Going for Three

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IMaNewbee
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Joined: Tue Mar 12, 2019 8:58 pm

Going for Three

Post by IMaNewbee » Tue Mar 12, 2019 9:19 pm

I am 70 years old, have been trying to make money using managed mutual funds and have finally concluded I need a different, wiser approach. I’m not sure what my next steps should be and would like some input.
First of all, I am currently in an IRA with TIAA. I believe I can buy three funds, TINRX, TEQKX and TBILX from TIAA to properly position myself. However those funds all carry expenses (0.33%,0.57%,0.44%). So do I swallow and pay those or switch to Fidelity or Vanguard where expenses may be zero?
Then, once I understand what to do there, how should I buy into these three funds - all at once or in stages over the next several months? I have over $500,000 to move. I will go with a 32/8/60 investing ratio.
Finally, if I don’t move it all at once, what do I do with the funds to be invested?

Thanks in advance for your help

mega317
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Re: Going for Three

Post by mega317 » Tue Mar 12, 2019 10:08 pm

My opinion:
(I don't know anything about those funds, but) those expense ratios are not killers, it's not going to make or break your retirement. If you're comfortable with TIAA, and especially if you have any technical deficiencies, it's reasonable to just leave it.
The typical recommendation is to go in all at once. And in your situation it sounds like you are currently in investments you don't like as much--what's the hesitation?

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ResearchMed
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Re: Going for Three

Post by ResearchMed » Wed Mar 13, 2019 4:55 am

IMaNewbee wrote:
Tue Mar 12, 2019 9:19 pm
I am 70 years old, have been trying to make money using managed mutual funds and have finally concluded I need a different, wiser approach. I’m not sure what my next steps should be and would like some input.
First of all, I am currently in an IRA with TIAA. I believe I can buy three funds, TINRX, TEQKX and TBILX from TIAA to properly position myself. However those funds all carry expenses (0.33%,0.57%,0.44%). So do I swallow and pay those or switch to Fidelity or Vanguard where expenses may be zero?
Then, once I understand what to do there, how should I buy into these three funds - all at once or in stages over the next several months? I have over $500,000 to move. I will go with a 32/8/60 investing ratio.
Finally, if I don’t move it all at once, what do I do with the funds to be invested?

Thanks in advance for your help
Welcome to Bogleheads!

To repeat what was said above, those expenses could be lower, but they aren't the horrid ones elsewhere.
With TIAA, are you paying *any* additional management fee (under any name) for an advisor?

And how is your money invested right now? Are you still in those "managed' funds, or are you already out, and in cash?
If you are still "in the market", then it definitely makes sense to make the change - if that's what you decide to do - and just keep your money in the market. You might want to transfer part, so you aren't completely out of the market while you liquidate and repurchase.
If you are already in cash, and you've been there for a while, then most here will recommend "lump sum". However, we would suggest at least a few stages of dollar cost averaging. Although lump sum has ON AVERAGE done better, that isn't what happens to each individual. And right now, some of the better money market funds (e.g., Vanguard's Prime or Federal) are getting higher rates than in the recent past, when it was all close to zero.

RM
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mega317
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Re: Going for Three

Post by mega317 » Wed Mar 13, 2019 5:21 am

ResearchMed wrote:
Wed Mar 13, 2019 4:55 am
If you are already in cash, and you've been there for a while, then most here will recommend "lump sum". However, we would suggest at least a few stages of dollar cost averaging. Although lump sum has ON AVERAGE done better, that isn't what happens to each individual.
I'm going to point out that while I agree with the last sentence here, that doesn't make dollar cost averaging a better plan. DCA being worse on average also isn't what happens to each individual, but it will happen to more.

That said, DCA over only several months doesn't matter much either way.

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ResearchMed
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Re: Going for Three

Post by ResearchMed » Wed Mar 13, 2019 5:53 am

mega317 wrote:
Wed Mar 13, 2019 5:21 am
ResearchMed wrote:
Wed Mar 13, 2019 4:55 am
If you are already in cash, and you've been there for a while, then most here will recommend "lump sum". However, we would suggest at least a few stages of dollar cost averaging. Although lump sum has ON AVERAGE done better, that isn't what happens to each individual.
I'm going to point out that while I agree with the last sentence here, that doesn't make dollar cost averaging a better plan. DCA being worse on average also isn't what happens to each individual, but it will happen to more.

That said, DCA over only several months doesn't matter much either way.
The goal isn't to maximize the short term returns. It it to avoid what might be relatively quick regret, thus perhaps leading to selling again, etc... With a lump sum that takes a relatively quick dive... that's a real concern for someone just starting out or just re-allocating to a new AA, etc.

RM
This signature is a placebo. You are in the control group.

Wanderingwheelz
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Re: Going for Three

Post by Wanderingwheelz » Wed Mar 13, 2019 7:28 am

I think being 70 years old had a bearing on how to “dive” into the market too. Vanguard has called for very low stock market returns over the next ten years, and a 70 year old could very well be better off just avoiding stocks altogether, rather than having the risk of regret on top of underperforming cash and bonds late in life. Age factors into just about every investment decision and sequencing is a bigger risk as a person gets older, since “riding it out” becomes a math problem at some point.

I had this convo with a 77 year old recently, with him being 70% invested in stock indexes, but he has a big pension that’s indexed to inflation and it easily covers all of his expenses (including long term care premiums), so I agreed that 70% isn’t unwise. Hell.. go 100%, if it’s money you’ll never need.

mega317
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Re: Going for Three

Post by mega317 » Wed Mar 13, 2019 11:32 am

RM- you assume the OP would feel regret and act unwisely on it. That's true for some, others might feel and do the opposite if they missed out on gains. OP has been through some bear markets. And yes I know people feel losses twice as much to gains.

You also assume OP is just starting out--not true--or changing allocation which we do not know.

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ResearchMed
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Re: Going for Three

Post by ResearchMed » Wed Mar 13, 2019 11:54 am

mega317 wrote:
Wed Mar 13, 2019 11:32 am
RM- you assume the OP would feel regret and act unwisely on it. That's true for some, others might feel and do the opposite if they missed out on gains. OP has been through some bear markets. And yes I know people feel losses twice as much to gains.

You also assume OP is just starting out--not true--or changing allocation which we do not know.
No assumption about current status. I asked specifically above, and still don't know.
My suggestions were not for any specific "current status".
I could put on a hat and argue for just about any stage investor, as it is just something to be aware of.
One could have some "quick regret" if one were a very experienced long term investor, who then made a change in AA just before a major change the markets.
"Ooops" wouldn't be a surprise; what one does with it is what matters. That's why some might benefit from DCA more than others, who can stick with it; each of those categories can include novice and experienced investors. What one *does* based upon any such reaction is what will matter in terms of "returns".

RM
This signature is a placebo. You are in the control group.

pkcrafter
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Re: Going for Three

Post by pkcrafter » Wed Mar 13, 2019 12:09 pm

Welcome,
IMaNewbee wrote:
Tue Mar 12, 2019 9:19 pm
I am 70 years old, have been trying to make money using managed mutual funds and have finally concluded I need a different, wiser approach. I’m not sure what my next steps should be and would like some input.
First of all, I am currently in an IRA with TIAA. I believe I can buy three funds, TINRX, TEQKX and TBILX from TIAA to properly position myself.
What are you holding right now, cash or some other funds? If other funds, please list.
However those funds all carry expenses (0.33%,0.57%,0.44%). So do I swallow and pay those or switch to Fidelity or Vanguard where expenses may be zero?
The expense ratios are higher than Fidelity or Vanguard, but not terrible. The three funds you are interested in are total stock market, emerging markets, and bond. If you do move to new funds, I would suggest total international instead of just emerging markets.
Then, once I understand what to do there, how should I buy into these three funds - all at once or in stages over the next several months? I have over $500,000 to move. I will go with a 32/8/60 investing ratio.
Finally, if I don’t move it all at once, what do I do with the funds to be invested?
If you are currently invested in funds, then you would be doing a sideways move, which means you simply transfer what you have now into the new funds. If you are now in cash, consider all at once because your allocation will only be 40% equity. If that really bothers you, do it in two steps. That means a full transfer of cash, then keep half in cash and the other half in your 40/60 allocation. At some point in the future, invest the second half.

Do you have any other accounts? What is, or will be, your withdrawal rate?

If you want to move the IRA, you should go all cash, then call the company you want to go to and they will set up the transfer (direct custodian to custodian transfer).

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

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tennisplyr
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Re: Going for Three

Post by tennisplyr » Thu Mar 14, 2019 7:06 am

Why do you feel you are not doing well? The expense fees are not terrible, maybe you need to take a look at your AA...I'm close to your age/retired and at 50/50 and feel fine. I'm with Vanguard and Fidelity.
Those who move forward with a happy spirit will find that things always work out.

Topic Author
IMaNewbee
Posts: 3
Joined: Tue Mar 12, 2019 8:58 pm

Re: Going for Three

Post by IMaNewbee » Fri Mar 15, 2019 10:53 am

I appreciate all of the comments. Here is some clarification. I am not using the money for expenses but since I just turned 70-1/2 I did start to make the RMD withdrawals. I have been able to live off a fixed pension plus my and my wife’s SSA income. The money is invested in mutual funds that are managed by TIAA, maintaining a balance of 50/50. Because it is managed, they are actively buying and selling so while I could I provide a list of the holdings, it is frequently changing. For what they are doing, TIAA’s fees are about 1%.
Having said all that, I expect at some point to begin to withdraw funds although my objective is to preserve and grow what I have now for kids and grandkids.

Topic Author
IMaNewbee
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Joined: Tue Mar 12, 2019 8:58 pm

Re: Going for Three

Post by IMaNewbee » Fri Mar 15, 2019 10:57 am

Oh. I missed a question. I have a taxable account with Fidelity that has about 20k in it. I will move the remainder of my RMD there after paying taxes and using a portion to cover my annual donations to charities.

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