How I wish I had understood all this Foolishness 30-35 years ago! But I'm still interested and would like to know how much of one's total investment package should (could?) be in stocks? I'm itching to try the DDA or the Foolish Four, but time doesn't seem to be my strong suit at this point. What is the minimum time you consider "long-term"?
SlateBelt wrote:>How I wish I had understood all this Foolishness 30-35 >years ago! But I'm still interested and would like to >know how much of one's total investment package should >(could?) be in stocks?I have just turned 60 this year and retired late last year.I just had to make this same choice with 401K funds and I have settled on around 50% with the other 50% in Bonds/CD'sOf the 50% in stock it will be 90% Foolish 4 and 10% growth (small caps) just to make it exciting.But also be advised that I, like you, just wish I had found this place a long time ago, and that I have just started proactively managing (or not) my investments as all prior investing was from within the Companies that I worked for. These company plans had extremely limited choices (that companies stock, a money market fund etc).So all that I can say about this approach is that it seems to me to be a resonably safe approach with some possiblity of growth.And of course part of the answer to your question has to be the question of how soon will you need to get ahold of the assests in that fund to help pay for your retirement. (Sooner need, less stock)Hope this helps, its at least a point of view.oldred22
Thank you so much for your reply, oldred22. I was beginning to think that no one was going to respond to my post. My money is in annuities and mutual funds and I just think I need to do something differently. I've often heard that a formula for investing in stocks is: 100-your age. (100-60=40% You're pretty close to that.)Any opinions out there on annuities?
SlateBelt wrote:>Any opinions out there on annuities? Again beware of my opinions cause I am a real newbie to this but I sure have opinions.What I have read about them is pretty much all negative in relation to the way they appreciate compared to stocks, plus they have costs that you have to pay (fees etc.)Now I have one and just cause I was in a way overload mode (and being finacially knowledge impaired) I let it roll over as an annuity but this time I did the least amount of time (1 year commitment) and its supposedly a new kind that does an S&P index type fund so that you will get whatever the SP does as interest.Because I only took it for a year the upside is a max of 10% return (the max time was three years but that would return whatever the S&P did for those 3 years), but the low side is a minimum of 3% return and the way the markets been that may be a good thing.Anyway the biggest thing that bugs me personally about annuties is the time commitment that you have to make in terms of tying up your money or paying a penalty.lol like I said I have more than enough opinionsoldred22
Now that capital gains are taxed at just 20%, I think you want to be in the stock rather than in an annuity holding the same stock where your income is taxed as ordinary income, probably at 28%.
I have just turned 60 this year and retired late last year. I just had to make this same choice with 401K funds and I have settled on around 50% with the other 50% in Bonds/CD's Of the 50% in stock it will be 90% Foolish 4 and 10% growth (small caps) just to make it exciting.I turned 60 July 1, and have been retired for about 10 years due to early retirement program (downsizing, or whatever you want to call it).I am really surprised by the timidity of people (are they so easily swayed by portfolio allocators?). It is not at all clear to me that purchasing bonds is a conservative thing to do. You may conserve the face value of your money, but when allowing for inflation, treasury bonds do not seem to appreciate at all. At least with an S&P 500 index fund, you get 10.7% annualized (before taxes and inflation) in the long run, which is better than I have ever seen from bonds.I have about 5% of my money in Series EE savings bonds that I will probably cash in as they mature. I have about 2.5% bullion grade gold coins in case the financial system collapses, and 2.5% in a Swiss Franc denominated Annuity. That is all the conservativeness I have and am concerned that this fear of economic collapse may be wasting me the time-value of that 10% of my portfolio. I consider that opportunity cost to be an insurance premium, but I would never put 50% of my money that way. Even my mother is not 50% in bonds.
I'm still interested and would like to know how much of one's total investment packagI am 68 and 100% in stocks. I just dropped 30 Gs in the foolish four I lost over $400 the day I bought in but I figure within 5 years I should do OK. I feel I will be around at 73 to enjoy my returns maybe by then I will start going over to cash.
I am not yet retired, (I have between 5 and 7 years to go) but I have given some thought to this question. At this point this is my strategy: I take Tom Sheard's advice that one can live on 5% of your portfolio each year. If you conservatively assume that the portfolio grows at 10% a year that allows 5% (10%-5%) growth each year to cover inflation. I plan to invest it all foolishly except the cash needed to hang on thru a bear market. The question then is how long do I expect to need to hang on. Well my reading of the tea leaves is that most recoveries since the depression took about 3 to 5 years. That means 15 to 25% needs to be in MM funds or better yet ST Bonds. The rest I plan to invest foolishly. I can't see gold or foreign currencies. I haven't figured out why anybody would buy an annuity. Joe Varga
Joe, according to a chart from John Hancock Ins. if you use a 3% inflation rate, with a return of 10% and withdraw 5% per year, your funds will last more than 50 years. Hal
Joe I agree with your comment on annunitiesHal
Jean David wrote?>I am really surprised by the timidity of people (are >they so easily swayed by portfolio allocators?).Lol, yep, specially if they have to deal with it and dont know how, and so use some software as a starting point.I will spare you the details, and remember as of November of last year I did not know my net worth plus or minus like 20 % and was deciding stuff left and right (and shame on me cause I should have been better prepared, but there is always denial, it cant happen to me).Anyway in the beginning of my latest career, (finanial planner for myself), these allocators were a tool I used.Give me time and I will get smarter, (they say the expensive lessons are the ones you really learn from) and I am sure will adjust my allocation.That is why I am glad they provided this folder so us folks that are having to deal with the disbursement period of our lives can share out thoughts.oldred22
I haven't figured out why anybody would buy an annuity. I bought a Single Payment Annuity denominated in Swiss Francs from a Swiss insurance company. I did not specifically want an annuity. I would have settled for a Swiss savings account. It did not even need to be numbered. However, the Swiss do not want that many foreign accounts (makes the currency too strong and hinders exports) so they pay negative interest on savings accounts by foreigners. The annuity was a way to be long Swiss Francs without being taxed, and to get a little interest at the same time.To buy such an annuity, however, the U.S.Government charges a 1% excise tax *-( on it and starting this year the IRS has made the current interest taxable even though you do not receive it.I do not consider this an investment, but as insurance against the fall of the dollar against the Swiss Franc. The dollar dropped 10:1 against the Swiss Franc in the 1970's. The Swiss Franc is backed at about 240% with gold, where the U.S.Dollar is backed by the faith that people have in it.
" the U.S.Dollar is backed by the faith that people have in it."All I can say is that I have more faith in the US dollar than in gold. The price of gold has been on a steady decline for 10 years or more. It appears to be headed for value related to its industrial uses.Joe Varga
Hal I guess I don't understand your math. It seems like with a 10% return minus 5% draw minus 3% inflation yields a net increase of abour 2% so the money would last forever, wouldn't it?This brings me to a point I didn't make before: I don't care to guess how long I will live or how long the money will last. My approach assumes the money will continue forever.One of the problems I haven't worked out is that retirement is "front end loaded". By that I mean that when you start out you want to travel and do other things that cost money. Later on you slow down and probably don't need as much money. So if I exceed my 5% draw in the early years that's probbabvly OK up to a point. But how much dare I risk, is the perennial question.Joe Varga
vargaj,You can look up the mortality tables in Section 2 of the Statistical Abstract of the United States. (It's one of my favorite books.) If you are a white male aged 60, you can expect with 50% probability to live to 79.0 years. You will reach 85 with 22% probability.One thing you don't mention is being sucked dry by nursing home care in your last years. When you have no assets left except your house, Medicare pays and then tries to take it out of your estate (i.e. your house) once both spouses die, if I read the newspaper articles correctly.
yes the nursing home question is a big question for which I don't have any answers. i live with a wonderful women who loves to take care of handicapped people. She thinks that I will never need a nursing home. but I don't know.As for mortality tables. What I need is the mortality table that tells me when Joe Varga's gonna die."If you are a white male aged 60, you can expect with 50% probability to live to 79.0 years. You will reach 85 with 22% probability."yeah but if I live one more year to 61, 79 becomes 79+, and in another year 79 become 79++ . So when am i going to die? Mortality tables don't help. That's precisely why I prefer Sheard's approach of just assuming the money will go on forever. I'll have a few thankful heirs that way too.Joe Varga
George Burns said the magic age at which you are safe was 100, because if you look at the obituary column you never see reports of a 100 year old man dying.
Regarding Annuities?Maybe I am confused too. But I bought mine so I could get a retirement plan going where I could put a bunch of money and avoid paying tax on dividends and capital gains.I have no pension or 401K and stated a business four years ago. I max my IRA options. Should I be doing something differently?Mel
Joe you are right but I have an adversion to using the term "forever" as things do change. And if you are retired as I am and when I add 50 years to my age I say I probably don't care if it last longer because the kids will have it spent by then!!!Hal
<<I don't care to guess how long I will live or how long the money will last.>> <<One of the problems I haven't worked out is that retirement is "front end loaded". By that I mean that when you start out you want to travel and do other things that cost money. Later on you slow down and probably don't need as much money>>Exactly right about being front end loaded. Some advice is to enjoy and spend it up front but it comes from the ones who have not yet retired!The trouble is, if you do not care to examine life expectancy, you will not figure out the problem you have posted.It seems to me that all you can do is to estimate when the desire to spend above "budget" will change and relate it to life expectancy even tho we all prefer to not have to think about it.I think certain time periods can be blocked out with expenditures assigned in order to develop a simple plan that can be adjusted as conditions warrant.I think others on this board have some good input as well.H.
"How I wish I had understood all this Foolishness 30-35 years ago! But I'm still interested and would like to know how much of one's total investment package should (could?) be in stocks? I'm itching to try the DDA or the Foolish Four, but time doesn't seem to be my strong suit at this point. What is the minimum time you consider "long-term"?"The questioner was 59. I'm 69.100% if you don't need the income from the stocks. 50% if you DO. Unless you're ILL already, time IS your strong suit. I'm 69 and looking (hoping-?) at 20 years. 5 Years.Now get with the program, and think positive.Ray
"Any opinions out there on annuities?"YES! The ONLY people who benefit from annuities are the Insurance Companies and their Agents.Ray
What is the minimum time you consider "long-term"? It is the year 2005, I now consider long=term over 6 yrs. During retirement, I keep money in stocks that I will not need for 6 yrs.Fool Kath
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