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Would like to Retire in 5 years- I need help with next investment steps
Old 12-13-2005, 07:03 PM   #1
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Would like to Retire in 5 years- I need help with next investment steps

My wife and I* have $230K in two 401K plans, $290K in a Defferred Compensation plan ( 1.5% return annually), $6,00 in a variable annuity, and $100,000 in a ING Savings account. The Defferred Compensation plan grows taxed deffered and will be paid out in ten yearly installments once I leave the company in 5 years. Once paid out, it will be taxed as regular income and I plan to reinvest it in mutual funds ( If this is the best thing to do?) . Currently his means a payout of $29k (before taxes) for ten years if I do not invest in this plan in the future. We have no ther debt

Our home is worth $750K with $146K left on the 10 year 4.75% mortgage.
We have just purchased with cash 2 acres to build our retirement home in South Carolina.

We would like to simplify our life and move to South Carolina
in 5 years and change to different jobs that would gross us $60K per year versus the $250K we currently are grossing.

We estimate that to build our new home in S.C.will cost $300K which would leave* approx. $400K after the sale of our current home, paying off the mortgage, and moving expenses. We would like to build in S.C. in four years and move in 5 years.

We currently are in the 33% tax bracket. I am 45 and my wife is 51, and we are wondering what our next steps should be. I am planning on investing a t least 30% of my gross income ($175K) in the EDC plan for the next 5 years as this will defer our income. Our only tax write-off is our mortgage interest currently so we are getting crushed in taxes (33%) as I mentioned.

The Questions I have are:

- Do we continue to invest in the Executive defferred Compensation Plan?
- Should we pay off our current Mortgage?
- Should we begin to build our retirement home with the $100K we have in the ING account and leave it sit for 2-3 years empty?
- What should we invest in if none of the above is the best strategy

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Re: Would like to Retire in 5 years- I need help with next investment steps
Old 12-13-2005, 07:13 PM   #2
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Re: Would like to Retire in 5 years- I need help with next investment steps

Quote:
Originally Posted by Foodeefish
My wife and I* have $230K in two 401K plans, $290K in a Defferred Compensation plan ( 1.5% return annually), $6,00 in a variable annuity, and $100,000 in a ING Savings account. The Defferred Compensation plan grows taxed deffered and will be paid out in ten yearly installments once I leave the company in 5 years. Once paid out, it will be taxed as regular income and I plan to reinvest it in mutual funds ( If this is the best thing to do?) . Currently his means a payout of $29k (before taxes) for ten years if I do not invest in this plan in the future. We have no ther debt

Our home is worth $750K with $146K left on the 10 year 4.75% mortgage.
We have just purchased with cash 2 acres to build our retirement home in South Carolina.

We would like to simplify our life and move to South Carolina
in 5 years and change to different jobs that would gross us $60K per year versus the $250K we currently are grossing.

We estimate that to build our new home in S.C.will cost $300K which would leave* approx. $400K after the sale of our current home, paying off the mortgage, and moving expenses. We would like to build in S.C. in four years and move in 5 years.

We currently are in the 33% tax bracket. I am 45 and my wife is 51, and we are wondering what our next steps should be. I am planning on investing a t least 30% of my gross income ($175K) in the EDC plan for the next 5 years as this will defer our income. Our only tax write-off is our mortgage interest currently so we are getting crushed in taxes (33%) as I mentioned.

The Questions I have are:

- Do we continue to invest in the Executive defferred Compensation Plan?
- Should we pay off our current Mortgage?
- Should we begin to build our retirement home with the $100K we have in the ING account and leave it sit for 2-3 years empty?
- What should we invest in if none of the above is the best strategy

Wait for the weekend and call Bob Brinker.

JG
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Re: Would like to Retire in 5 years- I need help with next investment steps
Old 12-13-2005, 07:17 PM   #3
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Re: Would like to Retire in 5 years- I need help with next investment steps

Quote:
Originally Posted by Foodeefish
- Do we continue to invest in the Executive defferred Compensation Plan?
Welcome to the board, Foodee.

Generally a tax-deferred investment is better than a taxable one. That's especially true if you're getting some sort of match for your contributions.

But if you're not getting a match and if you're only getting 1.5% return per year, whether that's tax-deferred or not you can do better just about anywhere else. Without knowing any more about your plan it's hard to make the call, but as you've described it I wouldn't put any more money into it.

Quote:
Originally Posted by Foodeefish
-- Should we pay off our current Mortgage?
4.75% is a great interest rate! If you can sleep comfortably at night, then keep paying the mortgage and don't pay it off early. Your portfolio will be bigger (and more survivable) and in the next five years you have a decent chance of making more money in equities.

But if your other investments are in lower-yielding assets, or if having a mortgage keeps you from sleeping at night, then pay it off.

Quote:
Originally Posted by Foodeefish
- Should we begin to build our retirement home with the $100K we have in the ING account and leave it sit for 2-3 years empty?
I wouldn't. Sounds like a waste of money that could earn 4%/year or more in a three-year CD. Then, a couple years before you retire, you could start the building process. Hopefully the house will be ready for occupation when you are.

Quote:
Originally Posted by Foodeefish
- What should we invest in if none of the above is the best strategy
That's an asset allocation question. It's hard to recommend a specific sector or fund because we don't know what your other assets are invested in. Before you ask for our specific advice, I'd recommend reading William Bernstein's "Four Pillars" and picking your portfolio allocation from one of his profiles near the back of the book. You might end up buying a whole lot more equities than you're holding now, but that depends on your personal tolerance for volatility.

Quote:
Originally Posted by MRGALT2U
Wait for the weekend and call Bob Brinker.
JG, you know that advice you used to hear from your alleged mother, "If you can't say anything nice, then don't say anything at all?"

That's good advice.
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Re: Would like to Retire in 5 years- I need help with next investment steps
Old 12-13-2005, 07:28 PM   #4
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Re: Would like to Retire in 5 years- I need help with next investment steps

Quote:
Originally Posted by Nords
JG, you know that advice you used to hear from your alleged mother, "If you can't say anything nice, then don't say anything at all?"

That's good advice.
I agree that it is good advice. I seem to be genetically
unable to follow it. Gets me in lots of trouble.

JG
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Re: Would like to Retire in 5 years- I need help with next investment steps
Old 12-13-2005, 07:30 PM   #5
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Re: Would like to Retire in 5 years- I need help with next investment steps

Quote:
Originally Posted by MRGALT2U
I agree that it is good advice.* I seem to be genetically unable to follow it.* Gets me in lots of trouble.
Well, it sounds like the description of a troll to me...
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Re: Would like to Retire in 5 years- I need help with next investment steps
Old 12-14-2005, 06:58 AM   #6
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Re: Would like to Retire in 5 years- I need help with next investment steps

Thank you all for your guidance and advice. It's greatly appreciated.
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Re: Would like to Retire in 5 years- I need help with next investment steps
Old 12-14-2005, 07:59 AM   #7
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Re: Would like to Retire in 5 years- I need help with next investment steps

Why does the deferred comp plan pay only 1.5% a year? Is it all held in cash? Or is the plan unfunded? If it is funded, who is investing that money and are there other investment choices?
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Re: Would like to Retire in 5 years- I need help with next investment steps
Old 12-14-2005, 08:12 AM   #8
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Re: Would like to Retire in 5 years- I need help with next investment steps

The below site will give you some good sound advice on investing.

www.coffeehouseinvestor.com
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