Hello - Advice for newbies?

[JP]

We have recently joined the wonderful world of retirement and have been reading up on the postings here for a few months (so appreciative for all of the good advice and suggestions that have been posted - thank you!)

We have contacted a Vanguard financial planner who provided us with the following recommended investment portfolio: (ages 57 and 55, no children, no credit debts, home mortgage free and have a HELOC available if needed, 401's and a company pension taken in a lump sum (approx. $600,000) going into Vanguard, $100.000 in cd ladders and a savings balance of $8,000) 

Thanks for any advice/comments you can give two newbies.


VMLTX    Ltd. Term Tax-Exempt                            6.3%
VFSTX    Short Term Investment                         11.7%
VBILX     Intermediate Bond Index Admiral         17.0%
VWESX   Long Term Investment Grade                 8.0%
VWEHX   High-Yield Corporate                              7.0%

VTSAX     Total Stock Market Index Adm Shares  19.6%
VWUSX    US Growth                                              7.2%
VWNFX    Windsor II                                               7.2%
VSEQX     Strategic Equity                                       3.0%
VEXPX      Explorer                                                  3.0%
VGTSX      Total International Stock Index             10.0%

 

[brewer12345]

Looks like they suggested 50/50 stock/bond. Assuming you have no health issues, that is pretty darned conservative for a couple in their late 50s, who might have another 40 years of time left. If it were me, I would drop the LT investment grade and high yield funds and put the money into VGSIX (REITs) and PCRIX Commodities index). That would still leave you with a 35% bond allocation (plus the CD ladder, I presume) and it would give you some real estate and commodities exposure.

 

[JP]

Thanks for your response B12345 - we do not have any health concerns - and when asked we opted for taking a more conservative route - guess we just felt safer at least right now. A little nervous on which way real estate is going as well as current market fluctuations. We posted here several months ago and rec'd some good advice and suggestions. We picked up Bernsteins 4 Pillars and researched Vanguard (web site was a valuable source of info for us) This forum is the greatest and we review postings daily and discover new areas to look into such as Motley Fool, Simple Living plus finding out what HSA's were. There is such a wealth of knowledge coming from so many of you and want you all to know how helpful your postings have been to better prepare us for ER and we thank you.

 

[nfs]

I won't comment on whether 50-50 is appropriate on no evidence re risk tolerance nor on most of the individual funds. I do see one obvious problem with what has been recommended.

401's and a company pension taken in a lump sum (approx. $600,000) going into Vanguard ... VMLTX Ltd. Term Tax-Exempt 6.3%

There is no possible justification for holding a tax-exempt bond fund inside an IRA.

 

[wildcat]

Yo

There is no possible justification for holding a tax-exempt bond fund inside an IRA.

Get it outta der in my opinion.

That is like saying "I want to keep a tax exempt bond fund in a tax def account so I can save on taxes 2x"

 

[Helen]

Hi JP,

If you haven't checked out the morningstar vanguard diehard forum, you may want to. It has a lot of good advice on investing with vanguard funds. Here is the link:

http://socialize.morningstar.com/NewSocialize/asp/AllConv.asp?forumId=F100000015&t1=1125243380

Best regards,

-helen

 

[JP]

Thanks Helen - added socialize.morningstar to our list - especially liked the posting "Should I wait for the next big drop"

B12345 - went and searched PCRIX - (is doing well) and that most likely is an area we may want to look into - THANKS!

Responding to both wildcat and nfs - good catch !! You can see why we love this board ! Sorry, Let me back up a bit - our Vanguard FP prepared the portfolio for us back in May based on the figures we gave. Since that time we sold one of our homes, will relocate to our remaining home and have reevaluated our portfolio options - sorry for any confusion - some of the "monies" being invested (VMLTX) (not tax-deferred) are coming from the sale of our home - some of the proceeds from the sale will go into cd laddering and a source of income for the next 2.5 years until we can draw from 401's and pension without penalty and start SS at age 62. We will be contacting our FP shortly and give our comments and changes to the portfolio and will transfer one of the 401's within weeks, the other 401 and pension will be transferred before the end of the year due to a severance pkg and final leaving of the company. We felt a whole lot "safer" by posting the portfolio through this board to see if it looked good. (and already we benefited from Brewer1-5 suggestion.) Thank you - thank you for your responses. We have looked forward to retirement for years and want to be happy in our decision to ER. In reading postings from "OAP" we know there was a lot more money than our little nest and made us double/triple our efforts in trying to make ER work for us and we wish OAP all good things in the future.

 

[brewer12345]

JP, before you leap into PCRIX, make sure you understand what you are getting into. Raddr has very good explanations/articles on his site at raddr-pages.com

 

[maddythebeagle]

That is like saying "I want to keep a tax exempt bond fund in a tax def account so I can save on taxes 2x"   

you can never be too careful.

If unclemick wasnt running from the storm of the century, I think he would say, "all you need is one fund, he. he. he".

Are you paying for this advice from vanguard or is this something off of a script for your age? I dont understand the total stock market index and then some other us stock funds in addition?

 

[gindie]

I would replace US Growth with Vanguard Morgan Growth (VMRGX) for your Large-cap Growth fund. 

US Growth has been very sub-par the past several years (I used to call it a "dog", but it's not been quite that bad lately).

 

[wabmester]

I would replace US Growth....

I used Vanguard's free advisory service a couple years ago. Wasn't impressed. They have a fixed pool of funds from which they always pull their recommendations. US Growth is one of those. Seems like an odd choice to me. Stick with the index funds.

 

[wildcat]

I used Vanguard's free advisory service a couple years ago. Wasn't impressed. They have a fixed pool of funds from which they always pull their recommendations. US Growth is one of those. Seems like an odd choice to me. Stick with the index funds

Agree index should account for most of the equity allocation but I do think Windsor 2 is an excellent choice for the value split.