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Author: rjm1 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75781  
Subject: Re: Balance of Retirement Funds Date: 9/12/1999 4:33 PM
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I am a new Fool but my wife says I'm just an Old Fool.

I am 54 and plan on retiring at 65. Children will be out of
college soon, the house is paid for, and I don't have any debt.
I am self-employed and put everything I can into a SEP-IRA.

I presently have about 85k in IRA Bank CD's. I have about
30k in IRA mutual funds (S&P 500 Index), about 40k in
non-IRA mutual funds (S&P 500 Index), and about 75k in a
mixed bag of stocks (Banks, Utilities, Health Care) that were
given/willed to me.

My questions involve the proper "mix" of CD's, Bonds,
mutual funds, stocks, etc.

1. What do the "wise ones" suggest as a mix between CD's,
bonds, stocks, mutual funds for someone who wants to see
their money grow but couldn't bear to have everything he
owned riding on the stock market.

2. The stocks are in sound companies, several are in S&P
500, but there are no rockets. Any benefit to selling the
stocks and putting them into an Index Fund?

3. Should I consider Bonds (Tax-free or otherwise) in my
mix of investments?

4. I have about 60k in one bank stock handed down to me
from my grandfather. I don't have any idea of what the capital
gains tax would be if I sold it (since the stock was a startup
of the bank) but I am sure the tax would be significant. How
do I analyze whether or not I should sell them and put them
into my Index Fund? This is a small hometown bank and my
gut feeling is that it will get gobbled up one of these days by
a megabank and the stock may be worth more at that time than
it is now.


My first question is do you have an emergency fund. This can be in CD's Money market etc. Assuming yes.

The CD's should be moved to individual corporate bonds (since in IRA tax free bonds should be avoided). If risk is to high look at goverment backed bonds like GINA Mae or Treasury. Note, The only reason for the move is that I am assuming you will get a higher rate of return.

I would lean toward putting the CD's into a stock index fund, balanced fund (bonds and stock) etc. I would want the extra return and would not be too worried about the market risk. You might want to do this with the idea that the 10,000 saved per year is going to go into a CD or bond that will mature 10 years from purchase date. You would spend the money when the bond maturied.

If the bank stock is not growing at least 10% a year consider selling and going into a mutual fund. The max capital gains tax would be 20% of the sale price.

To me it sounds like you are very conservative and therefore mutual funds maybe a better investment than individual stockfor you. You will get more diversification but probably a lower return. May also be easier to sell small parts of the fund in retirement that individual stocks.
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