investing towards retirement -15 years

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Topic Author
Wind power
Posts: 87
Joined: Sun Apr 24, 2011 5:46 am

investing towards retirement -15 years

Post by Wind power »

Hi Folks,

Thanks for the useful information eariler on handling my IRA CD.
Heres my situation, Everything is paid for, but the domestic goddess will be needing a car soon and its been 15 years since she had something reliable, so we might breakdown and get her something for the next 15 years.

Heres the skinny:

I'm 50 yrs old, average guy with an average job, here in the South.

I have the CD IRA which will be about 113,000 when it matures in just under two years. Then I will probably start laddering the CD IRA.
I have a 401k which is in a fedelity account,TRP 2020,currently it is worth about 17,000...not much, however i just bumped up contributions to about 400 dollars a month. The reason it is in the 2020 and not a 2025 is because as I get closer to retirement I want my money more secure....when 2020 rolls around I might do something else a bit more conservative with it.

I have a small mini bond in a utility which will be 38,000 over the life of the bond

Likewise, I hate taking a beating on the market, however I do realize in order to see some decent returns, you have to play the market....so I'm thinking of of personally investing about another 100 bucks a week religiously for the next 15 years in various stocks such as utilities and pharms... I will stay the couse come hell or high water and hope this portion of my "plan" works out in the end.

Overall, this is probably pretty conservative to mid risk investing, but I dont want to be trying to recover through a 5-7 year slump with all my money in the market at the point in which I retire. So my CD IRA will something of a "buffer"

Sure this is peanuts to a lot of folks out there, but it is has been be me and me alone...no silver spoons.

My question is:

Is this a good retirement plan... does anyone see any holes in this idea?
YDNAL
Posts: 13774
Joined: Tue Apr 10, 2007 4:04 pm
Location: Biscayne Bay

Re: investing towards retirement -15 years

Post by YDNAL »

Wind power wrote: Heres my situation, Everything is paid for, but the domestic goddess will be needing a car soon and its been 15 years since she had something reliable, so we might breakdown and get her something for the next 15 years.
Wind,

I have a few questions first:
1) Is this car going to be financed?
2) If so, will the monthly payment affect the savings for retirement (below)?

Wind power wrote:I have the CD IRA which will be about 113,000 when it matures in just under two years. Then I will probably start laddering the CD IRA.
I have a 401k which is in a fedelity account,TRP 2020,currently it is worth about 17,000...not much, however i just bumped up contributions to about 400 dollars a month. The reason it is in the 2020 and not a 2025 is because as I get closer to retirement I want my money more secure....when 2020 rolls around I might do something else a bit more conservative with it.

I have a small mini bond in a utility which will be 38,000 over the life of the bond

Likewise, I hate taking a beating on the market, however I do realize in order to see some decent returns, you have to play the market....so I'm thinking of of personally investing about another 100 bucks a week religiously for the next 15 years in various stocks such as utilities and pharms... I will stay the couse come hell or high water and hope this portion of my "plan" works out in the end.
IRA
$113K CD at maturity

Fidelity 401K
$17K TRP2020 [3) does this mean T.Rowe Price?]
4) What are annual contributions (including $400/mo bump)?

Taxable
$38K Muni Bond
$100/month to buy Stocks

$168K Total

5) Is the above a clear picture?
Wind power wrote:My question is:

Is this a good retirement plan... does anyone see any holes in this idea?
Please answer all questions by *editing* your original post. Perhaps you might even consider listing your portfolio as I did above.

When you answer the questions above, the picture becomes more clear to provide the best input possible.
Landy | Be yourself, everyone else is already taken -- Oscar Wilde
Topic Author
Wind power
Posts: 87
Joined: Sun Apr 24, 2011 5:46 am

Re: investing towards retirement -15 years

Post by Wind power »

Hi Landy thanks for your time:

Wind power wrote:Hi Folks,

Thanks for the useful information eariler on handling my IRA CD.
Heres my situation, Everything is paid for, but the domestic goddess will be needing a car soon and its been 15 years since she had something reliable, so we might breakdown and get her something for the next 15 years.

Answer to Question 1 & 2( Yes about 1/3 of car price will be finananced but insurance taxes and payments will not affect my planned contributions)
Heres the skinny:

I'm 50 yrs old, average guy with an average job, here in the South.

I have the CD IRA which will be about 113,000 when it matures in just under two years. Then I will probably start laddering the CD IRA.
I have a 401k which is in a fedelity account,TRP 2020,currently it is worth about 17,000...not much, however i just bumped up contributions to about 400 dollars a month. The reason it is in the 2020 and not a 2025 is because as I get closer to retirement I want my money more secure....when 2020 rolls around I might do something else a bit more conservative with it.

Answer to Question # 3, yes it is T Rowe Price Answer to Question # 4, $400 a month is the contribution amount....for a total contribtion of $5200 a year
Answer to # 5, everything is correct except I will also use $400 a month to invest in the market:
Ok, good idea I will list it as a portfolio with corrections:

IRA
$113K CD at maturity ( 2.4 years away)

Fidelity 401K
$17K TRP2020 (T.Rowe Price) Contributions now at $5,200 a year

Taxable
$38K Muni Bond
$400/month to buy Stocks (also at $5200 a year)

$168K Total (current)

I have a small mini bond in a utility which will be 38,000 over the life of the bond

Likewise, I hate taking a beating on the market, however I do realize in order to see some decent returns, you have to play the market....so I'm thinking of of personally investing about another 100 bucks a week religiously for the next 15 years in various stocks such as utilities and pharms... I will stay the couse come hell or high water and hope this portion of my "plan" works out in the end.

Overall, this is probably pretty conservative to mid risk investing, but I dont want to be trying to recover through a 5-7 year slump with all my money in the market at the point in which I retire. So my CD IRA will something of a "buffer"

Sure this is peanuts to a lot of folks out there, but it is has been be me and me alone...no silver spoons.

My question is:

Is this a good retirement plan... does anyone see any holes in this idea?
ResNullius
Posts: 2091
Joined: Wed Oct 24, 2007 3:22 pm

Post by ResNullius »

I would stay away from individual stocks, but that's just me. I would put the equity portion in the Vanguard's Total Market fund. Just my two cents.
Dandy
Posts: 6490
Joined: Sun Apr 25, 2010 7:42 pm

Post by Dandy »

Why do you think investing in individual stocks is "safer" than investing in a broadbased index fund like Total Stock Market? What do you think you know about these types of stocks that is not reflected in their market price??

In the past, I invested in Merk because of its high dividend and because I thought that Pharma stocks would do well with an aging population. Good idea except that one of their drugs caused heart attacks and they had thousands of law suits -- stock went from 51 to 31 in a flash. I held on for a 5+ years because the yield was good but eventually sold at a loss. This adventurism was because I was not familiar with the Boglehead philosophy. I almost bought Bank America at $40 because is was a "solid" stock with a 4% dividend -- what did it drop to $3?? Individual stocks increase risk. Even if you get a diverse portfolio of 20 or more stocks are you savy enough to manage them? i.e. know when to sell?

Utilities and Pharma stocks are noted for their dividends - are you planning to hold them in a tax sheltered account? If not you will be paying taxes on those dividends.

So, as you might guess I am not in favor of your investment plan for the $100 a month. My guess is that you won't get a lot of encouragement from others on this board.
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Majormajor78
Posts: 910
Joined: Mon Jan 31, 2011 9:13 pm

Post by Majormajor78 »

Likewise, I hate taking a beating on the market, however I do realize in order to see some decent returns, you have to play the market....so I'm thinking of of personally investing about another 100 bucks a week religiously for the next 15 years in various stocks such as utilities and pharms... I will stay the couse come hell or high water and hope this portion of my "plan" works out in the end.
If my math is right you currently have about 7.2% of your portfolio in stocks. This is by far the most conservative portfolio I've seen posted here though I know my grandfather ascribed to the depression-era shoe-box full of money philosophy. If you want a very conservative portfolio that's fine but in order to keep up with inflation while generating a revenue stream to live on you should really consider getting that up to at least 20% in stocks soonest (perhaps taking a little of that CD money when it matures?).

Wife's a pharmasict and she was telling me about one of her co-workers retirement woes. Elderly gent who was just about set to retire. He's a pharmasict so he invests in a couple of companies he knows and then oops! This wonder drug causes cancer and 30% of his portfolio is gone. This was about 5 years ago and he's still working...

As for utilities, have you looked at VPU? It's Vanguard's utilities ETF and it hold positions in 87 utility companies and has a yield of just over 4%. Being utilities they do not grow very quickly but keep up with inflation while generating an income for you. They are volitile compared to bonds but less so than most stocks and if you do hold hell or high water this should not effect you. Even if the value of the fund decreases it's pretty uncommon for a utility to cut or suspend it's dividends barring a disaster. That's one reason why the diversity of an index is so important. The revenue stream from the fund should remain pretty stable even in troubled economic times and slowly grow when times are good. Not the choice I would make (my situation is much differnt) but certainly not unreasonable if your specific stocks goal is just to help outpace inflation and generate an income stream during retirement.

Besides the utilities you have expressed interest in I'll second the opinion that you should look at a total market fund for a large part of you stock holdings. Some long-term growth is needed and a Total market fund like VTSMX fits the bill nicely.
"Oh, M. le Comte, it is only a loss of money which I have sustained... nothing worth mentioning, I assure you."
Manbaerpig
Posts: 1368
Joined: Wed Mar 09, 2011 2:32 am
Location: San Jose

Post by Manbaerpig »

I think you'll want to form a 50/50 or 40/60 portfolio out of the 168k or so you have now

something like:
54k US total stock market
30k Foreign total stock market-EX US
64k Total US Bond Index
20K TIPS
----------------------------
Then, save as much as possible, savings rate is key. I think at you're age you should consider aiming for 30-40% of gross or more if you can. I advise against ownership of any individual stocks, unless it's your employer through ESPP/options and you sell immediately on vesting.
Topic Author
Wind power
Posts: 87
Joined: Sun Apr 24, 2011 5:46 am

Post by Wind power »

Thanks! I hear what you folks are saying- "Stay away from individual investing especially pharms"
manbaerpig....I see I need to get with a good mutual fund diversity and take some more risk if I what some real potential, I was hoping to keep the IRA CD at the current situation -as a buffer in case my other investments hit a slump during the time I retire and I can use the IRA and that "gubmint" Social Security as a buffer until the rest of my tiny portfolio recovers....I really hate the idea of being in the same situation many people have experienced; of having to keep working when they wanted to retire but cant because the rest of the portfolio has spiraled into the abyss for 5 or so years. I would like to get up to 30-40 % but now its hovering around 20%....groan

Good advice folks I will probably go with mutual funds instead of individual stocks from now on! This place appears to be the premier site for advocating fund investing....great advice here!

Majormajor, indeed it is conservative, too many people from the Depression era have had an influence in my life, so much in fact that I now slum teaching a little history on the side...
I like that idea of the Vanguard utility fund! The VTSMX you also mentioned sounds like a good fit....I will look deeper into it in a few mins!

Dandy, Resnullies, thanks for the lesson on individual investing....too many pitfalls I like the idea of your ideas on a broad base index...it makes perfect sense over individual stocks!

One more question folks and I hope this is not some kind of trolling question (since this site is advocate for managed fund investing....but I'm completely ignorant here)

Is there an overwhelming preference for either Fidelity or Vanguard, or is this simply a coke/Pepsi thing...a Zebra with white stripes or is it a Zebra with black stripes?
I know this is a broad question and everybody’s needs are different, but you folks have some rock solid advice and it appears my situation might better suited for Vanguard funds????
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Taylor Larimore
Advisory Board
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Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Fidelity or Vanguard ?

Post by Taylor Larimore »

Hi Wind Power:
Is there an overwhelming preference for either Fidelity or Vanguard, or is this simply a coke/Pepsi thing?
Both companies are among the best so you won't go wrong with either.

Most of us on this forum prefer Vanguard which is the only mutual fund company owned by its fund shareholders.
"Simplicity is the master key to financial success." -- Jack Bogle
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Majormajor78
Posts: 910
Joined: Mon Jan 31, 2011 9:13 pm

Post by Majormajor78 »

One more question folks and I hope this is not some kind of trolling question (since this site is advocate for managed fund investing....but I'm completely ignorant here)

Is there an overwhelming preference for either Fidelity or Vanguard, or is this simply a coke/Pepsi thing...a Zebra with white stripes or is it a Zebra with black stripes?
I know this is a broad question and everybody’s needs are different, but you folks have some rock solid advice and it appears my situation might better suited for Vanguard funds????
I have accounts with both firms. Fidelity has a handful of good index called "Spartan" funds. The only drawback to these is the $10K minimum investment. The minimum of most vanguard mutual funds starts at $3K for investor class shares and allow you to upgrade to admiral class shares when you get to $10K. The only differnce between share classes is that the admiral class is a little cheaper.
"Oh, M. le Comte, it is only a loss of money which I have sustained... nothing worth mentioning, I assure you."
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