And Phil, we've got a question about contributing to a Roth...can you weigh in on that one?
Eagle - BDCs are interesting as is peer-to-peer; both are worthy of consideration as PART of a well diversified portfolio. PTP is new and relatively un-proven, so I would limit my investment there to money you can afford to lose, certainly no more than 5% of your liquid after-tax (non-retirement account) total.
Hi Adrian. Your'e young, follow your dream, follow your passion you are surrounded by a solid team of advisors on the real estate side.
Tom, I believe taking money out of a 401k you would have to start making payments on it immediately. You will pay a pretty high interest rate, ive seen 7%, and it will kind of function like any loan. If you have other means to tap, like equity from a home, that might be a better option. Id talk to the provider of your 401k first to see what it entails. Ask about the rate they give and the length of the loan.
Rich, we've got another 401(k) question...this one's from Tony P. and
relates to rollovers...
No, Tony, you don't need an advisor; go to any discount broker or bank and they will be delighted to set up and IRA Rollover account and walk you through the minimal paperwork, at no charge.
Hi Tony, if you have changed jobs and your new employer offers a 401k, you can see about merging it with the new plan (only if you like the investment choices). If not rolling it to an IRA is a good idea and you would not need an advisor to do so. Just make sure you get the rollover paperwork and have the funds payable directly to the new institution where your rollover IRA will be. This way there is no confusion as to whether its a rollover or not. Not knowing your situation there may reasons to keep it at the old vendor though, so id check with your previous employer.
An interesting followup question from eagle...on when might it make sense to switch to a planner...
Hi Bilal. For 2013 the maximum contribution to a ROTH is $5,500 ($6,500 if 50 years or older). Also, look into the "Savers Credit" for low-income earners.
Eagle, I think working with a planner is always a good idea as they give advise that fits your specific situation. I would look around the NAPFA website and see if there are any fee-only planners in your area. Some may have a minimum amount of assets to manage, but that depends on the firm. Happy hunting!
A timely question from Andrew...planners, your thoughts?
Curt, eagle had a followup question about investment newsletters ...
Tony, if you do decide to rollover your 401k just make sure it is a trust-to-trust transfer where the funds would be wired directly into the rollover account. To echo Rich's thoughts, there may be some advantages to keeping the 401k.
Andrew - the world always deals us short-term blows that have absolutely no long-term impact. Do you remember the oil crisis of the 1970's? Didn't think so. Was the Boston atrocity horrifying? Absolutely. Does it have an effect on investing for a 10-20-year goal? No.
Andrew, yes it was a tough week and the events were just awful. I think that people are afraid of what may, if anything, is to come. We may see increased volatility in the markets as there is more uncertainty and fear concerning our safety.
Eagle, our sponsor Kiplinger has a newsletter and also the Kiplinger Personal Finance has an excellent magazine available for subscribers.
Before we move on to another question, let's circle back to the estate planning question that One Wife, Two Kids had...
One wife, two kids...speaking to an estate attorney is a good idea. You will want to draw up a will and depending on your assets, they can help you with setting up trusts also. In the meantime you can make sure that all of your retirement accounts have the beneficiaries listed as you wish. This way they will go directly to your heirs and avoid probate.
Andrew, the sad events that have occurred make us all reflect on what is important and how fragile life can be sometimes. America is strong and will carry on, because of the resolve of the people who make up this nation. The world will see us for who we are and will not be afraid to invest in the future of this country.
Here's a good question from pete about bonds and interest rates...
Rich, a followup from One Wife, Two Kids...
Pete - Long-term bonds react much more strongly to changes in interest rates than do short-term bonds, so if you are concerned, as I am, that rates are more likely to go up than down in the future, you should avoid long-term bonds. With bonds, as interest rates rise, bond prices fall and vice-versa.
Curt, can you take this second question from Pete? a good question about age and asset allocation...
One wife, two kids. JUst to add to what has already been said, a very important element of a will is to name a Legal Guardianship for the kids. You and your wife should mutually agree to this provision and ensure it is placed in the will. An estate attorney can help you with this.
Also, Pete, unless you are fairly experienced in the bond market, use a mutual fund and get the value of either an index or an experienced manager. The bond market is the last trace of the wild west in terms of investing.
Yes, I think that this is the most important right now. The will directs who controls your estate (an executor) and more importantly where your assets go. You do not want to have your estate split up by the state. T
hat can get very sticky. Im not sure using legal zoom is the best idea, however it all depends on your situation and how complex it is.
Here's a question from KC about dividends...
Pete - beware of rules of thumb; the percentage/ratio of stocks to bonds depends more on your outlook and investing time horizon. That said, bonds are very un-attractive to me now, so the alternative for income might be dividend-paying stocks, REITs and the like, which effectively drives your ratio to a very high proportion of equities. Personally, at age 69, I have only 20% in very short-term bond funds, mostly bank loan funds.
Pete, you have to ask yourself if you are ok with a loss of retirement funds having 60% stock in your portfolio.
Pete - Phil raises a good question about your tolerance for volatility. I figure that I've got about 25 years in which my portfolio has to provide for me. At some point interest rates will go back up as inflation makes a cyclical reappearance, so I'm prepared to see my portfolio fall and rise quite a bit over time. Are you?
Pete, for example, assuming 60% stock mix; a 40% drop in the market would be a 24% loss of your total portfolio. Alternatively, for a 40% stock mix; a 40% drop in the market would be a 16% loss of your total portfolio.
KC - no, it doesn't change a thing for tax purposes: dividend income is income whether or not you re-invest it. You should be keeping good records, because those reinvested dividends become part of your cost-basis when the time comes to sell - you don't want to have to pay taxes on after-tax money!