New member ... help please

[Madeline]

Just found your website ... have had no help from Fidelity advisors who tell me just to put our entire portfolio in their Target date fund and won't recommend
specific funds. I am 59 and my husband is 60 and retired due to job elimination. We started investing very late in life ...our fifties after kids were done with college.
So many people on this site have like a million dollars ... where should I put about $75,000 cash to start ... even if I were to use a Target date fund, it seems like Vanguard ones
have a lower expense than Fidelity ones. I have sat on cash for fear of losing what I have accumulated but I know it's not the best place. I will keep working and saving. In
magazines, it seems like Vanguard Wellesley Income Fund VWINX is a good fund ... would I put all our money in something like that or go to a Vanguard Target date fund? Thank
you so much for a starting point.

[Johm221122]

You should use this link to post
viewtopic.php?f=1&t=6212
Wellesley is good fund but does not have as much diversification as vanguard retirement funds
Welcome to forum
John

[bottlecap]

Welcome. To help, we need to know a more complete financial picture and will need to know about your plans and goals.

Vanguard does typically have lower expense ratios for Target Retirement funds. Wellsley may or may not be appropriate for you, depending on your goals.

You found the right site. Let us know more. There are suggested posting guidelines, although I don't have the link. (oops, see post above).

JT

[Madeline]

Debt none no mortgage
Married
don't know anything about our tax rate
husband 61 wife 59
desired asset allocation totally unknown ... new investor since age 50
Currently have $45000 ... $15,000 stock (fairholme and Contrafund) the balance all in bond funds Fidelity total bond
$75,000 cash in a money market earning nothing ...that I don't know what to do with and afraid to lose
$45,000 in tax advantaged IRA $75,000 in non tax advantaged
I feel I am able to save $20,000 a year now with our household expenses currently
I am planning on continuing to work my husband is no longer working due to job elimination

[LadyGeek]

Welcome! Take your time and do some reading, our wiki is a good place to start: Getting Started (Be sure to watch the videos)

[Johm221122]

Try this vanguard tool for your AA
https://personal.vanguard.com/us/funds/ ... mmendation

[The Wizard]

If the OP does not HAVE an existing portfolio, just a lump sum going in, the standard format really isn't needed.
The Target Funds are good for folks who don't care to babysit their investments too often. Lots of folks here on the forum like to stay on top of things on a weekly if not daily basis, a hobby of sorts, so we might not use Target Funds ourselves.

You need to look at what you have for tax-sheltered options also. You can put 2x$6K per year in your Roth IRA, so have you been doing that?
And what does your employer offer?

[Johm221122]

A target date fund would be great but you have too much in taxable, after you find your AA try this
http://www.bogleheads.org/wiki/Three-fund_portfolio
Put as much bonds in Ira as you can(total bond market)
Any bonds in taxable maybe I bonds or municipal bond fund
WE really need tax rate and for you to post more clearer using posting link from my other post
Also we need to know employers options as mentioned

[Muchtolearn]

Madeline, I am glad you came here for help. As another poster indicated, your situation is relatvely simple as you are more or less not invested now. You also are not super knowledgable about this type of thing and really may not need to be. You have relatively small savings and I don't know how secure your job is or how heatlhy you and the husband are. I do know that your intentions are good and you plan to keep working. Others will talk to you about tax rates and tax efficient investing. I doubt your tax rate is super high based on your savings and one income. For you, I think a Target retirement fund or even better, the Life Strategy Conservative growth fund, could be a single fund for all your needs whether it is in taxable or tax deferred accounts. Just stick it in, add to it when you can and be done with it. Then enjoy life.

[retiredjg]

Welcome to the forum!

don't know anything about our tax rate

This is a number you need to know. Compare your taxable income (line 43 on your Form 1040) to this chart. Be sure to pick the correct filing status.

desired asset allocation totally unknown ... new investor since age 50

You will have to be the one to make this decision although people here can help. In addition to the Getting Started link already posted, spend some time with this link. Investment Planning.

It is hard to figure out what you have in what kind of accounts. Is this what you have?

Taxable
$75k money market

Ira
$15k Fairholme and Contrafund
$30k Fidelity total Bond

[PaddyMac]

Madeline: You mention that your husband is retired due to job elimination. He's relatively young at 60 though. Is it possible for him to find even part-time work to help with expenses? That way you could save a little more between now and your retirement.

Another angle to all this is what happens when you retire also. Are you tracking your current expenses well, and can you project what they'll be when you retire? Will SS cover the expenses? What happens when one of you passes and the other has to live on the higher of the two SS incomes?

Thinking a little more into the future will tell you whether you can afford to let the hubby kick back now! For instance, if one of you expects to live another 25-30 years, then you could stagger your SS by having one person claim at 62 and the higher-income earner claim later (up to 70).

[22twain]

Currently have $45000 ... $15,000 stock (fairholme and Contrafund) the balance all in bond funds Fidelity total bond
$75,000 cash in a money market earning nothing ...that I don't know what to do with and afraid to lose
$45,000 in tax advantaged IRA $75,000 in non tax advantaged

To clarify: are these all separate accounts that add up to $240K, or two accounts that add up to $120K ($45K in stock and bond funds in the IRA plus $75K cash in a non tax advantaged account)?

Do you know much Social Security will each of you be able to get? This depends on the age that you start collecting, but as a baseline, start with the amount that you would get at the SS "full retirement age" which is probably 66 for both of you.

[The Wizard]

Currently have $45000 ... $15,000 stock (fairholme and Contrafund) the balance all in bond funds Fidelity total bond
$75,000 cash in a money market earning nothing ...that I don't know what to do with and afraid to lose
$45,000 in tax advantaged IRA $75,000 in non tax advantaged

To clarify: are these all separate accounts that add up to $240K, or two accounts that add up to $120K ($45K in stock and bond funds in the IRA plus $75K cash in a non tax advantaged account)?

It's clear to most of us that she's giving the current total = $120K.

[Raymond]

Perhaps I missed it, but does the OP have an emergency fund?

[scone]

Hello there! Here are some suggestions for you to look at:

"$45000 ... $15,000 stock (fairholme and Contrafund) the balance all in bond funds Fidelity total bond"
You could split this half and half between Wellesley and the Target fund for now, and add to it later. It doesn't have to be perfect.

"$75,000 cash in a money market earning nothing ...that I don't know what to do with and afraid to lose"
I hear you. A series of bank CDs, I-bonds, or TIPs would be very safe. They won't earn very much right now, but a good bit more than a money market fund.

"I feel I am able to save $20,000 a year now with our household expenses currently"
That's great! Take a look at Vanguard tax-managed funds for your taxable account. Take a look at VTMFX (link below). You could start out with $10,000 in this fund, and add to it as you are able. Maybe half in this and half in CDs and TIPs.

When you get a little more experienced, you can venture into advanced stuff like "tax loss harvesting." Alternatively, you could set up your taxable account to take advantage of tax loss harvesting, and let an accountant figure it out for you. Obviously, however, accountants cost money.

"I am planning on continuing to work my husband is no longer working due to job elimination"
Maybe a temp job? Any port in a storm, and since you are living on one income, almost everything he earns could go to savings.

https://personal.vanguard.com/us/funds/ ... IntExt=INT

Good luck!

[LadyGeek]

Perhaps I missed it, but does the OP have an emergency fund?

That would be this: Emergency fund

We're probably inundating you with information. Slow down, take your time, and don't hesitate to ask questions.

[RyeWhiskey]

Just found your website ... have had no help from Fidelity advisors who tell me just to put our entire portfolio in their Target date fund and won't recommend
specific funds. I am 59 and my husband is 60 and retired due to job elimination. We started investing very late in life ...our fifties after kids were done with college.
So many people on this site have like a million dollars ... where should I put about $75,000 cash to start ... even if I were to use a Target date fund, it seems like Vanguard ones
have a lower expense than Fidelity ones. I have sat on cash for fear of losing what I have accumulated but I know it's not the best place. I will keep working and saving. In
magazines, it seems like Vanguard Wellesley Income Fund VWINX is a good fund ... would I put all our money in something like that or go to a Vanguard Target date fund? Thank
you so much for a starting point.

Hello Madeline, I don't have a million dollars. I have much less than half what you have.

If you wouldn't mind clarifying the following, it'd be of great help:
1. If you could figure out your tax bracket, this would be great.
2. It'd also be helpful to know what funds are available to you in the IRA.
3. You have stated that you have approximately 120k (75 cash, 45 in funds). Do you have any money other than this? That is, do you have money sitting around for emergencies?

It is clear that you have a low tolerance for risk. That's not a problem at all. I think you are in a fine position to take care of yourself and your husband, and it's great that you found this forum. It can be quite overwhelming at times so take your time. Also, using the Wiki is a great and easy way to become acquainted with issues you might have and further your knowledge of investment basics. As LadyGeek said:

We're probably inundating you with information. Slow down, take your time, and don't hesitate to ask questions.

[tibbitts]

Are we sure there is no pension income(s) involved here, other than SS?

Paul

[pingo]

EDIT: I struck through all most of the following, as it does not appear to be correct. (Sorry!)

We can't make portfolio recommendations until we know more since tax rates, taxable accounts and the size of contributions have a big impact on fund choice. I don't have any Fidelity funds or accounts, but I did want you to be aware that you may still have options where your at.

Fidelity has good index funds and target funds called Fidelity Freedom Index funds. They may be difficult to uncover if you don't know what to look for. The index fund-based target funds have the same asset allocations the active versions, but the underlying portfolios are inexpensive, simple and passive:

Fidelity Freedom Index 2015 W (FLIFX) ER 0.19% <--45% stocks/55% bonds and cash.
Fidelity Freedom Index 2010 W (FKIFX) ER 0.19% <--43% stocks/57% bonds and cash.
Fidelity Freedom Index 2005 W (FJIFX) ER 0.19% <--33% stocks/67% bonds and cash.
Fidelity Freedom Index Income W (FIKFX) ER 0.19% <--18% stocks/82% bonds and cash.

They tend to be cash heavy, arriving at a 50:50 spilt between bonds and cash in the very conservative Income fund.

Like I said, your tax rate, accounts and contributions will have a big impact on fund choice, but you have lots of options.

[LadyGeek]

The wiki also has suggestions on how to do a "Boglehead-style" portfolio with Fidelity: Fidelity

(Madeline - take your time and don't worry about this. It's for the members who will help you.)

[retiredjg]

Fidelity has good index funds and target funds called Fidelity Freedom Index funds. They may be difficult to uncover if you don't know what to look for.

The Fidelity Freedom Index series is so difficult to uncover, that I'm still unable to find it. This has led me to believe these funds are only available in 401k/etc. plans.

Are these funds available to the general public? If so, I'd like to have a link. The actively managed Freedom series is not something I would recommend, but I would be willing to recommend the index series.

[nisiprius]

Just found your website ... have had no help from Fidelity advisors who tell me just to put our entire portfolio in their Target date fund and won't recommend specific funds.

I think you are being unfair to Fidelity. I think they did recommend "a specific fund," and I think well of them for doing it. They were being helpful. Since you sound risk-averse and I personally am risk-averse too, most fund companies' target-date funds might have more stocks in them than you and I would be comfortable with, and it might have been more helpful if they'd gone over that with you, though.

We started investing very late in life ...our fifties after kids were done with college. So many people on this site have like a million dollars. where should I put about $75,000 cash to start?

Life is what it is. $75,000 ain't hay.

But by the time we get to our sixties we've pretty much got what we've got. The one thing you must not do is make some panicky search for some magic investment that will "put your retirement back on track" and grow that $75,000 to $750,000. That could be a serious danger. And don't beat yourself up about sitting on cash for fear of losing what you've accumulated, what's done is done and that's not by any means the worst mistake you could have made.

Make no mistake about it, any stock market investment is going to involve risk. The robust recovery after 2009 sure surprised me, but fortunately I had a low stock allocation all along and didn't cut back in 2008-2009. You missed out on some of that, what's done is done. Don't swing too far in the opposite direction.

even if I were to use a Target date fund, it seems like Vanguard ones have a lower expense than Fidelity ones.

Yes. Speaking as a sort of smarty-pants pseudo-connoisseur I can and have criticized Fidelity's target funds--which I held for many years in my employers' 401(k)--as complicated, irrational messes of funds, quantities too tiny to make any difference, and expenses that are distinctly higher than I'd have liked. So if you want a target-date fund by all means use Vanguard's because, yeah, I think they are "better" than Fidelity's. But that's the least important investment decision you are going to make, and, by the way, Fidelity's are perfectly OK.

it seems like Vanguard Wellesley Income Fund VWINX is a good fund ... would I put all our money in something like that or go to a Vanguard Target date fund?

Wellesley does have one interesting feature, I think. I believe that if you invest in that fund, and set the account up so that only reinvests capital gains but does not reinvest dividends, that you will get a quarterly dividend payout that is relatively stable from quarter to quarter.

I think that one thing you really need to do, take however long it takes to work out an answer for yourself, is decide what percentage of your holdings should be in stocks. The other big think you need to work out is how much of that $75,000 to invest in a mutual fund whose ups and downs may shock you if you're not used to it, and how much to keep back as an "emergency fund."

With regard to specifics, I feel that whatever else they look at, every investor should look at the growth charts for the funds they're interested in, carefully and in detail, even though past growth does not predict future growth. An explanation of how to use Morningstar's growth charts is in the Wiki here. I'm going to compare four funds: Wellesley (blue), Target Retirement Income (orange), Fidelity Freedom Income (green),and a pure stock investment, Vanguard Total Stock Market Index (yellow) which tracks the stock market as a whole.

No, I'm not--I'm getting "server is too busy." I'll try to remember to get back to this later. But seriously, take the time to try it for yourself. Look closely at the growth charts for the funds you are interested in. Play with the starting point. Try going back more than 10 years. These charts show what you'd see in your brokerage account if you bought $10,000 of a fund and just let it sit, reinvesting dividends; they show the "total return" of the fund. They will give you an idea of the sort of fluctuations you need to expect if you invest in the fund.

[nisiprius]

P.S. Madeline, I'm afraid I replied to your first post without reading your followups. One other random thought that occurs to me. "Fairholme and Contrafund" are sort of typical of the actively managed funds people read about, or their broker/"advisors" suggest. And while Bogleheads don't think much of them, what I think you have there is one that's done poorly and one that's done well, and overall, that combination of $45,000, $15,000 in Fairholme and Contrafund and the rest in Fidelity Total Bond, is actually a do-it-yourself mixture that is not hugely different from the mix in Wellesley or Fidelity Freedom Income or Vanguard Target Retirement Income.

How do you feel about that account and how it has behaved?

[pingo]

The Fidelity Freedom Index series is so difficult to uncover, that I'm still unable to find it. This has led me to believe these funds are only available in 401k/etc. plans.

Are these funds available to the general public? If so, I'd like to have a link.

Good point. I can't find them at Fidelity.com unless I put in the ticker (which I obtained from Morningstar).

When I do, a quote pops up with the option to "trade". Not having an account with Fidelity, I can go no further.

[retiredjg]

I know that a few years ago, we were all excited to see these new (and much better) funds appear. I recall some talk that they would first be available in retirement plans only. Seems, they have not made it past that yet. It's a shame because Fido's original target funds are not worthwhile, at least in my opinion.

[nisiprius]

I know that a few years ago, we were all excited to see these new (and much better) funds appear. I recall some talk that they would first be available in retirement plans only. Seems, they have not made it past that yet. It's a shame because Fido's original target funds are not worthwhile, at least in my opinion.

I don't want to sound like a pitchman for Fidelity. I never liked their expense ratios and I dropped them when they started bulking up on junk bonds. I can find all sorts of reasons to criticize them, including unstable glide paths (see Bait and Switch: Glide Path Instability).

But it's not as if they were terrible. In the time Vanguard Target Retirement 2015 has existed, do you really see any earthshaking difference between the Vanguard and Fidelity year-2015 funds? If, let us say, Vanguard Target Retirement 2015 seemed "worthwhile" for someone, but all they had access to was Fidelity Freedom 2015 (and didn't have access to the building blocks of a three-fund portfolio), wouldn't you just shrug and say "Go with the Freedom 2015 fund?"



Even expenses are not terrible. Fidelity Freedom 2015: 0.60%, which Morningstar calls "low." T. Rowe Price, 0.65%. American Century LIVESTRONG 2015, Institutional class, 0.58%. Class A, 1.03%. Blackrock 2015, institutional, 0.68%. American Funds Trgt Date Ret 2015 A, 0.73%. And there are plenty that are higher.

Yes, Vanguard Target Retirement 2015 at 0.17% is in a class by itself. Yes, we can all do the math. Just saying, if you need a target date fund, the Fidelity Freedom Funds will get the job done. There are better choices, but it's a perfectly OK choice.

[retiredjg]

If, let us say, Vanguard Target Retirement 2015 seemed "worthwhile" for someone, but all they had access to was Fidelity Freedom 2015 (and didn't have access to the building blocks of a three-fund portfolio), wouldn't you just shrug and say "Go with the Freedom 2015 fund?"

Yes, I probably would shrug and say "go with the Freedom fund". But interestingly enough, that does not happen often. My experience is that there is almost always a better choice in the 401k/etc. than a Freedom Fund. (Also, keep in mind that folks are usually looking at Freedom Funds that are closer to .77% than .60%.)

However, if a person were bound and determined to use a Freedom Fund at .77% in a 401k and a Target Fund at .19% in an IRA, I can think of worse ways to invest their money. It might not be the lowest cost portfolio they could put together, but it would certainly be good enough.