401k/rollover IRA, and my car
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- Posts: 7
- Joined: Sat Jun 29, 2013 10:48 am
401k/rollover IRA, and my car
Please bear with me. I'm a single mom and bit overwhelmed at the moment. I don't have much experience in this area. I appreciate any insight/advice you may have.
Student Loan Debt:
$5442.79 @ 5.55%
$4980.33 @ 5.55%
$956.47 @ 1.14%
$201.00 @ 1.14%
$1,439.89 @ 1.14%
$2,818.84 @ 1.14%
$3,853.21 @ 1.14%
$2,825.11 @ 1.14%
$2,114.13 @ 1.14%
------------------------
Total Student Debt = $24,698.68
Other Debt: None.
Emergency funds: $9250 savings + $2000 in checking +$500 I set aside for my son
Tax Filing Status: Single
Tax Rate: 15% Federal, 5% Utah (based on $37k/yr)
Age: 42
Desired Asset Allocation: I started with 75% stocks / 25% bonds, but I'm open to suggestions!
Desired International Allocation: roughly 1/3 of stocks.
Total Portfolio: $5418
Fidelity 401k ($798)
04% Fidelity Spartan 500 Adv (FUSVX) 0.07
04% Fidelity Spartan Extended Mkt Adv (FSEVX) 0.07
04% Fidelity Spartan International Adv (FSIVX) 0.17
04% Pimco Total Return Adm (PTRAX) 0.71
Fidelity Rollover IRA ($4620)
85% Fidelity Government Money Market (SPAXX) 0.42
New Annual Contributions:
$3312 Personal 401k Contribution + Full Employer Match
Funds Available in 401k (No Brokerage Option)
SPTN 500 INDEX ADV (FUSVX) 0.07%
SPTN EXT MKT IDX ADV (FSEVX) 0.07%
SPTN INTL INDEX ADV (FSIVX) 0.17%
SPTN US BOND INDEX (FSITX) 0.12% (eliminated)
PIMCO TOT RETURN ADM (PTRAX) 0.71%
ABF LG CAP VAL INV (AAGPX) 0.97%
FID CONTRAFUND (FCNTX) 0.74%
JPM US EQUITY SELECT (JUESX) 0.83%
MFS GROWTH R3 (MFEHX) 1.12%
ARTISAN MID CAP VAL (ARTQX) 1.20%
EV ATL CAP SMID-CP A (EAASX) 1.32%
FID LOW PRICED STK (FLPSX) 0.88%
ALZGI NFJ SMCPVL ADM (PVADX) 1.12%
JANUS TRITON T (JATTX) 0.95%
RS PARTNERS A (RSPFX) 1.49%
FID INTL DISCOVERY (FIGRX) 1.01%
FID BALANCED (FBALX) 0.60%
JPM SMART RET 2015 A (JSFAX) 1.20%
JPM SMART RET 2020 A (JTTAX)1.24%
JPM SMART RET 2025 A (JNSAX) 1.28%
JPM SMART RET 2030 A (JSMAX) 1.32%
JPM SMART RET 2035 A (SRJAX) 1.36%
JPM SMART RET 2040 A (SMTAX) 1.39%
JPM SMART RET 2045 A (JSAAX) 1.41%
JPM SMART RET 2050 A (JTSAX) 1.43%
JPM SMART RET 2055 A (JFFAX) 1.39%
JPM SMART RET INC A (JSRAX) 1.15%
FID HIGH INCOME (SPHIX) 0.76%
FIDELITY GOVT INCOME (FGOVX) 0.45%
PIMCO LOW DUR ADM (PLDAX) 0.71%
TMPL GLOBAL BOND ADV (TGBAX) 0.66%
FID RETIRE MMKT (FRTXX) 0.42%
Additional Comments/Questions:
1. I recently divorced with one child who I can claim every other year. I currently live with family so my overhead is low.
2. Any recommendations of where I should place savings for a house?
3. I setup autopayments of $335.96 each month which gave me a 1.25% decrease in interest, but each payment is distributed across all loans. I am allowed to specify where to apply extra payments. After 22 on-time payments there's an another discount, but I don't recall how much. I recently stopped additional loan payments because my 1996 Saturn S2 is dying. It's why I have accumulated the $9000 in emergency savings. I was unable to find a good motor to replace the original (mechanic pulled 4-5, according to him Saturn engines are a pain to rebuild so it doesn’t happen a lot.). I might be able to have the engine rebuilt for $2000, but investing more in this car is a concern. In addition, the AC has stopped working, emergency brake broke and who knows what else is going to happen. So I wonder whether I should another $2k into my car, or use the money for another car.
4. If I purchase another automobile, I question whether I should use all my cash to purchase it, or should I take out an auto loan at a low interest rate so I can use whatever savings is left to reduce my high interest student loans. I don't like the idea of more debt, but I do like the idea of saving some money.
5. In a previous 401k, I had allocated 90% to a Fidelity Freedom 2035 Fund and 10% to a Small Cap Growth Fund and I was comfortable with the setup. That money is long gone, but I'm trying to right the ship with new savings and a our new 401k match. Based on the previous 401k, my brother suggested that if I split contributions equally between the 4 Spartan funds, I'd end up with pretty much the same asset allocation as before while bringing my international exposure back up. Now that Spartan U.S. Bond is eliminated, I have Pimco Total Return instead. Also, I have now received my portion of my ex-Husband's 401k into a Fidelity Rollover IRA, so I need to figure out the simplest way to proceed.
6. I hope to purchase a home in 5 years. I want to leave retirement savings alone, but there's always a possibility I'd have to tap an account to make the purchase. Should I reduce my percent of equities in the retirement accounts just in case? Any suggestions? Anywhere special I should place my savings for the house?
Student Loan Debt:
$5442.79 @ 5.55%
$4980.33 @ 5.55%
$956.47 @ 1.14%
$201.00 @ 1.14%
$1,439.89 @ 1.14%
$2,818.84 @ 1.14%
$3,853.21 @ 1.14%
$2,825.11 @ 1.14%
$2,114.13 @ 1.14%
------------------------
Total Student Debt = $24,698.68
Other Debt: None.
Emergency funds: $9250 savings + $2000 in checking +$500 I set aside for my son
Tax Filing Status: Single
Tax Rate: 15% Federal, 5% Utah (based on $37k/yr)
Age: 42
Desired Asset Allocation: I started with 75% stocks / 25% bonds, but I'm open to suggestions!
Desired International Allocation: roughly 1/3 of stocks.
Total Portfolio: $5418
Fidelity 401k ($798)
04% Fidelity Spartan 500 Adv (FUSVX) 0.07
04% Fidelity Spartan Extended Mkt Adv (FSEVX) 0.07
04% Fidelity Spartan International Adv (FSIVX) 0.17
04% Pimco Total Return Adm (PTRAX) 0.71
Fidelity Rollover IRA ($4620)
85% Fidelity Government Money Market (SPAXX) 0.42
New Annual Contributions:
$3312 Personal 401k Contribution + Full Employer Match
Funds Available in 401k (No Brokerage Option)
SPTN 500 INDEX ADV (FUSVX) 0.07%
SPTN EXT MKT IDX ADV (FSEVX) 0.07%
SPTN INTL INDEX ADV (FSIVX) 0.17%
SPTN US BOND INDEX (FSITX) 0.12% (eliminated)
PIMCO TOT RETURN ADM (PTRAX) 0.71%
ABF LG CAP VAL INV (AAGPX) 0.97%
FID CONTRAFUND (FCNTX) 0.74%
JPM US EQUITY SELECT (JUESX) 0.83%
MFS GROWTH R3 (MFEHX) 1.12%
ARTISAN MID CAP VAL (ARTQX) 1.20%
EV ATL CAP SMID-CP A (EAASX) 1.32%
FID LOW PRICED STK (FLPSX) 0.88%
ALZGI NFJ SMCPVL ADM (PVADX) 1.12%
JANUS TRITON T (JATTX) 0.95%
RS PARTNERS A (RSPFX) 1.49%
FID INTL DISCOVERY (FIGRX) 1.01%
FID BALANCED (FBALX) 0.60%
JPM SMART RET 2015 A (JSFAX) 1.20%
JPM SMART RET 2020 A (JTTAX)1.24%
JPM SMART RET 2025 A (JNSAX) 1.28%
JPM SMART RET 2030 A (JSMAX) 1.32%
JPM SMART RET 2035 A (SRJAX) 1.36%
JPM SMART RET 2040 A (SMTAX) 1.39%
JPM SMART RET 2045 A (JSAAX) 1.41%
JPM SMART RET 2050 A (JTSAX) 1.43%
JPM SMART RET 2055 A (JFFAX) 1.39%
JPM SMART RET INC A (JSRAX) 1.15%
FID HIGH INCOME (SPHIX) 0.76%
FIDELITY GOVT INCOME (FGOVX) 0.45%
PIMCO LOW DUR ADM (PLDAX) 0.71%
TMPL GLOBAL BOND ADV (TGBAX) 0.66%
FID RETIRE MMKT (FRTXX) 0.42%
Additional Comments/Questions:
1. I recently divorced with one child who I can claim every other year. I currently live with family so my overhead is low.
2. Any recommendations of where I should place savings for a house?
3. I setup autopayments of $335.96 each month which gave me a 1.25% decrease in interest, but each payment is distributed across all loans. I am allowed to specify where to apply extra payments. After 22 on-time payments there's an another discount, but I don't recall how much. I recently stopped additional loan payments because my 1996 Saturn S2 is dying. It's why I have accumulated the $9000 in emergency savings. I was unable to find a good motor to replace the original (mechanic pulled 4-5, according to him Saturn engines are a pain to rebuild so it doesn’t happen a lot.). I might be able to have the engine rebuilt for $2000, but investing more in this car is a concern. In addition, the AC has stopped working, emergency brake broke and who knows what else is going to happen. So I wonder whether I should another $2k into my car, or use the money for another car.
4. If I purchase another automobile, I question whether I should use all my cash to purchase it, or should I take out an auto loan at a low interest rate so I can use whatever savings is left to reduce my high interest student loans. I don't like the idea of more debt, but I do like the idea of saving some money.
5. In a previous 401k, I had allocated 90% to a Fidelity Freedom 2035 Fund and 10% to a Small Cap Growth Fund and I was comfortable with the setup. That money is long gone, but I'm trying to right the ship with new savings and a our new 401k match. Based on the previous 401k, my brother suggested that if I split contributions equally between the 4 Spartan funds, I'd end up with pretty much the same asset allocation as before while bringing my international exposure back up. Now that Spartan U.S. Bond is eliminated, I have Pimco Total Return instead. Also, I have now received my portion of my ex-Husband's 401k into a Fidelity Rollover IRA, so I need to figure out the simplest way to proceed.
6. I hope to purchase a home in 5 years. I want to leave retirement savings alone, but there's always a possibility I'd have to tap an account to make the purchase. Should I reduce my percent of equities in the retirement accounts just in case? Any suggestions? Anywhere special I should place my savings for the house?
Last edited by latterdaymom on Tue Jul 02, 2013 8:58 pm, edited 1 time in total.
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- Joined: Thu Sep 03, 2009 10:52 am
- Location: Houston
Re: 401k/rollover IRA, and my car
1. Keeping your recurring costs down is always a good idea.
2. I suggest that you ask again once you have paid off all loans.
3. I'd recommend selling and getting 10-year old Honda Civic or similar.
4. Definitely no more loans, but don't spend more than $5k on the new used car.
5. Your 401k balance is so low considering your age, so I think the aggressive 75% stock allocation is appropriate, but the AA is also not yet a very important decision. The 3 stocks fund you have selected are a good choice and I agree with allocating 25% to each of them for simplicity. As for the bond fund, I'd recommend taking another look and picking the the bond fund with the lowest expense ratio.
6. First get rid of all debt. If you use retirement savings to buy a house, what will you retire on?
2. I suggest that you ask again once you have paid off all loans.
3. I'd recommend selling and getting 10-year old Honda Civic or similar.
4. Definitely no more loans, but don't spend more than $5k on the new used car.
5. Your 401k balance is so low considering your age, so I think the aggressive 75% stock allocation is appropriate, but the AA is also not yet a very important decision. The 3 stocks fund you have selected are a good choice and I agree with allocating 25% to each of them for simplicity. As for the bond fund, I'd recommend taking another look and picking the the bond fund with the lowest expense ratio.
6. First get rid of all debt. If you use retirement savings to buy a house, what will you retire on?
Re: 401k/rollover IRA, and my car
Welcome to the forum.
If you need to buy a new car, then pay cash. Only spend as much as you need to spend (no more than $5k sounds reasonable). If you bought a new car for about $5k, then it looks like you would still have about $6k left in cash.
I don't think you need to pay off all of your debt before you start saving for a house, but you need to kill off those 5.5% loans. Take advantage of the fact that you live with your family and your expenses are low to pay as much as you can on them every month until those two are dead. Once the two larger loans are paid off, I don't think you should pay down the lower interest rate debt. It doesn't make sense to me to pay off a very low interest rate debt if you're going to buy a house in 5 years. It makes much more sense to save that money for a bigger down payment especially if you can save 20% to avoid PMI.
Don't tap your retirement accounts to buy a house. Just don't.
If you need to buy a new car, then pay cash. Only spend as much as you need to spend (no more than $5k sounds reasonable). If you bought a new car for about $5k, then it looks like you would still have about $6k left in cash.
I don't think you need to pay off all of your debt before you start saving for a house, but you need to kill off those 5.5% loans. Take advantage of the fact that you live with your family and your expenses are low to pay as much as you can on them every month until those two are dead. Once the two larger loans are paid off, I don't think you should pay down the lower interest rate debt. It doesn't make sense to me to pay off a very low interest rate debt if you're going to buy a house in 5 years. It makes much more sense to save that money for a bigger down payment especially if you can save 20% to avoid PMI.
Don't tap your retirement accounts to buy a house. Just don't.
Walk a single path, becoming neither cocky with victory nor broken with defeat, without forgetting caution when all is quiet or becoming frightened when danger threatens. -- Jigoro Kano
Re: 401k/rollover IRA, and my car
Welcome to the forum!
Regarding your portfolio, add enough money to the rollover to get above $5k. That way you can buy 2 different Spartan funds in that account. Then adjust what is currently in your portfolio to this:
Fidelity 401k 13.8% ($798)
10% Fidelity Spartan 500 Adv (FUSVX) 0.07
3.8% Fidelity Spartan Extended Mkt Adv (FSEVX) 0.07
Fidelity Rollover IRA 86.2% ($5000)
43.1% Spartan Global Except US
43.1% Spartan US Bond Index
Yes, this is completely out of kilter, but will adjust fairly quickly as you add money to the 401k. It eliminates the use of the high cost PIMCO fund. Eventually, you would need to add both a bond fund and an international fund to the 401k to keep your percentages where you want them.
Option 2
Fidelity 401k 14.7% ($798)
0% Fidelity Spartan 500 Adv (FUSVX) 0.07
0% Fidelity Spartan Extended Mkt Adv (FSEVX) 0.07
14.7% PIMCO Total Return
Fidelity Rollover IRA 85.3% ($4620)
85.3% FFNOX Fidelity Four In One Index (85% stocks, 15% bonds)
This would start out closer to your desired AA. Money going into the 401k would go mostly to the 500 Index and Extended Market funds, with enough going into the high cost PIMCO fund to keep your bond allocation high enough. Eventually, as the 401k grows, the Rollover could be switched to the funds listed in Option 1 (Spartan US Bond Market and Global Except US Index).
Another option is to use a Fidelity Freedom fund, but the expense ratios are too high for my taste - I would not use them.
Whatever extra money you have should go to the 5.55% loans. Those loans might be draining off interest faster than your investments are earning.
I don't wish to sound harsh, but with almost $25k in debt and essentially no savings for retirement, I don't believe you can afford a house in 5 years. Paying off the debt and increasing your retirement savings A LOT are much more important than buying a house.latterdaymom wrote:2. Any recommendations of where I should place savings for a house?
I would not put that much into a that old a car unless you are almost certain you will get several years of use without more expensive repair.3. So I wonder whether I should another $2k into my car, or use the money for another car.
Use part of your cash for a new used car.4. If I purchase another automobile, I question whether I should use all my cash to purchase it, or should I take out an auto loan at a low interest rate so I can use whatever savings is left to reduce my high interest student loans. I don't like the idea of more debt, but I do like the idea of saving some money.
Unless you will get a big chunk of cash from somewhere, I think buying a home in 5 years is not realistic at all. Maybe you are underestimating the importance of retirement savings. Just as an example, if you retired today your portfolio could provide you with about $18 a month to live on. That might help you see how much you need to increase your retirement savings.6. I hope to purchase a home in 5 years. I want to leave retirement savings alone, but there's always a possibility I'd have to tap an account to make the purchase. Should I reduce my percent of equities in the retirement accounts just in case? Any suggestions? Anywhere special I should place my savings for the house?
Regarding your portfolio, add enough money to the rollover to get above $5k. That way you can buy 2 different Spartan funds in that account. Then adjust what is currently in your portfolio to this:
Fidelity 401k 13.8% ($798)
10% Fidelity Spartan 500 Adv (FUSVX) 0.07
3.8% Fidelity Spartan Extended Mkt Adv (FSEVX) 0.07
Fidelity Rollover IRA 86.2% ($5000)
43.1% Spartan Global Except US
43.1% Spartan US Bond Index
Yes, this is completely out of kilter, but will adjust fairly quickly as you add money to the 401k. It eliminates the use of the high cost PIMCO fund. Eventually, you would need to add both a bond fund and an international fund to the 401k to keep your percentages where you want them.
Option 2
Fidelity 401k 14.7% ($798)
0% Fidelity Spartan 500 Adv (FUSVX) 0.07
0% Fidelity Spartan Extended Mkt Adv (FSEVX) 0.07
14.7% PIMCO Total Return
Fidelity Rollover IRA 85.3% ($4620)
85.3% FFNOX Fidelity Four In One Index (85% stocks, 15% bonds)
This would start out closer to your desired AA. Money going into the 401k would go mostly to the 500 Index and Extended Market funds, with enough going into the high cost PIMCO fund to keep your bond allocation high enough. Eventually, as the 401k grows, the Rollover could be switched to the funds listed in Option 1 (Spartan US Bond Market and Global Except US Index).
Another option is to use a Fidelity Freedom fund, but the expense ratios are too high for my taste - I would not use them.
Whatever extra money you have should go to the 5.55% loans. Those loans might be draining off interest faster than your investments are earning.
This is on the aggressive end of a reasonable spectrum. But as you age, increase your bond allocation so that you always have at least "age minus 20" in bonds. Going more aggressive than that would be reckless in my opinion. Many here would encourage you to stay nearer "age minus 10" in bonds or age in bonds.Desired Asset Allocation: I started with 75% stocks / 25% bonds, but I'm open to suggestions!
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Re: 401k/rollover IRA, and my car
thank you for the feedback. I'm not overly worried about a house right now, just know I want that in future.
On my rollover IRA, I can't add to it in its current state. I guess I need to go back to Fidelity to ask questions and understand why keeping it in the rollover IRA is advantageous or not. Initially I chose that over rolling it into my 401k because it seemed like there were better investment choices. I can roll it into my 401k any time I want.
On my rollover IRA, I can't add to it in its current state. I guess I need to go back to Fidelity to ask questions and understand why keeping it in the rollover IRA is advantageous or not. Initially I chose that over rolling it into my 401k because it seemed like there were better investment choices. I can roll it into my 401k any time I want.
Re: 401k/rollover IRA, and my car
I don't see why not unless it is still in your husband's name. It's an IRA. You are allowed to contribute up to $5,500 this year to an IRA.On my rollover IRA, I can't add to it in its current state
The advantage of keeping it separate is you have a few better choices (a cheaper bond bund, a more complete international fund) outside the 401k than inside the 401k. But if you roll it into the 401k, you have good choices there too
- SPTN 500 INDEX ADV (FUSVX) 0.07%
SPTN EXT MKT IDX ADV (FSEVX) 0.07%
SPTN INTL INDEX ADV (FSIVX) 0.17%
PIMCO TOT RETURN ADM (PTRAX) 0.71%
FIDELITY GOVT INCOME (FGOVX) 0.45%
Link to Asking Portfolio Questions
Re: 401k/rollover IRA, and my car
Can you make contributions to a rollover ira? wouldn't she have to start a new traditional or roth ira to make new contributions?retiredjg wrote:I don't see why not unless it is still in your husband's name. It's an IRA. You are allowed to contribute up to $5,500 this year to an IRA.On my rollover IRA, I can't add to it in its current state
The advantage of keeping it separate is you have a few better choices (a cheaper bond bund, a more complete international fund) outside the 401k than inside the 401k. But if you roll it into the 401k, you have good choices there too
- SPTN 500 INDEX ADV (FUSVX) 0.07%
SPTN EXT MKT IDX ADV (FSEVX) 0.07%
SPTN INTL INDEX ADV (FSIVX) 0.17%
PIMCO TOT RETURN ADM (PTRAX) 0.71%
FIDELITY GOVT INCOME (FGOVX) 0.45%
Walk a single path, becoming neither cocky with victory nor broken with defeat, without forgetting caution when all is quiet or becoming frightened when danger threatens. -- Jigoro Kano
Re: 401k/rollover IRA, and my car
As far as I know, you can make contributions to a rollover IRA. I believe there was a time when rollover IRAs were kept separate, but that is no longer true to my knowledge. I suppose there might be other reasons she can't contribute to it though.fulltilt wrote:Can you make contributions to a rollover ira? wouldn't she have to start a new traditional or roth ira to make new contributions?
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Re: 401k/rollover IRA, and my car
I'd suggest you invest more aggressively for the next few years. Your portfolio balance is currently less than your cash balance, so I'd suggest you keep 100% of your portfolio in stocks until it grows to be at least 3x your cash savings. I like to think of cash and bonds together when thinking about asset allocation.
What is the benefit of auto payments on your student loans if you can't pay the high interest ones first ?
What is the benefit of auto payments on your student loans if you can't pay the high interest ones first ?
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Re: 401k/rollover IRA, and my car
The autopayment reduces my interest by 1.25% and ensures its on time. They take out the required amount and distribute it according to their rules. I can, however, make additional payments and specifiy where to apply them -- which is the plan once the car situation is sorted.EJE wrote:What is the benefit of auto payments on your student loans if you can't pay the high interest ones first ?
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Re: 401k/rollover IRA, and my car
Fidelity told me I couldn't, but I'm going to call them and ask more questions.retiredjg wrote:As far as I know, you can make contributions to a rollover IRA. I believe there was a time when rollover IRAs were kept separate, but that is no longer true to my knowledge. I suppose there might be other reasons she can't contribute to it though.fulltilt wrote:Can you make contributions to a rollover ira? wouldn't she have to start a new traditional or roth ira to make new contributions?
Re: 401k/rollover IRA, and my car
It might depend on whether it is in your name or not. Be sure to ask them that part.latterdaymom wrote:Fidelity told me I couldn't, but I'm going to call them and ask more questions.retiredjg wrote:As far as I know, you can make contributions to a rollover IRA. I believe there was a time when rollover IRAs were kept separate, but that is no longer true to my knowledge. I suppose there might be other reasons she can't contribute to it though.fulltilt wrote:Can you make contributions to a rollover ira? wouldn't she have to start a new traditional or roth ira to make new contributions?
Link to Asking Portfolio Questions
Re: 401k/rollover IRA, and my car
Welcome to the forum!
Your contributions will dramatically re-shape the portfolio over the next little while, so it almost doesn't matter what you're AA is right now. For example, if you leave your 401k as posted, you could put 100% of the Rollover IRA in bonds and you'd end up with a combined portfolio of 60% Stocks / 40% Bonds in 5 years, with 1/3 of your stocks still allocated internationally, which is in the direction you want to go. That said, it's not the absolutely simplest arrangement, and I can't seem to let go of the exclusion of Emerging Markets.
I'm going to suggest the simplest arrangement I can think of for the next 5 years, at which point it'll be time to revisit the question of asset allocation and fund placement. I believe my idea balances your current situation with where you need to go, while achieving the broadest diversification possible over the time period, albeit with compromises depending on when one looks at the portfolio. Accounts below do not equal 100%, rather each account equals 100% so that you can set your Fidelity 401k rebalancing tool in the percents listed for a simple set-and-forget portfolio over the next 5 years:
Fidelity 401k ($798)
28% Fidelity Spartan 500 Adv (FUSVX) 0.07
28% Fidelity Spartan Extended Mkt Adv (FSEVX) 0.07
44% Fidelity Government Income (FGOVX) 0.45% or Pimco Total Return Adm (PTRAX) 0.71
Fidelity Rollover IRA ($4620)
100% Fidelity Spartan Global Ex-U.S. Index Fund (FSGUX) 0.24 <--Developed Int'l + Emerging Markets. The 401k Int'l is excellent, but is only Developed markets.
*No need to contribute additional money to IRA.
*International assets now include emerging markets.
*Your stock funds are back to an even 3-way split within 5 years.
*Fidelity 401ks offer automatic rebalancing so you can set the percents as listed and leave it alone for 5 years. (A simple set-and-forget, eh?)
*I left the U.S. Extended Market (Mid and Small Caps) and the S&P 500 in the same even-split as before, which does overweight Mid and Small relative to Large Caps. I did this partially to keep in line what you've already done, and partially to compensate for the lack of International Small caps. I have no idea if these are valid reasons, but the most important part is the overall stock-bond split. And speaking of which...
*Combined portfolio lands in the vicinity of 65% Stocks and 35% Bonds in 5 years, with 1/3 of your stocks in International, representing a reasonable asset allocation of age minus 12 in bonds (with a nod to retiredjg's cautions) and which can slowly continue to become less risky over the years in preparation for retirement.
Your contributions will dramatically re-shape the portfolio over the next little while, so it almost doesn't matter what you're AA is right now. For example, if you leave your 401k as posted, you could put 100% of the Rollover IRA in bonds and you'd end up with a combined portfolio of 60% Stocks / 40% Bonds in 5 years, with 1/3 of your stocks still allocated internationally, which is in the direction you want to go. That said, it's not the absolutely simplest arrangement, and I can't seem to let go of the exclusion of Emerging Markets.
I'm going to suggest the simplest arrangement I can think of for the next 5 years, at which point it'll be time to revisit the question of asset allocation and fund placement. I believe my idea balances your current situation with where you need to go, while achieving the broadest diversification possible over the time period, albeit with compromises depending on when one looks at the portfolio. Accounts below do not equal 100%, rather each account equals 100% so that you can set your Fidelity 401k rebalancing tool in the percents listed for a simple set-and-forget portfolio over the next 5 years:
Fidelity 401k ($798)
28% Fidelity Spartan 500 Adv (FUSVX) 0.07
28% Fidelity Spartan Extended Mkt Adv (FSEVX) 0.07
44% Fidelity Government Income (FGOVX) 0.45% or Pimco Total Return Adm (PTRAX) 0.71
Fidelity Rollover IRA ($4620)
100% Fidelity Spartan Global Ex-U.S. Index Fund (FSGUX) 0.24 <--Developed Int'l + Emerging Markets. The 401k Int'l is excellent, but is only Developed markets.
*No need to contribute additional money to IRA.
*International assets now include emerging markets.
*Your stock funds are back to an even 3-way split within 5 years.
*Fidelity 401ks offer automatic rebalancing so you can set the percents as listed and leave it alone for 5 years. (A simple set-and-forget, eh?)
*I left the U.S. Extended Market (Mid and Small Caps) and the S&P 500 in the same even-split as before, which does overweight Mid and Small relative to Large Caps. I did this partially to keep in line what you've already done, and partially to compensate for the lack of International Small caps. I have no idea if these are valid reasons, but the most important part is the overall stock-bond split. And speaking of which...
*Combined portfolio lands in the vicinity of 65% Stocks and 35% Bonds in 5 years, with 1/3 of your stocks in International, representing a reasonable asset allocation of age minus 12 in bonds (with a nod to retiredjg's cautions) and which can slowly continue to become less risky over the years in preparation for retirement.
Last edited by pingo on Sat Jul 27, 2013 4:59 pm, edited 25 times in total.
Re: 401k/rollover IRA, and my car
I don't have any personal knowledge, but I was always under the impression that one wouldn't be able to contribute directly to a Rollover IRA, rather one would have to request it be converted (I don't know the specific jargon) to a Traditional IRA, or rolled into a Traditional IRA, or something of the sort. From there, one could contribute to the Traditional IRA.retiredjg wrote:It might depend on whether it is in your name or not. Be sure to ask them that part.latterdaymom wrote:Fidelity told me I couldn't, but I'm going to call them and ask more questions.retiredjg wrote:As far as I know, you can make contributions to a rollover IRA. I believe there was a time when rollover IRAs were kept separate, but that is no longer true to my knowledge. I suppose there might be other reasons she can't contribute to it though.fulltilt wrote:Can you make contributions to a rollover ira? wouldn't she have to start a new traditional or roth ira to make new contributions?
Perhaps a TIRA would have to be opened and then have the RIRA rolled into it?
Something else occurred to me as well. There are certain commission-free ETFs that can be purchased with a Fidelity account in order to get around the issue with fund minimums. I'm not familiar with what the appropriate commission-free ETFs would be and I personally prefer traditional funds.
- interplanetjanet
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Re: 401k/rollover IRA, and my car
Be aware that while the deduction and child tax credit can be transferred from one parent to another per-year, the *only* parent who can take the earned income credit (EIC) and Head Of Household filing status is the one who the child lived with for more than half of the year. This is IRS regulation and your divorce decree cannot override it. This may help out your taxes a bit if you have primary physical custody.latterdaymom wrote:1. I recently divorced with one child who I can claim every other year.
Re: 401k/rollover IRA, and my car
A recent topic for some light reading, in case it would be of interest:
Cashing out Standard IRA to purchase first home
Cashing out Standard IRA to purchase first home
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Re: 401k/rollover IRA, and my car
Thank you so much for that reminder. I didn't even think of that.interplanetjanet wrote:Be aware that while the deduction and child tax credit can be transferred from one parent to another per-year, the *only* parent who can take the earned income credit (EIC) and Head Of Household filing status is the one who the child lived with for more than half of the year. This is IRS regulation and your divorce decree cannot override it. This may help out your taxes a bit if you have primary physical custody.latterdaymom wrote:1. I recently divorced with one child who I can claim every other year.
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Re: 401k/rollover IRA, and my car
Thanks everyone for all your feedback. This gets what I have placed while I start learning. Have a great day!
Re: 401k/rollover IRA, and my car
And if you could have used head-of-household or the earned income credit for any of the previous three years, you can file an amended tax return for those years and still get the tax refund.latterdaymom wrote:Thank you so much for that reminder. I didn't even think of that.interplanetjanet wrote:Be aware that while the deduction and child tax credit can be transferred from one parent to another per-year, the *only* parent who can take the earned income credit (EIC) and Head Of Household filing status is the one who the child lived with for more than half of the year. This is IRS regulation and your divorce decree cannot override it. This may help out your taxes a bit if you have primary physical custody.latterdaymom wrote:1. I recently divorced with one child who I can claim every other year.
Re: 401k/rollover IRA, and my car
I would make sure the divorce was equitable financially. There are women that will not take what hey are owed only to find out later they shot themselves in the foot when they are hurting financially. If your son lives with you there is no reason to flip flop the child credit.
Nothing is free, someone pays...You can't spend your way to financial freedom.