HELP !!! Please - What do I do with 401K choices ???

Have a question about your personal investments? No matter how simple or complex, you can ask it here.

HELP !!! Please - What do I do with 401K choices ???

Postby captdan » Thu Oct 14, 2010 10:42 am

After reading the posts for a while I have confirmed what I already knew - I know absolutely nothing about investing.

I need some sound advice on what I should do with my 401k as far as investing goes. I currently have $220k in a stable value fund earning only about 4% a year. A little background is as follows:

I am married, 54 years old, working on 28 1/2 years as a police capt in NC. My wife does not work.

Mortgage of $143k at 4.5% for the next 29 years!

I can retire in 1 1/2 years with a pension of $2800 per month with 100% survivorship. I will also have a supplemental pension from age 55 -62 of $1700 per month. When it ends at 62 I will take social security which will also be about $1700 per month.

My 401k is through the NC states Prudential program. As I said above the current balance is $220k. Prudential has what they call "GoalMaker" which automatially chooses investments based on your risk tolerance profile. After some pretty big losses several years ago when I was using "GoalMaker" with an aggresive profile I switched it all over to a Stable Value fund to protect my principal since I was getting close to retirement.

I contribute $22K per year (the max) and employer contributes 5% of my $70K salary.

Now I am starting to wonder if I should go back to something earning a little more interest. I have re-done my profile on "GoalMaker" to the most conservative profile and the suggested investments are as follows:

NC Stable Value 50%
NC Fixed Income Fund 9%
NC Fixed Income Index 8%
NC Large Cap Value Fund 5%
NC Large Cap Index Fund 10%
NC Large Cap Growth Fund 5%
NC SMID Value Fund 2%
NC SMID Cap Index Fund 2%
NC SMID Growth Fund 2%
NC Global Equity Fund 3%
NC International Fund 2%
NC International Index Fund 2%

I can retire in a little under 2 years or I could say on longer if I choose. I would like to have my 401k earning more interest but I have very little tolerance for risk as I dont want to loose my principal.

Should I just stay where I am or take the above suggestion or look at other alternatives, the 401k plan has many others, I was looking at the above since it was the most conservative.

Any help or advice would be greatly appreciated!

Dan
Here is the list of all the options available in my 401K:

NC STABLE VALUE-401K
Prudential Stable Value Fund
Fixed Income - Intermediate Bond
Fidelity Intermediate Bond Fund FTHRX 0.45%
Fixed Income – Domestic
North Carolina Fixed Income Fund 0.42%
North Carolina Fixed Income Index 0.25%
Balanced – Value
Invesco Van Kampen Equity and Income Fund A ACEIX 0.82%
Balanced – Blend
Fidelity Balanced Fund FBALX 0.68%
Balanced – Specialty
Fidelity Freedom 2000 FFFBX 0.51%
Fidelity Freedom 2010 FFFCX 0.67%
Fidelity Freedom 2020 FFFDX 0.74%
Fidelity Freedom 2030 FFFEX 0.79%
Fidelity Freedom Income FFFAX 0.50%
Large Cap Stock – Value
Fidelity Equity Income Fund FEQIX 0.74%
Invesco Van Kampen Growth & Income Fund A ACGIX 0.89%
North Carolina Large Cap Value Fund 0.64%
Large Cap Stock – Blend
Federated Capital Appreciation Fund FEDEX 1.36%
Fidelity Spartan U.S. Equity Index FUSEX 0.10%
North Carolina Large Cap Index Fund 0.21%
Large Cap Stock – Growth
American Funds Growth Fund of Amer R4 RGAEX 0.70%
Fidelity Magellan Fund FMAGX 0.75%
North Carolina Large Cap Growth Fund 0.63%
Putnam Multi-Cap Growth Fund PNOPX 1.27%
Mid Cap Stock – Value
Goldman Sachs Mid Cap Value Fund A GCMAX 1.19%
Small Cap Stock – Value
BB&T Sterling Capital Small Cap Value Class I SPSCX 1.26%
North Carolina SMID Value Fund 0.73%
Small Cap Stock – Blend
North Carolina SMID Cap Index Fund 0.24%
Oppenheimer Main Street Small Cap Fund A OPMSX 1.38%
Putnam Capital Opportunities Fund PCOAX 1.34%
Small Cap Stock – Growth
North Carolina SMID Growth Fund 0.83%
Global Stock – Blend
North Carolina Global Equity Fund 0.69%
International Stock – Blend
American Funds EuroPacific Growth Fund R4 REREX 0.86%
North Carolina International Fund 0.80%
North Carolina International Index Fund 0.31%
International Stock – Growth
T. Rowe Price International Stock Fund PRITX 0.91%

ALL HELP IS APPRECIATED.
Last edited by captdan on Thu Oct 14, 2010 3:40 pm, edited 3 times in total.
captdan
 
Posts: 4
Joined: Thu Oct 14, 2010 10:14 am

Postby vesalius » Thu Oct 14, 2010 11:12 am

Go ahead and edit your post above and list the funds you have available with the expense ratios, ticker symbols and names. You will also get much more help if you follow the prescribed posting format listed in this post stickied at the top of this forum.

Like I said everyone here finds it much easier to help if you include all the information requested in the original post, and not just in subsequent replies.
vesalius
 
Posts: 681
Joined: Tue Jul 13, 2010 8:00 pm
Location: Texas

Postby flyfisher_work2 » Thu Oct 14, 2010 2:45 pm

like vesalius mentioned, we need to see all your plan options (with expense rations if possible) , not just this "pre-packaged" mix. See the link provided. Do you have any Roth IRA's (you, spouse)?

If you have very little tolerance for risk and do not want to lose any principal, then 100% stable value or a money market fund would be your best option....not what the computer mix is coming up with.

Within your existing 401k, if you could "mix" your own portfolio, a well balanced solution might look like this:

50% Fixed Income Index Fund
40% Large Cap Index Fund
10% International Index Fund

That would give you 50/50 stock/ bond ratio, and 20% of your equities would be international. There would still be some risk of loss.

If you can find a mix that can get you to retirement (1.5 years), you may be able to roll your 401k over to Vanguard...many choices for a diverse, low-cost portfolio.
flyfisher_work2
 
Posts: 52
Joined: Tue May 18, 2010 1:11 pm

Postby crew » Fri Oct 15, 2010 12:26 am

No wonder you're confused - your plan has too many choices. Investment is a simple activity when done correctly that is needlessly complicated by the financial industry. Let's try to clear the fog.

Buy this book and check out the website www.analyzenow.com. Buying this book will be a very good investment for you.

Author: J.K. Lasser (this is a pen name, the true author is Henry Hebeler).
Title: Your Winning Retirement Plan

Go to Chapters labeled Pre-Retirement and Post-Retirement Planning towards the back. Follow the tables and charts and step-by-step process to plan your retirement.

The book has you estimate your retirement expenses, subtracts your Social Security and pension income, and then you know what you must cover with your own investments. It then gives you an idea of what % of your portfolio must be in stock, bonds, and cash. It takes risk and contingency planning into account. It is very practical. Your wife will love it; have her help you.

At the end of the process, you can evaluate the tradeoff of investing more in stock for potentially more money, or investing in less risky investments and having potentially less money.

The author is a retired engineer and former Boeing business manager who is conservative and will steer you in the right direction. he has a website called www.analyzenow.com that gives practical retirement advice.

Once you know how much you keep in cash and what % to invest in stock and bonds, almost anyone on this board will recommend you go with low-cost index funds for the stock and bond portion. Below are the low-cost index options from your list. If you construct your portfolio using these four funds, you will have broad coverage in the market and stand a good chance of doing as well or better than most investors out there. Your task is to determine how to allocate your portfolio among these four funds:

You are already familiar with the stable value funds.
For bonds, its the North Carolina Fixed Income Index 0.25%
For large company US stocks, its Fidelity Spartan U.S. Equity Index FUSEX 0.10%
For medium to small company US stocks, its North Carolina SMID Cap Index Fund 0.24%
For international company stocks, its North Carolina International Index Fund 0.31%

Regarding how you invest in these four funds, I can only tell you how I would approach it - you need to decide this for yourself, perhaps with a financial planner to help. An initial cut is to assume the stock portion is (100% - your age). So if you are 60 years old, then stocks should be (100-60) or 40% of your portfolio, with bonds filling the remaining 60%. Since you are very risk averse, you might want fewer stocks and more bonds - only you can make that decision.

Once you know the total amount to invest in stocks, then a rule of thumb is to make the international stock fund anywhere from 15% to 40% of that total number. For you, I might stick on the low end, no more than 25% of your total stock amount. Ultimately its up to you and your financial planner. The balance is split between the US large and the US medium/small funds. If you want it to look like the US market, then 65% to 70% of the US stock amount would be the large and 30% to 35% the medium/small. If you took this advice, your entire portfolio allocation would look like this:

Bonds, North Carolina Fixed Income Index - 60% of total portfolio
Large US stocks, Fidelity Spartan U.S. Equity Index FUSEX - 20% of total portfolio
Medium to small US stocks, North Carolina SMID Cap Index Fund - 10% of total portfolio
International stocks, North Carolina International Index Fund - 10% of total portfolio.

If you find this to be too complicated or hesitate to make the decision, your 401(k) offers a simpler alternative that requires only one investment decision - the Fidelity Freedom funds. You estimate the year to retire and then invest your entire portfolio into the fund that best matches your time horizon and risk tolerance.

Fidelity Freedom 2000 FFFBX 0.51%
Fidelity Freedom 2010 FFFCX 0.67%
Fidelity Freedom 2020 FFFDX 0.74%
Fidelity Freedom 2030 FFFEX 0.79%
Fidelity Freedom Income FFFAX 0.50%

In looking at the rest of the mutual funds in your 401(k) plan, I personally would not invest in them because they are either too expensive or do not give you the broad market exposure you need.

I hope this gives you a clearer view of some alternatives. Of course, this doesn't replace your own decision-making or that of a financial planner.
crew
 
Posts: 132
Joined: Wed Jun 30, 2010 9:09 pm

Postby JW Nearly Retired » Fri Oct 15, 2010 8:56 am

captdan wrote: I can retire in 1 1/2 years with a pension of $2800 per month with 100% survivorship. I will also have a supplemental pension from age 55 -62 of $1700 per month. When it ends at 62 I will take social security which will also be about $1700 per month.

A few more years working would make your 401(k) a lot bigger. If you don't mind, can I ask why you want/need to retire at 56? Is a police captain an unpleasant job? You ought to be just getting really good at it. I've never understood such early retirement for police/firemen. What drives it?

What would your pension be if you worked to 66?
JW
JW Nearly Retired
 
Posts: 4058
Joined: Sun Dec 16, 2007 1:25 pm

Postby captdan » Fri Oct 15, 2010 9:11 am

Thanks so much for your time in giving this reply and your advice. I will definately look into the website and book you provided and consider all your advice.[/quote]
captdan
 
Posts: 4
Joined: Thu Oct 14, 2010 10:14 am

Postby captdan » Fri Oct 15, 2010 9:17 am

A few more years working would make your 401(k) a lot bigger. If you don't mind, can I ask why you want/need to retire at 56? Is a police captain an unpleasant job? You ought to be just getting really good at it. I've never understood such early retirement for police/firemen. What drives it?

What would your pension be if you worked to 66?
JW[/quote]

I am actually considering working longer, I do not have to retire at 56, but after 30 years I must admit I am a little tired of the place. My pension would indeed continue to grow the longer I work as would my 401k and that is attractive. However my supplemental retirement of $1700 per month is only available from age 55 to 62 and it is a use it or lose it pension. Every month I work past 30 years I lose the ability to draw the $1700 per month for the supplemental retirement. That is something to take into consideration for sure.
captdan
 
Posts: 4
Joined: Thu Oct 14, 2010 10:14 am


Return to Investing - Help with Personal Investments

Who is online

Users browsing this forum: bertilak, BigTom, Bing [Bot], boomingaway, Google [Bot] and 20 guests