Retired at 68 with 500K; leave in 401k or move to IRA?

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AhrGeeEl
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Joined: Wed Aug 29, 2018 9:46 am

Retired at 68 with 500K; leave in 401k or move to IRA?

Post by AhrGeeEl » Wed Aug 29, 2018 4:45 pm

Original Post
We retired this year at age 68. Drinking from a fire hose re: how to produce income from our $500k in liquid assets, which are 60% in 401k and remainder in brokerage and MM funds. The $300K in 401K is 50% MM and remainder in a conservative retirement age targeted Fidelity fund. We have decent SS and pension income, but more would help. We are having discussions with full service brokers who want 1.3% annually to actively manage the funds. However, since we are forced to take about 4% of 401k as RMD at 70 1/2, I am trying to decide whether to a) leave in 401k, but move funds to a less conservative 65/35 bond/stock indexed funds, ala the Bogle advice I'm just learning about, or b) move to an IRA with a similar 65/35 bond/stock split, but taking income as dividends and bond earnings. Sorry if this doesn't make since. Basically wanting to know if I need services of a financial adviser, or if I can save the cost and used index stock and bond funds in the existing 401k or a new IRA.

Updating to use "Asking Portfolio Questions" format and detail.

Emergency Funds: 6 months in place
Debt: None
Tax Filing Status: Married Filing Jointly
Tax Rate: Federal: 11%; State: 4% (based on understanding from a FA. Still learning Effective vs. Marginal, and my actual rates in retirement)
State of Residence: MO
Age: Husband 68; Wife 63
Desired Asset Allocation (65 bonds, 35% stocks, per BH age based recommendations and splitting age diff with wife)
Desired International allocation: 20% of stocks, per BH recommendations

Assets:

Cash: $20k

His 401K:
$320,000
40% Money Market
50% 401k Retirement Target Date fund
10% S&P 500 Index Fund

Her Inherited Brokerage Account at Edward Jones
$80,000
Do not want to change this account at this time.

Her Inherited IRA at Fidelity
$6,000 Contra Fund

Their Money Market
$65,000 at local bank

Their HSA
$11,000 (not sure how allocated. Probably a MM equivalent.)

Total of All Accounts
$482,000; Includes $80,000 that remains with EJ, and $11,000 HSA that needs managed for better returns.

New Contributions:
Not adding to any accounts in retirement

Funds Available in his 401k
AGGRESSIVE; Stock Investments, Large Cap; 0.5351%

S&P 500 INDEX; Stock Investments, Large Cap; 0.0209% (Currently 10% of 401k)

FIAM SMID CAP CL O; Stock Investments, Mid-Cap; 0.61%

FID MID CAP IDX PR (FSCKX); Stock Investments, Mid-Cap; 0.025%

VERY AGGRESSIVE; Stock Investments, Mid-Cap; 0.6661%

RUSSELL 2000 INDEX; 0.0268%

DODGE & COX INTL STK (DODFX); Stock Investments International; 0.63%

INTL EQUITY INDEX; Stock Investments, International; 0.0402% (Short term trading fees of 2% for fee eligible shares held less than 30 days.)

OAKMARK INST (OANMX);Stock Investments; 0.72%

MODERATELY CAUTIOUS; Blended Fund Investments, Income; 0.0401%

MOD. AGGRESSIVE;Blended Fund Investments; 0.1991%

MODERATE; Blended Fund Investments; 0.0327%

Target Date 2020; Blended Fund Investments; 0.1064%

Target Date 2025; Blended Fund Investments; 0.1045%

Target Date 2030; Blended Fund Investments; 0.1047%

Target Date 2035; Blended Fund Investmentsl 0.1053%

RETIREMENT FUND; Blended Fund Investments; 0.1114% (Currently 50% of 401k)

CONSERVATIVE; Bond Investments, Income; 0.1058%

EV INC FND BOSTON R6 (EIBRX); Bond Investments, Income; 0.66%

FID INFL PR IDX PR (FSIYX); Bond Investments, Income; 0.05%

FID LT TR IDX PR (FLBAX); Bond Investments, Income; 0.03%

FIXED INCOME INDEX; Bond Investments, Income; 0.0417%

JPM US GOVT MM CAP (OGVXX); Short Term Investments; 0.21% (Currently 40% of 401k)

Questions:
1: To achieve the equivalent of a 3-Fund Portfolio, can I use funds in the 401k, or is an IRA a better choice?

2: If the 401k is suitable, are there recommendations from the available funds?
Last edited by AhrGeeEl on Sun Sep 02, 2018 6:33 pm, edited 1 time in total.

PFInterest
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Joined: Sun Jan 08, 2017 12:25 pm

Re: Retired at 68 with 500K; leave in 401k or move to IRA?

Post by PFInterest » Wed Aug 29, 2018 7:33 pm

you might need a FA, but not at 1.3%. Vanguard will do it for 0.3% so think of that as your base.
well do it for free, but we need some specific info: viewtopic.php?t=6212

moving to an IRA does not change RMDs in case thats what you mean. you will still need to withdraw ~3.6%.
if your 401k has bad choices or fees, then moving to an IRA is likely the better bet.
but well find out....

ExitStageLeft
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Re: Retired at 68 with 500K; leave in 401k or move to IRA?

Post by ExitStageLeft » Wed Aug 29, 2018 8:00 pm

Welcome to the forum! As PFInterest pointed out, we can provide much more useful advice with a little more information from you. Using the pencil icon in the top corner of your original post, can you update it to include the information given in the Asking Questions thread?

You would probably benefit more from the convenience and flexibility of having your assets in IRA accounts than you would from any slight gains you could get from institutional 401k funds.

delamer
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Joined: Tue Feb 08, 2011 6:13 pm

Re: Retired at 68 with 500K; leave in 401k or move to IRA?

Post by delamer » Wed Aug 29, 2018 9:31 pm

Here are some examples of low-cost, index portfolios that you can implement on your own:

https://www.bogleheads.org/wiki/Lazy_portfolios

If you don’t have options like these funds in your 401(k), that would be a good reason to move your money to an IRA.

EDIT: You could use a target date retirement fund or a Vanguard LifeStrategy fund (similar to target date, but with fixed allocations to stocks/bonds) in an IRA in lieu of a multi-fund portfolio.

As another poster noted, you will need to do RMDs even if you move money to the IRA. It may be that you have more flexibility with how withdrawals (both RMDs and otherwise) are done with the IRA, but that depends on your 401(k) plan.

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Watty
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Re: Retired at 68 with 500K; leave in 401k or move to IRA?

Post by Watty » Wed Aug 29, 2018 10:12 pm

AhrGeeEl wrote:
Wed Aug 29, 2018 4:45 pm
Basically wanting to know if I need services of a financial adviser, or if I can save the cost and used index stock and bond funds in the existing 401k or a new IRA.
There are all sorts of assumptions and qualifications but academic studies have found that in the past a person that retired could start out with about a 4% "safe withdrawal rate" and probably not run out of money.

https://www.bogleheads.org/wiki/Safe_withdrawal_rates

A problem is that the financial advisors fees come out of that 4% so if you pay someone 1.3% to manage your funds you are paying them a third of your income each year. It is actually worse than that because many financial advisors will put you in expensive investments to get a commission and you also have to pay your taxes out of that 4%.

Vanguard will manage your account for 0.3% a year and not put you in expensive investments. One option would be to use them for a couple of years to get your portfolio set up and on automatic pilot then you could stop paying them and manage it yourself.

You can get better suggestions on how to invest your money if you post your information using this suggested format as a guide. It does not need to follow it exactly.

viewtopic.php?f=1&t=6212

A big unknown for us is your tax situation. Target date funds are not ideal in a taxable account because of the tax issues with them. It sounds like you have around $200K in taxable accounts so if you are in the 12% federal tax bracket a target date fund might be OK in your taxable account.

I was in a different situation when I retired since most of my funds were in retirement accounts so I put almost all my funds into a target date fund. Some people think target date funds are some sort of dumbed down "investing for dummies" choice that needs to be improved on but in the right situation they are an excellent choice.

If a target date fund would cause you tax problems then a three fund portfolio would be a standard alternative to suggest.

https://www.bogleheads.org/wiki/Three-fund_portfolio

One of the founders of the Bogleheads recently published a book on three fund portfolios. I have not read it yet but you might take a look at that.

https://www.amazon.com/Bogleheads-Guide ... +portfolio

AhrGeeEl
Posts: 3
Joined: Wed Aug 29, 2018 9:46 am

Re: Retired at 68 with 500K; leave in 401k or move to IRA?

Post by AhrGeeEl » Sun Sep 02, 2018 4:39 pm

PFInterest wrote:
Wed Aug 29, 2018 7:33 pm
you might need a FA, but not at 1.3%. Vanguard will do it for 0.3% so think of that as your base.
well do it for free, but we need some specific info: viewtopic.php?t=6212

moving to an IRA does not change RMDs in case thats what you mean. you will still need to withdraw ~3.6%.
if your 401k has bad choices or fees, then moving to an IRA is likely the better bet.
but well find out....
Thanks for the help. I will submit the additional information requested here and in the other responses.

Mike Scott
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Joined: Fri Jul 19, 2013 2:45 pm

Re: Retired at 68 with 500K; leave in 401k or move to IRA?

Post by Mike Scott » Sun Sep 02, 2018 4:56 pm

If the cost of expenses in the 401k is larger than in an IRA, I would move it asap and put it into whatever new fund(s) suits you. As mentioned, Vanguard will manage it for you for a modest fee if you don't want to do it yourself. You can also choose a Life Strategy or Target Date balanced fund that will more or less match Vanguards recommendation for even less cost.

inbox788
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Re: Retired at 68 with 500K; leave in 401k or move to IRA?

Post by inbox788 » Mon Sep 03, 2018 2:37 pm

AhrGeeEl wrote:
Wed Aug 29, 2018 4:45 pm
We retired this year at age 68.
Congrats!
Drinking from a fire hose re: how to produce income from our $500k in liquid assets, which are 60% in 401k and remainder in brokerage and MM funds.
Really? I think you're making mountain out of a molehill. Seems like you're in fine shape. EF in good shape. I'm assuming you own your own home and don't have a mortgage. SS and pension should be more than sufficient. Anyway, it's no walk in the park, but more like shopping at the supermarket and having lots of choices, some good, some not so good. And depends on which market (boutique, Whole Foods, Krogers, Warmart, etc.).
1: To achieve the equivalent of a 3-Fund Portfolio, can I use funds in the 401k, or is an IRA a better choice?
AFAIK, it doesn't really matter. Just use funds with EF less than 0.10. You don't need to pay 1.3% just for handholding, and possibly leading you astray (i.e. get those funds out of EJ ASAP).
2: If the 401k is suitable, are there recommendations from the available funds?
Any of these low expense fee funds seem adequate. Are these all Fidelity funds? What company/fund is the MODERATELY CAUTIOUS, MODERATE, CONSERVATIVE; Bond Investments?
S&P 500 INDEX; Stock Investments, Large Cap; 0.0209% (Currently 10% of 401k)
FID MID CAP IDX PR (FSCKX); Stock Investments, Mid-Cap; 0.025%
RUSSELL 2000 INDEX; 0.0268%
INTL EQUITY INDEX; Stock Investments, International; 0.0402% (Short term trading fees of 2% for fee eligible shares held less than 30 days.)
MODERATELY CAUTIOUS; Blended Fund Investments, Income; 0.0401%
MODERATE; Blended Fund Investments; 0.0327%
Target Date 2020; Blended Fund Investments; 0.1064%
RETIREMENT FUND; Blended Fund Investments; 0.1114% (Currently 50% of 401k)
CONSERVATIVE; Bond Investments, Income; 0.1058%
FID INFL PR IDX PR (FSIYX); Bond Investments, Income; 0.05%
FID LT TR IDX PR (FLBAX); Bond Investments, Income; 0.03%
FIXED INCOME INDEX; Bond Investments, Income; 0.0417%
JPM US GOVT MM CAP (OGVXX); Short Term Investments; 0.21% (Currently 40% of 401k)
You could pile everything into RETIREMENT FUND; Blended Fund Investments; 0.1114% (Currently 50% of 401k) and not worry about it. Any changes you make are likely marginal. There is an argument to be made that you could be far more aggressive in your investments, but you can make those choices as you get more comfortable. ( viewtopic.php?t=151875 , https://www.google.com/search?sitesearc ... aa+pension )

Assuming 80K at EJ is all equities, you're already roughly at 35/65, so there's no need to hurry and make changes right away. I'd leave most things alone for now, except to clean up some accounts, eliminating unnecessary ones. One thing to look into is whether it makes sense to make Roth conversions before RMDs kick in in a couple of years.

https://investor.vanguard.com/ira/roth-conversion
viewtopic.php?t=235751

Lynette
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Joined: Sun Jul 27, 2014 9:47 am

Re: Retired at 68 with 500K; leave in 401k or move to IRA?

Post by Lynette » Mon Sep 03, 2018 4:30 pm

If you make any charitable contributions, you can use QCDs as part of RMDs. QCDs cannot be taken from a 401K. This is why I moved 50% of my 401K to Vanguard and 50% to Fidelity. There are many threads on the advantages of QCDs.

AhrGeeEl
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Joined: Wed Aug 29, 2018 9:46 am

Re: Retired at 68 with 500K; leave in 401k or move to IRA?

Post by AhrGeeEl » Wed Sep 05, 2018 4:56 pm

Good to know. I’ll ask about using QCD for giving to our church.

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David Jay
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Location: Michigan

Re: Retired at 68 with 500K; leave in 401k or move to IRA?

Post by David Jay » Wed Sep 05, 2018 6:09 pm

AhrGeeEl wrote:
Wed Sep 05, 2018 4:56 pm
Good to know. I’ll ask about using QCD for giving to our church.
It has to be a qualified charity, churches in most main-line denominations are.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

Lynette
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Joined: Sun Jul 27, 2014 9:47 am

Re: Retired at 68 with 500K; leave in 401k or move to IRA?

Post by Lynette » Thu Sep 06, 2018 6:37 am

David Jay wrote:
Wed Sep 05, 2018 6:09 pm
AhrGeeEl wrote:
Wed Sep 05, 2018 4:56 pm
Good to know. I’ll ask about using QCD for giving to our church.
It has to be a qualified charity, churches in most main-line denominations are.
I give checks from Vanguard/Fidelity to my church. There are many, many threads on the mechanisms of how to do this and the reporting tax requirements. Once you figure that out it is very easy. I called Vanguard/Fidelity and asked for checks to be made to my church and another charity. The check is made out to the church/charity but mailed to me with a tear off section with my information on it. I then send/give it to the church but keep the tear off. For extra caution for tax reporting, I ask the church to send me a receipt.

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