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Hi!

I'm new to the Fool environment so I hope I'm not being redundant with my question. I'm getting closer to retiring and I was wondering if, even though the markets have taken a beating, it might be a good time to retire and roll my retirement funds over to an IRA where I could invest in a diversified group of 30-35 of the dividend paying companies listed in the Income Advisor.

Doing this would lock in some pretty high dividend yields and also provide future potential growth as stock prices improve with the economy over the next few years.

My present retirement funds have not taken a beating so I'm in good shape to make new investments. Thanks
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I'm new to the Fool environment so I hope I'm not being redundant with my question. I'm getting closer to retiring and I was wondering if, even though the markets have taken a beating, it might be a good time to retire and roll my retirement funds over to an IRA where I could invest in a diversified group of 30-35 of the dividend paying companies listed in the Income Advisor.

Doing this would lock in some pretty high dividend yields and also provide future potential growth as stock prices improve with the economy over the next few years.

My present retirement funds have not taken a beating so I'm in good shape to make new investments. Thanks


Anytime is a good time to retire, if you ask me. I left the rat race 9 years ago, although I've continued to do a little part-time consulting on the side. If you can roll your company retirement fund into an IRA without locking in signficant loses from the recent downturn, doing so might be a good idea. As for what to do with the money when it enters the IRA, I personally wouldn't invest in individual stocks, since I don't know enough to count myself smarter than most of the mutual fund advisors. If I had a load of cash right now, and I was inclined towards dividend paying stocks, I likely would move the money into Vanguard's Windsor II and Wellington funds, both invest in large cap value stocks, which pay nice dividends. These funds would give you a lot of diversification in case of another collapse down the road. You could add the Value Index or one of Vanguard's other dividend funds. Check them out at Vanguard's web site, then do what you think best. I have a signficant portion of my overall portfolio in Windsor II and Wellington, because I too like dividends as a way to generate current income. For now, I'm still reinvesting my dividends, because my part-time consulting more than covers our living expenses. Anyway, best of luck.
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I was wondering if, even though the markets have taken a beating, it might be a good time to retire and roll my retirement funds over to an IRA where I could invest in a diversified group of 30-35 of the dividend paying companies listed in the Income Advisor.

Well, couldn't you do that even if you didn't retire?

I'm no prognosticator, but I feel we've hit the bottom. There's definitely bargains to be had.
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I was wondering if, even though the markets have taken a beating, it might be a good time to retire and roll my retirement funds over to an IRA where I could invest in a diversified group of 30-35 of the dividend paying companies listed in the Income Advisor.

Well, couldn't you do that even if you didn't retire?

I have to assume that OP is talking about an employer plan, not funds already in an IRA, since the IRA can be allocated as desired at any time. While an active employee you have limited ability to move your funds as you like.

Phil
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The big question is, Do you have enough assets to retire on?

A guideline accepted by many on TMF is that you can safely withdraw 4% of the value of your portfolio each year if it's allocated properly (approximately 75% S&P500 or equivalent and 25% cash or equivalent), and it will last you at least 30 years. That's 4% of your portfolio value when you retire, adjusted annually for inflation. According to the studies we go by, such a withdrawl would have gotten you through the worst 30-year periods since 1871 and provided you with lots left over after many of those 30-year periods. So you're safe taking 4% if the 30 years immediately following your retirement are no worse than the worst 30-year period so far. That's your call to make. The fact that the markets have already taken a beating increases your odds if you can stay at or below a 4% withdrawl rate at current valuations, in my opinion.

The place to start is knowing how much you want or need to live on, including taxes, and multiply that amount by 25. You often hear that you will need 70% or 80% of your working income, but what you will actually need is what it takes to cover your expenses. For most of us they are different after retirement than before. Assume health-care costs will be going up faster than inflation and allow for that.

If you have a pension and/or Social Security, then you will obviously need to draw less from your portfolio. If you expect to live a lot longer than 30 years, a lower rate of withdrawl is prudent.

Good luck.

--fleg
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Thanks everyone!! I welcome additional thoughts too! Yes, my employer plan won't let me roll over to a self-directed IRA until I actually retire.

But what about mutual funds vs individual stocks. Using a portion of MF Income Investor suggestions results in developing your own fund, doesn't it?? ... and saves expense ratio costs? Is this approach too focused and not diversified enough? Dan
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Rollover your 401K to Vanguard. Simple. Painless. And quick when you do it.

Don't play with individual stocks unless you are a better stock picker than Warren Buffet. You'll tend to take on much more risk.

If you have company stock in your 401K plan and can sell it, sell it now or before you rollover.

You want to be diversified in your IRA..and have some inflation protection.

What you want inside a tax protected plan is total return.


Outside your IRA, you can invest differently. Tax treatment is important....it's a lot better paying 15% on dividends than 25% or whatever. But think mutual funds.

It's not fun watching one stock or sector plummet by 50% when the market overall goes down 15%. Or you could own a Lehman Bros type stock or Enron or WCOM. Great going up. Not so great coming down.

Everytime you think about individual stocks, take a 2x4 and whack yourself up by your head. Repeat until thought disappears.

t.
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Everytime you think about individual stocks, take a 2x4 and whack yourself up by your head. Repeat until thought disappears.

t.


Telegraph, it's posts like this that keep you out of my pee box.

cliff
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"Everytime you think about individual stocks, take a 2x4 and whack yourself up by your head. Repeat until thought disappears.

t.

Telegraph, it's posts like this that keep you out of my pee box.

cliff "

If folks want to play with 5% of their portfolio, which they can afford to lose, that's OK......

I've watched too many folks chase too many stocks and too many 'hot sectors' .....

And seen too many systems fall flat on their face...the DOW bottom 4.....high dividend stocks.....value investing......this sector...that sector.

Unless your 5% is considerable $$$$, and you can afford to own 10-20 stocks in different areas, or have inside information, or insight better than 98%of the professionals, you aren't likely to even come close to the averages...and if you can't, then buy index funds.

I have a few stocks I bought along the way. Socked as much as I could in IRA/401K as I could along the way, but that wasn't that much as I was saving.

t.
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You guys are hilarious! I'm looking for a 2x4. Until I find one, I'd like to know more about how you already-retired-folks approached retirement and benefit from your sage advice. Vanguard funds have been mentioned. What are some good sources of information to help educate oneself? Thanks! Dan
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You guys are hilarious! I'm looking for a 2x4. Until I find one, I'd like to know more about how you already-retired-folks approached retirement and benefit from your sage advice. Vanguard funds have been mentioned. What are some good sources of information to help educate oneself?

Thanks!

Dan


Just remember – have it tattooed inside your eyelids – Read’s Dictum: a broker is not a financial advisor. That’s rule one; rule two is ‘listen to rule one’. Read’s Hypothesize on finding oneself in difficulty: you didn’t listen to rule two.

Read’s Corollary on Read’s Dictum is ‘Brokers pose as financial advisors whenever the market is in fluctuation but not else wise’. Understand that whenever the market is stable brokers don’t make a dime. Therefore, a broker’s pitch is always is ‘Buy now before everyone else snaps up this stock’ or ‘Sell so you don’t lose more than you have already’. These are their stock phrases (pun intended).

In the hierarchy of persons to avoid we can start with used car salesmen wearing loud ties, people in alleys selling Genuine Real Rolex watches, pitchmen on late-night TV selling 100 mpg gizmos, people selling loudspeakers off the back of a truck in supermarket parking lots, and brokers.

To educate oneself about the market raises the question ‘why’? Most of those writing about how the market can be beaten only beat the market on occasion and that by sheer happenstance – on which they then base their entire investing philosophy of making a bundle in 1982.

To understand the market and investing in it is to understand the personages in the market are there to make it a fear generator. They have no other purpose. Nice, placid markets are anthemia so these people take a stick and swirl the waters saying, “Whirlpools! Whirlpools!” The financial newspaper then pick this up (it sells newspapers) and spooked investors run for the exits – where there’s a charge made by brokers for exiting.

Can one make money in the market? Absolutely. Can one lose money in the market? Absolutely. Can Russian Roulette be beaten? Same chances as making money in the market or losing money in the market.

Fresh Meat, er, I mean Dan, I wish you luck.

First thing – get that tattoo now.

MichaelR
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I retired 2 years ago at 48 from a 27 year career in programming.

Thirteen years before retirement I started buying individual stocks with my post-tax savings (small amounts at first), becoming comfortable with analyzing them and developing my investment strategy. I track about 30 stocks, all with long histories of rising earnings and dividends, and try to own the cheapest of them. I red-flag sectors or stocks that seem in temporary danger, and I throw stocks out of my universe when they start violating my rules (changing the direction of the company, bad capital allocation decisions, etc).

Eight years before retirement I rolled over my 401k from a 14 year-long job into an IRA and invested it in a set of individual stocks, similar to my post-tax savings. This eventually became the bulk of my retirement funds.

Two years before retiring I hit my financial target, but kept working anyway because I was in a real sweet spot at work (interesting programming, perfect working conditions). I knew this would not last long, and two years later the work conditions went drastically downhill, and I was able to retire with substantially more than I think I need. I rolled this 401k into a seperate IRA. I also paid off my mortgage 4 years early, just because it felt good.

I am now living off 72t's from my big IRA (more than funded by dividends there), with my post-tax savings as a buffer. I have been 100% invested (actual average about 97% because dividends pile for the 72t transfers) in individual stocks for close to 15 years now. I have been sleeping just fine, because even as the market value of my stocks has gone down this year, earnings and dividends have continued to go up.

I agree with the previous respondants that most people should use index funds, because they do not have the time / interest in tracking stocks over the years and making the resultant trades that the analysis leads to.
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What is a "72t"?

Thanks.

AM
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What is a "72t"?

It's a/k/a Substantially Equal Periodic Payments (SEPP), a way of withdrawing retirement savings penalty-free at any age. You can read about it in IRS Publication 590.

Phil
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Thanks Phil.

AM
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Many who have retired early did very well in the stock market of the 90s. Own just about anything, and you made money hand over fist.

Those days are over. The end of the bubble caught a lot of individual investors very heavily in 2001 with the dot com crash. Stocks vanished. Dropped 99% or 90% in a few days.

If you are investing today, you would have to be exceptionally good, or have inside information, or have better knowledge of industries compared to those who spend most of their working days analyzing those same industries with access to company books and company spokespeople on a daily basis. That rules out 99.99% of the folks in the country.

The NASDAQ plummeted something like 75% in the dot com bust..or more if you count the stocks that went bust and were deleted never to be seen again.

The SP500 and DOW did much better.

If you are starting out, it is hard to beat the index averages.

Reading list - other than what is on the FAQ -

John Bogle - book on Mutual FUnds

Malkiel - A random Walk down Wall Street

The Millionaire Next Door

Avoid, like the plague, any Suze Orman book. She has flip flopped so many times, so often, she qualifies for Olympic flip flopping and stupidity. Buy high..sell low..panic sell....etc....

t.
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(approximately 75% S&P500 or equivalent and 25% cash or equivalent)

If you are suggesting an index fund when you say S&P 500, I don't think that is a good idea. I am not a big fan of index funds. If you were currently in a S&P 500 index fund this year you would be down 35%. 75% in an index fund is a very aggressive strategy.
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I retired in July after a total of 35 years with Wells Fargo. It was the smartest decision I've made in years.

One of the things I did in preparation for retirement was to hire a fee-based financial advisor about 3 years ago. She was extremely direct and efficient, and put me in solid position to retire at 62 rather than waiting until 66.

One of the biggest things she had me do was take my Cash Balance (replaced the defined benefit plan) and 401k funds and move them into a self-directed IRA in July. So instead of about 12-15 Wells Fargo funds to choose from, I can now choose from nearly 5,000 mutual funds. I am now diversified in about 5 bond funds, 15 stock funds, a commodities fund and a money market fund. So while some of my former co-workers have lost about 30-35% of their 401k balances in the past 3 months, I was able to keep my losses for the same period to about 18%.

So my advice is yes, move those accounts into an IRA when you can, but by all means get in touch with a Financial Advisor. In my opinion it is money well spent.
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Thanks everyone!! I have to ask this... so what do you folks think about the advice received from the MF Income Investor or the Stock Advisor, Champion Funds, etc?? Dan
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Thanks everyone!! I have to ask this... so what do you folks think about the advice received from the MF Income Investor or the Stock Advisor, Champion Funds, etc??

Dan


All advice is relevant to your level of risk. You have to decide what that level is.

You also have to have your own touchstones to which you apply to that advice. You know when something’s right – you have had some advice already from members of this board and the question is how do you feel about what has been offered: if it sits right then do it, if it doesn’t don’t. What one does in becoming better at investing is trusting your own growing instincts realizing you know already a lot about trusting your own gut.

That said, I trust Motley and that’s biased because following advice I got from TMF in one year I saved more than half a million in taxes. Even my accounting team didn’t know that advice.

I realize you are looking for practical advice yet advice has to resonate with who you are. It’s why investing is more an art than cast in concrete. It’s why there’s contrarians.

I mentioned touchstones. I have three I apply to any investment and, for what they’re worth:

• Is there a market for the company’s product?

• Can that market afford the company’s product?

• Is management smart enough to realize the ramifications of point one and point two?

I realize I am not offering specific advice but attitude is advice.

MichaelR
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<<Everytime you think about individual stocks, take a 2x4 and whack yourself up by your head. Repeat until thought disappears.

t.

>>


Maybe I'll try whacking myself with rolled up Washington Mutual stock certificates. Much more graphic than a 2 x 4.




Seattle Pioneer
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Thanks Michael. Appreciate your thoughts very much, and everyone elses.

Just a parting bit, here's a link to some interesting research about the performance of Russell 2000-based index funds. It was published in the Financial Analysts Journal.

http://news-releases.uiowa.edu/2008/october/102008index_fund...


Dan
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I am a better stock/company picker than Warren Buffett

Then are you worth Billions - I think NOT!

awfully impressed with one's self!
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I am a better stock/company picker than Warren Buffett

Then are you worth Billions - I think NOT!

awfully impressed with one's self! ...


Maybe he is and maybe he's not. WB started with a greater 'kitty' than the average family and my annual income. And he started it a long, long time ago.

TB
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"Don't play with individual stocks unless you are a better stock picker than Warren Buffet. You'll tend to take on much more risk. - telegraph | Date: 10/20/2008 7:35:23 PM | Number: 14873

I am a better stock/company picker than Warren Buffett. I mostly search for investments in the Private Equity Markets. A few successful picks over the last few decades: Amgen(AMGN), Genentech(DNA - acquired by Hoffman-le Roche), Federal Express(FDX), Tandem Computers(TNDM, then TDM, now part of Hewlett Packard). More recent companies: Nextel(NXTL, now Nextel-Sprint(S), Google(GOOG), and PetsMart(PETM) and many, many more.

Kahuna, CFA "

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Folks should recognize that you don't have to be a stock picker
better than one person or another. You only have to get a return
sufficient to live - hopefully as you want to live as opposed to
how others would want you to live or how you can scrape things
together. You have choices you have to make reguarding how much and
what type of risk you are willing to take on - and what kind of return
you feel comfortable with if you take on that risk.
There is always risk - even with the most secure investments.

But success in investing does not require an investor to
join the list of "richest people" - it is measured by accomplishing
the investor's goals.

Howie52
so far successful enough but tomorrow may be another day.
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