New Here - Will I have to work till I'm 90?

[Rose3408]

Hello Everyone - I just discovered this wonderful site yesterday and am so excited! What a great bunch of members and am honored to have joined the group. Although sadly, here I sit during memorial day weekend, it's beautiful outside and I need to get my butt out there and enjoy the day. However, retirement and $$$ weighs heavily on my mind every day.

STATS:
I'm 57 yrs young, was married 20yrs but when through a divorce in '99 when husband decided the hootchie-mama on the other side of the fence was better. As a result within the last few years I haven't been able to save as I should have and also went through two job losses which really put me behind. And In the interim lost my parents and dear sister, so I have gone through many trials and tribulations. Fast forward 12 yrs later, I have a wonderful job, albeit my salary is only $40k, but in this economy I'm very grateful! I'm a very positive and happy person and love life, and I know from personal experience, life is what we make it to be.

Due to divorce and two job losses I am way behind in my retirement fund; make that very sadly behind. But I know I can fix it by working hard and saving like mad int my 401k, etc.

The problem is I have no knowledge of which funds I should be choosing at through my 401k with Fidelity at work, and how to allocate properly. And then due to my extreme lack of investing properly I did a very stupid thing (you can send me a cyber-slap). About a year ago when the market was crashing I took the funds I had in American Funds ($20k) which was dwindling so quickly, and I spoke with a financial adviser and told him I need these funds to retire and cannot tolerate the risk and he advised me to transfer the funds to an Annuity with Modern Woodmen, and he opened up an account for a Flexible Premium Deferred Annuity. Long story short - when I reach 67 I will receive $160.07 for life. The guaranteed rate is 3.0%.

In moving forward, I am a single woman, owning a home, and as you can imagine $$$ is tight, but I try to save every single penny. My income is only $40k. I put 11% in my 401k at work with Fidelity, and another $150 into a savings account.

I also just recently transferred 401k ($4,500k) from a previous job into a new account I opened up with Fidelity. But again, I have no idea what I am doing and put the funds into PRPFX. Within 2 mo I already lost $200!

I know I need to save like mad, but where, which funds? I'm so confused. I attached a chart so you can review my current investments and 401k funds through my employer. Since I recently opened up an account with Fidelity, I would have many choices, but don't know which funds I should be choosing. Because I am 57 yrs young I can't be too aggressive, and obviously the fund I did pick (PRPFX) when I opened up the account was a bad choice, and I transferred all my funds ($4,500) into that account (bad choice) and lost already $200. I should have left it with my old employer which was a fixed account at 2% - duh?

I appreciate any and all advise so very much. So much so, I am sending you all {{{hugs}}} in advance.

[Chuckanut]

I strongly recommend you stop, take a breath, relax and do some reading before you do anything else. In particular I recommend reading

All About Index Funds by Richard Ferri

Bogle on Mutual Funds by John Bogle

How Mutual Funds Work by Fredman

Also, check out Mr. Ferri's website at Rick Ferri

[2B]

Welcome to the forum. We'll try to give you some useful information but don't forget that it may only be worth what you're paying for it.

Hopefully, you neglected to list some assets. Do you have any outstanding pensions that are either yours or yours via ex-SH. Typically, we'll abbreviate Dear Husband or Wife as DH or DW. In your case I'll put in a "S" that can fit whatever you like. What sort of SS are you eligible for? Don't forget that you are eligible for SS using SH's income since you were married more than 10 years.

Is that all of your savings? If so, you need to get working towards getting at least a years worth of living expenses outside of your retirement accounts. Do you have any debts? I may have missed it but I didn't see that statement. Getting debt free is another requirement for retirement.

Since you bring up a cyber-slap for your annuity purchase, consider it done. I'm glad you realize it was less than optimal. I know it will hurt but you need to find out what the cancellation options are. Don't cancel but you may want to post that info here.

I also didn't notice any living expense requirements. How much do you need to live on per year before income taxes? What do you think retirement heath insurance would run?

Right now, I'm pretty sure you can retire before 90; but without more info, I'd only suggest 88.

[FIREd]

Hi Rose, welcome to the forum.

Sounds like you have gone through a rough patch in your personal life, but I like your positive attitude. You need to step back, take a deep breath, and start learning about investment basics. It's not really complicated and it will prevent you from making some big mistakes down the road. Here is a list of books we recommend for people who get started:

http://www.early-retirement.org/foru...ist-45562.html

I think this is a good place to start:
"The Boglehead's Guide to Investing" by Taylor Larimore, Mel Lindauer, and Michael LeBoeuf

While you are learning, you could put your investments on autopilot by investing in one of the Fidelity Freedom funds. They are relatively cheap and well diversified. Because part of these funds is invested in stocks, be aware that the value of your investment will fluctuate with the stock market. Such fluctuations are inevitable for anyone investing in the market and you will have to learn how to live with that reality.

[Rose3408]

Thanks to everyone for our replies and kind words. In regards to reading books on investing, in the last 6 months, I have brought home so many books regarding investment strategies I could have opened up my own library. The only good info I got out of the books was "diversify." However, that still leaves you with, "what funds," And given Fidelity has sooooo many choices, I am still very confused and need direction.

To answer some of your questions, I do have a VERY small pension I will be receiving from the divorce (and when I say small, I mean small.) It was split 50/50 and I will receive $225 a month begin in 2017. At the very least, I can make sure to invest this pension until I reach 67 in 2022 which will allow it to grow, but then again where to invest?

Regarding debt, I do have a home I purchased after the divorce (3-bedroom ranch) and I do have a 30 fixed mortgage in the amount o f $104k. I do not have any other debt.

Regarding SS, I will receive my SS which should be around $1,200.

I live in Wisconsin, so I could easily live very comfortably on $3,000 a month.

I will most definitely continue to building up my liquid asset savings to reach 30k. Working hard on that. I put in about $150 each pay check, which given my mortgage payment, utilities, etc. is a struggle, but I manage to do it.

I hope this information helps.

So my two basic questions are:

#1 -- In looking at my 401k which I invest 11% of my salary, company matches 5% - do I have it the right funds in looking at my chart?

#2 -- Which funds should I choose in Fidelity for the 401k I transferred into an IRA, and what other funds should I invest in if I open a Roth IRA?

PS. Should I be able to convince the investor who convinced me to put my 20k into the annuity, where should I transfer those funds?

[antmary]

Hello Rose, and welcome.

It does, indeed, sound like you have weathered some storms. Please do keep reaching out, because there are some very generous and helpful people out there.

I second reading "Boglehead's Guide to Investing" referred to by FIREd. It seems that for right now your priority is to center yourself so that you can learn and make wise decisions.

Best of luck!
Antmary

[Moemg]

Hi Rose , Welcome ! You have had a hel- of a few years . Take a deep breath and figure out how you can cut back so you can save like crazy . I would consider a roommate and cutting all unnecessary spending . You also need to track your spending so you actually have a grasp on how much you need . Good Luck and I hope you get to retire !

[Midpack]

Welcome to the group. Sorry about the challenges you've faced, but your outlook can only help as others have noted.

It's never too early to invest in your future, but it's never too late either.

It's really best if you choose for yourself, it's your money and you have to live with the outcome from your investments. Even though we can make recommendations, we don't have to live with your results. And we won't be there when the market takes one of the inevitable, periodic dips when the discipline of investing is really put to the test.

IMO you owe it to yourself to know with confidence what you invest in and why. You'll sleep better.

But since you've asked more than once, I think you'd be better off with 100% invested in a Freedom Fund than what you're holding now. At your age, the 2015 fund would be my choice. The Freedom Funds pick an asset allocation for you, chooses the funds and rebalances for you - all good fundamental investing principles. You might be tempted to put only part of your funds in a Freedom Fund, but they're designed to offer a complete portfolio solution. And they are made up of other Fidelity funds and hundreds of holdings so it's not as if you "have all your eggs in one basket."

I'd encourage you to continue to learn. When you're more comfortable with choosing your own funds, you can move away from the Freedom Fund, though most hands-off investors (which is most investors, unlike this forum) are probably best served by low expense balanced funds like the Freedom Funds.

[Rose3408]

Thanks again to everyone for your suggestions. Other than referring me to more books, and as I said, I read so many investment books, is there anyone on this site you can look at my present funding allocations and advise me accordingly? As you can see I have 50% in PIMCO, etc.

I opened up an account with Fidelity, inidicated previously which fund I'm in, which I believe I need to transfer and am looking for advise on which fund(s) to transfer to? Also if I open up a Roth IRA which funds?

Please don't suggest reading another book -- been there, done that, and as you can see haven't done well.

Thank you in advance.

[Midpack]

Quote:

Originally Posted by Rose3408 Thanks again to everyone for your suggestions. Other than referring me to more books, and as I said, I read so many investment books, is there anyone on this site you can look at my present funding allocations and advise me accordingly? As you can see I have 50% in PIMCO, etc. I opened up an account with Fidelity, inidicated previously which fund I'm in, which I believe I need to transfer and am looking for advise on which fund(s) to transfer to? Also if I open up a Roth IRA which funds? Please don't suggest reading another book -- been there, done that, and as you can see haven't done well. Thank you in advance.

I just offered a suggestion, we were probably posting at the same time.

I won't suggest another book, but how about a short article that offers the fundamentals every DIY investor should benefit from once understood. Why Wall Street Hates the Lazy Portfolios Strategy - SmartMoney.com

Note lazy portfolio returns http://www.marketwatch.com/lazyportfolio?siteId= and links to exactly what each portfolio holds. You'll see they all have a lot in common WRT asset classes and allocations, just different funds that are essentially equivalents.

[2B]

I won't refer you to another book but I will refer you to a newspaper columnist. Here's a link to Scott Burns' site. I suggest you read a few articles on couch potato investing.

Scott Burns' Articles - AssetBuilder Inc. - Registered Investment Advisor

OK. You say you'd be able to retire with $3,000/month or $36,000/yr. This would have to be inflation adjusted. Your pension is so small I suggest you not worry about it on these back of the envelope type calculations. Your SS of $1,200/mo is inflation adjusted so you now need $1,800/mo or $21,600/yr. A very rough rule of thumb is that you need 25 times this amount to have a high confidence level for retirement. That is $540,000. Don't have a heart attack (although that would change your retirement plans )

I'll have to assume you don't have any assets other than what you've shown. You have a lot of saving you need to do to get to another $500,000. Your best approach is to look at reducing your spending. You might want to consider selling your house and living on significantly less. By your own admission your target retirement income is effectively on your current income. That means you must be saving very little. I know it hurts to hear it but you have got to live on less than you make if you hope to save.

As for investing, you need to understand the stock market moves up and down. You could easily watch 25% of your equity value drop but you should also see it eventually come back. I lost almost 50% of my equities in 2008/2009 - yes, it hurt but it has more than come back. In your situation I suggest you have a year's living expenses in secure, safe money (like a CD) for emergencies. You would then be in a good position to invest in stocks. I personally have everything in low cost, index mutual funds. These have low fees and their returns as a whole beat most non-index mutual funds. I have 60% is large US stocks, 10% in small US stocks, 20% in developed foreign markets and 10% in emerging markets.

For your 401k, you should consider the S&P500 index on the assumption it has low fees. I really wouldn't see any problem having all of your equities in there until you get close to $100,000. You may be able to get your annuity money back but I expect you will have to pay up to a 10% penalty. Personally, I'd pay it but I suggest you get the details and post them under Fire and Money.

[growing_older]

Quote:

is there anyone on this site you can look at my present funding allocations and advise me accordingly?

If you post your holdings on Bogleheads Investing Advice and Info they will give you specific investment advice.

[pb4uski]

I agree with MidPack that the Fidelity Freedom 2015 fund has a good asset allocation for someone our age (I'm 56) so I would suggest that you go all in to that in your 401k.

I also agree that you should find out the options with respect to surrendering the Woodmen annuity. If the penalty is not too bad, I would suggest surrendering the annuity and setting up a taxable account with Fidelity in the 2015 fund for that money.

Finally, if you make $40k a year now, what is your take home pay? The reason that I ask is because I suspect that what you actually need to live may be less than the $36k you indicate, because you are probably living on substantially less than that now after considering taxes, withholdings and savings.

[Khufu]

What is your SS claiming strategy? How old is your ex-husband? Was he the high-earner? Have you investigated claiming your spousal benefit early while delaying your own Principal Insurance Amount as long as possible? If you are eligible for such a strategy it can benefit you a lot.

[EvrClrx311]

Hi Rose, welcome!

Everyone has posted some really good advice so far. One thing I'll add is to make sure you read and re-read everything here many times over. From the three posts you've made so far it seems that choosing a correct asset allocation, or set of funds, is stressing you and you're chompin at the bit to get that 'fixed'... what others said about "slow down take a deep breath" really applies here.

You might have jumped to a few impulsive decisions regarding investments in the past... our top priority is to help you avoid making more into the future. Waiting a day, week, two weeks... isn't going to change things. That $200 or about 4% you lost was most likely due to the recent overall drop in the stock market... I can tell you I've lost a lot higher percentage then that. You would have seen a drop in almost any fund over that time (even the good ones like the great suggestion: Freedom Fund). It's not a reason to sell... the market goes up and it goes down. You'll see plenty more 4% drops over the next 30 years, its nothing to be alarmed or concerned with if you're in the right investment and staying the course.

On that note, plenty here would be more than willing to just give you a list of funds to invest in and explain why they are good, but nothing is better than really understanding this stuff yourself and getting to that asset allocation on your own (give a [wo]man a fish...). You mentioned you've read a lot of books, but are you reading the right ones? The few that have been mentioned here, if read front to back, will make you a semi-expert in the financial aspect of your life. At the very least you'll be better educated than 95% of Americans.

The goal of most here will be to help you help yourself... there is a reason for that. People who understand their financial picture are MUCH more likely to stay the course and avoid costly mistakes in the future... also everyone has a different situation and different experiences. Often advice from multiple smart people can differ because of preference

Stick around and you'll learn a lot... great to meet you.

-Eric

[Rose3408]

Thanks to everyone for all your great advise and compassion, and it has been great meeting everyone on this site. You are all so fabulous! You are absolutely right in advising me to "take a deep breath and relax," and to also to help myself and stay the course.

I have gone through many trials and tribulations in the last few years and the only reason I survived is because I am a strong, independent woman who works hard and always sees the glass as half-full. I do miss my parents so much and especially my dear sister and best friend so much and a day doesn't go by I don't think about them and wish they were here with me. However, I know they are with every day watching over me and in spirit.

To answer your questions, my "take-home" pay is about $989 (twice a month) after taxes, medical, dental and vision insurance, flex medical account and also 11% towards my 401k.

When it comes time to applying for SS I have given thought to filing under my ex's, but I would only receive 50% and although I know he makes a great income, I believe 50% is going to be less than what I would receive. I believe mine will be around $1,200. When I tried calling SS to inquire what 50% of his SS would be they wouldn't tell me and said they could only inform me of that information when I physically file for SS. Is there also a "maximum" amount one get receive for SS? As an example, if he was to receive $3,000, I could get $1,500 which would be nice, and then when I reach 70, file for my one SS.

I will look into the Modern Woodmen Annuity and advise you accordingly. But I have two questions regarding this Annuity. No. 1 -- getting around $167 a mo. for life doesn't sound too bad. No. 2 -- if I take it out of the Annuity, where would I invest the $20k? Remember, I am not too sharp in figuring out appropriate investment choices. And if the annuity is guaranteed at 3% minimum, I really don't see any funds, etc. that are getting a guaranteed amount greater than that right now; hence my confusion.

I look forward to hearing from everyone. I will go to the library on Tuesday and get those books!

[Old Microbiologist]

Dear Rose, that is rough and I am sorry you are going through this. I went through something similar as well so fully understand. At 57 it is going to be tough to do but not impossible. At least you have some basis to start with.

I know it is risky, especially after the 1st year but Day Trading is one way to earn more. One other option no one mentioned probably as it is somewhat personal and touchy is to find a new mate to do this with. My wife and I did this for much the same reasons and met on line and haven't regretted it at all. Being alone and old is not something we wanted for ourselves. Others want something different but for us it was a blessing and the best thing we have ever done. Both of us are on 3rd marriages (read this as very set in our ways) and have been pretty badly burnt in the process (read this as extremely cautious). Anyway, we gathered up the $25K minimum to open a brokerage account and my DW learned the in's and out's of Day Trading. She opened a practice account and played for 6 months with fake money until she learned the basics. At the time she had a government contract job which only required her to be at her desk and as the Web Administrator really had very little to do (something like 10 minutes work a day, yes [mod edit] ). She was bored to death so started Day Trading at work and found that quickly she was making more per day doing that then actual work so quit and started doing this full time from home instead. That was a bold move but we didn't actually need her salary as I was earning an excellent salary. Anyway, she is still doing this full time even in retirement. Yes, it is high risk and the market can move very fast but it is one way to earn money at a relatively high rate of return. Her brokerage account now 5 years later is over $500K despite a couple of huge losses along the way. I don't know anywhere that you can turn $25K into $500K in 5 years except by gambling but the market is more scientific in a sense so if you are good you can make money quickly. She tries to make 2% per trade and typically makes up to a hundred trades a day. She has a target of $600 a day which was twice as much what she was earning before. Of course, there are days that doesn't occur and there are others that it happens quickly. Some days are huge and she can make $25K in a few minutes and quits for the day. But, it can go the other way just as fast so one has to have the ability to shrug off the losses or even wait it out on a bad decision like we did with Apple 2 weeks ago. So for 2 weeks she has been tied up waiting for the stock to return which it is nearly back so all we have lost is time. Also, and this is the biggest rule, you can't trade with money you live on or can't afford to lose. We are living well within our budget so all of this was actually for nothing as we haven't needed to tap into it for any reason. Some time soon we will be forced to start moving our 401K money as well which we also don't need yet. All of that is being saved for emergency use.

Also, don't forget the SS of your spouse which may be higher than yours. My wife never finished her 40 quarters so will get 1/2 of mine when I finally retire from SS. She is 5 years older so is stuck waiting until I turn 62 in 3 years. That will essentially double my military pension so more for the emergency kitty.

Really, it is shocking that we over-estimated what we need to live on so the 25 times rule is only a rough guide. You may find it to be less so the best thing to do early is decide exactly where you want to retire, how much it will cost to live, and then use that as the target. One other place to look for overseas retirement info is a commercial site run by Kathleen Peddicord (search for this and you will find their site quickly) and her husband Lief. They are pushing to sell properties in Panama but also have a great deal of useful information about retiring abroad so is one place to look at if you have any interest in retiring overseas. I learned about them much later but can verify what they are saying is right on the money so I trust them to at least not be cheating anyone. I am certain they are making a very good business from this but still, it is a good source for information.

That is the strangest decision we ever made though. The decision to retire early which was more or less a spur of the moment decision. I was earning $190k a year between my salary and military pension. But, after taxes, mortgages, and other costs we had a bit over $3k a month to actually live on. Crazy but true. That is what I get in my military pension so I retired from civil service to get my paltry 1% and we actually retired. We decided early to move to Europe. Both of us have extensive world wide experience (hers in the former Soviet Union and mine in the Western Hegemony) so we had a variety of experience to choose from. We decided on Hungary as it was in between the 2 former political/economic systems, is fully Westernized, a member of the EU but not in the Euro Zone (which is a good thing), has a low cost of living, no property taxes, no death taxes, a mild Mediterranean climate, excellent health care, and excellent food. We paid cash for the house and the renovation and have few actual expenses other than utilities and food. Utilities are high though and account for about $1K a month (or less). Whatever else we spend is on other stuff like food (we rarely eat out as both of us are gourmet cooks), house cleaning, massages, personal care (stylist, manicure etc.) gardening stuff, and the like. Because typically we spend less than $2k a month we saved a lot, which we use for travel. She also gets a pension from Russia of about $500 a month but has to physically go there to get it so that is slowly building up as well. Recently we pulled it out and I bought a catamaran (actually she bought it for me as a birthday present) for use on Lake Balaton. Next time will be for a car in a few years. We actually don't drive much so it may be a long time to come. Even stranger is that our property is so beautiful we don't leave it much. I go mountain biking daily (or go hiking in the nearby forests or walk to the supermarket or village marketplace and go shopping for whatever I am going to cook that evening) so get out and about and now I am sailing a few days a week but typically we just sit and enjoy life near the pool or on our terrace. It is a great life and you can do this as well if you set your mind to the task.

The most important thing is to get debt free as soon as possible. This gives you complete freedom. I can't say we are debt free though as we still have two houses in the DC area but they are rented at a positive income (also going into savings for eventual renovations for sale) so not a big hassle as the renters are long term, but still we are net free yet. On the other hand we could walk away from both houses and be fine (extremely painful as one has $300K in equity still, the other is under-water) but we could survive it easily. So, we are in for the long haul on the houses until the economy eventually recovers (if it does). If not, we are fine.

So, if you plan correctly you may find that you will have enough to retire and enjoy life. But late in life is going to require some risk taking and/or aggressive portfolio management to get where you need to be.

[MichaelB]

Hi Rose, and welcome. As you have already seen, we like to read and never miss an opportunity to recommend others follow our example. Count me in that group.

Don't rush things now is good advice. Learn about asset allocation so you can take charge of your investments. Not everyone here like annuities, but you already have one so there is no need to do anything about it right now. One thing at a time.

Your idea on SS is good thinking. You are entitled to the larger of 100% of yours or 50% of his, and a good strategy is to take the 50% and postpone taking yours as long as possible, as every year of delay adds 8% to yours. Is your relationship with your ex good enough to ask for his SS data?

[Sarah in SC]

While I can appreciate that you want someone to just tell you what mutual funds to buy in order to be okay for retirement it just doesn't work that way. There is no secret list of funds that will go up, never lose money, and will offer the peace of mind you want.

The annuity may or may not be a good thing for you, depending on if you'd rather have a sure thing very small amount coming in each month than have that money at greater risk in exchange for a chance at a greater return.

There's a reason that folks keep saying to read and pick your own funds, and that's because no one else is going to care as much about your retirement and your money than you, whether the advice is free or something you paid dearly for, as in the case of the annuity.

The key to your retirement isn't picking the right fund, it is figuring out how to save more between now and then, either by finding a better-paying job or to trim expenses at your present salary. The key is adding money to your retirement accounts.

I'll try to dig up a good article I read for you on the subject. And good luck and welcome!

[Midpack]

Rose: I'm curious what you think about putting your 401k money to work in a Freedom Fund? Again the 2015 fund looks appropriate to me, but 2010 or 2015 if you want to be more conservative, or 2020 or later if you want higher returns AND you're willing to accept more risk - IOW more volatility or fluctuation (up and down) in your 401k balance. You'll want to verify (through your HR folks or whoever your company administrators are), but there are no fees moving among funds within any 401k that I know of though there may be restrictions on how many transfers you can request, though not very restrictive usually (once a month or so). If you want to devise your own asset allocation and then pick individual funds within your 401k choices later, there's nothing stopping you when you're comfortable doing so.