Confused by too many funds

[nun]

I'm 45 and I've managed to handle my finances relatively well making regular
after tax contributions to mutual funds and by maxing out my deferred contributions
with TIAA_CREF since I was 25. In both taxed and after tax accounts I buy index funds

50% domestic index fund
20% international equity index
15% REIT
15% bond index

Now I'm thinking about how to organize things for ER in 2 to 3 years and thinking about rolling over
funds to Fidelity as they offer far more products and services than TIAA_CREF.
However, I'm completely baffled by the enormous range of of bonds, fixed income, CDs
and funds they offer. Does anyone have any advice on the type of investments and allocation given that I'm 45, ERing in a couple of years, living in MA and I estimate that I'll be in the 15% tax bracket when I retrire. As I'll be in a low tax bracket I assume that invetsments like tax free bonds wouldn't be
too attractive. I also like the idea of putting 25% on my money in fixed income (maybe a CD ladder)
to damp out variations of the 75% of my money that I'll put in equities. As you see I have a general philosophy I'm just confused by the enormous range of products Fidelity offers.

[yakers]

That is a pretty good AA for your age and TC is a pretty good company. Doing nothing is a real viable option here.

[nun]

Originally Posted by yakers

That is a pretty good AA for your age and TC is a pretty good company. Doing nothing is a real viable option here.

Thanks, but Fidelity would allow me to set things like CD ladders up buy index funds and have it all in one place. I suppose I'm just a bit confused by all those options that Fidelity offers after the limited number of funds and income options available with TIAA-CREF. Another thing that annoys me about TIAA is their continues emphasis on annuities, even though they have all the usual options for their retirement funds, they really push the life time annuity.

[brewer12345]

nun, I don't think your current allocation is terrible, but going to Fido or elsewhere would give you more options. If I were you, I would give some serious thought to what allocation you want and THEN go find suitable funds to get there.

On the allocation, we can make suggestions, but YOU are the one who has to live with the portfolio. You will be ERing in a few years, so I would probably suggest that you diversify a bit more. Something like the following might (emphasizing might) be a reasonable starting point:

10% REIT
10% Commodity Futures
10% unhedged foreign bonds
20% Bond market index
20% international equity
10% US large cap index
10% US mid cap index
10% US small cap index

Naturally, you may wish to modify this based on your risk tolerance, expected longevity, any pensions you might have, etc.

[d]

i'm confused by your confusion! *While Fidelity does indeed offer a rather dizzying array of funds, they offer index funds for all but real estate, where there are only three choices. You might also consider going to Vanguard, or as yakers suggests, staying with TC (now offering brokerage services). *Either of the three would work for me.

[nun]

Originally Posted by brewer12345

nun, I don't think your current allocation is terrible, but going to Fido or elsewhere would give you more options. If I were you, I would give some serious thought to what allocation you want and THEN go find suitable funds to get there.

Thanks Brewer12345, I think I didn't quite pose by OP correctly. At TIAA I get a choice of maybe ten equity funds and 4 bond funds. At Fidelity there are just so many and also things like tax free MA municipal bond funds. Where do I start?

Should I set up a CD ladder with 25% and put 75% in Index funds, are tax free bond funds appropriate?

I mentioned in a previous post TIAA Crefs enthusiasm for life time annuities, I've sort of discounted this option for the fixed income part of my portfolio because of the fees, lack of flexibility and lack of access to my principal that I'd have in a CD ladder, am I right?

[brewer12345]

Originally Posted by nun

Where do I start?

Should I set up a CD ladder with 25% and put 75% in Index funds, are tax free bond funds appropriate?

I mentioned in a previous post TIAA Crefs enthusiasm for life time annuities, I've sort of discounted this option for the fixed income part of my portfolio because of the fees, lack of flexibility and lack of access to my principal that I'd have in a CD ladder, am I right?

Like I said, start with an asset allocation. The thousands of funds and other vehicles out there are only tools to get the job done. I've never needed a backhoe or a left-handed axehead drainer; you probably don't need most of the funds Fido offers.

If you were retiring at a "normal" retirement age, TIAA's annuities might make some sense. Given your relative youthfulness, it is hard to see how an annuity would work for you.

I'd probably go with a bond market index or individual treasury bond ladder rather than CDs. Why? You have no hope of capital gains with CDs. When we go back into a falling rate environment, bonds will likely do better than CDs. You have to be in the 28% or higher tax bracket for munis to be obviously superior to taxable bonds, so I would probably stick with taxable bonds.

As to the rest, index funds make a heap of sense, but make sure you get exposure to a wide variety of asset classes, not just the S&P500.

[nun]

Originally Posted by brewer12345

Like I said, start with an asset allocation. The thousands of funds and other vehicles out there are only tools to get the job done. I've never needed a backhoe or a left-handed axehead drainer; you probably don't need most of the funds Fido offers.

If you were retiring at a "normal" retirement age, TIAA's annuities might make some sense. Given your relative youthfulness, it is hard to see how an annuity would work for you.

I'd probably go with a bond market index or individual treasury bond ladder rather than CDs. Why? You have no hope of capital gains with CDs. When we go back into a falling rate environment, bonds will likely do better than CDs. You have to be in the 28% or higher tax bracket for munis to be obviously superior to taxable bonds, so I would probably stick with taxable bonds.

As to the rest, index funds make a heap of sense, but make sure you get exposure to a wide variety of asset classes, not just the S&P500.

Thanks that's very clear and seems like sensible advice. I'll keep doing what I've done so far ie KISS (keep it simple stupid), as I see that TIAA-CREF is now odffering CDs and brokerage services I'll probably stay with them. I bet they will start to offer more funds too, given TIAA's current limited funds what about this as a starting point for retirement.


10% Short Term Bond TCSTX
10% Bond Plus TCBP
10% Real Estate Securities TCREX
20% Equity Index TINRX (Russell 3000 so is very broad)
20% International Equity TIERX
20% Large Cap Value TCLCX
10% Mid Cap Value TCMVX

I'll keep 1 year's living expenses in the bank and 4 year's funds in the bond funds. Every 6 months I'll rebalance selling enough for the next 6 months of expenses, should be around 2% of the portfolio's value.

[brewer12345]

Sounds reasonable. I personally would not do without the foreign bond and commodities allocation, but not everyone feels the same.

[audreyh1]

KISS is a real smart investment strategy - easier to manage and easier to deal with psychologically too IMO.

Audrey