I should mention this about target date funds. They are not all alike and the mix with a Vanguard Target Date 2015 might be very different from a T Rowe Price Target date 2015. Look under the hood and remember, the date does NOT have to be exactly the date you will retire. Rather, look at the stock/fixed income mix of several (in this case perhaps the target 2010, 2015, and 2020) to get the mix you want. Vanguard does a pretty good job of providing a goos mix for the stated retirement dates.
Elizabeth, you can typically only roll money out of a 401(k) and into an IRA after a "qualifying event". Have you left your employer?
We agree, David. It's definitely impressive.
Elizabeth there are plenty of low expense funds without any sales charges that you can use. Vanguard is a great place to start.
@Elizabeth: If you are buying funds for yourself, pay attention to the expense ratio. That is the fee the company charges for operating a fund. For similar types of investments, you will find a wide range of expense ratios. You can not control the return on the invesment, but you can control the fees you pay. Also, choose "no-load" funds. Loads are fees companies charge either up-front to buy the fund or at the point when you sell it. There are plenty of funds that are great that do not have any loads and low expense ratios.
As for putting the 401k miney into the ROTH, unless it was a ROTH 401k you will have to roll the money first into an IRA and then into a ROTH. During that last step you will have to pay income tax on the money that is rolled into the ROTH. Currently there are no income limits on rolling money into a ROTH (though there are on contributing to a ROTH). Be tax wise with your strategy as you don't want a big lump rollover to push you into a higher tax brackett.
David et al, yes, when the client is first, it is amazing how similar the advisor strategies can be. Thank YOU Kiplinger for undersanding that there is a difference in various types of advisors.
Alright, here's a good question for the advisors from Greg
So much of planning is NOT about investments. Think estate planning (the will AND documents for the living you if you are unable to act on your behalf), education funding, financial distress, cash flow plans, risk management. I often see clients with limited investments. I strongly suggest you look for hourly advice by going to NAPFA.com planner serarch (some do have minimums but there are hourly planners here) and Garrent Planning Network (all fee only hourly planners). Hourly adivce is a great way to get a start at a reasonable cost. And NAPFA has online educational events for the public. You might also check community finanical education offereings. But beware educational events that are a front for selling product!!!1
Also know that in many cases, an advisor can see something that will save you money well in excess of what is spent on the consultation.
@Greg: Part of why NAPFA members hold these events, write article, and hold free seminars is specifically to help those who may not be able to afford it otherwise. Getting a financial plan in place is daunting even when you are working with an advisor. We have a daily financial blog for people to pick and choose the parts of their plan they are working on and whittle away at comprehensive wealth management. Subscribing to these might help, but here is the priority I would set:
I love seeing several posts from younger adults. There is no doubt that getting a good start in your 20s ort 30s is MUCH easier than making up for lost time/mistakes at age 60.
Here's our next question from Richard.
And to throw it out there, Susan wants to know what you all think about Facebook's upcoming IPO.
I've got to step out. Thanks to everyone for their questions and thanks to the other advisors. We certainly get something out of these events, too! Have a great day!
Thanks so much for joining us, Danielle.
Richard, 98% of market movement is noise. What matters is how your portfolio performs over the long haul. If you are concerned about a -4% short-term move, you either need to adjust your expectations or consider low yielding investments that are not tied to the market. Vanguard has lower fees but they will not shield you from the ups and downs of the market. The worst case scenario is for you to sell after seeing a big drop which is always likely to come at some point.
@Richard: This isn't the week to panick and get out of the markets. So I agree with what Matthew Illian has said completely. Having said that, these funds are not necessarily the best choices for fees and expenses. Am I correct that Wells Fargo Advantage Asset (EACFX) has an expense ratio of 2.08%? All three of these funds are in the bottom half of funds according to the 3-year fiduciary score from fi360.com. We use that service to help rate mututal funds according to their score on a fiduciary acceptableness. It works at least as a first pass for funds which are are not familiar with.
As a rule of thumb, stocks historically do not do well in the six months after the IPO. This insiders usually have a lock-up period during this time and selling pressure becomes large when these hand-cuffs are lifted.
Here's a timely question from Adriana about how to pay for college
I agree with the other advisors re:IPOs (if you want them wait 6 months) AND VGT (which we love to use). I believe that tech has some robust years ahead.
We have a follow-up question from Richard, as well.
@Richard: I would recommend switching to better funds, and Vanguard has some of the best. I would not necessary want to be out of the markets a long period of time, so I would open the Vanguard accounts and give them the information to get the funds from where they are now by liquidating those accounts and transferring the money where it would be invested again quickly.
Dear possilbe MBA, I think lot of people are doing more thinking about the cost of a BA or graduate degrees. While a good education offers many intangibles, basically when you are thinking of the money you should think of return on investment. I've counseled many who went 150K in debt to get non-professional graduate degrees only to lack the subsequent salary to make the loan payments. They will be paying on student loans the rest of their lives...a big load to tote.