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Investment questions
Old 05-09-2012, 08:02 AM   #1
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Investment questions

Hi to everyone. I retired last Fall just prior to age 58 and my wife will be retiring at the end of the month 5 months short of 58. I have a pension that more than covers monthly expenses, we have a savings account that could cover living expenses for 2 years, a small deferred compensation account and her 401(k). In the absence of a life altering event, the money in the 401(k) is essentially extra money and not needed day to day. We are debt free. I am fortunate to receive a family retiree health care plan with no premium.

The question is regarding what to do with the 401(k), which is approximately $200K. Whether we leave it where it is or roll it over to an IRA, what is the best way to invest it? The beauty of the regular monthly contribution to the account over the years, of course, was the dollar cost averaging. However, DCA will now be gone as there will not be any more contributions.

My objective is simple: We need the money to grow, obviously, to keep up with inflation and perhaps a little more. I don't need to get greedy here.

What suggestions does anyone have on how to do this? Stay in mutual funds, and if so, what type, purchase blue chip, dividend paying stocks, stay in bonds, Current investment blend is 75% large cap mutual fund and 25% bond index fund.

Thanks ahead of time for any suggestions.
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Old 05-09-2012, 08:22 AM   #2
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Hi vttlarry. Is your pension COLA indexed?
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Old 05-09-2012, 08:26 AM   #3
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Congratulations, you seem to be very well prepared for retirement.

As you probably know, a 401k can be transferred into an IRA. I RE'd a few months ago and decided to do that because the funds that I could get in an IRA were much better than those in my former employer's 401k.

You may also want to consider tIRA to Roth conversions from now since I assume you will be in a higher tax bracket once SS and RMDs begin.

I personally use Vanguard (almost 20 years now) and have been very satisfied with them. You could either put together your own portfolio using their low-cost index funds (for example you could put 60% in Total Stock Index, 15% in Total International Index and 25% in Total Bond Index) or you could just put it all in one of their balanced fund offerings such as Wellesley, Wellington, Star and let it ride.
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Old 05-09-2012, 08:30 AM   #4
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Yes. It is capped at 1% until the pension fund is 90% funded. I am in Minnesota, which is in better shape than many states. I am not exactly certain of where the fund is now, but I believe it is close to 80%. Changes were made in 2010 to increase contributions and limit COLA increases.
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Old 05-09-2012, 08:36 AM   #5
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Welcome vttlarry-- we're "next door" in Sartell!
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Old 05-09-2012, 08:52 AM   #6
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Bizlady, very near indeed. I am in NW St. Cloud, just a stone's throw from Sartell. My 2 sons and 4 grandchildren live there.
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Old 05-09-2012, 09:09 AM   #7
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Quote:
Originally Posted by pb4uski View Post
Congratulations, you seem to be very well prepared for retirement.

As you probably know, a 401k can be transferred into an IRA. I RE'd a few months ago and decided to do that because the funds that I could get in an IRA were much better than those in my former employer's 401k.

You may also want to consider tIRA to Roth conversions from now since I assume you will be in a higher tax bracket once SS and RMDs begin.

I personally use Vanguard (almost 20 years now) and have been very satisfied with them. You could either put together your own portfolio using their low-cost index funds (for example you could put 60% in Total Stock Index, 15% in Total International Index and 25% in Total Bond Index) or you could just put it all in one of their balanced fund offerings such as Wellesley, Wellington, Star and let it ride.
+1

Roth conversion has the additional advantage of reducing your future RMDs. This is well worth exploring now.
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