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Newbie here - need suggestions on my retirement plan please.
Old 09-10-2013, 04:01 PM   #1
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Newbie here - need suggestions on my retirement plan please.

Hello everyone. Long story short is that I got a late start in my retirement due to some student loan debt. Anyways, my wife and I have made up some ground over the past 5 years as far as paying off a good chunk of my student loans as well as our house, which in turn has put us in a position for her to stay home with our 1 year old. I am 34 and she is 31.

Current debt:
65K - Mortgage (original loan amount was 185K)
15K - Student Loan (original loan amount was 85K)
23K - Vehicle (original loan amount was 35K)

Current investments:
12K - PUTNAM ABSOLUTE RETURN 700 FUND CLASS A (originally had this in a Vanguard Roth IRA, but moved it with Putnam Investments 5 months ago)
5K - PUTNAM ABSOLUTE RETURN 700 FUND CLASS A (originally had this in a Vanguard Roth IRA, but moved it with Putnam Investments 5 months ago)
15K - (former employer 401K plan, I have yet to move or do anything with it)
2K - ING 401k (recently just started contributing 5% with company match)
45K - (wife's existing 401k plan from her former employer and she is in the process of moving it over to a PUTNAM 401k plan)
23K - PUTNAM OH TAX EXEMPT INCOME-A


Current emergency cash:
20K

We had in total around 50K in checking and met with a financial advisor. He suggested we put 25K in the PUTNAM OH TAX EXEMPT INCOME-A
He also suggested we move our Vanguard Roth IRA's into PUTNAM ABSOLUTE RETURN 700 FUND CLASS A funds as well as move my wife's 401k into a Putnam fund.

Just looking for some feedback on this move?
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Old 09-10-2013, 04:31 PM   #2
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A couple things.

First, is your marginal tax bracket high enough that tax-exempt makes sense?

Second, the Putnam fund seems very conservative for people your age and it has high fees. If you want simple, the Vanguard Target Retirement 2035 fund has a better AA for your age and a ER of only 0.18 vs 0.88% for the Putnam fund.

The Putnam fund seems like it is good for your advisor but not great for you!
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Old 09-10-2013, 05:27 PM   #3
Confused about dryer sheets
 
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The 23K in the PUTNAM OH TAX EXEMPT INCOME-A was due to me being nervous about investing our hard earned money. My financial advisor suggested this was a low risk method as well as tax free approach.
It is also my understanding that the initial investment fee's we incurred are a 1 time fee versus with vanguard fee's are ongoing?
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Old 09-10-2013, 07:29 PM   #4
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....It is also my understanding that the initial investment fee's we incurred are a 1 time fee versus with vanguard fee's are ongoing?
I suspect either you misunderstood, or worse, were lied to. The Putnam fund you reference has a 0.81% ER (each year) plus a "load" (initial sales charge). Vanguard has a similar fund whose ER is 0.16% with no sales charge.

Both funds you have are pretty expensive. I would ditch Putnam and your FA.
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Old 09-10-2013, 09:06 PM   #5
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Maybe I misunderstood about the yearly fee's. Why is it then that Putnam has a "load" and a higher ER then Vanguard? Is it because the Putnam fund will be closely managed versus the Vangaurd?
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Old 09-10-2013, 09:16 PM   #6
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I suspect either you misunderstood, or worse, were lied to. The Putnam fund you reference has a 0.81% ER (each year) plus a "load" (initial sales charge). Vanguard has a similar fund whose ER is 0.16% with no sales charge.

Both funds you have are pretty expensive. I would ditch Putnam and your FA.
+1

Congrats on getting your loans down. Next step is to put a fork in them (when they are done existing).
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Old 09-10-2013, 09:44 PM   #7
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I guess your financial advisor works for Putnam, right? I would recommend you keep your Vanguard funds instead.
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Old 09-10-2013, 09:48 PM   #8
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Maybe I misunderstood about the yearly fee's. Why is it then that Putnam has a "load" and a higher ER then Vanguard? Is it because the Putnam fund will be closely managed versus the Vangaurd?
The load is paying your FA. Guess why he steered you into Putnam instead of Vanguard?
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Old 09-10-2013, 09:49 PM   #9
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No he doesn't work for Putnam and it's already too late. The funds have already been moved from Vanguard to Putnam.
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Old 09-10-2013, 09:55 PM   #10
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Yes it would seem that some F.A. had a fee structure that encouraged relationships with fund(s). Many hidden costs, front end, sales load, 12b1 fees.

The important thing is to go forward, the past is gone. Make money to be FI.

MRG
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Old 09-10-2013, 10:50 PM   #11
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No he doesn't work for Putnam and it's already too late. The funds have already been moved from Vanguard to Putnam.
Unless you are in some kind of annuity with surrender charges (which it appears you aren't) it's never too late to move your funds. That would most likely mean firing your Financial Adviser.

If you want to learn more about investing, read the FAQs on this board and on Boggleheads.org. They will explain a simple do-it-yourself approach using low-cost, no-load funds.
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Old 09-10-2013, 10:57 PM   #12
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Unless you are in some kind of annuity with surrender charges (which it appears you aren't) it's never too late to move your funds. That would most likely mean firing your Financial Adviser.

If you want to learn more about investing, read the FAQs on this board and on Boggleheads.org. They will explain a simple do-it-yourself approach using low-cost, no-load funds.
Agree 100%, also check out 'trailing sales fee' (or similuar wording), not that's it's the end of the world. Just understand the costs.

MRG
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Old 09-10-2013, 11:47 PM   #13
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Maybe I misunderstood about the yearly fee's. Why is it then that Putnam has a "load" and a higher ER then Vanguard? Is it because the Putnam fund will be closely managed versus the Vangaurd?
The sales load is what Putnam collects from you because they have to pay the FA for bringing them your money.

The ER is higher because Putnam is a for-profit enterprise and Vanguard is owned by its shareholders (like a co-op or mutual company).

WADR, those Putnam funds stink. It is what it is but the quicker you leave them the better off you will be.
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Old 09-11-2013, 07:04 AM   #14
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........
WADR, those Putnam funds stink. It is what it is but the quicker you leave them the better off you will be.
+1. Making mistakes is part of getting an education.

Learn from this experience, don't let people rip you off.
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Old 09-11-2013, 07:26 AM   #15
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Welcome ykswalks and kudos on your motivation to pay off debt and plan for retirement. It smarts to find out and accept you made a mistake, but the advice here regarding the financial advisor and Putnam is coming from a very knowledgeable group with NO agenda...this is the best kind of advice you can get. As you are already aware, at age 34 you are at least a little behind the 8ball on savings and minimizing mistakes is very important. I would begin by reading a good book like the Bogleheads Guide to Investing and get on the Bogleheads.org site. It would serve you well, grasshopper. You also want to learn about ROTH IRAs, back door option, and how ROTH conversions will be affected if you roll any of the 401k money into an IRA. Good luck.
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Old 09-11-2013, 07:30 AM   #16
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Thanks for all the feedback and suggestions. My wife's existing 401k ($45,000) has yet to transfer over to, the paperwork has been filled out and submitted.
What are some suggestions on where to put this money? She is no longer employed with her former employer and needs to move the money somewhere.....
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Old 09-11-2013, 09:27 AM   #17
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Thanks for all the feedback and suggestions. My wife's existing 401k ($45,000) has yet to transfer over to, the paperwork has been filled out and submitted.
What are some suggestions on where to put this money? She is no longer employed with her former employer and needs to move the money somewhere.....
Folks here mostly go to Vanguard or Fidelity. Both offer quality, no load, no 12b1 fees, no deffered sales fees funds. Both have active or passive funds.

I personally use Fidelity, as the is an office 20 minutes from my house. Either company will treat you very well.

My 64 year old sister just asked for a recommendation on a book regarding mutual fund investing. She doesn't know how easy it can be. Someone here mentioned 'The Millionaire Teacher', I just got a copy, great book. Just what she needed, I'm keeping the copy I bought, but told her go read this. If you need basic info, this is a great place to start. Sounds like a FA slowed you their 'value', this book shows how to DIY. For those that don't know it, it lays out a 'couch potato' and a 3 fund option using index funds.

MRG
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Old 09-11-2013, 12:15 PM   #18
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Agreed. Zillow is just what Mint.com uses.
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