Finally paid off the mortgage after 15 years. Now I have about $1000 a month to invest for the next 10 years (I'm 57 tomorrow). My car and truck are paid for, credit card (I only have one with a $13,500 limit) is paid up, and I have about $65,000 cash between 3 different 5% online savings accounts. Wife and I have %26k combined in (unmatched)401ks and $35k in IRA accounts (Fidelity & Franklin - doing OK). We definitely haven't saved enough. I'm a middle manager at a company where I've worked for 25 years. I only make $67k per year (Central Florida), wife makes about $20k and that's not likely to change much. Our jobs are fairly secure.I'm not adverse to a moderate amount of risk. Obviously, I have a long way to go to a comfortable retirement. I've been reading for a few months, but just can't decide how to get started. Any suggestions will be appreciated and considered carefully.JJJustdave
Growth Stocks, of course. Or funds which invest in same.
Any suggestions will be appreciated and considered carefully.JJJustdave --------------------------------------------------------------------------Meet with a fee-only financial planner. There are several good ones in Central FL.www.NAPFA.orgwww.GarrettPlanningNetwork.combuzmanMembership disclosure
Any suggestions will be appreciated and considered carefully.I wouldn't waste my money on a financial planner, fee only or not. You might want to look at Vanguard (vanguard.com) and find two or three mutual funds to spread the money around in. Low fee index funds, or possibly some of Vanguard's active funds. I would stick with domestic funds, large and mid-cap, but that's up to you. Good luck.
There is a lot more to retirement planning than buying mutual funds.However Vanguard is a better choice than most. buzman
You may want to look at increasing one or both 401k contributions if you're happy with the fund selections and performance. Even if they're both unmatched, the tax savings now might be worth it as long as you're happy with what's offered.Do you have any large expenses coming up like kid's tuition, remodeling the house, health issues, or caring for a parent?Since you have some risk tolerance, I'd look at something a little more aggressive than the 5% savings/CDs you're doing now. That's a pretty healthy cash cushion compared to your living expenses. Funds are a good choice.
3 simple plans.1) Consider cash. currencyshares.com etfs FXC FXE and others will allow you to diversify. In Florida check out everbank.com they also offer FDIC currency CDs. Basically put 50% in US$ and split the rest into the other currency offerings. The idea is to diversify, not trade currencies.At some point you might toss in an inflation hedge like energy mutual funds or even precious metals.2) go to vanguard and go with an asset allocation fund. very simple one fund no more decisions.3) 50% international bond like BEGBX, 50% total stock market index fund.If you want to get complicated put things that generate taxable income like bonds in the ira.
I agree with the foregoing recommendation to seek the advice of a Fee-Only advisor. The reason for this is you need to know what risk-level you'll need to invest at to get the return you'll require to have the pot of $$ you'll need to fund your retirement in 10 years or so. This is a time value of money calculation that any competent CFP should be able to do for you. It'll take into account your required household income in your retirement year, Social Security/job related pension(s) and your estimated life expectancy. You can do this by guess, but do you really want to?You don't mention if you have an expected pension through your employer(s)/past employer(s), but assuming you do not, your retirement savings are modest, so directed, focused investing is most likely what you need to be doing right now.BruceM
I feel you have been too conservative. Your $65K in cash is actually decreasing in value when you consider inflation plus the taxes you are paying. For emergency funds that is fine, but not for your retirement money. At 57 if you are average you will live 30 or so years.I am going to recommend you look at the dated retirement mutual funds. Many of not all mutual fund companies have them. I checked into some and was amazed to find significant differences in investment approach. For a person at retirement age, some funds had 25% stocks and others 50% stocks. With 30 years for retirement, I think a person should not have 75% of their funds in fixed income.Additionally there are two different ways fees are collected. Most of these funds keyed to a retirement year are just mixtures of other mutual funds. You need to look at the fees in both the 2015 fund and the underling mutual funds. I found a range from 0.6% to 1.9% for total fees.After consideration, I choose the T. Rowe Price retirement funds. Although there fees were marginally higher then Vanguard, I found their investment approach more inline with my wishes.Incidentally, I found using the link below a very easy way to compare different funds. http://moneycentral.msn.com/detail/stock_quote?Symbol=trrgx&Funds=1 You can get total fees, returns, portfolio, etc.GordonAtlanta
At 57 if you are average you will live 30 or so years.Actually, average at 57 would be about 21 years remaining. I find that life insurance mortality tables to be great for these estimates since it is their job to interpret statistics and to get it right. Such a table can be found at http://www.budgetrates.com/mortality.htm.Is your $1,000 on top of already maxing out IRA and 401k? I am assuming no since maxing those out + $1k/mo would eat up about all of your income. So first, I would put the money there. Now we have to decide what to do with it.Because you are looking to obtain a higher return, I would make sure that your asset allocation includes 80% equities and 20% fixed-income. For the fixed-income, I would go with two-year fixed-income fund/index because long-term fixed-income do not correctly compensate investors for the risk, as shown by the higher sharpe ratio when using two-year fund.For equities, I would go with 60% U.S. and 20% International. People perceive other countries to be more risky than their own, but it has been shown that a 40% allocation to international produces the highest Sharpe ratio and can increase returns while reducing risk. U.S.Large 15%Large Value 10%Small 15%Small Value 10%Real Estate 10%InternationalLarge 7%Small 7%Emerging Markets 6%This is a moderately-aggressive portfolio, which is what I would recommend for the type of returns you desire and the time in which you have left to invest. Explore Vanguard's selection of index funds for terrific investment vehicles that will allow you to invest in these asset classes.-Will
Actually, average at 57 would be about 21 years remaining. I find that life insurance mortality tables to be great for these estimates since it is their job to interpret statistics and to get it right. Such a table can be found at http://www.budgetrates.com/mortality.htm.That's a pretty old table - you may want to look for something newer. This one is somewhat newer :http://www.ssa.gov/OACT/STATS/table4c6.htmlas is this :http://www.cdc.gov/nchs/data/nvsr/nvsr54/nvsr54_14.pdfrad
Will:"Actually, average at 57 would be about 21 years remaining. I find that life insurance mortality tables to be great for these estimates since it is their job to interpret statistics and to get it right. Such a table can be found at http://www.budgetrates.com/mortality.htm."That is the 'average'. I shouldn't have said average. You need to plan for beyond 'average life expectancy'. Half of the people will live longer. Some much longer.If you plan on 21 years, better plan on taking out the .45 cal and blowing out your brains on your anniversary of retirement as well...But if you expect to live longer than half the others, you might live 30 years.....or 40 years. One in 100 will easily live to 100.if you are female, you likely will live a handful of years more.t.
You should be considering a Roth IRA.
WOW! Thanks for all the good info. Based on a majority of the recommendations and a weekend of reading I'll be getting a Vanguard account this week, looking at some index funds, and starting a Roth IRA. Still lots to learn, but I feel like I'm at a good starting point.JJJustDave
jjj:Look into TIAA-CREF as well. They have index funds in each of the nine Morningstar categories.
Will while you data may or may not be correct, I think you are missing a key point. Averages are not very important for pension duration planning. If on the average you and your wife will both die in 21 years, planning on funds lasting 21 years is very risky. One of you might live longer -- a lot longer. While planning on living for ever is not smart, I personally would like to look at the 95th percentile as a starting point.GordonAtlanta
Will while you data may or may not be correct, I think you are missing a key point. Averages are not very important for pension duration planning. If on the average you and your wife will both die in 21 years, planning on funds lasting 21 years is very risky. One of you might live longer -- a lot longer. While planning on living for ever is not smart, I personally would like to look at the 95th percentile as a starting point.A very good point and I personally plan on saving for many more years than I believe possible now because I have no idea what the world will be like when I retire in 50 years. I confused his use of "average" to be an actual average, which would be silly to plan for. Thanks for bringing in the actual aspect that should be discussed, and more of what Telegraph was getting at.As far as your plan to open an account with Vanguard, I think that is a great choice. The smart money knows that active-investing is a losers game.-Will
The suggestion to max your 401(k) is the best advice on this thread, assuming your company offers at least a 10 percent immediate return and you have a choice of investment vehicles that are safe and prudent. If you save $1,000 a month, does your company match with at least $100 or more?My wife and I (each age 59) use Vanguard. We like the simplicity, and the free counsel and advice they offer by phone: 1-800-VANGUARD. If you have an online brokerage account with them, you can do most transactions yourself ... and their fees are exceptionally low.The time-value of monthly investing is incredibly powerful! Invest, stay invested, and do NOT panic if there are downturns. Over most 20-year time horizons, investments do wonderfully well!There is a superb free calculator online: www.tcalc.comIt says, if you start with $0 and invest $1,000 a month, at:5 percent interest compounded, you will accumulate $155,000 in 10 years9 percent interest compounded, you will accumulate $193,000 in 10 years5 percent interest compounded, you will accumulate $216,000 in 10 yearsNow look what happens if you invest $1,000 a month for 20 years!5 percent interest compounded, you will accumulate $411,000 in 20 years9 percent interest compounded, you will accumulate $667,000 in 20 years11 percent interest compounded, you will accumulate $865,000 in 20 yearsStart as soon as you're ready, and stay the course. Good luck.
Actually Will I will not open a plan with Vanguard - but do not confuse that with not purchasing Vanguard funds.Here is the deal -- my wife and I learned the import of keeping a minium of accounts when we took over the financial affairs for a friend who had a stroke. Dear Hilda believed in diversification -- as in Growth Funds at multiple brokerage houses and checking accounts are multiple banks, etc. It took the better part of a year to get all the stuff consolidated. Every place wanted/needed different papers before we could do even simple things like see balances.We happen to have our brokerage business at Charles Schwab (which frankly is not the cheapest, but has excellent customer support). We can and do buy for example T Rowe Price mutual funds. Each purchase has a $50 fee, so we only make one purchase a year. When me move from the money accumulation to the money removal position, we may transfer all the funds to a Vanguard or T. Rowe Price.GordonAtlanta
First, don't beat up on yourself. Based on statistics I've been reading you're doing incredibly well compared to 90% of your peers. Having your mortgage paid off is a huge monkey off your back and has surely reduced your monthly expenses and thus your financial security. Congrats!All the suggestions on this thread sound good, but there is one I haven't heard yet. You might want to consider income investing. Put your savings cash and extra income into 4-8 solid stalwart stocks like PG, CL, etc... Then sign up for their DRIP until you retire. These stocks don't go up much on the charts, but with DRIP they will often beat the market. Once you retire, simple cancel the DRIP and start getting quarterly income. The more of your bills you can pay with dividends, the less you will have to take from your other investments which will continue to grow. I believe this also has significant tax advantage. Also, these stocks tend to be far more stable over short and long terms.My experience with this is pretty low, so I would get other opinions on the subject before choosing this path.-Robert
Increasing your 401k contribution and placing those in a few diversified index funds sounds like the best option to me.
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