While Jdm gets back to us, here's one from Jber:
jdm, totally agree with Lea Ann, Emergency fund is always FIRST.
JBer...make something easier????
Hi John, Like many questions there is no right answer. I like having cash, so I would say fund the emergency fund with all the money (or at least 1/2). If interest rates rise you can always use some of that money to pay down the variable rate loan at that time. I realize this means you earn about nothing on the cash and are still paying 3-3.5%. If you are comfortable that you can raise $10,000 quickly should you have a real emergency -- I might change my answer.
Haha, right Delia. Where's the fun in that :)
JBer, sorry, but you gave me a chuckle and I forgot to finish my thought. I know of no efforts to change the RMD calcs. But I do think you could do it on your birthday; it's a good way to remember to do it.
JBer -- wouldn't that make all kinds of sense. My faith in our legislators isn't high right now though!
jdm, if you have the earning capacity you could start with 6mo emergency fund and out the rest to the highest rate loan; otherwise all to EF
Here's a question from Dennis:
Hi Dennis, I generally have 15-20% in international holdings. So I'm comfortable if you bump up your allocation a bit. But I'll let someone else answer if now is the right time and the correlation with US stocks. The US market continues to perform with a number of reasons not to (and a number of reasons to), the negatives were basically the same a year ago -- and the US market doesn't seem to care -
Dennis, generally I don't recommend going higher than a typical 10% or so diversifying investment in international stocks or mutual funds. If you invest in developed international countries/companies, they are highly correlated to the US market and if you invest a lot in emerging or frontier markets the risks is significantly greater. Depends on how much risk you are willing to take...you could be wrong and international could do worse than US...depends on your risk tolerance, time horizon, goals...lots of variables.
HI Dennis. I think it's smart to be looking at international exposure in your portfolio right now. I usually recommend 15%-20% in international, with 3-5% in emerging markets, depending on your tolerance for risk and volatility in your portfolio. Yes, there is more and more overlap between international stocks and US stocks, especially in the large cap world, but still worth it to diversify globally.
Dennis, I think an allocation of somewhere between 15-30% of your total stock allocation (not your total portfolio) is an appropriate weight for international stocks (as a general rule, knowing nothing about your circumstances). Your expectation of outperformance in the next 2-3 years may not pan out, but a long-term allocation to international stocks, including emerging markets, is a prudent move.
Donna, when do you expect to need these funds?
Donna, tell me a bit more about your situation first. Do you have an emergency fund set aside?
Hi Donna, what it the time horizon for this 25-50K?
Donna, we're all going to want you to first put aside money for emergencies. Check out online savings accounts for FDIC-insured interest of 0.85%-0.90%.
Donna, both Sallie Mae and Barclays USA are paying 0.90%. Do a search on their names and savings accounts.
Donna, since you are a single empty nester you need to make sure you have about 12-18 months of core living expenses set aside in an emergency fund. For the rest, you could put it in 1) Treasuries or CDs (very low rates; safest) 2) Money market funds (still low rates; pretty safe 3) short-term bond fund (still low rates; pretty safe but subject to risk of rising interest rates 4) senior bank loan funds (a little better return,still pretty safe)...it goes on from there as to return and risk
Dona, assuming you need all the money in three years -- as you know you need to spend it then, there is nothing better than cash/money market/CD's. If you only need a portion of that money in three years, then that portion should remain in cash. If that's too boring for you, you could risk a potion of the money -- knowing it may not work in a three year time frame.. Maybe 25-40% in a risker stock mutual fund investment.
Donna, when you open online savings accounts and you have a revocable trust you need to check with the company to see if they'll title the account in the name of the trust. Some won't, and in that case you may want it to be Paid on Death or Transferred on Death to the trust.
Donna, that depends on how secure you think your job is, and whether you have disability insurance that would pay the bills if you couldn't work.
Donna, the duration of your EF depends on a lot of things, some of which are: disability coverage and elimination period, earning capacity, etc.
We have another question from JBer:
JBer: Vanguard funds have low cost options and generally respectable returns. How much of your Net Worth are we talking about?
JBer: unless you get over $1MM with an individual firm probably not too big a concern...but if it worries you at all, probably worth it to spread it out just for the peace of mind
JBer, take a look at Vanguard's SIPC (Securities Investor Protection Corporation) insurance coverage statement and see if you're comfortable with that. I personally don't have a problem with consolidating assets at one strong firm -- in fact, I'm in favor of it as I believe that consolidating accounts makes it a lot easier to get your arms around your finances.
JBer Vanguard is a great place. I use them and have the largest portion of client money at Vanguard. I happen to like active managers for some areas of investing. For example, I rarely use Vanguard for small cap investing. However, if you are happy and have well diversified with your portfolio I see now reason to change.
JBer: I agree with Therese - consolidating at one firm usually makes sense. Vanguard in particular has great funds at low cost.
JBer: from Vanguard "Securities in your brokerage account are held in custody by Vanguard Brokerage Services, a division of Vanguard Marketing Corporation. Vanguard Marketing Corporation is a member of the Securities Investor Protection Corporation (SIPC) which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash subject to future adjustments for inflation). To obtain information about SIPC, including an explanatory SIPC brochure, please contact SIPC at www.sipc.org or 202-371-8300.
To offer greater protection and security, Vanguard Marketing Corporation has secured additional coverage from certain insurers at Lloyd's of London and London Company Insurers for eligible customers with an aggregate limit of $250 million, incorporating a customer limit of $49.5 million for securities and $1.9 million for cash. Coverage provided by SIPC and certain Lloyd's of London and London Company Insurers does not protect against loss of market value of securities. The policy provided by certain Lloyd's of London and London Company Insurers is subject to its own terms and conditions.
Hi John, Like many questions there is no right answer. I like having cash, so I would say fund the emergency fund with all the money (or at least 1/2). If interest rates rise you can always use some of that money to pay down the variable rate loan at that time. I realize this means you earn about nothing on the cash and are still paying 3-3.5%. If you are comfortable that you can raise $10,000 quickly should you have a real emergency -- I might change my answer.
HI Dennis. I think it's smart to be looking at international exposure in your portfolio right now. I usually recommend 15%-20% in international, with 3-5% in emerging markets, depending on your tolerance for risk and volatility in your portfolio. Yes, there is more and more overlap between international stocks and US stocks, especially in the large cap world, but still worth it to diversify globally.
