How do I protect my investments moving forward?

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Topic Author
thegeneral
Posts: 2
Joined: Wed Sep 02, 2020 6:54 am

How do I protect my investments moving forward?

Post by thegeneral »

Emergency funds: 53,000
Debt: 0
Tax filing: Married Filing Jointly
Tax Rate: 22%
State: VA
Age: 62
Desired allocation: unknown
Portfolio size: High six figures
Taxable
14% Cash (Credit Union Money Market Fund)
40% Janus Henderson Government Money Mkt D Shr (JGVXX) (.59% exp ratio) Trad IRA
26% 1 year CD Trad IRA

403B
17% Fidelity® Large Cap Core Enhanced Index (FLCEX) (.39% exp ratio)
1% Fidelity Freedom® Index 2025 (FFEDX) Fund (.08% exp ratio)
401A
2% Fidelity Freedom® Index 2025 (FFEDX) Fund (.08% exp ratio)
_______________________________________________________________


Contributions

New annual Contributions
403b 26000 at least (it is confusing. We have a 403b and 401a and a Social Security Base)


Available funds

No 401K for him
No “her” investments
No 403b except for what I listed above.

Questions:

1) I took my money out of a Janus Std 500 Index Fund after I lost 15% due to Covid. This is 40% of my total investment money and it remains in a Janus JGVXX money market account. It makes no interest. It is a Traditional IRA, and I am scared to put it back in Index Funds since I am 62 years old and I cannot afford to take another hit. My accountant said, personally, at my age, 20% in the market would be his max. With COVID the general unrest I feel, for the first time, that I need to be very careful with my money. What do I do with that 40%? A Janus Money Market fund is not insured. I have another credit union with their vehicles. Should I move it to CD there? Or what would you do please?
2) I (foolishly) put a large portion of money in Traditional IRAs. Now I realize the tax repercussion. As I get older, I want to tap that money. Should I consider moving in the future, even for the minimum amount of time necessary, and rent my great home that I love, just long enough to withdraw all that Traditional IRA money? What would you do?
thanks!
delamer
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Joined: Tue Feb 08, 2011 6:13 pm

Re: How do I protect my investments moving forward?

Post by delamer »

1) How soon are you going to retire? How much will you need to withhdraw from your portfolio each year in retirement to cover your expenses?

2) How will moving out of your house save you money on taxes?
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FiveK
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Re: How do I protect my investments moving forward?

Post by FiveK »

thegeneral, welcome to the forum.
thegeneral wrote: Wed Sep 02, 2020 9:54 am 1) I took my money out of a Janus Std 500 Index Fund after I lost 15% due to Covid. This is 40% of my total investment money and it remains in a Janus JGVXX money market account. It makes no interest. It is a Traditional IRA, and I am scared to put it back in Index Funds since I am 62 years old and I cannot afford to take another hit. My accountant said, personally, at my age, 20% in the market would be his max. With COVID the general unrest I feel, for the first time, that I need to be very careful with my money. What do I do with that 40%? A Janus Money Market fund is not insured. I have another credit union with their vehicles. Should I move it to CD there? Or what would you do please?
Unfortunately the horse has left the barn, but had you not done anything that investment would have already recovered and exceeded its pre-COVID value.

Nobody knows what the market will do from this point. It may continue to grow on average, never falling back to today's value. Or it may have one or more large drops that take it below today's value. Your accountant seems too conservative, but asset allocation is in some ways a matter of taste so there is no one-size-fits-all. Consider reinvesting that cash into an asset allocation you won't sell, regardless of future market gyrations.
2) I (foolishly) put a large portion of money in Traditional IRAs. Now I realize the tax repercussion. As I get older, I want to tap that money. Should I consider moving in the future, even for the minimum amount of time necessary, and rent my great home that I love, just long enough to withdraw all that Traditional IRA money? What would you do?
Why "foolishly"? You got a tax break when you did so. Do you have some reason to believe you will pay a higher marginal rate when withdrawing than you saved when contributing?
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CyclingDuo
Posts: 3656
Joined: Fri Jan 06, 2017 9:07 am

Re: How do I protect my investments moving forward?

Post by CyclingDuo »

thegeneral wrote: Wed Sep 02, 2020 9:54 am Emergency funds: 53,000
Debt: 0
Tax filing: Married Filing Jointly
Tax Rate: 22%
State: VA
Age: 62
Desired allocation: unknown
Portfolio size: High six figures
Taxable
14% Cash (Credit Union Money Market Fund)
40% Janus Henderson Government Money Mkt D Shr (JGVXX) (.59% exp ratio) Trad IRA
26% 1 year CD Trad IRA

403B
17% Fidelity® Large Cap Core Enhanced Index (FLCEX) (.39% exp ratio)
1% Fidelity Freedom® Index 2025 (FFEDX) Fund (.08% exp ratio)
401A
2% Fidelity Freedom® Index 2025 (FFEDX) Fund (.08% exp ratio)
_______________________________________________________________


Contributions

New annual Contributions
403b 26000 at least (it is confusing. We have a 403b and 401a and a Social Security Base)


Available funds

No 401K for him
No “her” investments
No 403b except for what I listed above.

Questions:

1) I took my money out of a Janus Std 500 Index Fund after I lost 15% due to Covid. This is 40% of my total investment money and it remains in a Janus JGVXX money market account. It makes no interest. It is a Traditional IRA, and I am scared to put it back in Index Funds since I am 62 years old and I cannot afford to take another hit. My accountant said, personally, at my age, 20% in the market would be his max. With COVID the general unrest I feel, for the first time, that I need to be very careful with my money. What do I do with that 40%? A Janus Money Market fund is not insured. I have another credit union with their vehicles. Should I move it to CD there? Or what would you do please?
2) I (foolishly) put a large portion of money in Traditional IRAs. Now I realize the tax repercussion. As I get older, I want to tap that money. Should I consider moving in the future, even for the minimum amount of time necessary, and rent my great home that I love, just long enough to withdraw all that Traditional IRA money? What would you do?
thanks!
Missing information: Are you still working? When do you plan to retire? What is your annual income? Is your 401a a defined benefit pension plan? Do you or will you have the traditional three legged stool of retirement income: pension, Social Security, and risk portfolio/savings?

It sounds like you do have the traditional three legged stool, but you didn't hammer it all out for us regarding the 401a. If you do have a pension - when will you take your pension, when will you take SS and how much of your annual expenses will not be covered by those two streams of income? It's rather difficult to give any advice on the risk portfolio without knowing what portion of it will be needed each year to cover any expenses that the pension and SS do not cover.

Accountants are nice for doing your taxes, but I wouldn't rely on them for asset allocation advice beyond how it impacts your annual taxes. It's too bad you hit the panic button earlier this year and have been sitting on the sidelines since then with the amount you pulled out of the market. What's done is done, but you do need to plan for the future and funding the next 20-30 years of your life.

We have no idea about your mention of moving. You list $0 debt, so we have to assume your mortgage has been retired and if you did sell the home, you are thinking about using some of the proceeds to help fund your retirement or to rent it out to a tenant to create some cash flow income from renting it. Would the rental income be enough to cover repairs/maintenance/property taxes/insurance and cover your rent if you moved out? We don't know as you didn't list any potential figures for that. Do you really want to do that or need to do that?

As you can see, we have more questions for you than you have for us without all of the missing information.

CyclingDuo
Last edited by CyclingDuo on Wed Sep 02, 2020 10:36 am, edited 2 times in total.
"Save like a pessimist, invest like an optimist." - Morgan Housel
livesoft
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Re: How do I protect my investments moving forward?

Post by livesoft »

There are some misperceptions in the OP that none of us will be able to change for them.
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Doctor Rhythm
Posts: 421
Joined: Mon Jan 22, 2018 3:55 am

Re: How do I protect my investments moving forward?

Post by Doctor Rhythm »

I am interpreting the “moving” idea as considering moving to a state without income tax to be able to reduce the tax on IRA distributions (top bracket is 5.75% - which looks awfully benign from here in California).
Should I consider moving in the future, even for the minimum amount of time necessary, and rent my great home that I love, just long enough to withdraw all that Traditional IRA money?
Anyway, I think OP will need to run the numbers to see how much he would save in taxes with his expected withdrawals and decide whether that’s worth the financial and emotional costs of moving. Keep in mind that if you “withdraw all that Traditional IRA money” (and as you know, this applies to your 403b as well) over "the minimum amount of time" while also collecting rental income while sojourning, you may end up in a higher federal tax bracket, wiping out the savings at the state tax level.
Topic Author
thegeneral
Posts: 2
Joined: Wed Sep 02, 2020 6:54 am

What do I do with my money market fund money?

Post by thegeneral »

[Merged into the previous discussion -- moderator oldcomputerguy]

I took my money out of a Janus Std 500 Index Fund after I lost 15% due to Covid. This is 40% of my total investment money and I moved it to a Janus JGVXX money market account. It makes no interest. It is a Traditional IRA, and I am scared to put it back in Index Funds since I am 62 years old and I cannot afford to take another hit. My accountant said, personally, at my age, 20% in the market would be his max. With COVID the general unrest I feel, for the first time, that I need to be very careful with my money. What do I do with that 40%?

This Janus Money Market fund is not insured. I have another credit union and utilize a Trad IRA 1 year CD there. Should I move it to CD there? Or what would you do please?

thanks!
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AlabamaPaul
Posts: 106
Joined: Sat Jul 18, 2020 2:45 pm

Re: What do I do with my money market fund money?

Post by AlabamaPaul »

There's not enough information provided to advise you. Your risk tolerance appears to be very low, but without knowing your risk capacity, any advice would be a guess at best...
7eight9
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Joined: Fri May 17, 2019 7:11 pm

Re: What do I do with my money market fund money?

Post by 7eight9 »

You might want to consider a multi-year guaranteed annuity (MYGA) for part of your fixed income allocation. Their yield is much higher than a money market fund.

Example --- Fixed Annuity Rates for September 2020 ---https://www.blueprintincome.com/fixed-annuities

Five year rates as high as 3.45% per above link.

If you aren't familiar with them this is a good explanation --- https://www.blueprintincome.com/resourc ... annuities/
I guess it all could be much worse. | They could be warming up my hearse.
sport
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Re: What do I do with my money market fund money?

Post by sport »

A good alternative would be a high yield savings account. These are available on-line. I don't agree with your accountant. At age 62 you could easily live another 30 to 35 years. 20% maximum for equities may not provide the inflation protection you need. You would have to provide more of your financial details to get a better answer here. That would include, your total investments and your annual spending needs.
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AlabamaPaul
Posts: 106
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Re: What do I do with my money market fund money?

Post by AlabamaPaul »

7eight9 wrote: Sat Sep 05, 2020 4:49 pm You might want to consider a multi-year guaranteed annuity (MYGA) for part of your fixed income allocation. Their yield is much higher than a money market fund.

Example --- Fixed Annuity Rates for September 2020 ---https://www.blueprintincome.com/fixed-annuities

Five year rates as high as 3.45% per above link.

If you aren't familiar with them this is a good explanation --- https://www.blueprintincome.com/resourc ... annuities/
Do you work for this entity? Every post relates to this...
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oldcomputerguy
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Re: How do I protect my investments moving forward?

Post by oldcomputerguy »

thegeneral, welcome to Bogleheads! I merged your later thread into your previous one so that the members' responses would be collected in one place for a more productive and helpful discussion.
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tibbitts
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Re: How do I protect my investments moving forward?

Post by tibbitts »

Nobody understands the idea of moving and renting your home - you might want to explain that. How much is your total tax-deferred balance, traditional and 403b, etc.? Depending on what happens with tax rates, and your marriage, those contributions might or might not prove to be a mistake, but probably not the hugest mistake ever.
7eight9
Posts: 1435
Joined: Fri May 17, 2019 7:11 pm

Re: What do I do with my money market fund money?

Post by 7eight9 »

AlabamaPaul wrote: Sat Sep 05, 2020 4:53 pm
7eight9 wrote: Sat Sep 05, 2020 4:49 pm You might want to consider a multi-year guaranteed annuity (MYGA) for part of your fixed income allocation. Their yield is much higher than a money market fund.

Example --- Fixed Annuity Rates for September 2020 ---https://www.blueprintincome.com/fixed-annuities

Five year rates as high as 3.45% per above link.

If you aren't familiar with them this is a good explanation --- https://www.blueprintincome.com/resourc ... annuities/
Do you work for this entity? Every post relates to this...
I do not.

MYGAs represent one of the best low-risk fixed income investments in my opinion. And I think a lot of people would agree IF they only understood them. I've rarely seen them mentioned as a investment vehicle and I think it is because many people lump them into the "Annuity = bad investment/rip-off by salesman, etc." category. And that is too bad because nothing could be further from the truth. SPIAs aren't the only good annuity.
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LadyGeek
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Re: How do I protect my investments moving forward?

Post by LadyGeek »

As a reminder, alternative points of view are welcome.

The point has been made, let's move on.
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dbr
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Re: What do I do with my money market fund money?

Post by dbr »

7eight9 wrote: Sat Sep 05, 2020 7:23 pm
AlabamaPaul wrote: Sat Sep 05, 2020 4:53 pm
7eight9 wrote: Sat Sep 05, 2020 4:49 pm You might want to consider a multi-year guaranteed annuity (MYGA) for part of your fixed income allocation. Their yield is much higher than a money market fund.

Example --- Fixed Annuity Rates for September 2020 ---https://www.blueprintincome.com/fixed-annuities

Five year rates as high as 3.45% per above link.

If you aren't familiar with them this is a good explanation --- https://www.blueprintincome.com/resourc ... annuities/
Do you work for this entity? Every post relates to this...
I do not.

MYGAs represent one of the best low-risk fixed income investments in my opinion. And I think a lot of people would agree IF they only understood them. I've rarely seen them mentioned as a investment vehicle and I think it is because many people lump them into the "Annuity = bad investment/rip-off by salesman, etc." category. And that is too bad because nothing could be further from the truth. SPIAs aren't the only good annuity.
I think the MYGA is an instrument that has not often been mentioned here and only by one person. Actually, looking at what is involved, I am a little surprised. I am not personally interested because I am quite happy with holding the same intermediate term bond funds I have had for decades and don't plan to change for further decades.

You may be right that there is an annuity=bad thing going on here, but I think there is an understanding issue regarding how to evaluate the agency risk. The yield increases steeply with lowered rating of the insurance company and I don't think people know how to evaluate that. For very high rated agencies there is not much advantage to this type annuity, it would seem. An expression such as "rates as high as . . . " (for lower rated companies) sounds like a sales pitch. The gold standard default risk comparison is FDIC insured savings or Treasury bills, notes, or bonds. People also have to account for state guarantees if they apply. It starts to look complicated.
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celia
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Re: How do I protect my investments moving forward?

Post by celia »

thegeneral wrote: Wed Sep 02, 2020 9:54 am New annual Contributions
403b 26000 at least (it is confusing. We have a 403b and 401a and a Social Security Base)
thegeneral, This is the part I don't understand (along with what other people ask), especially the reference to Social Security along with mentioning some of the accounts. Please explain what you mean by this and what makes it confusing. Is it that you don't understand something or that some "rules" are too complicated or that you don't yet know your withdrawal optionss for these?

If you think you put too much in tax deferred, I would agree with you since it looks like everything is tax-deferred, except for the 14% cash in Taxable. If that is the case, why would you continue to add to tax-deferred accounts when you already have "too much" in there? Suppose you add $26K to tax-deferred a year and also withdraw (or convert) the same amount. You are back to where you started.


I cleaned up the formatting of your accounts so it is easier for us to understand:

Taxable
14% Cash (Credit Union Money Market Fund)

Trad IRA
40% Janus Henderson Government Money Mkt D Shr (JGVXX) (.59% exp ratio)

Trad IRA
26% 1 year CD

403B
17% Fidelity® Large Cap Core Enhanced Index (FLCEX) (.39% exp ratio)
1% Fidelity Freedom® Index 2025 (FFEDX) Fund (.08% exp ratio)

401A
2% Fidelity Freedom® Index 2025 (FFEDX) Fund (.08% exp ratio)
If this is correct, you currently have less than 20% in stocks (in the last two accounts in Fidelity funds), so this matches your accountant's suggestion for now. Let's leave this Asset Allocation alone for now and look at the three cash-like accounts. If any of those accounts are held at a bank and they are all in your name alone, you need to be reminded that FDIC insurance only covers $250,000 for each type of account titling, eg a Taxable account titled with just your name: <thegeneral>. (Is there a reason the taxable account isn't a joint account with your spouse? Then it could be covered up to $500,000 through credit union insurance, just like FDIC is for banks.)

At the same bank, you are also covered for $250,000 for "<thegeneral> Traditional IRA". So if your two Trad IRA are held at the same bank, that can be a problem, should the bank go under. In addition, there is no reason to pay .59% in fees on a money market fund that could be earning less than that.

Questions:

1) I took my money out of a Janus Std 500 Index Fund after I lost 15% due to Covid. This is 40% of my total investment money and it remains in a Janus JGVXX money market account. It makes no interest. It is a Traditional IRA, and I am scared to put it back in Index Funds since I am 62 years old and I cannot afford to take another hit. My accountant said, personally, at my age, 20% in the market would be his max. With COVID the general unrest I feel, for the first time, that I need to be very careful with my money. What do I do with that 40%? A Janus Money Market fund is not insured. I have another credit union with their vehicles. Should I move it to CD there? Or what would you do please?
Before we can answer this, we need more information:
Are you retired? If not, how do you know you are in the 22% tax bracket?
Have you started SS or pensions and for how much? If delaying SS, how much should you get at age 67? How much would your spouse get at 67?
What do you think your monthly living expenses would be? (That is needed as we would recommend when to start pensions and SS, making it less that you have to withdraw for living expenses.)
2) I (foolishly) put a large portion of money in Traditional IRAs. Now I realize the tax repercussion. As I get older, I want to tap that money. Should I consider moving in the future, even for the minimum amount of time necessary, and rent my great home that I love, just long enough to withdraw all that Traditional IRA money? What would you do?
thanks!
I suspect that after we get more info (including why you think moving would matter), that you will be not just fine, but much better than average. You were a super-saver and it shows. We will help you figure out how much you can safely withdraw whatever amount you need on top of pensions and SS.
flaccidsteele
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Re: How do I protect my investments moving forward?

Post by flaccidsteele »

thegeneral wrote: Wed Sep 02, 2020 9:54 am 1) I took my money out of a Janus Std 500 Index Fund after I lost 15% due to Covid. This is 40% of my total investment money and it remains in a Janus JGVXX money market account. It makes no interest. It is a Traditional IRA, and I am scared to put it back in Index Funds since I am 62 years old and I cannot afford to take another hit. My accountant said, personally, at my age, 20% in the market would be his max. With COVID the general unrest I feel, for the first time, that I need to be very careful with my money. What do I do with that 40%? A Janus Money Market fund is not insured. I have another credit union with their vehicles. Should I move it to CD there? Or what would you do please?
You sold into a stock market downturn when the stock market always recovers? Is this correct?

If so, how did you determine your asset allocation in the first place?

We’re you able to catch any of the 50%+ recovery?
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat
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