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Set it and forget it retirement
Old 03-04-2006, 03:32 PM   #1
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Set it and forget it retirement

Iím a single woman about to retire at the end of the year. I want to set up a ďSet it and forget itĒ financial plan that will last for at least 30 years.

Iíll be receiving about $17,000 from social security and my expenses will be about $50,000 per year. My home is paid for.

For assets, Iíll have around $150,000 in a taxable account, and $1,100,000 in 401K/IRA ROTH accounts.

My problem is that $720,000 of the 401K will be in cash (as a result of a payout from my company 401K plan).

Iím considering signing up with Fisher Investments (charging 1% or 1.5% of my account as a yearly fee)

My brother is recommending that I either move all of my accounts to Vanguard and use their financial planning services, or skip the financial planning and invest as follows for a ďSet it and forget itĒ plan:

VGSTX Ė 30% - A conservative fund of funds.

DODGX Ė 20% - An aggressive low cost actively managed large value fund. I already own some, so itís being closed isnít an issue.

VSMGX Ė 30% - A conservative indexed fund of funds.

VWENX Ė 15% - A conservative actively managed fund.

DODFX Ė 5% - A bit of foreign exposure to add to the DODGX foreign exposure.

Iím thinking on using another fee based financial planner, but I really donít know WHAT to do.

Any suggestions?
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Re: Set it and forget it retirement
Old 03-04-2006, 03:57 PM   #2
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Re: Set it and forget it retirement

[quoteIím considering signing up with Fisher Investments (charging 1% or 1.5% of my account as a yearly fee) ]Reconsider. For those investors who don't know much or don't care much about rebalancing, allocations and slicing/dicing, why not just put your money into Target Funds that match your needs going forward? That's the only true set it and forget it plan. Pay 1-1.5% is crazy when the returns will likely not compensate for the expenses. You worked hard to accumulate the money, why pay it out and make someone else rich in the process?
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Re: Set it and forget it retirement
Old 03-04-2006, 04:03 PM   #3
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Re: Set it and forget it retirement

BTW Mugs - that was free
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Re: Set it and forget it retirement
Old 03-04-2006, 04:07 PM   #4
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Re: Set it and forget it retirement

Hi Ms Mugs,

Vanguard is probably a good way to go.* Fisher is not.* If you like the Fisher route, then go with someone better and cheaper.* *Here are two links which you should look at:

www.altruistfa.com
www.evansonasset.com

You can also read the stuff at
www.fundadvice.com

FD: I have not used any of these outfits, but maybe one day I will.
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Re: Set it and forget it retirement
Old 03-04-2006, 04:26 PM   #5
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Re: Set it and forget it retirement

Hey Mugs,

You have gotten some pretty good advice so far, most of which I agree with. Most folks do not realize how much a 1% fee on the value of their funds is. This is why investment firms use percentage (%) rather than dollar amount. 1% on a million dollars doesn't sound like much to pay for someone who is going to look after your hard-earned money. However $10,000 a year for the rest of your life is really more indicative of the real costs. You would also have to pay the expense ratio of each mutual fund that you were also invested in, an average of 1.5% (or $15,000).*

This is why you are receiving so much support in this thread for the Vanguard option.* A million dollars at Vanguard at 0.20% (ER) would be that same as about $2000 per year.

The difference ($25,000-2,000=$23,000) is yours. And again, this represents only one year.

This is also the reason why Fisher would like to have you as a client ($25,000/annually). Vanguard/Dodge & Cox would also love to have you as a client also but leave it up to you to decide.
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Re: Set it and forget it retirement
Old 03-04-2006, 04:32 PM   #6
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Re: Set it and forget it retirement

One way to look at it is that by learning to be your own financial adviser you are effectively earning $20k a year or so. Once you have your portfolio set up you shouldn't need any more than just to rebalance once a year or so. Hardly worth paying someone $20k a year for.

I suggest you DIY with Vanguard, and look at the Target funds.
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Re: Set it and forget it retirement
Old 03-04-2006, 04:33 PM   #7
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Re: Set it and forget it retirement

Fisher: * :P :P :P

Vanguard: * *
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Re: Set it and forget it retirement
Old 03-04-2006, 04:47 PM   #8
 
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Re: Set it and forget it retirement

You should have no Problem with a 1.25 Mil portfoilo and only needing about a 3% withdrawal rate. My advice would be to go with the Vanguard Target Retirement Fund 2005. They will change the allocation for you as you get older. The yield on this fund is around 3.8% which is more than you need to add your SS to give you $50K per year.

RUn this by your brother, he sounds like he knows what he's doing.

I'll bet he agrees with my advice. He may not be aware of these funds. You can truly set and Forget it and redeem shares on an annual basis.
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Re: Set it and forget it retirement
Old 03-04-2006, 04:50 PM   #9
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Re: Set it and forget it retirement

For Mugs:

I recommend against paying anywhere near 1.0% to 1.5% in management fees. You need a custodian to handle retirement accounts. Pay Vanguard or some other low cost provider to handle the account, but direct the money yourself.

I recommend that you build a TIPS ladder within your tax-sheltered account. If you can get 2.0% interest rate (the current rate for TIPS), you will be able to withdraw 4.0% (plus inflation) for 35 years before running out of money. This should be enough even after taxes.

[Even if you were not able to get any interest at all, you would be able to withdraw 3.33% (plus inflation) for 30 years. This means that $1000000 would be enough to meet your $33000 (plus inflation) requirement if it were not for taxes.]

With a TIPS ladder, you make your withdrawals from the bonds that mature and reinvest the rest. That is, you buy some new TIPS at the longest maturity of the ladder. In your case, I would expect you to choose a ladder length between 10 and 20 years.

This approach meets your requirement for income.

You also have the option of reinvesting some of your money into stocks later, if you find them attractive enough. Pay special attention to high quality companies with higher than average dividends. The odds are high that you will be able to find some really good stock buying opportunities within the next 10 to 20 years. Exactly when? I donít know. But it will happen sometime within the next 10 to 20 years.

In any event, you never have to buy any stocks. You simply have the option available to you.

Have fun.

John Russell
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Re: Set it and forget it retirement
Old 03-04-2006, 04:52 PM   #10
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Re: Set it and forget it retirement

Mugs,

A few comments:

(1) Is your 401k currently in cash? *If not it is a sideways move to go from stocks/bonds in the 401k to similar stocks/bonds in a Vanguard account and doesn't change your risk levels. *If the 401k is in cash you might want to consider putting it in a money market first and then dollar cost averaging it into the funds.

(2) I suggest that you calculate the overall stock, bond, etc. allocation since your bonds are in balanced funds. *I think that you should know where you are at. *I think that your funds are all good choices and I'm not sure what your knowledge base is as far as investing but it would be worth while to do some home work on asset allocation.

(3) *If you want to make it really simple look at the taget/lifestyle funds.

MB
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Re: Set it and forget it retirement
Old 03-04-2006, 05:03 PM   #11
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Re: Set it and forget it retirement

Welcome, Mugs!!! *

You have come to the best place to get lots of good advice. *

Take your time - don't rush into anything that you don't feel comfortable with or understand fully.

I agree with the Target Retirement Fund at Vanguard - it truly is a "set it and forget it" account.* *

Please don't pay anyone a percentage of your portfolio - if you really feel the need to pay an "advisor" there are fee-only advisors who charge an hourly or set rate.* Find out up front the cost and also find out if they are making any money (very likely) off of any of the investments they sell or recommend to you.*

Please keep posting here - you are among friends!*

Wishing you good luck!
Jane
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Re: Set it and forget it retirement
Old 03-04-2006, 05:36 PM   #12
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Re: Set it and forget it retirement

While I agree with the "target portfolio" approach, I'd first*investigate a couple of others besides Vanguard.

True, Vanguard is the cheapest, but they tend to have the most conservative stock/bond mix.

Before commiting to Vanguard, take a look at the similar, but a little more aggresive offerings by T. Rowe Price and Fidelity.
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Re: Set it and forget it retirement
Old 03-04-2006, 05:54 PM   #13
 
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Re: Set it and forget it retirement

Quote:
Originally Posted by JWR1945
The odds are high that you will be able to find some really good stock buying opportunities within the next 10 to 20 years.

Exactly when? I donít know. But it will happen sometime within the next 10 to 20 years.
Not necessarily!

No one knows for sure. Stocks may be cheaper now than anytime in the next 100 years!
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Re: Set it and forget it retirement
Old 03-04-2006, 05:58 PM   #14
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Re: Set it and forget it retirement

...not to mention that TIPS ladder only works great if your personal inflation rate is less than or equal to the CPI, and you dont live longer than 35 years...

My bet is you see declining value of your portfolio in many areas due to CPI underperformance, then the joys of hitting 90, still being alive, and having no money.

But its nice to get our semi-annual visit from one of the 'wonder twins'...
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Re: Set it and forget it retirement
Old 03-04-2006, 08:17 PM   #15
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Re: Set it and forget it retirement

Various portfolios back tested, may be of some interest.

http://socialize.morningstar.com/New...mrr=1141516560
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Re: Set it and forget it retirement
Old 03-05-2006, 10:40 AM   #16
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Re: Set it and forget it retirement

Mugs wants a set-it-and-forget-it package.

I would go with Vanguard, for sure (and I have!).

As I recall, Vanguard will also set up a regular withdrawal for you, even a SEPP withdrawal schedule by the 72T rules.

EZ. Least expensive. Automatic.

Now, go to Spain and lay on the beach.
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Re: Set it and forget it retirement
Old 03-05-2006, 10:44 AM   #17
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Re: Set it and forget it retirement

Hello Mugs!

I was going to be the "first" (really I was *, when my DW told me it was "time to go" (go here - go there - go everywhere) yesterday, when I read your initial post.

24 hours later, I see that the "advice" * I have to contribute to this issustrious "gang of reason" * is the same....

I split my (and my DF) portfolio between Vanguard and Fidelity. *Fidelity, since it is "required" of my respective work places, and Vanguard, since I've been with them "on my own" for the last 20+ years.

The important thing stated in all the posts (and I agree), is to not let your retirement decisions "to someone else". *As has been stated, it will "cost you" upwards of $20K per year to have somebody else tell you what to do. *Wouldnít it make more sense if "YOU" understand the "investment scheme" and save the $$$?

I have (over the last 25+ years), and have spent the time in the local colleges (macro/micro economics, global economics, investment theory <yes, even learning the Sharpe Ratio for investment performance analysis!>

I can't reveal the detail results, but I can tell you that it certainly made a difference in "where I was - where I am" from a financial perspective.

The only "advice" I would tell you is to "take charge", but do it carefully. *Don't jump into any new scenario unless you understand and accept what the results would be.

No, having your money in a retirement (e.g. tax deferred account) money market account may not seem "glamorous", but it's safer than "making the leap" without knowing what's on the "other side of the wall".

Peace!

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Re: Set it and forget it retirement
Old 03-07-2006, 09:58 PM   #18
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Re: Set it and forget it retirement

Thanks for the great question, Mugs!

I'm right behind you on the retirement track and want to set up a plan that takes minimum effort and allows me maximum play time! I own a couple of Vanguard funds myself for non-retirement money, and plan on moving my mish-mash of 401(k) accounts over to Vanguard before I retire.

Does anyone think it would be wise to split the money among a few low-cost fund companies, instead of just one, to lower the risk?

I suppose that Vanguard is as sound as any other company. If they got into trouble it would probably mean that the whole market was on the ropes -- so owning more than one fund wouldn't matter anyway.

Thoughts, anyone?

Thanks,
Caroline
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Re: Set it and forget it retirement
Old 03-07-2006, 10:08 PM   #19
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Re: Set it and forget it retirement

Quote:
Does anyone think it would be wise to split the money among a few low-cost fund companies, instead of just one, to lower the risk?
C -

We discussed this in an old thread (Yrs to go..) and the consensus was your money will be safe at one institution. I believe Al posted the facts.
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Re: Set it and forget it retirement
Old 03-07-2006, 10:11 PM   #20
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Re: Set it and forget it retirement

Vanguard is basically shareholder owned, and even below that level, theoretically you own the underlying stocks and bonds in your funds.

This is sort of one of those 'nuclear war' scenarios. Should a company like vanguard suddenly become insolvent, maybe your portfolio isnt going to be your biggest problem.

Still, scandals come and go. If I were going to list a hundred fund/investment companies that I thought would run into a scandal, vanguard wouldnt be one of them.
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