Going from 80/20 to 50/50-Help me pick a fund

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avp1234
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Joined: Mon Jun 24, 2013 12:27 pm

Going from 80/20 to 50/50-Help me pick a fund

Post by avp1234 » Sat Feb 03, 2018 10:13 am

Hi,

I lowered most of my accounts a while back from 80/20 to about 60/40. I'm 49 and felt that allocation was more appropriate for my age. I believe I moved it to Fidelity Index 2025 if I remember correctly, for my Roth. My employer 457 is in Fidelity Puritan and it's apx 60/40. If I work 4 more years, assuming I keep my job w/o something crazy happening, I will have my 30 yrs. in and will be able to draw my pension and plan to retire. My husband is self employed and will continue to work a long time. He loves what he does, vs me....not so much.

I didn't do anything with his IRA which is still in Fidelity-4-in -one index. It's apx 85/15. It's done very well, but considering our ages and my desire to no longer work and draw my pension (i may work, just do something totally different) I'm looking for a low cost fund more around 50/50. I'll admit, the latest tiny drop in the stock market reminded me I need to take care of this.

I know not to sell if it goes down and will continue to buy regardless. Dumb question, but am I correct in thinking changing funds to a lower risk fund isn't selling, just moving the money? We'll still be in the market and should have already done this anyway. I know my risk tolerance and losing 1500 a day (on just a 2 percent drop) in one account isn't for me at this point in my life.

So, I need suggestions on a lost cost 50/50 fund. Can you help me pick one?

Thanks so much for advice, as always :)

ionball
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Re: Going from 80/20 to 50/50-Help me pick a fund

Post by ionball » Sat Feb 03, 2018 10:48 am

Changing funds to lower your risk would not be considered selling in terms of market timing. Risk profile can change approaching retirement and shifting to lower risk is a typical strategy.
Are all of your accounts with Fidelity? And do you have access to the Freedom target funds?
The Fidelity Freedom 2010 Fund is allocated about 45/55.
The Fidelity Freedom 2015 Fund is allocated about 54/46.
Depending on your various account balances you could do about half 2010 and half 2015 if you want to be very close to 50/50. Would that work for you?

nps
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Re: Going from 80/20 to 50/50-Help me pick a fund

Post by nps » Sat Feb 03, 2018 11:42 am

If all your accounts were 60/40 now, and it sounds like it might be a little higher, losing $1500 on a 2 percent drop in stocks would imply that you have about $125,000 invested. That's not going to produce much retirement income at any AA. Will you be able to live off your pension and husband's income alone when you retire?

treatyall
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Re: Going from 80/20 to 50/50-Help me pick a fund

Post by treatyall » Sat Feb 03, 2018 11:54 am

When you retire and start to draw you pension along with possibly working elsewhere, will you need to start drawing from your investments to supplement your income or would pension and other job provide you with enough to live off of? Being in your early to mid 50s at that point in time you still have a lot of life ahead of you and your investments should reflect those factors. I'd look at if the 50/50 allocation would continue to grow at the rate you'd need it to in order to achieve your needs later in retirement. But then again, it's hard to take the emotions out of investing and if you're losing sleep at night seeing the account value drop perhaps moving to a more conservative approach is going to suit you better provided a "smoother ride" during the market's ups and downs.

avp1234
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Joined: Mon Jun 24, 2013 12:27 pm

Re: Going from 80/20 to 50/50-Help me pick a fund

Post by avp1234 » Sun Feb 04, 2018 1:50 am

nps wrote:
Sat Feb 03, 2018 11:42 am
If all your accounts were 60/40 now, and it sounds like it might be a little higher, losing $1500 on a 2 percent drop in stocks would imply that you have about $125,000 invested. That's not going to produce much retirement income at any AA. Will you be able to live off your pension and husband's income alone when you retire?
One of my husbands accounts is the only one thats still 85/15 apx. It's FFNOX. I think that's too risky for our age. That's the one I was saying lost $1500. I really was just wondering about this one since I had changed others to 60/40.I wasn't including any losses in other accounts or my state pension and 457. We have around $300,000 in retirement accts, not counting my pension, and our house is paid off. Yes, we got a late start.

We are just now at the point in our lives where we can really save a lot and in the next 4 years it's critical we really bring our accts up. One reason i mentioned retiring where I'm at is because I work in a political office. My boss is retiring and i'm currently working an election not knowing the outcome. If my girl wins or assuming the opposition keeps me 4 more years i'll have my 30 yrs in and be able to draw full retirement and buy insurance through work. That doesn't mean I won't do something else, it means if I get canned next election at least I'll be in an ok place.

TwstdSista
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Re: Going from 80/20 to 50/50-Help me pick a fund

Post by TwstdSista » Sun Feb 04, 2018 4:13 am

I love FFNOX Fidelity's Four-In-One Index Fund! That being said, there is a time when it's not longer and good choice given its 85/15 ratio.

I'd suggest switching it out for FLIFX Fidelity Freedom Index 2015 Fund Investor Class, ER 0.15% -- it's approximately 50/50 which sounds like a better match for you at this stage.

chmcnm
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Re: Going from 80/20 to 50/50-Help me pick a fund

Post by chmcnm » Sun Feb 04, 2018 8:03 am

We went through similar thought process recently. You reach an age where you're more concerned about keeping what you have than big gains. I like the target date funds but Fido also has FASMX. It's a 50/50 fund. The expense is a little high but it's a constant 50/50. You could also look at the iShares allocation funds. I think the symbols are AOM, AOR, AOK, etc. Only $4.95 per transaction.

nps
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Re: Going from 80/20 to 50/50-Help me pick a fund

Post by nps » Sun Feb 04, 2018 8:36 am

The Freedom funds at Fidelity look like they glide to 24 percent equity. Not sure if you're looking for that or to maintain 50/50 indefinitely. If Fidelity doesn't have a cheap 50/50 option there are others who do. You can switch your IRA custodians but are likely stuck with your 457 provider's options.

That same $1500 drop at 85/15 would be $1060 at 60/40 or $880 at 50/50. Would you have reconsidered your AA in that account with equity allocations at those levels? What if the market drops the same percent again tomorrow?

retiredjg
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Re: Going from 80/20 to 50/50-Help me pick a fund

Post by retiredjg » Sun Feb 04, 2018 8:44 am

Since you want your portfolio to be 60/40, your best option at Fidelity is to pick a Fidelity Freedom Index fund at or near 60/40.

Selling something when you realize it should have been adjusted awhile back is not market timing. Just do it.

benway
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Re: Going from 80/20 to 50/50-Help me pick a fund

Post by benway » Sun Feb 04, 2018 9:17 am

All great suggestions so far. It sounds as though you want to maintain a one fund approach, which is a fine choice and keeps things very simple. Not sure if you have other options for the individual funds that make up the target funds. I’m about your age, early retirement not too far off and my approach to 50/50 is 25% total stock market US, 25% total international, 25% treasury inflation protected index (TIPS) and 25% total bond market. I do this because I want to control my glide path based on personal need, ability and willingness for risk. But again, one fund approach very fine choice IMO and in the end will serve you well.

avp1234
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Re: Going from 80/20 to 50/50-Help me pick a fund

Post by avp1234 » Mon Feb 05, 2018 6:04 pm

All great suggestions. Thank you so much!

I just want to make sure I understand correctly. With the drop today, if I switch funds, that isn't considered selling? I know not to time the market and sell and that's not what I want to do. But I also don't want to lose all gains by staying in a fund that is too risky for my age and situation. I am still going to continue my monthly/bi-weekly contributions that are on auto as usual.

I hope I'm making sense, just want to make sure I'm understanding and on the right path.

TwstdSista
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Re: Going from 80/20 to 50/50-Help me pick a fund

Post by TwstdSista » Mon Feb 05, 2018 6:07 pm

Revising your asset allocation based on changed circumstances and then re-allocating towards that revised AA is not market timing.

nps
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Re: Going from 80/20 to 50/50-Help me pick a fund

Post by nps » Mon Feb 05, 2018 7:18 pm

You shouldn't fool yourself, exchanging stocks for bonds means selling stocks and buying bonds. But I agree with the above poster, I wouldn't consider it to be counterproductive market timing to permanently adjust your AA downward to reflect your age and risk tolerance.

avp1234
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Re: Going from 80/20 to 50/50-Help me pick a fund

Post by avp1234 » Mon Feb 05, 2018 7:58 pm

So...maybe I should just leave what I have in FFNOX that's 85/15 and put new contributions into a one of the lower risk funds suggested above?

gerntz
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Re: Going from 80/20 to 50/50-Help me pick a fund

Post by gerntz » Mon Feb 05, 2018 8:28 pm

Don't do anything & you'll be 50/50 shortly.

ionball
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Re: Going from 80/20 to 50/50-Help me pick a fund

Post by ionball » Mon Feb 05, 2018 9:01 pm

avp1234 wrote:
Mon Feb 05, 2018 7:58 pm
So...maybe I should just leave what I have in FFNOX that's 85/15 and put new contributions into a one of the lower risk funds suggested above?
Don't let recent volatility alter your AA master plan. Whenever you change AA or rebalance, you must buy and/or sell something. Emotions can ruin a retirement plan. Settle on a sound plan, then execute the plan. If you transition on your contribution schedule how soon will you reach the 50/50 that you are seeking? Is your plan to switch to a more secure 50/50, or is the plan to slowly glide to 50/50 over a period of time? If the latter, set the timeframe in your master plan and execute on a preset schedule. Think in terms of year to year, not day to day if you want long term success.

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Tyler Aspect
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Re: Going from 80/20 to 50/50-Help me pick a fund

Post by Tyler Aspect » Mon Feb 05, 2018 9:45 pm

This mix will be approximately 50% stock / 50% bond:

60% Fidelity Four-in-One Index Fund
40% Fidelity U.S. Bond Index Fund

A solo 401k account will allow a higher contribution amount for your husband.
Past result does not predict future performance. Mentioned investments may lose money. Contents are presented "AS IS" and any implied suitability for a particular purpose are disclaimed.

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