UnThreaded | Threaded | Whole Thread (2) | Ignore Thread Prev | Next
Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75383  
Subject: Re: Defined benefit/purchase service time ? Date: 3/30/2008 6:13 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
Welcome to the board, kimmmm.

A key question is what about inflation from your Arizona state pension. If the payment from that and Social Security are both cost of living adjusted, they could be an excellent program. But many pensions pay a fixed amount for life. Then covering rising cost of living becomes very important. For that equity investments are often recommended because they tend to give better average returns than do fixed incomes.

Vanguard is a quality company, but if you need inflation protection your problem is that in 2020 and beyond your money will be mostly in bonds. So you will need a strategy for growth after that. Reinvesting in another fund is possible, but some deal with this problem by selecting longer term funds, say a 2040 fund--to maintain a higher equity position.

The advantage of the 2020 funds (or similar Freedom funds) is simplicity. They adjust your allocation automatically as you get closer to the target retirement date. You can do the same thing yourself by selecting your own mutual funds, but then the transfers from one fund type to the other might be taxable (although you hope they will mostly be transfers of capital gains).

So that is just a few things to think about. Make sure you plan for inflation during retirement. You will likely be retired over 30 years and costs will probably double at least once and maybe more while you are retired.
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (2) | Ignore Thread Prev | Next

Announcements

The Retire Early Home Page
Discussion on accelerating retirement day.
Post of the Day:
Macro Economics

2.1: The Labor Pool Problem
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement