Hi, This is Angela Thomson with Coastal Financial Planning, Inc.
Hi, I'm Tim Parker, CFA with Regency Wealth Management in Northern New Jersey!
Good morning. This is Ara Oghoorian with ACap Asset Management, Inc in Los Angeles.
Welcome to today’s Jump-Start Your Retirement Plan Live Chats! And thanks for joining us, Tim, Ara and Angela.
Now, just a quick word about the format of today’s chat, and then we’ll get started.
We received several questions in advance, and for the most part, questions will be answered in the order they were received. Each question will be held for moderation until an advisor is available to give you a detailed, personalized response. So, please do not be concerned if you do not see your question appear right away.
If you have a follow-up question, please submit it, and we will bring it to the advisors’ attention right away.
Angela, you can take this one from Richard
There is nothing wrong with having cash in your portfoilio. Use these funds for other investment opportunities or strenghten positions within your portfolo to take advantage of market shifts
Angela, when you're ready, we have a follow-up from Mr. Dalton.
Tim, here is one for you from Hbbery
Hbberry - The risk of sticking with cash is you might miss out on further rising stocks and you will not even beat inflation given the low rates you can earn on cash. You might consider dollar cost averaging into the markets.
And Ara, here's one from Luisa
Thank you for your question Luisa. You should also look for the fund’s objectives (i.e. large cap, small cap, international, etc.) so that you are sufficiently diversified, its holdings to ensure there is no overlap in your portfolio, and whether the fund is actively managed or passively managed depending on your personal preference.
Tim, here's another one for you from Sneaky Pete
Hi Sneaky Pete - Projecting inflation is very challenging. Even the FED has difficulty with it. The 2.3% is probably close to historical inflation which might be just fine. To be more conservative, you can use higher rates, especially if you think you might have more medical bills in the future as medical costs seem to rise faster than overall inflation.
Angela, you can take this next one from Amy
Bob: regarding Dell stock. Its up 32% year-to-date. Depending how long you've owned it and what you paid for it...I'd be tempted to take some profits here. Sell a portion...stay invested with a portion.
Here are our next few questions from Terry and Kern44
HI Terry, you can transfer those muni bonds to a discount broker and they won't be charging you 1.5% a year to hold them. If you have a local Fidelity or Scottrade office near you, stop by and they will handle the transfer paperwork for you. There may be a transfer fee from your current broker, especially if you are transferring an entire account, but discount brokers like Fidelity or Scottrade don't charge an account fee for brokerage accounts.
Terry, OUCH! 1.5%?. Open up an account with a discount broker like Schwab, or e-trade and have those muni's transferred to them. There might be an initial fee for doing this but it is a lot cheaper that 1.5%Holding them yourself can be a real pain. Let somebody else do it.
Kern44: A starting point is finding out the cost of your health insurance under COBRA. This will give you a sense of what an individual/family plan may cost you. From there, you can shop the health insurance providers in your state. Your cost of insurance will depend on the type of coverage and how much of the medical expenses you are willing to bear out of pocket.
Here are our next few questions from Gianluca
Hi Gianluca. I'm not a big fan of gold for long term investing. It's barely doubled in the last forty years. I think most everyone should have a balanced portfolio and a 20% allocation for a thity five year old person may be a good start. Right now, I would look for short term or ultra short finds. GNMA funds are good too. If you are investing regularly thorough a 401(k) plan, don't be afraid to allocate a portion to intermendiate bonds - remember you are dollar cost averaging . If they are available to you, I prefer managed bond funds to indexed funds at this time. Keep on investing.
HI Gianluca. I am a big believer in having some allocation to bonds regardless of interest rates, stock market performance, etc. They are an important diversifier in any portfolio. You are right to be cautious about the low interest rates right now, as rates are likely to start climbing. But I've been saying that for about ten years now...the key may be to limit your allocation (especially for long term retirement money) to bonds and to use short or intermediate term bonds vs long term bonds. This will allow you to react more quickly to a future rise in interest rates. A small portion in a high yield bond fund may also mitigate the lack of return on short/intermediate term bonds as well.
HI Janice. Make sure you have an emergency fund equal to 3-6 months of living expenses socked away before worrying about anything else. Once that's established use that extra monthly cash to save in your employer's retirement plan (if you have one) and/or set up an automatic monthly deposit to a Roth IRA, where you can invest it. T Rowe Price has some very good asset allocation funds, which are a good, low cost way to start investing.
Janice: Starting over can be tough, so I commend you for taking the necessary steps to rebuild your retirement financial resources. The most bang for your buck is to avoid making major missteps by chasing aggressive returns. You didn’t say if you already have other funds for emergency, so if you don’t, make sure you save enough to cover 3 – 6 months of expenses before investing for retirement.
Hi Janice. We don't know a lot about you but it sounds like you may have gone through a rough patch. First build up an emergency fund to cover six months of living expenses. Put this money in a savings account. I know the rates are lousy but think of it as an insurance policy. If your employer offers a 401(k) plan, invest in a balance of stock and bond funds. If not, open up an IRA with a mutual fund company like Vanguard or Fidelity and start putting in as much as you can up to $6,500. If you don't have much in savings now, you may find yourself needing to work part time in retirement. This doesn't have to be a bad thing. Lot's of people do it for a variety of reasons. Good luck to you.
Janice: be careful...taking Social Security at 65 means you will be penalized for taking it "early". Your full retirement age is 66 and 2 months. So, taking SS at 65 will only get you @ 93-95% of your full benefit - for life.
Ready for our next round of questions? Here's one from Deb
We're trying to decide how to allocate funds between debt repayments and savings. We have a $35,000 student loan at 4.58%, and a $115,500 loan at 1.625%. We owe about $373,000 on our first and only mortgage, and the house is worth about $350,000. The rate is 4.75% post-HARP refinance. We have no consumer debt of any kind. Our savings account earns 0.70% APY (about $17,000 in emergency savings) and the stock market, as you know, fluctuates wildly. We are in our late 30s. My current thinking is to focus on paying down the relatively high-interest debt before investing in stocks, but I'm happy to hear a contrary view.
HI Terry, you can transfer those muni bonds to a discount broker and they won't be charging you 1.5% a year to hold them. If you have a local Fidelity or Scottrade office near you, stop by and they will handle the transfer paperwork for you. There may be a transfer fee from your current broker, especially if you are transferring an entire account, but discount brokers like Fidelity or Scottrade don't charge an account fee for brokerage accounts.
Terry, OUCH! 1.5%?. Open up an account with a discount broker like Schwab, or e-trade and have those muni's transferred to them. There might be an initial fee for doing this but it is a lot cheaper that 1.5%Holding them yourself can be a real pain. Let somebody else do it.
Kern44: A starting point is finding out the cost of your health insurance under COBRA. This will give you a sense of what an individual/family plan may cost you. From there, you can shop the health insurance providers in your state. Your cost of insurance will depend on the type of coverage and how much of the medical expenses you are willing to bear out of pocket.
