#Bella: I did an analysis of the small cap funds you mentioned in your 401k choices (CRIMX,CRMMX,AESAX,VIMSX,NAESX). We use fi360.com's fiduciary analysis tool for mutual funds. It rates the two Vanguard funds the highest, which coincides with simply looking at which funds have the lowest fees. I would favor the Vanguard funds for that reason alone.
Ah Kate, you aren't the first person who has asked me this in the last year or two. I hate to chase winners but a closer look shows me that Apple is currently trading at a P/E (price to earnings) ratio of 12.3. This is a far cry from the days when people were buying tech stocks that weren't earning anything. As a comparison, IBM is currently selling at a PE of 12.5 and Microsoft at 10.9. If you do buy individual stocks, I suggest that they only be a very small part of your portfolio (we have clients with Las Vegas accounts where they play their hunches with only a small amount of their total investments). For the bulk of you money, stick with mutual funds and ETFs....great way to diversify.
Deb, I had a client yesterday, only 56, but hesitated to contact an LTC agent because he didn't think he was insurable. I told him the only way to find out was to ask. After all, very few of us get to 60 without any health concerns. The big trick with this is to find a good reputable agent who isn't just a sales person.
#Bella: I looked up the two international funds and fi360.com did not like either of them. In that case I would steer clear of that category in your 401k and simply make it up in your taxable account where you have better control over the choices. ... You are adequately funding your taxable account, aren't you? We recommend 10% of your salary in retirement accounts and 5% in taxable investments.
Kate, MItch makes a good point in that Apple stockholders are very loyal. Even on bad news, I wouldn't expect a shockingly steep price decline. But, again, as Mitch says, who knows. I have been wrong:-)
#Kate: We recommend investing a healthy amount in Vanguard Information Technology ETF (VGT). The largest holding is Apple, but it is only 14.5% of the ETF. This offers a better diversification than straight Apple stock. We expect US technology to outperform because it does not suffer from regulators. US b
anking, energy, and now healthcare all have regulatory issues.
Stephen. Depends on your age. If you are under 70 and 1/2, the answer is yes because your part-time job earnings are greater than the max contribution. Note that if you are older than 70 and 1/2 you cannot contribute to a traditional IRA. However, you could still contribute to a Roth IRA - no age consideration with Roth IRAs, just whether or not there is 'earned income.'
#Stephen: Adding to Mitch's advice. This is a good year to contribute to a Roth IRA as even the 10% bracket is going up to 15% next year.
We use VGT as well in almost every portfolio.
#Kate: We put about 19% of our US stock allocation into VGT. (But we invest more in the foreign markets than the US.)
Janek, this is a complicated question and your overall situation would be key in developing a good answer. I strongly suggest you consult with an advisor. Many work on an hourly basis. Kiplinger shares the link to the NAPFA advisor search below.
Janek, when you say alternatives, do you mean private investments that are not publicly traded such as limited partnerships or oil and drilling programs? I think the first step is to understand what the terms are with your alternative investments. Some do not really allow you to 'cash out' until the investment program is completed. Or, if you can cash out you may have to do so at a very discounted price. As Bobbie mentioned, I think this is a very involved question that you should consult an advisor on.
#Janek: This is a side comment, but we aren't fans of target funds. We use six asset classes, three of which aren't in most target funds (foreign bonds, foreign stocks including emerging markets, and hard asset stocks). These three have performed better than the other three over the last decade. We expect that to continue. Additionally, target funds are generally too conservative for their target dates. And finally, this conservative approach has not saved them from significant drops in value.
Kate, we allocate 15-20% of ALL of our equities to technology at this time. Certainly, if those PEs start to creep up, our allocation would decline. DJM, it is very interesting to see that the majority of your equity allocation is ex-US. We are up to 35-45% of equities in international and we have had to pull our clients along on this. I strongly believe that there is great opporunity in international investing going forward. For much of the last 100 years, the US WAS an emerging market but if you want that kind of growth now, you have to look elsewhere.
When we do advise some of our hourly clients to use target date funds, we do "look under the hood" if you will to make sure the allocation is consistent with the client's needs. This can often be very different than the target date would imply. Also, it is interesting that the same target date may have vastly different allocations depending on which mutual fund company you are using.
Just like last time, I am learning a lot from the other advisors who are participating. Thanks.
ChicagoDave: My understanding is that you cannot convert a 401k to a designated Roth 401k. The question is exactly what David John notes - do you begin to contribute to the Roth now? The answer depends primarily on your current and future tax status expectations, but there are other factors as well. FYI, when you retire or leave the company, you can convert a 401k directly
to a Roth IRA.
I use EPP for Australia, Singapore and Hong Kong. I also use ILF for Latin America. I do believe in these areas going forward. And Canada has a very bright future.
#ChicagoDave: Most employer 401k do NOT allow an "in service distribution". In other words you can't roll your money out until you leave employment. We allow in service distributions for the profit sharing portion. This allows our employees to roll part of their 401k to an IRA and then convert the IRA to a Roth. You could check with your employer if they allow in service distributions. The answer is probably no, but in rare cases I find a "yes".
Sophia, I have never heard of this fund but it looks like a winner. It has beaten the standard Europe and Far East category in all time periods from m month to 10 years. That is largely possible because it is primarily emerging markets instead of the more general allocation used by the Europe and Farm East index. I think it would be a great addition to your overall holdings BUT not too much. Emerging markets should be a smaller part of your overall allocation.
"Gone fishing portfolio"....I love it.
ChicagoDave and David John: I've also seen the opposite where it is the employee contributions, NOT the profit sharing portion, that is allowable to be rolled out as an in-service distribution. Great point David John. There are the cases where you can find a work-around like that to get some of the money converted. Just depends on the plan details.
Some great dialogue between the advisors here!
#Sophia: Lazard Emerging Markets Equity Instl (LZEMX) has a very high rating in fi360.com with a score last quarter of 0 (perfect) and a 3 year average of 7 (on a scale that goes down to 100). We use that fund extensively in TIAA-CREF accounts and can recommend it heartily. The expense ratio is 1.14% which is under the average for an emerging markets fund. If you have a choice, we recommend Vanguard MSCI Emerging Markets ETF (VWO) with an expense ratio of 0.22% and a fiduciary score of 0,0 (perfect).
#Nancy: Social Security benefits can represent a big stack of cash. A typical monthly benefit of $2,200 has a present value well over $500,000. Consider all your Social Security options carefully to avoid making a costly mistake. You are probably about to make a mistake by taking Social Security at age 62.
#Nancy: I *highly* recommend seeing some advisor before making any decision on Social Security. The difference between the best way to take social security and the worst way to take it is usually between $150,000 and $250,000. Taking Social Security at age 62 is *usually* the worst way and could cost you a quarter of a million dollars during your retirement.
Nancy, David is right that careful thought should be given before immediately jumping to taking it at age 62. There are cases when it makes sense, but in most it is better to postpone. The earnings test works so that in 2012, if your annual earned income is greater than $14,640, social security witholds $1 of benefits for every $2 of earned income greater than that threshold.