either owns or rents a home, not both)
    This dubious arithmetic extends to the bottom lines - they are much greater than the sum of the bolded components. I think that addresses @Derf 's observation that transportation isn't included. Apparently, transportation (including travel?) is not considered a "key category" (see text at top of chart).
    Note that these are means, not medians. So while the text suggests that these figures illustrate how your spending might change in retirement, I'm not so sure.
    Here's actual data from the 2018 BLS Consumer Expenditure Survey, by age. The numbers don't exactly match the table above, but they're close enough. The difference could be due to the fact that I'm looking at a column labeled "65 years and older", which is not the same as "retired".
    https://www.bls.gov/cex/tables/calendar-year/mean-item-share-average-standard-error/reference-person-age-ranges-2018.pdf
    FWIW, the mean transportation spending by a "consumer unit" with age 65+ is $7,270, while the national mean for consumer units is $9,761.
    The BLS defines a "consumer unit" as:
    either: (1) all members of a particular household who are related by blood, marriage, adoption, or other legal arrangements; (2) a person living alone or sharing a household with others or living as a roomer in a private home or lodging house or in permanent living quarters in a hotel or motel, but who is financially independent; or (3) two or more persons living together who use their income to make joint expenditure decisions. Financial independence is determined by the three major expense categories: Housing, food, and other living expenses. To be considered financially independent, at least two of the three major expense categories have to be provided entirely, or in part, by the respondent.
    https://www.bls.gov/cex/csxgloss.htm#cu
    Of course, since we're classifying by age, and a "consumer unit" consists of more than one person, we need to be clear on what "age" means for that unit. It's the age of the "reference person".
    Reference person - The first member mentioned by the respondent when asked to "Start with the name of the person or one of the persons who owns or rents the home." It is with respect to this person that the relationship of the other consumer unit members is determined.
    https://www.bls.gov/cex/csxgloss.htm#refper
  • 50 Essential Retirement Statistics for 2020
    Three-quarters of Americans agree the country is facing a retirement crisis, making research around the topic more relevant than ever. We dug into the data on every angle of retirement and compiled the most important statistics below. Read on to learn about what today’s retirees face, from financial challenges to lifestyle decisions and more.
    https://annuity.org/retirement/retirement-statistics/
    Does the chart below appear to be for a couple or an individual? If single, $100K / yr (for a couple) in retirement spending seems like a high hurdle to achieve. But wait... housing costs wouldn't double, would they for a couple? Are these studies forgetting that, in reality, many retirees have a wife, life partner, or family member that share many of these expenses. Also, some of these numbers are additive (take a look at telephones services...the subgroup costs add up to the bold number. The housing numbers don't add up...what gives?
    image
  • Let the SS COLA Projections for 2022 Begin
    Further Reading on:
    Reducing Retirement Risk with a Rising Equity Glidepath
    Rising Equity Glidepath
  • Let the SS COLA Projections for 2022 Begin
    Here the Buying Power Study referenced in @davfor link and an image. Staying ahead of inflation when you no longer enjoy wage inflation (a raise from work income) is probably why Wade Pfau and Micheal Kitces recommend a increasing equity glide path from the date of retirement forward. Stocks stay ahead of inflation over the long term.
    Should Equity Exposure Decrease In Retirement, Or Is A Rising Equity Glidepath Actually Better?
    should-equity-exposure-decrease-in-retirement-or-is-a-rising-equity-glidepath-actually-better
    Social Security Buying Power
    temporary-improvement-in-social-security-buying-power-wiped-out-by-soaring-inflation
    image
  • Oakmark Small Cap Fund in registration
    Some history:
    https://www.sec.gov/Archives/edgar/data/0000872323/000104746903024284/a2112100z497.txt
    497
    1
    a2112100z497.txt
    497
    SUPPLEMENT DATED JULY 16, 2003
    TO PROSPECTUS OF THE OAKMARK FAMILY OF FUNDS DATED JANUARY 29, 2003
    THE OAKMARK SMALL CAP FUND - NEW CO-MANAGER
    Edward A. Studzinski, C.F.A., has become co-manager of The Oakmark Small Cap
    Fund with James P. Benson. Mr. Studzinski has replaced Clyde S. McGregor. Mr.
    McGregor continues to manage The Oakmark Equity and Income Fund with Mr.
    Studzinski. Mr. Studzinski joined the Adviser as an analyst in 1995. Previously,
    Mr. Studzinski was Vice President and Investment Officer at Mercantile National
    Bank of Indiana. He holds an M.B.A. in Marketing and Finance from Northwestern
    University (1985), a J.D. from Duke University (1974), and an A.B. in History
    from Boston College (1971).
    THE OAKMARK FAMILY OF FUNDS - NEW ADDRESS
    Effective June 1, 2003, the address for The Oakmark Family of Funds has changed
    to:
    FOR MAIL: FOR EXPRESS DELIVERY OR COURIER:
    The Oakmark Funds The Oakmark Funds
    P.O. Box 219558 330 West 9th Street
    Kansas City, MO 64121-9558 Kansas City, MO 64105-1514
    SUPPJULY03
    ======================================================
    Here is when the fund was liquidated:
    https://www.sec.gov/Archives/edgar/data/0000872323/000104746904025313/a2141447z497.txt
    497
    1
    a2141447z497.txt
    497
    HARRIS ASSOCIATES INVESTMENT TRUST
    Supplement dated August 4, 2004
    to the Prospectus of The Oakmark Family of Funds dated January 31, 2004
    LIQUIDATION OF THE OAKMARK SMALL CAP FUND
    On August 4, 2004, the board of trustees of Harris Associates Investment
    Trust, upon the recommendation of Harris Associates L.P. (the "Adviser"),
    approved a plan to liquidate and terminate The Oakmark Small Cap Fund (the
    "Fund"). The liquidation is expected to occur on or about September 28, 2004
    (the "Liquidation Date").
    As of August 4, 2004, a substantial majority of the Fund's total assets
    consisted of cash or cash equivalents, and the balance of the portfolio is
    expected to be in cash or cash equivalents before the Liquidation Date. During
    this liquidation period, the Adviser has agreed to waive its management fees
    payable by the Fund.
    The Fund has not accepted any purchases of Fund shares since August 2nd and
    will not accept any purchases of Fund shares through the Liquidation Date.
    However, at any time prior to the Liquidation Date, you may redeem shares of the
    Fund pursuant to the procedures set forth in the prospectus. Beginning August 5,
    2004, the Fund will waive the 2% redemption fee on shares held for 90 days or
    less.
    You may also exchange your shares of the Fund for shares of any other fund
    in The Oakmark Family of Funds. No redemption fee will be imposed on such an
    exchange transaction.
    Shareholders of taxable accounts in the Fund who do not exchange or redeem
    their shares prior to the Liquidation Date will have the proceeds of their
    account sent to them when the liquidation occurs. The proceeds will be the net
    asset value of such shares in the shareholder's account after provision for
    charges, taxes, expenses and liabilities.
    Absent an instruction to the contrary received by the Oakmark Funds
    prior to the Liquidation Date, shares held in an individual retirement
    account ("IRA"), SIMPLE IRA, or Coverdell Education Savings Account or in
    custodial accounts under a SEP or SARSEP, or in certain other retirement plan
    accounts will be exchanged on the Liquidation Date for Oakmark Units of the
    Government Portfolio, a money market fund.
    HASSUP 804
  • Cash Flow Strategy
    Nice piece. Evensky is a common sense kind of guy. I'm not sure where that excerpt came from, because it looks somewhat like a mashup of three consecutive paragraphs on p. 71 (pdf p. 9) of the cited paper. It's worth reading what's in the paper for emphasis. I've highlighted some additonal text:
    Clients think that because they are retired, the way to get income is through dividends and interest. Such thinking arises from what my partner Deena calls the “paycheck syndrome,” and it is nonsense. ...
    ... if clients depend on income largely from their bond portfolios, then when interest rates go up, they feel rich. But what is actually happening to the value of their portfolio? It is going down. When interest rates go down, they feel poor, but the portfolio value is going up. The strategy runs counter to financial reality. ...
    People need real income. They need real cash flow, not nominal cash flow, and they do not get that real cash flow from an income portfolio.
    In a nutshell, this is why I (and some other posters here) focus on total return, not yield.
    See also M*, Income vs. Total Return: Who Says You Need to Take Sides?
    Needless to say, I also like what he has to say about Monte Carlo analysis:
    [T]here is nothing new about it. ... I think it has been misused and overused. ...
    I see several problems ... First, the increased number of guesses that Monte Carlo allows does not mean more accuracy. Second, Monte Carlo devalues the goal-setting process. Third, Monte Carlo probabilities are all or nothing. If Monte Carlo says I have a 70 percent chance of success, what does the remaining 30 percent mean? Starvation? Finally, Monte Carlo offers no insight into the unexpected, such as a Katrina event or the subprime crisis.
    He goes on for several paragraphs with examples and ways to address his concerns.
    The cash flow strategy described may be better known as the two bucket strategy:
    The first bucket strategy was developed by financial planning pioneer Harold Evensky in 1985. This was a two-bucket approach with a cash bucket holding five years of retirement spending, and a longer-term investment bucket consisting mostly of stocks. When the stock market performed poorly, withdrawals were taken from the cash account to avoid selling stocks in a down market, and when the stock market did well withdrawals were taken from the investment bucket, and investments from this bucket were also sold to replenish cash.
    https://www.advisorperspectives.com/articles/2020/04/20/bucket-strategies-challenging-previous-research
    As a complement to the final section of the paper, Other Strategies, here's Wade Pfau's Fortune piece on managing sequence of return risk.
    https://www.forbes.com/sites/wadepfau/2017/04/12/4-approaches-to-managing-sequence-of-returns-risk-in-retirement/?sh=5bda15b66fcf
  • Cash Flow Strategy
    An excerpt from a longer writing. Both seemed worth sharing.
    E&K Cash Flow Strategy. Sometime in the early 1980s, at Evensky and Katz we developed the E&K cash flow strategy that we continue to use today. It allows us to break the paycheck syndrome -The traditional withdrawal strategy for retirement is the income portfolio. It is a deeply flawed strategy, and any financial adviser who recommends income portfolios should cease and desist. Clients think that because they are retired, the way to get income is through dividends and interest. Such thinking arises from what my partner Deena calls the “paycheck syndrome,” by providing clients with a regular cash flow that they can depend on. Typically, it also includes an inflation adjustment because pay typically goes up with inflation.
    To implement the cash flow strategy, we bifurcate the portfolio into two components—the cash flow reserve and the investment portfolio. The cash flow reserve portfolio is made up of two parts: two years’ worth of cash flow and any amounts needed for lump-sum expenses—a wedding, a new car, for instance—over the next five years. We base this amount on our five-year planning model. We do not believe in investing in stocks or bonds unless we have a five-year window in which to decide when to sell. We thereby mitigate the timing risk because we have control over the timing.

    Retirement_Income_Redesigned_Master_Plans_for_Distribution
  • Thiel's Roth IRA is worth $5B, in comparison Romney was a piker
    The problem is no one in Congress thought about putting an upper limit on Roth IRA withdrawals when they wrote the law
    Congress has done the opposite for inherited IRAs by eliminating the stretch provision for heirs. All inherited IRAs (including Roth IRAs) must be fully distributed within 10 years. This at least forces this $5 billion Roth account to be liquidated 10 years after the death of the Account holder.
    Had Theil bought these shares in a taxable account the $5 Billion would also be mostly tax free to his heirs based on the step up provision that:
    When someone inherits property and investments, the IRS resets the market value of these assets to their value on the date of the original owner’s death. Then, when the heir sells these assets, capital gains taxes are applied based on this reset value. The result is a situation – often considered a tax loophole – that allows investors to pass assets to their heirs virtually tax-free.
    image
    https://darrowwealthmanagement.com/blog/step-up-in-basis-on-certain-inherited-assets/
    Also,
    If President Biden gets his way, many wealthy Americans will no longer be able to pass stocks, real estate, and other capital assets to their heirs when they die without paying capital gains tax. He wants to do this by changing the tax rules that allow a "step up" in basis on inherited property. This proposal, along with others designed to increase taxes on the wealthy, is included in Biden's recently released American Families Plan – a $1.8 trillion package that includes spending on childcare and education, guaranteed paid family and medical leave, tax breaks for lower- and middle-income Americans, and more.
    https://kiplinger.com/retirement/estate-planning/602701/biden-hopes-to-eliminate-stepped-up-basis-for-millionaires
  • Thiel's Roth IRA is worth $5B, in comparison Romney was a piker
    From ProPublica:
    Using stock deals unavailable to most people, Thiel has taken a retirement account worth less than $2,000 in 1999 and spun it into a $5 billion windfall. To put that into perspective, here’s how much the average Roth was worth at the end of 2018: $39,108.
    https://www.propublica.org/article/lord-of-the-roths-how-tech-mogul-peter-thiel-turned-a-retirement-account-for-the-middle-class-into-a-5-billion-dollar-tax-free-piggy-bank
    To put that into a different perspective, Romney's (traditional) IRA, disclosed as a 2012 presidential candidate, was valued at "merely" between $20.7 million and $101.6 million.
    https://www.reuters.com/article/us-usa-campaign-romney-ira/how-did-romneys-ira-grow-so-big-idUSTRE80N04E20120124
    This is just so far over the top that I'm not going to offer any other quotes or comments. The figures speak for themselves, and the legislative proposals seem to be as expected.
    https://www.wsj.com/articles/what-peter-thiels-roth-ira-means-for-yours-11625218209
    WSJ: What Peter Thiel’s Roth IRA Means for Yours
  • JULY commentary, mugs, profiles, vacation recs and more!
    Hi, guys.
    Sorry for the long absence. I think the Semper + Brentview launch was a sort of "kindred souls" thing. I spoke at length to the guys involved and they seemed very much united in their view of each other and their relations with the investor community. Not sure that it's part of any larger plan, fyi.
    Three things.
    (1) on younger / more aggressive investors: you'd want to separate the monthly issue from the board discussions and, within the monthly issue, the commentary pieces from the fund profiles. My commentaries generally do have a fair risk-consciousness but a bunch of the profiled funds at nearly 100% equities and often in higher risk / higher return segments (EM value or microcaps). Even within those spaces, I tend to have more respect for managers who'd prefer not to impoverish you, since some people react poorly to losing 60% of the their money.
    I did, by the way, try to arrange an alliance with a site dedicated to younger investors. They reached out to us, I responded and didn't hear back, then responded again and experienced more silence.
    I anticipate two profiles for the aggressive in September: North Star Microcap and Baillie Gifford Long Term Global Growth. The former keeps popping at a top MCV fund and we're investing in the latter for Will's Roth IRA: he turns 21 next week and the Roth should have a 45+ year window. Dan Wiener, aka Dan the Vanguard Man, made a strong pitch for BG and has almost all of his clients invested in it.
    (2) on August: at most we'll post the four pieces that are already essentially ready (an Elevator Talk with attorneys specializing in ESG disclosure issues, the T Rowe Price Retirement Blend series launch, Corbett Road Opportunity ETF and StandPoint Multi-Asset), perhaps with a short wine review as my monthly letter.
    I read a really disheartening news story that makes me dislike VC and bitcoin even more: a VC fund is running a gas-fueled power station that (a) is providing power for bitcoin mining and (b) is dramatically warming Seneca Lake. They're response to "you're destroying the most iconic of the Finger Lakes" is "hey, we got the permits to do it!"
    (3) on celebrating you: we have some of the MFO coffee mugs left and I'd happily share with you. Just drop a note to my david at MFO email and I'll take care of it as soon as I can. image
    Buying a 2018 Camry today after a failed search for an inexpensive but reliable used car for my son, Will. (10 cars, 10 test drives, three full mechanical reviews = 10 disasters waiting to happen. So I'm "selling" my Kia to Will and upgrading.) Chip and I head to Pittsburgh Monday, we visit my family Tuesday, head northward Wednesday to be with her family for her son's wedding ... then onto the Wine Trail! Thanks for the leads!
    David
  • Top Mf rose 140% in a yr
    Have MSSMX in a retirement account. Bought into it a couple a months ago after it plateaued.
    Also have BRUSX in taxable and non-taxable accounts. which is behind BRSVX according to M*:
    https://www.morningstar.com/funds/screener-rank
    Other funds not performing as well as those in the WSJ article, but are tops in their categories are EVDAX and BIVRX.
  • Revisiting Defensive Funds
    Currently, due to high equity valuations, my portfolio's limited equity exposure is confined to these three defensive funds: CTFAX, JHQAX and VWINX. For the bond portion I use CLMAX, NVHAX and RCTIX, along with the bond-like alternative fund ARBIX. The rest of my portfolio, roughly 15%, is in cash and may find a temporary home in SH, the inverse equity ETF, during the next market crash.
    Since my retirement, I have found the advice of another poster always very helpful: "I don't really need a lot more money - but I certainly don't want to lose a lot. I need to remind myself to err on the side of caution."
    In the current market environment, I am quite satisfied if my annual total return is within a range of 4 to 6%.
    Good luck, and many thanks to Lynn Bolin for his valuable contributions.
    Fred
  • AMG to Acquire Parnassus Funds
    Complete text of article from Barron's: Affiliated Managers Group, the big holding company for asset managers, has agreed to buy Parnassus Investments, the socially responsible investment firm, for $600 million, according to a person knowledgeable about the transaction.
    The move demonstrates the popularity of environmental, social, and governance, or ESG, investing. In recent years, Parnassus, based in San Francisco, has grown swiftly as the vogue for sustainable investing strengthened and as the firm developed a reputation for reliably good performance. It has five mutual funds, all fossil-fuel free.
    Sustainable investing, also known as ESG investing, has been a huge and steady trend in recent years. In 2020, nearly a quarter of all fund flows went into sustainable funds. That could gain strength as U.S. retirement plans open up to sustainable investing.
    About a third of the $51.4 trillion of U.S. assets under management is sustainably managed, according to US SIF, the trade group for the sustainable-investment industry. Indeed, a survey by investment manager Schroders found that 69% of retirement-plan participants said they would or might increase their overall contribution rate if their plan offered ESG options.
    Both Parnassus and AMG (ticker: AMG) declined to comment or confirm the terms of the transaction. The transaction is subject to the agreement of Parnassus fund shareholders.
    Parnassus is approximately 35% owned by its employees and 65% by the founder, Jerome Dodson, and his family. It oversees $47 billion. AMG invests in independent investment managers and allows them to remain independent while providing capital, distribution, and other capabilities to affiliates such as AQR Capital Management and Yacktman Asset Management. It has roughly $720 billion in assets under management.
    In recent years, some of the most venerable names in U.S. sustainable investing have been purchased by larger entities. Calvert Research & Management was acquired by Eaton Vance in 2016, which in turn was bought by Morgan Stanley (MS) this year. In 2018, Pax World Management was acquired by Impax Asset Management (IPX.London). Trillium Asset Management was purchased last year by Australian financial services company Perpetual. This year, AMG bought 15% of Boston Common Partners, while Boston Common’s management team and principals retained 85%.
    AMG has agreed to pay Parnassus $400 million in cash on closing and an additional $200 million one year later. There is an additional performance fee, according to the person familiar with the transaction. As part of the transaction, Parnassus CEO Ben Allen and chief investment officer Todd Ahlsten, both longtime employees, are signing contracts to remain with the firm. Ahlsten is also a member of the Barron’s Roundtable.
    Founder Dodson, 78, a longtime star investor, stepped back last year, leaving Parnassus Endeavor Fund (PARWX) and the funds’ board of trustees. Dodson founded Parnassus in 1984 with $350,000 from friends and family.
    Write to Leslie P. Norton at [email protected]
  • JULY commentary, mugs, profiles, vacation recs and more!

    I dearly wish, however, that MFO wasn't almost exclusively aimed at catering for those in retirement or approaching retirement.
    There is practically nothing at all within these pages to cater for or appeal to those starting out on life's investment journey. In fact, nothing to appeal to those from 18-45. .... I'm still seeking agressive growth.
    That sounds a bit ageist, don't you think?
    Expanding on Catch's suggestion to look at the discussions:
    I've posted several comments speaking positively about Pfau and Kitces research on rising glidepaths in retirement. In a sense I've gone further, suggesting that if you're investing to leave a legacy, you might consider the heir's lifetime not your own for the investment horizon. Many, um, older people have reasons to invest as aggressively as "those starting out".
    Then there's the question of what you mean by "aggressive growth". If you're looking for a gambling table, here's a recent thread on dogecoin, appropriately titled "keep gambling ?!! Anyone buying dogecoin"
    Or perhaps you're looking for posts on the latest hot fund manager. There's been a fair amount posted on Cathy Wood, e.g.
    https://mutualfundobserver.com/discuss/discussion/57508/ark-investing-etfs-interview-with-cathy-wood
    https://www.mutualfundobserver.com/discuss/discussion/57784/digging-into-ark-innovation-s-portfolio/p1
    https://mutualfundobserver.com/discuss/discussion/57574/you-want-some-more-ark-coming-soon-to-a-choice-near-you-x
    Personally, not my cup of tea. To add to the comments of some of the posters in those threads, I find the buzz reminiscent of that surrounding Van Wagoner. All I know of Tsai is what I read in history books, but it seems there were similarities to him as well.
    "Aggressive growth" might mean building an aggressively allocated portfolio or it might mean disregarding "risk". On the former, there's been a fair amount of discussion about giving up on bonds. On the latter, I've questioned how risk is quantified, or if it even matters: "why do you care about the volatility of an investment you won't touch for a decade or more?"
  • JULY commentary, mugs, profiles, vacation recs and more!
    Interesting July commentary, as usual.
    I dearly wish, however, that MFO wasn't almost exclusively aimed at catering for those in retirement or approaching retirement.
    There is practically nothing at all within these pages to cater for or appeal to those starting out on life's investment journey. In fact, nothing to appeal to those from 18-45. I'm 55, and Lynn Bolin's monthly articles bore the hell out of me despite their impeccable quality. I'm still seeking agressive growth.
    What's a younger invester to do?
  • Withdrawals from your TSP plan
    I had no idea.
    The Washington Post
    Personal Finance
    Your retirement with Michelle Singletary.
    A reality TV couple wanted to ‘bless’ Black people suffering financially. The FTC says it was a pyramid scheme.
    A Texas couple once featured on an OWN network reality show “Family or Fiance,” promised people they could get a financial blessing of 800 percent in as little as a week.
    It turns out they were running a pyramid scheme that targeted and then bilked Black people affected by the pandemic, according to two lawsuits filed against the Black couple.
    In a joint complaint filed on June 16, the Federal Trade Commission and the state of Arkansas accused Marlon and LaShonda Moore of operating a pyramid scheme program called “Blessings In No Time,” or BINT. The Texas attorney general also has filed a lawsuit against the couple for scamming needy Black families.
    For an upfront fee of $1,400 or $1,425, participants were told they could receive a return of $11,200 or $11,400 respectively — eight times their contribution to a “blessing loom.”
    “In general, these schemes falsely promise a big return — or as BINT termed it, being ‘blessed out’ — following a modest initial payment,” the FTC and Arkansas complaint said. “In reality, however, very few consumers make any money. And the few consumers that do make money sometimes lose their profits by reinvesting in the scheme.”
    Marlon Moore is known as DJ ASAP, which he says in marketing materials stands for “Always Serve A Purpose.” Participants said in interviews that the couple often chastised people for not recruiting enough. And in one call, they tried to discredit my reporting and warnings about pyramids schemes, one participant said.
    Attempts to contact the Moores were unsuccessful.
    Coretta Vanterpool of Florida said she lost close to $13,000. In total, Vanterpool said she and the family members she recruited were out $30,000. Others paid as much as $62,700 to participate in BINT, according to the FTC.
    Vanterpool said she was told that an initial contribution of $1,425 would net her a “blessing” of $11,400 in seven to 10 days. To make even more money, she paid for multiple places on the blessing loom board. She was going to use the money to help pay down some of her $50,000 in student loans.
    “They just made it sound so real, so nice,” said Vanterpool, whose nephew recruited her. “Since he received his first payment, he thought it was legit. A lot of people came in because they had been furloughed or they had lost their jobs. Their companies had closed. A couple of ladies were about to lose their homes. I met one lady through the group who was trying to get the money so she could pay for chemotherapy.”
    The type of fraudulent schemes alleged in the complaint go by various names — sou-sou, gifting circle, money board, or blessing loom. The illegal operations borrow the principles of legitimate sou-sous, informal savings clubs that have cultural roots in West Africa, the Caribbean and other immigrant communities.
    In the real-deal saving circles, groups are small. People pool their money, taking turns receiving a payout. But they don’t get back more money than they put into the pot. It’s more like a forced savings program with accountability partners.
    The hallmark of an unlawful pyramid scheme hinges on two key elements: You are asked to pay an upfront entry fee with the expectation of a significant payout, and you have to recruit others to do the same.
    Typically, people are relentlessly pushed to recruit. There are steps or levels of the circle or octagon that lead to a center, which is when you are supposed to get your payout. The core of the con is that you’ll get a substantial “gift” relative to what you put up from people joining after you. The whole enterprise eventually collapses, and the last folks coming in — the wide base of the pyramid — lose their money.
    Here’s why these scams work. Some participants get the promised payout. They in turn share testimonies of their substantial gains. But after several rounds of this fraudulent scheme, the money dries up because not enough new people are recruited who are willing to make upfront payments.
    I’ve been reporting the rise of illegal pyramid schemes since last summer as desperate folks started looking for quick ways to make money. Promoters often target certain communities in which they share an affinity. Black promoters, for example, have been exploiting the disenfranchisement that many African Americans are feeling, especially those who have lost jobs because of the coronavirus. The operators get recruits to drag in family and friends, fellow church members and co-workers.
    The message of building Black wealth that the Moores espoused resonated with people, the lawsuits said.
    “People were really vulnerable, just ready for any kind of hope,” one California woman who was involved in BINT said in an interview. “They were talking about building a Black community and building generational wealth. Those are the catchphrases now. They were just kind of selling people a dream.”
    I asked Vanterpool how she felt recruiting family members who lost money.
    “It hurts because I brought someone else into a situation that they didn’t have to be in when they were already suffering,” she said. “I’ve put in money that I really don’t have that I should have just used for what it was for and that was for my loans. Now I’m starting back at square one and hoping and praying that I’ll get this money back.”
    Reader Question of the Week
    If you have a personal finance or retirement question, send it to [email protected]. In the subject line put “Question of the Week.” Please note that questions may be edited for clarity.
    Q: As a federal civil service employee, I heard that when I retire, I can’t specify which Thrift Savings Plan fund (e.g., C fund or G fund) I can withdraw from. It sounds like any amount I withdraw will be from all funds that I have invested in. Is this true?
    A: For those not familiar with the federal government’s workplace retirement plan it’s called the Thrift Savings Plan or TSP, which is available to federal employees and members of the uniformed services, including the Ready Reserve.
    TSP generally offers the same types of savings and tax benefits that many private corporations offer their employees under their 401(k) or similar plans.
    If you have a TSP and will be tapping the funds, you should read “Withdrawing from Your TSP Account.”
    You can leave your entire account balance in the TSP after you leave federal government service if the balance is $200 or more.
    The options in the TSP include the following:
    G Fund – Government Securities Investment Fund
    F Fund - Fixed Income Index Investment Fund
    C Fund - Common Stock Index Investment Fund
    S Fund - Small cap stock Index investment fund
    I Fund - International Stock Index Investment Fund
    L (Lifecycle) Funds - A diversified mix of the five core funds (G, F, C, S, and I)
    So, as to the question, can you withdraw from specific TSP funds? The answer is no. Distributions are taken proportionately from each fund.
    When participants retire, they can specify whether they want to withdraw solely from their traditional (pre-tax) balance or from their Roth money. But, “the withdrawal will come from all of the funds,” said Kim Weaver, director of external affairs at the Federal Retirement Thrift Investment Board. “A participant cannot specify which fund she or he wants to withdraw from.”
    Weaver said participants can rebalance their accounts with an interfund transfer if they want to, pre or post-withdrawal.
    Two years ago, there were major changes to withdrawal options for TSP account holders. Here’s a Washington Post article that explained the changes:
    Federal employees have more withdrawal choices for their retirement savings
  • Rollovers: There has to be a better way
    We had similar experience with Fidelity as @Tarwheel on rollover transfer. I discussed how I was going to transfer with a Fidelity representative ahead of time. Sold all proprietary funds and other NOT on Fidelity NTF platform and let the rest transfer-in-kind. As noted above, the entire transfer took less than one week to complete.
    Concur that Fidelity’s website runs smoothly and have solid person support on phone or online chat. Did not quite appreciate these features until the pandemic last year. Also Fidelity has other tools to calculate for retirement $ and asset allocation in order to meet your project goal (in probability term or at least an estimate). Vanguard has a similar tool but they are not as intuitive and organize all in one place. This would really help to work with an advisor sometime down the road if you wish to.
  • Some 401(k) plans may start offering cryptocurrency as an investment option. Why that’s a bad idea.
    The average employee has trouble often understanding how a 401k works in many cases let alone cryptocurrency. I find the "personal responsibility" argument to be a hackneyed one I often hear emerging from libertarians. One response I have to that--as you can make a similar argument for almost any dangerous product--what is the personal responsibility of the drug dealer to the drug taker? Why is it always the consumer of the product that is blamed with that personal responsibility mantra? If you offer a faulty dangerous product and sell it to consumers, you should be blamed. And yes, offering crypto will be a magnet for lawsuits. 401ks are a common target for lawsuits as they work well in class action suits and the laws about what are suitable investments for retirement plans are strict.
    Financial literacy... The world's most serious issue.