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What would you do in this unique situation???
Old 11-05-2008, 10:19 AM   #1
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What would you do in this unique situation???

Well I've been ER'd for a little more than 3 months and I gotta say it's been HEAVEN so far

I worked 19 years for an ESOP company and the stock skyrocketed in the last 5 years. It is a 100% employee owned company and there is no public stock.

It's like being in a cult when you work there... They seem to think the stock will never go down, and it never has I have a feeling things will get harder for them soon, but I don.t work there anymore...

The stock price is calculated quarterly and in the last quarter it actually went up while the rest of the market tanked

It is a steel forging company that's been in business since 1893. I was starting to get concerned that all the record profits and increasing stock price increases couldn't last forever. I was worried about having everything in one basket. While it was a great place to work and it provided me with unbelievable good fortune... The job itself SUCKED so I quit and I have no regrets

These are the rules of the ESOP concerning cashing in my company stock...

I quit on 7-18-08 I still had to hold the company stock until the beginning of the 4th quarter. This was great because while the rest of the market tanked I made almost 3% on the company stock for doing nothing

On 10-15 the stock price was quoted and my stock was sold back to the company and they are gonna put it in my 401K

It will be in my 401K until 7-18-09 they hold your money for 1 year before you can have it...

On 11-17 they are gonna put it in my 401K I think it kinda sucks they are just holding it for 1 month and I can get no return at all

But it will be in the 401K until next July then I can go to Vanguard...

In the mean time I was just wondering what you more seasoned investors would do with the $$$ in the 401K

Im 39 and I will be getting $1,928,000

Im not really very happy with any of the choices available in the 401K though...

Here they are.

American Funds AMCAP Fund A American Funds Reports AMCPX $13.29

American Funds Bond Fund of Amer A American Funds Reports ABNDX $10.85

American Funds Fundamental Invs A American Funds Reports ANCFX $27.80

American Funds Growth Fd of Amer A American Funds Reports AGTHX $23.06

American Funds Income Fd of Amer A American Funds Reports AMECX $13.98

American Funds Investment Co Amer A American Funds Reports AIVSX $22.97

American Funds Smallcap World Fund A American Funds Reports SMCWX $22.50

American Funds US Govt Securities A American Funds Reports AMUSX $13.49

Fidelity Advisor Freedom Fund 2010 Fidelity Funds -NCRF FACFX $9.40

Fidelity Advisor Freedom Fund 2015 Fidelity Funds -NCRF FFVAX $9.31

Fidelity Advisor Freedom Fund 2020 Fidelity Funds -NCRF FDAFX $9.51

Fidelity Advisor Freedom Fund 2025 Fidelity Funds -NCRF FATWX $9.04

Fidelity Advisor Freedom Fund 2030 Fidelity Funds -NCRF FAFEX $9.46

Fidelity Advisor Freedom Fund 2035 Fidelity Funds -NCRF FATHX $8.89

Fidelity Cash Reserves Fidelity Funds -NCRF FGRXX $1.00

Fidelity Retirement Money Market Fidelity Funds -NCRF FRTXX $1.00

Right now I have it set up to go all in The Fidelity retirement money market.

Id like to make enough on interest and dividends to live on next year. I want around $70,000 and Im not gonna get it with these low interest rates...

Id also like to get in the market. I wish I could have in October but they held my $$$ for a month longer than I thought they would

I want about 55/45 cash/Stocks

Should I go all in one of these stock funds at that allocation and sell in July next year and roll it over to Vanguard

Or average in...

Or just hang out in cash until I can setup my own account
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Old 11-05-2008, 10:52 AM   #2
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Wow. That's great timing, except for missing the October deal which is not that big of a deal. I think you will get ample time to average in to equities over the next couple of years.

I would just keep it in cash until you set up your own account, then start averaging into an index (or whatever).

Actually, the more I think about it, what you should do is take a portion of that cash and buy my wonderful (but not currently profitable) car dealership. You have plenty of cash to last through the next few months of slow sales, and then you will be set for life one things start rocking again! Plus, you will have an exciting new career, and you can Be Your Own Boss, and ride around in sexy Chevrolets and Chrysler products (unless they go bankrupt-- lol)!!

I'm just kidding. I think.................

Serisouly, congrats. Looks like you got a nice slug of cash very close to the bottom of the market.
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Old 11-05-2008, 11:19 AM   #3
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Quote:
Originally Posted by cardude View Post
Actually, the more I think about it, what you should do is take a portion of that cash and buy my wonderful (but not currently profitable) car dealership. You have plenty of cash to last through the next few months of slow sales, and then you will be set for life one things start rocking again! Plus, you will have an exciting new career, and you can Be Your Own Boss, and ride around in sexy Chevrolets and Chrysler products (unless they go bankrupt-- lol)!!

I'm just kidding. I think.................
I could turn your dealership around, but my consultation rates are quite high........

I would require a new Z06 Vette for my wife, a loaded Chevy Tahoe for me (both free), free gas, and of course a clothing allowance.....
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Old 11-05-2008, 11:45 AM   #4
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Quote:
Originally Posted by Steve O View Post
Im 39 and I will be getting $1,928,000
...
Id like to make enough on interest and dividends to live on next year. I want around $70,000 and Im not gonna get it with these low interest rates...
...
I want about 55/45 cash/Stocks
Do you have any other funds to live on while your ESOP funds earn interest and dividends for you?
If so, you are looking for a 3.5% interest rate before you take inflation into account. I don't think you could solely live of dividends and interest without a larger nest egg, or another income source.
Unless you would go very high risk and shoot for 7-10% dividend yields (which I would not recomend).
Have you run through some scenarios in FireCalc? That may be a good start for you.
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Old 11-05-2008, 12:14 PM   #5
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Yes I have about $50,000, that should make it until July.

So in the meantime I need to try to figure out how to make my income for when that runs out without touching the principal when I get full control of the $$$ in July.

I cant take anything out or roll over from the 401K until July 09

And yes I like how things worked out as far as the timing

I don't like any of the investment choices available in the 401K but Im leaning towards averaging into the American funds.

Or I could go all into the Fidelity target 2010 fund and get instant allocation but that scares the bejeezus out of me and Id have to sell it later when I go to Vanguard...

I don't like em much but I want to get in the market and these are my only options until 7-18-09

I also want to set up a 72T sepp plan on some of the fixed income when I get my own account but that's another thread.

No way Id want to be involved in anyway with anything automotive these days
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Old 11-05-2008, 12:56 PM   #6
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I would be inclined to average into the 2010 fund until you can roll over
to Vanguard's Welleslely Income Fund.

Cheers,

Charlie
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Old 11-05-2008, 02:20 PM   #7
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If you want investment advice and which funds to pick, then you can read the Asset allocation tutorial? and the links and books mentioned therein.

You can also go to Bogleheads :: View Forum - Investing - Help with Personal Investments for free, personal and outstanding investment advice. Be sure to read the "stickys" at the top to understand how to present your question.
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Old 11-05-2008, 05:23 PM   #8
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Roll the 401k into an IRA and make your own investment choices. I can't believe that you are required to stay in this 401k! I'd consult an employment law atty and see if you can escape.
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Old 11-05-2008, 08:02 PM   #9
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I'd go ahead and DCA into the equities portion, maybe over the next 6 months or so to try to hit recession prices. Go ahead and add a chunk to equities if we hit new lows.

If you hold out 55% cash on your own, then you want to go with a fund or two that are all stocks and no cash. The 2035 would be OK, or maybe the growth and small cap world funds (I have not researched them!). Having to sell when you close the 401k should not be a problem unless they have a short-term redemption fee within your 401k.
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