Join Early Retirement Today
Reply
 
Thread Tools Display Modes
asset allocation
Old 05-07-2006, 05:39 PM   #1
Confused about dryer sheets
 
Join Date: May 2006
Posts: 3
asset allocation

hi all,
i'm about to retire in two months , and in need of advise. i'm 60 years old and my wife is 59.we would like to rollover our 401k and lumpsum to fidelity.
we will need 4% plus inflation each year. how can we allocate our funds so we can live comfortable. fidelity has given us a plan but i'd like to get other opinions. any advise will be greaty appreciated
thanks,
eddie is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: asset allocation
Old 05-07-2006, 06:07 PM   #2
Moderator Emeritus
Rich_by_the_Bay's Avatar
 
Join Date: Feb 2006
Location: San Francisco
Posts: 8,827
Re: asset allocation

Eddie,

Welcome to the board.

Asset allocation is a widely discussed topic here and elsewhere. Might try a search under the keyword "allocation."

Also, I found Bob Clyatt's book to have a very useful chapter on that, as does Merriman's "Live it up without outliving your money." Browse them at your local megabookstore to see if these work for you.

Vanguard has LifeStrategy funds (I like moderately conservative) which do most of the work for you.

Hope that helps.

__________________
Rich
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.

As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
Rich_by_the_Bay is offline   Reply With Quote
Re: asset allocation
Old 05-07-2006, 07:30 PM   #3
Full time employment: Posting here.
 
Join Date: Jan 2006
Posts: 899
Re: asset allocation

Eddie,

A couple of comments:

First, R_in_T gives good advice as far as educating youself.

Second, many on this forum will give advice on asset allocation but they will need a lot more information, e.g. your risk tolerance, how much effort and time you want to spend, etc?* Do you want something simple like a single Life Strategy fund mentioned above?* Are you comfortable with the "slice and dice" approach and a dozen or so funds that you pick youself or do you want somebody like Fidelity determining it?

Third, a rule of thumb that some use is that % bonds in your AA should be equal to your age and the rest should be in equities.* That would put you at 40% equities and 60% bonds.* But that is just a very gross generalization and should only be used as a starting point.* Many in your situation will have more in equities while some that are less risk tolerant and are willing to accept lower long term returns will have more in bonds.

Fourth (if I recall correctly) historically equities have a real return of 6-7% and bonds have a real return of 3-4% and cash is about 1% so you could use those number to construct and AA that gives your 4% requirement.* The problem with that is of couse that these are historical numbers and you can't count on them being the same going forward.

Since this is a 401k and you can move it around at any time without tax consequence my advice would be to "park it" in something like the Vanguard Conservative Growth Lifestyle Fund.* It is 50/30/20 stocks/bonds/cash which reading between the lines might be a pretty good place for you to be while you figure out exactly what you want to do.* I think that Fidelity has something similar.

You also might want to look at the Vanguard Target Retirement Funds or similar offering from Fidelity.* They automatically adjust the AA as you age.

MB
mb is offline   Reply With Quote
Re: asset allocation
Old 05-07-2006, 08:12 PM   #4
Confused about dryer sheets
 
Join Date: May 2006
Posts: 3
Re: asset allocation

my problem is ,am i over thinking our situation, i'd like a 50/50 stock vs equity situation. i don't want an index fund or life styles funds. i'd like to manage the ira myself. i'm thinking i'd like 25% large cap, 25 % small/ mid cap, 25% foreign, and 25% gold, gas, real estate, and other. that would be on the equity side. my real problem is on the fixed income side. right now i'm just about all in the money market. am i doing the right thing.
thanks again
eddie is offline   Reply With Quote
Re: asset allocation
Old 05-07-2006, 08:22 PM   #5
Thinks s/he gets paid by the post
frayne's Avatar
 
Join Date: Oct 2002
Location: Chattanooga
Posts: 3,871
Re: asset allocation

Don't know if this is of any help but should be a start.
http://www.geocities.com/finplan825/...ta.html?200513

I'd also suggest some background reading by Bogle or Bernstein to give you some good investing fundamentals.
__________________
Earning money is an action, saving money is a behavior, growing money takes a well diversified portfolio and the discipline to ignore market swings.
frayne is offline   Reply With Quote
Re: asset allocation
Old 05-07-2006, 08:32 PM   #6
Full time employment: Posting here.
perinova's Avatar
 
Join Date: Apr 2006
Posts: 523
Re: asset allocation

retireearlyhomepage has some links on the subject.
most would agree that the simplest solution is to put all your fixed income allocation in Vang. Tot. Bond Ix.
(if the interest rate goes higher you will trade immediate return for higher yield. not necessariliy a bad thing)

most ER books have info on the subject including Bob Clyatt's and Gilette Edmunds'
perinova is offline   Reply With Quote
Re: asset allocation
Old 05-07-2006, 08:36 PM   #7
Moderator Emeritus
Rich_by_the_Bay's Avatar
 
Join Date: Feb 2006
Location: San Francisco
Posts: 8,827
Re: asset allocation

Quote:
Originally Posted by eddie
my problem is ,am i over thinking our situation, i'd like a 50/50 stock vs equity situation. i don't want an index fund or life styles funds. i'd like to manage the ira myself. i'm thinking i'd like 25% large cap, 25 % small/ mid cap, 25% foreign, and 25% gold, gas, real estate, and other. that would be on the equity side. my real problem is on the fixed income side. right now i'm just about all in the money market. am i doing the right thing.
http://flagship4.vanguard.com/VGApp/...FundIntExt=INT

Pretty much as diverse as you can get re: domestic bonds; add an intn'l bond fund if you wish.

Can't say if you are over-thinking this or not since that is such a personal call, but these suggestions would be a great place to park your funds while you take your time doing your homework.

I've gone from over analyzing to now looking for simplicity. In the end, I suspect I will have about 6-8 equity mutual funds, and maybe just one bond fund, one cash fund.

A point to consider: there is no "right" or "wrong" allocation, though most around here favor lots of diversification, a healthy dollop of foreign stocks, and disciplined rebalancing if you are not with a strategy type fund.

Stand by for more advice... I can just feel it coming .
__________________
Rich
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.

As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
Rich_by_the_Bay is offline   Reply With Quote
Re: asset allocation
Old 05-07-2006, 11:46 PM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Ed_The_Gypsy's Avatar
 
Join Date: Dec 2004
Location: the City of Subdued Excitement
Posts: 5,588
Re: asset allocation

Quote:
A point to consider: there is no "right" or "wrong" allocation...
Only if you are realistic about returns on investment vs. inflation. You ain't gonna get 4% per annum, adjusted for inflation, for 30 years out of CDs. But, you know that. Good.

"Gold" I don't like. I want equities that pay dividends. I do not understand commodities, even oil (and I work in the business). REITs, I understand. Extractive industries, I understand. Oil, I would have to do a bunch of research to choose good companies. There are bad oil companies. I use index funds for that purpose. Consider allocating half of your assets 60/40 or 70/30 with the equity part 50/50 US/foreign equities and the fixed income part to laddered TIPS in a discount brokerage. Then you can play with the other half.

Me, for the moment, I consider my future SS to be my bond/fixed income part. I am fully invested 50/50 US/international for equities.

Disclaimer: I am not living off my investments. I am still working for a living.

You appear to be in good shape.

Good luck,

Be well.

Another Ed, from a universe far, far away
__________________
I have outlived most of the people I don't like and I am working on the rest.
Ed_The_Gypsy is offline   Reply With Quote
Re: asset allocation
Old 05-08-2006, 07:12 AM   #9
Thinks s/he gets paid by the post
 
Join Date: Aug 2005
Posts: 1,375
Re: asset allocation

I used to keep my fixed income investments mostly in individual bonds and bond funds, but since the rates are so low these days, I've mostly switched to CDs and money market accounts. When bond rates go back up, ah'll be back. My AA:

-- 30% US equities (diversified across large, mid, small, and microcap, and growth, blend, and value funds)

-- 20% foreign equities (diversified across developed & emerging markets and large & small, value, blend, and growth funds)...I'd like to reduce US stock and add foreign stock, but doggone it, it keeps going up

-- 10% real assets, including REITs, a natural resources (mostly energy) fund, a precious metals fund, a water fund, and a timberland stock

-- 40% fixed income, mostly CDs and money market accounts, a few individual bonds, and some balanced/hybrid funds (such as OAKBX)

We're just a little younger than you (57 and 56), I'm retired, and DH is working at a downscaled job that makes enough to live on (a little over 4% of our portfolio as it happens), but not really enough to add to savings. We're "coasting." I rolled over my last 401k to Fidelity (that's where the 401k was), no problem. I kept a little of the Contrafund (FCNTX) and Low-Priced Fund (FLPSX) and all of the Diversified International (FDIVX) leftover from my working days, and with the proceeds from sales of FCNTX and FLPSX, I added classes we didn't have in my 401k: Foreign Small Opportunities (FSCOX), Natural Resources fund (FNARX), and foreign REITs (FIREX). I'm up 16.5% in this account since the rollover 8 months ago.
__________________
You can't always get what you want, but if you try sometimes, you might find you get what you need.
astromeria is offline   Reply With Quote
Reply

Tags
Asset Allocation


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Asset Allocation: Effective but not feasible? Hillbilly FIRE and Money 20 04-28-2007 10:02 PM
Asset Allocation Question - Deferred Compensation b3bobster FIRE and Money 1 11-06-2006 03:51 PM
Retiree Asset Allocation WilliamG FIRE and Money 37 08-29-2006 10:14 PM
Asset Allocation AV8 FIRE and Money 17 02-25-2006 07:13 PM

» Quick Links

 
All times are GMT -6. The time now is 08:59 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.