Akilu, You could use a SEP as well as an IRA. I would recommend funding a Roth IRA first and then work on your SEP. Your SEP contributions are limited based on your income.
And here is another question from Dennis when you're ready
Yes you can Dennis! You may want to consider converting it to a Roth. See one of Anna's answers below.
Thanks, planners. Here is our next question from ghrad.
Here is our next question from Jeb
Jeb: First it depends on your risk tollerance. Generally an investor in their late 30s can allocate the following:
Jeb: addition to my earlier entry-
1. Stocks/Bonds (conservative 55%45%, moderate 70%/30%, aggressive 85%/15%)
2. Small/Mid/Large Cap (these are ranges: 10%-15%/5%-10%/20%-40%)
3. domestic/foreign (the ratio can be 2:1 or 3:1)
A good book to check out is by Rick Ferri, All About Asset Allocation
Jeb: It's definitely important to consider your own risk tolerance, time horizon and goals. However, generally speaking a couple in their late 30s could have a mix of 30% equities (half in large, half in mid/small), 20% in foreign, 20% in alternatives, 30% bonds.
Jeb: see my answer below.
I'm a big believer in having exposure to REIT's in a portfolio. I advise to have these in a qualified account because they pay a lot in dividends and you do not want to be paying taxes on that if it can be avoided.
Again, alternatives are very much tailored to the individual investors and their goals. Yes, real estate and commodities are some alternatives we like, but there are also alternatives that use different strategies for investing.
We use alternatives for a percentage of our portfolios - typically our alternatives fall into two buckets: asset classes that do not necessarily move in correlation with the broader markets (ie. gold, real estate, commodities) as well as alternative investment strategies (long-short strategies, merger arbitrage, convertibles, etc.).
Jeb, Many "experts" are suggesting there may be a bond bubble right now. Your perception seems to align with theirs. I would still argue that bonds are an important part of a diversified portfolio and if appropriate rebalancing is being performed then you should not have purchased more bonds because of their appreciation. In most portfolios, predominantly stocks have needed to rebalance appropriately.
Jeb: No you are not crazy! It depends on what time period you are looking at to analyze the performance. Remember when investing you need to have a clear goal on when you plan to use your investments. If your time horizon is short, then be more careful. If you have more time, then re-balancing your portfolio will keep you balanced in all asset classes. I also agree with Garrett's comment below.
Here's our next question from Arthur
Arthur, great question and one that I often debate myself. Here are my thoughts. Gold prices move very differently than stock prices which is a nice diversification factor. It also should be a nice hedge against inflation which makes it appealing in a portfolio. There is a lot of debate about whether it is a good investment. I am still on the fence, but I do have a small amount of gold in my personal portfolio because of the positive reasons mentioned above.
Planners, when you're ready, here's our next question from Bill
Bill, I guess it depends on what your goal is. My guess from what I am reading is that you will have more than enough for your retirement. You are just looking to maximize your net worth. This means to me that you want to have the most for your heirs when you pass. If that is the case, then as morbid as it sounds you should pick the age you plan to pass and use that as your gauge to make your decision with the calculator. I hope I am right on that assumption.
And planners, here is our next one from Shawn
Shawn, if you are looking to consolidate for the sake of consolidating I wouldn't recommend it. I wrote an article on that topic on my website here (http://prominentfp.com/consolidating-old-401ks-2/). If you are looking to convert all the previous retirement accounts to Roths, are young enough for this to be effective, understand what that does to your taxable income, and have the money available in cash to pay the taxes, then I say it is a good idea. Since you are a graduate student and you and your wife probably expect to earn more in the future. Now might be a great time to roll and convert everything to a Roth. Hope this helps, Garrett
Thanks, planners. Here's another one from Glenn
Rebalancing is usually done on a timely basis throughout the year (quarterly, semi-annually) and brings your current investments to percentages that align with your risk tolerance. You may with to keep 40% in US funds, 20% in International funds, and 40% in bonds. Rebalancing keeps your allocations close to these percentages.
Garrett, before you have to take off, here is one from David L
Hey David, I admire you for assisting with your parents as it is hard enough taking care of yourself financially after graduation. Not knowing all your options, I'll start with the basics. 1) Contribute to your company's 401k up to the point that they match contributions (i.e. they match 0.5% up to 6%, then contribute 6%). 2) Contribute as much as you can to a Roth IRA. 3) If you can max the Roth IRA ($5500 in 2013) then continue to contribute to your 401k. I hope this is helpful and best of luck to you.
And Anne, you can take this one from Jonathan P
Jonathan: you have a few options here: 1. If you have a retirement plan that you currently contributing too, you can rollover your SIMPLE into that plan. There will be no tax consequences. 2. If you have no retirement plan at the moment, you can roll it over to a Rollover IRA, no tax consequence as well. 3. You can convert it to Roth IRA now and will have to pay taxes.
Thanks to all the financial planners volunteering their time and expertise today! New shift of advisers coming on board now.
It has been a pleasure chatting with you all and answering your questions. If you have additional questions, I enjoy answering questions on my website in a column I call Ask Garrett. Please check it out at www.prominentfp.com or follow me on twitter @prominentfp. Have a great day! Garrett