Lurker seeking IRA advice

[bluebonnet]

I have been reading the forums for a few months now....what a wealth of information!! I'm 52 and DH is 57 we are hoping to ER in 5 years. My Traditional IRA has been in a CD which is up for renewal. I want to invest it to get a better return and need to do it ASAP. Bank advisor is suggesting Franklin Income Fund FKINX but I don't like that it's a front load fund. I have 31k in it now and add to it monthly. Any other suggestions? I've been looking at the Vanguard Index funds. I won't need to withdraw from this for at least 10 years. Thanks in advance for your advice.

[samclem]

Bluebonnet,
Welcome to the board. Good call on the "recommended" fund--you can guess where the money from that load fee is going, and why the folks at the bank are pushing it. Nobody should be paying a load anymore.

You don't need to do anything in a rush, take your time. You can let the money in the CD renew if you want, then just pull it out in a few weeks when you decide where you want to invest--all you'll lose is a few weeks of the very, very pitiful interest the bank is paying on their CDs.
The first step is to do some reading and to decide on an asset allocation. There are good here on how to do that, and also some good book recommendations. That's what I'd recommend, and you'll probably end up with 3-5 low-cost, no-load index funds. It's not very difficult, and will repay you for the rest of your life.

If you'd prefer not to do this research and planning, then I'd recommend that you put your money in one of the Vanguard Target Date retirement funds. No load, very low expenses, and a wide variety of investments that are automatically re-balanced for you. They aren't fancy and it's not the absolute most tax efficient way to invest, but you'll be doing better than 80% of investors and (if history is any guide) there's a good chance the investments will perform better than CDs, especially over the 10 year period you'll have before you need the money. Here's a link to the Vanguard Target Date funds. Pick the one with the asset allocation that is most appropriate for you.

[LongPrime]

You can buy more risk in a quality public utility company. The trading cost will be $6-12/trade. Following is an approximation. Interest, dividend, and stock price are assumed to static.

Comparison: IF FXINX has a frontend load of 5% (no idea, but typical) the invested amount is $31000 initial-$1500 load =$29500 invested. If 6% total return, then the 1st year is $29500+1770 (the 6%) =31270. The 2nd year is $31270 + 6%= $33146

vs a stock purchase with dividends of 4%. No trading.
The 1st yr $31000 (ignore trading fee) + 4%= 32240. The 2nd yr, 32240+4%= $33530

Appears you will be ahead in buying stock up to about the 9th quarter, after which the FKINX would be more advantageous.

See your advisors!!!

[samclem]

Bluebonnet,
Ref: a nearby post:
You already know enough not to use all/a big chunk of your money to buy a single stock. Buy a widely-diversified mutual fund (or better yet, several of them which are in the asset allocation plan you devise.)
I think you also know that you probably do not need an advisor (and the fees they charge).
There is no circumstance in which the purchase of FKINX would be advantageous. With a load of up to 4.25%, a 0.62% expense ratio and a 12b-1 fee of .15, you can do better.

[bluebonnet]

samclem,
Thanks for confirming what my gut is telling me. I can move IRA CD to a MM at the bank until I decide what to do without any penalties. Thinking that is what I will be doing today.

[samclem]

Quote:

Originally Posted by bluebonnet samclem, Thanks for confirming what my gut is telling me. I can move IRA CD to a MM at the bank until I decide what to do without any penalties. Thinking that is what I will be doing today.

That sounds like a good short-term plan.

[2B]

You haven't given us any idea of your total portfolio or your level of investment knowledge. Whatever you do with your IRA should be part of an overall investment plan of your total assets. It's a safe bet you and your DH aren't planning on retiring on $31K.

Vanguard is my mutual fund family of choice and they have many low cost, no load index funds. It's a good place to concentrate your funds. I use brokered CDs for my fixed income allocation and have created a ladder of maturities out about 2 1/2 years. Brokered CDs can be bought through Vanguard and they frequently pay better interest rates than available through bank branches although some banks offer high teaser rates for new CDs.

[bluebonnet]

Quote:

Originally Posted by 2B You haven't given us any idea of your total portfolio or your level of investment knowledge. Whatever you do with your IRA should be part of an overall investment plan of your total assets. It's a safe bet you and your DH aren't planning on retiring on $31K.

DH has 401k at work with 215k and I have another bank IRA CD with 9k which I will probably transfer to what ever fund I pick now. House is paid for. We hope to workamp with the RV for a few years before deciding what to do with the house and where we want to end up. This past winter was enough!!

[whipsaw]

Any pensions or other income in the plan that you can tap at ER or thereafter?

[2B]

Quote:

Originally Posted by bluebonnet DH has 401k at work with 215k and I have another bank IRA CD with 9k which I will probably transfer to what ever fund I pick now. House is paid for. We hope to workamp with the RV for a few years before deciding what to do with the house and where we want to end up. This past winter was enough!!

You need to look at the whole asset allocation. You have to decide what you feel is most appropriate. If you haven't read much on asset allocation and index funds, read Andrew Hallam's Millionaire Teacher. It's an easy read and is at an entry level of complexity. If you feel more advanced, go for William Bernstein's Investor's Manifesto.

As for determining your "number," have you run FireCalc?

[bluebonnet]

No pensions but DH & I will have part time work until we take SS. I will try to run FireCalc this week. Thanks for the book recommendations.

[racy]

Quote:

Originally Posted by bluebonnet DH has 401k at work with 215k and I have another bank IRA CD with 9k which I will probably transfer to what ever fund I pick now. ...

Hi blue,
Are you well diversified? That is, do you have a mix of US stocks, International stocks, REITs, and bonds in addition to your CDs?

[bluebonnet]

Quote:

Originally Posted by racy Hi blue, Are you well diversified? That is, do you have a mix of US stocks, International stocks, REITs, and bonds in addition to your CDs?

This is what we have in Employer 401k:
44.63% MIP II CL 1Bond Stable Value
16.90% PIM TOTAL RT INST Bond Income
11.13% EV ATL CAP SMID-CP I Stock Mid-Cap
8.20% DH SMALL MID CAP I Stock Mid-Cap
6.60% AF EUROPAC GRTH R4 Stock International
6.30% SPTN 500 INDEX INST Stock Large Cap
6.25% SPTN EXT MKT IDX ADV Stock Mid-Cap

I'm thinking a Vanguard Life Strategy Moderate Growth Fund for my IRA. Any thoughts?

[whipsaw]

Quote:

Originally Posted by bluebonnet No pensions but DH & I will have part time work until we take SS. I will try to run FireCalc this week. Thanks for the book recommendations.

Do you know your annual expenses?

[bluebonnet]

Quote:

Originally Posted by whipsaw Do you know your annual expenses?

Just starting to work on that.

[2B]

to bluebonnet:

I suspect you will find yourself on the low end of assets to achieve a safe early retirement anytime soon but you have to start somewhere. Your DH is probably trapped with the 401k choices. Hopefully, his plan will allow rollovers to an individual IRA when he's 59 1/2. Some do and some don't. My only comment on your asset allocation is that you and DH are a bit heavy in fixed income (over 60%) but that is a decision only you can make.

Do the reading and discuss with DH. Nothing needs to be done quickly.

[MichaelB]

Quote:

Originally Posted by bluebonnet Just starting to work on that.

You may find this helpful http://www.early-retirement.org/foru...ml#post1399715

[racy]

Quote:

Originally Posted by bluebonnet This is what we have in Employer 401k: 44.63% MIP II CL 1Bond Stable Value 16.90% PIM TOTAL RT INST Bond Income 11.13% EV ATL CAP SMID-CP I Stock Mid-Cap 8.20% DH SMALL MID CAP I Stock Mid-Cap 6.60% AF EUROPAC GRTH R4 Stock International 6.30% SPTN 500 INDEX INST Stock Large Cap 6.25% SPTN EXT MKT IDX ADV Stock Mid-Cap I'm thinking a Vanguard Life Strategy Moderate Growth Fund for my IRA. Any thoughts?

My thoughts--
..a little heavy on bonds at your age, also quite a bit of 'tilting' to mid cap stocks. If one chooses to tilt from a whole stock market investment, most would suggest a little to value and small cap. (If you want to get into the weeds on this Google Fama-French). I'd suggest more reading and education; might start with these videos & books (upper left hand corner of the page, "New To Investing?" section): Bogleheads Investing Advice and Info
Good luck!

[bluebonnet]

Quote:

Originally Posted by racy My thoughts-- ..a little heavy on bonds at your age, also quite a bit of 'tilting' to mid cap stocks. If one chooses to tilt from a whole stock market investment, most would suggest a little to value and small cap. (If you want to get into the weeds on this Google Fama-French). I'd suggest more reading and education; might start with these videos & books (upper left hand corner of the page, "New To Investing?" section): Bogleheads Investing Advice and Info Good luck!

Thanks for the suggestions, I will have to check to see what is available in the employer 401k.