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What to Do for My New 401(k)?
Old 12-21-2008, 04:10 AM   #1
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What to Do for My New 401(k)?

Before the bust, back in July 2007, I sat down with the financial consultant, gave him all my details, including investments from other companies, and was told that I was doing well in my diversification as well as my goal of retiring (not sure if I said 50 at the time though). Of course things have changed now.

I just got rehired into my former company and actually have some hope to stay here until I retire. I get to bridge my time for retirement, not just get back the 2 1/2 years I already worked the first time around, but getting the time that I left the company , so that will help with my pension plan.

I also get to participate in a 401(k) and here lies the questions. I'm planning to put in 20% of my income in 2009 up to the $16,500 maximum (I would go over... finally making good money, I guess), so it's a lot of money to put away. My company will match 75 cents of each dollar up to 6% of my salary, which is $5,400, so it'll be a total of $21,900, at least for 2009

Assuming that I believe my FC regarding diversification and being on track regarding my other finances, which I do, and assuming that putting away 20% won't "kill" me, do you think this is a good move? Is it ever "too much"? And what type of funds, in general, would you suggest for now? We use Fidelity but have over 150 choices from what I remember, and they aren't all Fidelity funds. I'm trying to figure out whether this is a good time to put all the money in the riskier categories (since the value has gone down) at least for a while (and how long? Or how can I tell I will need to go back to less riskier diversification?).

The second part of this story is that at some point down the road, DH will be inheriting 4 houses, which are all paid for, 2 in the Bay Area and two outside the state. Assuming they live till they are 95, we'll be 65, so down the road, we will have access to some money if we need it. I'm not sure if this is relevent, but I'm saying that there is a safety net, unless we get disowned or something strange happens (which can happen).

Let me know if there are more info you need. Thanks for your help!!!
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Old 12-21-2008, 08:56 AM   #2
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Quote:
Originally Posted by retiringby50 View Post
Assuming that I believe my FC regarding diversification and being on track regarding my other finances, which I do, and assuming that putting away 20% won't "kill" me, do you think this is a good move? Is it ever "too much"?
Again, assuming your allocation was a good one, then it would be a good idea to resume putting money into it. Nobody knows when the market will turn around, but one thing is certain: stocks are 20% to 50% cheaper today than they were at their peak. So, if you were happy to invest at the previous prices, you should feel you are getting a good bargain today: Many more shares for the same price
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Originally Posted by retiringby50 View Post
And what type of funds, in general, would you suggest for now? We use Fidelity but have over 150 choices from what I remember, and they aren't all Fidelity funds. I'm trying to figure out whether this is a good time to put all the money in the riskier categories (since the value has gone down) at least for a while (and how long? Or how can I tell I will need to go back to less riskier diversification?).
That's the rub: No one can tell for sure exactly when these other categories will take off. Again, if you stick to your former asset allocation and it was well diversified, then you'll automatically be putting more money into the riskier categories (since they'll have fallen farther and you'll need to put more $$ in to catch up and bring the allocations back into balance). Type of funds to buy: Ones with low expenses.
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Originally Posted by retiringby50 View Post
The second part of this story is that at some point down the road, DH will be inheriting 4 houses, which are all paid for, 2 in the Bay Area and two outside the state. Assuming they live till they are 95, we'll be 65, so down the road, we will have access to some money if we need it. I'm not sure if this is relevant, but I'm saying that there is a safety net, unless we get disowned or something strange happens (which can happen).
Obviously, I don't know the particular situation, but many folks have set themselves up for disappointment by counting on an inheritance, Unless your wife's name is on the deeds, it's probably risky to count on these assets. A lot can happen over long time periods, and these homes represent a big store of wealth that could be tapped by an elderly couple that has seen a drop in assets. The economy is shaky, and could get much shakier. You can fill in the rest of the blanks.

Good luck.
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Old 12-21-2008, 09:46 AM   #3
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Your advisor should have discussed your risk tolerance with you. Not sure of your current age either.

If you follow the conventional 100-age to determine your equity allocation, you can't go too far wrong. This would of course depend on the risk tolerance discussion results. The non-equity portion represents a kind of safety net for this kind of market.
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Old 12-21-2008, 09:51 AM   #4
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One more thought.....you didn't say where the parents have legal residence. If they are in CA, the costs and effort involved in probate are large, suggesting you make sure they have been to a CA estate atty to get set up with a living trust and have someone in the family who knows what to do as secondary trustee. If they are in another state, they still need good legal advice.
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Old 12-21-2008, 09:53 AM   #5
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For your new 401(k) stuff you just have to follow your written investment policy statement which includes your asset allocation and also the best places to locate your assets. If you don't have such a plan, then you need to get educated and get one.

One way to get educated is to go through the asset allocation tutorial found at this link: Asset allocation tutorial? which has lots of links and tools to get you going. Fidelity-sponsored 401(k) plans also have alot of help and education at www.401k.com This will only take you a month or so to go through and get it all figured out. But what's a month for something that is going to give you 30+ years of retirement income?

Furthermore, you can get free, personalized advice that is better than any financial consultant if you go to Bogleheads :: View Forum - Investing - Help with Personal Investments and READ then follow the advice given in the "sticky" 2 or 3 threads at the top. But be prepared for SERIOUS discussion about your money. You can't expect to spend an hour on this and get a good plan. You have to put the time into it.
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