Retirement Conundrum

[Oldmanlookatyourlife]

Hi all, I learned about this site from a message board.....so could use advise on where to place my funds for the next 15-20 years:

Me - age 49
Salary $125K annually
Expected SSI at retirement - $3K per month
No pension
401K balance of $35K
Maxing out 401K @ $20K per year
Investing in Roth IRA @ max allowed per year
$150K balance in IRA with Fidelity
3 homes owned with $500K in equity currently (2 are cash flow positive rentals)
Emergency Fund of $25K

I would like to retire early but dont think I will make it as I started later in my serious retirement saving. That being said, I welcome any and all advise on where to park my $20K per year in 401(k) for the best returns in the next 15-20 years and where to invest my $150K from my IRA that will maximize my returns as well.

Thanks for all the help, time and advice.

 

[Sunset]

With a 20 year span, I'd put it all in VTI or 80% in VTI and 20 % in VXUS. (as someday the rest of the world may revert to the mean relatively speaking).

I would not pay an FA to manage my funds.

My reasoning for an aggressive stock allocation is you have 20 yrs plus 2 rental homes, and pure stock returns are the highest over long periods (also more volatile).

 

[Montecfo]

Hi all, I learned about this site from a message board.....so could use advise on where to place my funds for the next 15-20 years:

Me - age 49
Salary $125K annually
Expected SSI at retirement - $3K per month
No pension
401K balance of $35K
Maxing out 401K @ $20K per year
Investing in Roth IRA @ max allowed per year
$150K balance in IRA with Fidelity
3 homes owned with $500K in equity currently (2 are cash flow positive rentals)
Emergency Fund of $25K

I would like to retire early but dont think I will make it as I started later in my serious retirement saving. That being said, I welcome any and all advise on where to park my $20K per year in 401(k) for the best returns in the next 15-20 years and where to invest my $150K from my IRA that will maximize my returns as well.

Thanks for all the help, time and advice.

Beginning in the year you turn 50 you can add $6k additional to 401k annually. That will get you there more quickly if you can afford it.

I would also suggest you go equity heavy. As an individual stock investor ( primarily) I will leave the specific suggestions to others.

 

[Another Reader]

Since you are in Phoenix and I have investment properties in that market, I'm curious about these properties and what you mean by "cash flow positive." What are the income and expenses for these houses? Are they mortgaged? Did you buy them during 2009-2012, or did you buy at higher prices? Are they older houses requiring a lot of maintenance and capital improvements, or are they newer? Close in or in outlying areas?

I ask these questions because generally unless you bought low and close to town, the returns on SF rentals out there are not very good. Over the next 15 to 20 years, you will likely pay them off if they are mortgaged, so they will provide you some income. How much they will help you down the road and how much they are a drag on current investing in other asset classes are factors to consider.

 

[pb4uski]

Since you have a 15-20 year time horizon equities are the way to go... does your 401k have a broad based, low cost equities fund?

 

[Rianne]

The financial minds here will guide you to the best advice.

I just had to say I Love Neil Young. I have Old Man lyrics memorized, as well as most of his songs. He does say "old man look at my life" if that is your reference.
Welcome!

 

[HI Bill]

Me - age 49
Salary $125K annually
Expected SSI at retirement - $3K per month
No pension
401K balance of $35K
Maxing out 401K @ $20K per year
Investing in Roth IRA @ max allowed per year
$150K balance in IRA with Fidelity
3 homes owned with $500K in equity currently (2 are cash flow positive rentals)
Emergency Fund of $25K

I would like to retire early but dont think I will make it as I started later in my serious retirement saving. That being said, I welcome any and all advise on where to park my $20K per year in 401(k) for the best returns in the next 15-20 years and where to invest my $150K from my IRA that will maximize my returns as well.

What are your total annual savings ($25K + $5K?), and what are your current annual expenditures?

For the two rentals, how cash flow-positive are they, after taxes on income, property taxes, mortgage, etc.? Would you be better off selling them and investing in VTI (e.g., are you making 7-10% annually after costs, including appreciation)? They may be useful for diversification, but with your low total IRA and 401(k) balance (for your age), I'm wondering if they're the best use of your money (lost opportunity cost). Best wishes!

 

[Oldmanlookatyourlife]

Good evening, I want to thank everyone for thier input and responses as it will give me time over the weekend to digest the information. I will respond and answer all the questions below that I received:

1. Purchased the homes in the Phoenix market during the financial crisis. The homes are in Glendale and North Phoenix in great areas close to major shopping and sporting venues.

2. The rental homes are mortgaged and are on track to be paid off over the next 7-10 years. The income and expenses are good and there is income after property taxes and insurance.

3. The low cost equity choices my company offers are VFIAX and VEXAX...the rest of expense ratios of .7% to 1%

4. Annualized I save approx $30K per year and current annual expenditures are roughly $36K-40K per year. I have thought about selling the 2 homes and putting the money in the IRA but than I think if they are paid off in 7-10 years that can also supplement my retirement with $2500-$3000 per month in income....less taxes, insurance and any improvements that may be needed.

4. I am not interested in a FA to assist me as I think I will get through it myself but I certainly could use the assist by more experienced and successful members.

5. So yea, the Neil Young handle was changed to reference me looking in the mirror and saying that to myself....and yes enjoy his lyrics and sound.

Thank you again so far for the dialogue, suggestions, help, questions and I will spend this weekend continuing to learn and research.

 

[JakeinChina]

Good evening, I want to thank everyone for thier input and responses as it will give me time over the weekend to digest the information. I will respond and answer all the questions below that I received:

1. Purchased the homes in the Phoenix market during the financial crisis. The homes are in Glendale and North Phoenix in great areas close to major shopping and sporting venues.

2. The rental homes are mortgaged and are on track to be paid off over the next 7-10 years. The income and expenses are good and there is income after property taxes and insurance.

3. The low cost equity choices my company offers are VFIAX and VEXAX...the rest of expense ratios of .7% to 1%

4. Annualized I save approx $30K per year and current annual expenditures are roughly $36K-40K per year. I have thought about selling the 2 homes and putting the money in the IRA but than I think if they are paid off in 7-10 years that can also supplement my retirement with $2500-$3000 per month in income....less taxes, insurance and any improvements that may be needed.

4. I am not interested in a FA to assist me as I think I will get through it myself but I certainly could use the assist by more experienced and successful members.

5. So yea, the Neil Young handle was changed to reference me looking in the mirror and saying that to myself....and yes enjoy his lyrics and sound.

Thank you again so far for the dialogue, suggestions, help, questions and I will spend this weekend continuing to learn and research.

How much is left to pay off the rental properties? I'm a big fan of having rental income as it will allow you to retire early and not have all of your eggs in one basket with equities and such, but are you cool with being a landlord? Or perhaps you have a person or company in mind to manage your properties?

 

[eastnortheast]

With a 20 year span, I'd put it all in VTI or 80% in VTI and 20 % in VXUS. (as someday the rest of the world may revert to the mean relatively speaking).

I would not pay an FA to manage my funds.

My reasoning for an aggressive stock allocation is you have 20 yrs plus 2 rental homes, and pure stock returns are the highest over long periods (also more volatile).

+1 (and +1 to the other poster to mentioned low cost index funds in your 401K)