Joe, also look if you are eligible for a Roth IRA. Your Roth we certainly know has advantages to the taxable account.
Olaf, I personally think so. Most active funds that outperform tend to do so by investing in areas outside of the one you hired them for.
Olaf, you are right. The american Funds are very popular and found in many 401(k) plans. Many of them are assett allocation funds and that's not obvious to many investors. You are definely on the right track. Morningstar and many fund companies have tools that let you "see inside" the funds.
That said, I'm not confident how to do that with many bond / commodity funds using derivatives instead of investments.
Olaf, many times mutual funds use strategies such as you mention, or hold quite a bit of cash (often to meet redemption requests or because a lot of investors have piled into the fund in a short amount of time). This may or may not throw the allocation off enough to give you different results. Personally, I select funds that "stick to their knitting" and don't engage in exotic tactics (or hold too much cash), so that I can be confident that they truly represent their asset classt. PIMCO is rather well known for using leverage and other tactics; some investors like this and know about this, but if this bothers you there are other good bond funds out there that play it a bit straighter.
Albert, I like your strategy. Use Lagre cap funds as your core and supplement with small cap and international.
Albert, if you told him to have cash reserve, include small / value tilt and diversify globally, I think that's absolutely reasonable.
Albert, my bias is to use index funds for large cap, but well-run active funds for small cap and international.
Albert, your strategy is good. The 15% will definitely help your son grow his retirement account.
But... that's just my bias :)
Albert, as for the 15%, it can be hard for young peole to put away 15% of their pay. Make sure he build up his emenrgency fund and don't forget that he has stuff to buy. Get him started but don't forget that he is young just as you one were.
Mitch, congratulations! Sounds like you're able to save a lot. I think the Roth will help for diversification. Since you're young and may make more in the future, I would think about trying to max that for tax and investment diversification.
Mitch, you are doing a great job. Invest more if it fits into the context of the rest of your life. A 28 year old person maxing out his TSP is well on his way to a secure retirement especially if you stay with the federal government and earn that pension. Aggressive investments are fine but remember, large ap US funds are your core (like the TSP C Fund) and supplement with small and international.
We're already half way through! Thank you to all the advisers who were with us for the past two hours.
With us now are NAPFA certified advisers Delia Fernandez, Bobbie Munroe, Kathy Holden and we still have Pat Jennerjohn on the line. Welcome!
Good afternoon. I'm Bobbie Munroe and I run a fee only practice, Supporting Your Choices. We have offices in Atlanta and the Tallahasse FL area though we have clients all over the United States. My kudos to Kiplinger for sponsoring this wonderful event. I look forward to talking to you.
Here's another reader write-in:
Reader: I am 66, so I am full retirement age for purposes of Social Security. My wife is 62. I was hoping that I could file and suspend so that my wife could claim a spousal benefit while I delay claiming mine until age 70. Then I would restrict an application to a spousal benefit so that I could claim on her record while continuing to delay claiming mine. Can we do this?
Reader, you can certainly do this as at least one of you is at full retirement age. It's a complicated technique, and here's a pretty good explanation (in addition to the other resources being provided here):http://www.aarp.org/work/social-security/info-2014/file-and-suspend-retirement-strategy.html
Reader, also keep in mind that you both can't file and suspend and claim for spousal benefits on the other spouse's record.
Reader, the article I referenced has a great example that fits your situation. Know that if your wife files she will get her own REDUCED benefit (if she has her own social security earnings) when she files in addition to the spousal amount. But you may still want to do this. It seems that yours in the high benefit. When you die, she would get your benefit which would be much higher if you wait until 70. So even if she takes a reduced amount while you are living, her survivor benefit would be your larger benefit.
Here is the key to your situation, taken from the AARP link already given: The example: Note that if Mary had been at less than full retirement age but 62 or older, she still could have begun a spousal benefit based on her husband's move to file and suspend, assuming that that benefit would be larger than what she was due on her own work record. However, the spousal payment would have been less than the full 50 percent. And she would be locking in a discounted rate forever, whether for the spousal benefit or her own work record benefits
Revbecka, first assess your overall financial picture to see if you also need to build up an emergency fund and build for your retirement. If the debt is low interest, you may be better off focusing on other goals. What kind of debt do you have?
Rebecca: Could you give a bit more information? Do you have any savings for retirement?
Rebvecka, one problem I often see with parents who just paid off college for their children is that they have overlooked their own long term planning.
Ben, first of all, you do have a retirement plan at work? Once you have saved a liquid emergency cash fund, this is a great place for saving. Indeed, if your employer has a match you need to AT LEAST contribute enough to get the full match. You will defer income taxes on the amount you can contribute and you also get money from your employer.
Ben, I advise that clients have a strategy in place like this: first, have an emergency fund (in plain old boring cash), next, fund your employer's retirement account ESPECIALLY if there is an employer match, then, save into a longer term portfolio outside of your retirement assets.
As for what investments you should use, it may be easiest to start with a target date fund. This is a single fund that is diversified among many investments. Now, what that the mix is for a certain age depends on what company the fund is from. You might first look at a Target Date 2040 or 2045 fund.
Pat, I love that you pointed out that people can save outside of retirement accounts. I LOVE having different "buckets" of assets to fund a plan. Indeed, if a client wants to retire at say 53 and they only have retirement savings, they may be subject to early withdrawal penalties. Also, it is difficult to use retirement accounts for things like real estate.
Daniel, the percentage savings guideline is looking forward to potential retirement spending needs, so if when your wife starts working you anticipate that you'll "step up" to a more expensive lifestyle, then yes, saving earlier is better for those larger costs.
Daniel, a good plan would help you model this. I suggest that you save 15% of your income whatever that is (you working alone or both of you working). Or, as an alternative, many of my clients have one parent stay at home when the children are young. But, when that parent goes back to work, they may put fully half of those net earnings into savings while using the other half to enhance their lifestyle, fund college for the children, etc.