My retirement portfolio (missing anything?)

[Rose3408]

Attached is my retirement portfolio. My 401k and IRA are with Fidelity. I realize we are limited at work in investment choices, but they're pretty decent, and I have many choices with the IRA. I also want to open up a Roth IRA but to make certain my choices are good ones.

Am I diversifying correctly, or do I have duplication? I'm 57 and retirement is 10-12 yrs away. Appreciate your input.

[Rose3408]

Does anyone else not see it?

[Bestwifeever]

I see four fund names and the abbreviations for them.

Do you have an equal percentage in each of them?

[Rose3408]

I have 50% in the PIMCO, 25% in the PERKINS, and 25% in the PRU/J HEALTH. 100% of my IRA is in the Fidelity Freedom 2020.

I would like to now open a Roth IRA, but I'm sure about allocating and diversify correctly and want to make sure I'm not duplicating with my investments. Not the sharpest pencil here when it comes to investment choices.

Appreciate your input

[Nords]

Quote:

Originally Posted by Rose3408 I have 50% in the PIMCO, 25% in the PERKINS, and 25% in the PRU/J HEALTH. 100% of my IRA is in the Fidelity Freedom 2020.

Rose, you don't need to tell the board how many dollars you have in which account, but you do need to give readers a way to figure out which assets your dollars are invested in.

"100% of my IRA in the Fidelity Freedom 2020" does not give a clue as to what percentage that asset is of the total portfolio. Your IRA is just one component of the total portfolio, and you have too many variables for readers to figure out the percentages.

Most investors total up the value of their entire portfolio, including 401(k)s, IRA(s), and all their other accounts. Then they figure out what percentage of that total is invested in each asset (like PIMCO or Fidelity Freedom). Then, after the percentages, they mention whether or not that asset is in a tax-advantaged account (like a 401(k) or an IRA) or whether it's in a taxable account (like a brokerage account).

[Rose3408]

I thought I did just that. I have three funds in the 401k which is the PIMCO 50%, PRU 25% & PERKINS 25% which equals 100% of the 401k pie.

Then I rolled over 100% of an old 401k into the Freedom Fund.

All of these are tax-advantaged accounts since we I won't star paying tax until I start withdrawing the funds. None of the above is through a brokerage account.

I have an Annuity w/Modern Woodmen which I purchased through a broker, but that's aside from the above.

I'm sorry for being such an ignoramus and not knowing the rules here and the proper way to supply information. I'm a newbie.

[Bestwifeever]

I think the question is, what percentage of your total nest egg is in your 401K now and what percentage in your IRA now. Then you can see what your asset allocation is right now for your total nest egg.

[Rose3408]

50% is in the 401k and 50% in the IRA right now. But the 401k grows every month. I presently contribute 11% of my income to the 401k at work. Company matches 6%. I know I should probably decrease since they only contribute 6%, however, I really feel more comfortable knowing without doubt 6% goes into the retirement account; no fail. Otherwise, I could be easily swayed to use the money for something else.

[Animorph]

Quote:

Originally Posted by Rose3408 I thought I did just that. I have three funds in the 401k which is the PIMCO 50%, PRU 25% & PERKINS 25% which equals 100% of the 401k pie. Then I rolled over 100% of an old 401k into the Freedom Fund. All of these are tax-advantaged accounts since we I won't star paying tax until I start withdrawing the funds. None of the above is through a brokerage account. I have an Annuity w/Modern Woodmen which I purchased through a broker, but that's aside from the above. I'm sorry for being such an ignoramus and not knowing the rules here and the proper way to supply information. I'm a newbie.

We have no way to know if the 401k is 98% of your total portfolio or 35%. We would like to know what percentage of your entire portfolio is in each fund. No rules, we just need better info. We don't need $ amounts.

Anyway, the Freedom fund is intended to be a simple buy one and done fund. It includes equities and bonds. Any additional funds will have some overlap with it and are generally unnecessary. The Freedom 2020 fund is intended for those retiring in 2020, which might OK for your age and retirement expectations.

So you have an extra mid-cap value and health care tilt. Do you know why, or did those funds just have good performance? I'm not sure where the bond level of Freedom 2020 is now, but you may be close with 50% in your 401k.

What you should do first is figure out what percentage of your total portfolio is in bonds (look up the Freedom 2020 at Fidelity or your 401k site, and add Total Return if that is mostly bonds). If that looks like a level you are comfortable with, then you can decide if you want to diversify in equities beyond the Freedom fund.

[Rose3408]

As of today, 30% in the 401k, 30% in the IRA, and 40% in the Annuity which is fixed at no lower than 3.0% with Modern Woodmen. Not the largest of interest rates, but sure felt good when I was losing all that money when the market was so bad. It will provide a small, but comfortable monthly income, or total payout option in 10 yrs when I turn 67. The total $$$ in the 401k will surpass the Annuity within a year due to my monthly contributions.

If this is not the answer you're looking for, I'm sorry, but I give up, an I'm just not smart enough to answer your questions.

[Nords]

Quote:

Originally Posted by Rose3408 I thought I did just that. I have three funds in the 401k which is the PIMCO 50%, PRU 25% & PERKINS 25% which equals 100% of the 401k pie. Then I rolled over 100% of an old 401k into the Freedom Fund. All of these are tax-advantaged accounts since we I won't star paying tax until I start withdrawing the funds. None of the above is through a brokerage account. I have an Annuity w/Modern Woodmen which I purchased through a broker, but that's aside from the above. I'm sorry for being such an ignoramus and not knowing the rules here and the proper way to supply information. I'm a newbie.

It's not a format question. It doesn't have to do with "smart". It's a math question of converting the dollar value of your shares to the percentages of your total assets. We're trying to figure out how all of your various kinds of assets compare to the total of the entire pie, not the individual pies or their individual pieces.

Let's put aside the accounts for now. Let's disregard whether a mutual fund is part of this 401(k) or that 401(k) or an IRA.

Instead, first add up the value of all of your mutual funds-- whether it's in the 401(k) or the IRA, add up the dollar value of all the shares of all the funds. You're going to have to sort through all the different company & account websites and their statements to come up with that combined total. Let's say that they all add up to a total of $100,000.

Then break that down into percentages. Divide the dollar value of the Fidelity Freedom 2020 fund by the total dollar value of the portfolio and tell us that percentage. If you have $24,000 of FF shares then that'd be $24,000/$100,000 or 24%. Divide the dollar value of the Perkins fund by the portfolio's dollar value and tell us that percentage. If you had $43K of Perkins shares then that'd be 43,000/100,000 or 43%. Once you've converted all the fund share values to percentages, you'll have a list of the funds (spread among the 401(k)s and the IRAs) and their percentages (which should add up to 100%).

If any of this process is causing problems then pick the name of a moderator or a poster whom you feel you can trust, and ask them if you can send them a PDF scan of your account statements for them to figure this out for you. Or go find a fee-only financial planner in your neighborhood who can help you summarize your holdings and break them down into percentages. Then we can get on with the diversification analysis.

[Katsmeow]

I think this is what she is saying:

She has an equal amount in her IRA and 401k.

100% of the IRA is in the Fidelity Freedom 2020 fund.

For the 401k, she has 50% in the PIMCO, 25% in the PERKINS, and 25% in the PRU/J HEALTH.

If so, then allocations are:

50% - Fidelity Freedom 2020 fund - FFFDX
25% - PIMCO Total Return ADMIN - PTRAX
12.5% - Perkins Mid CP Val T - JMCVX
12.5% - Pru/J Health SCI A - PHLAX

I looked these up. PTRAX is described as an intermediate bond fund. JMCVX is an equity fund investing in mid-size companies, mostly US but a little (about 8% non-US). PHLAX is a health related equity fund. FFFDX is a fund with both equities and bonds that becomes more conservative over the years.

I don't know what options you have for investment in your 401K. In my 401k, I don't have a lot of options and some of the ones that I do have are unappealing due to high expenses. Could you list what funds you have available in your 401k and the expense percentage for each fund?

[clifp]

Quote:

Originally Posted by Katsmeow 50% - Fidelity Freedom 2020 fund - FFFDX 25% - PIMCO Total Return ADMIN - PTRAX 12.5% - Perkins Mid CP Val T - JMCVX 12.5% - Pru/J Health SCI A - PHLAX

In addition she has 40% of her assets in deferred annuity with a 3% interest rates. So the above percentages should be multiplied by .6

I entered the four funds into Morningstar Portfolio manager to get an instant X-Ray. (This is a program which analyzes mutual funds holdings).
Overall your portfolio was
Cash -6% (some of your funds, probably PIMCO is borrowing money to invest)
US Stocks 36%
International Stocks 11%
Bonds 57%
Overall expense ratio was .78%

This is a bit conservative for somebody not retired for my taste, but well within the range of a normal portfolio for a somebody in or near retirement. One of the forum's favorite funds Wellesley has an mix between stocks bonds (aka an asset allocation or AA) of just about the same.

Looking at the equity portion of your portfolio nothing stands out other than have 3x the exposure to health care stocks than the overall market.
You expense ratio is a bit higher than I'd suggest but not outrageous. You may want to look at cheaper funds with in your 401K, and possibly ditching the Freedom Fund, but only after you become a bit more knowledgeable about investing.

Overall I'd give your 401K and IRA a solid B for diversification and low expenses, well done.

My only concern is that with a conservative portfolio you also have a large chunk of money in a fixed annuity at low interest rate. I think of an annuity as bond so this makes your overall asset allocation closer to 25% stocks 75% bonds. The good news is that you have a steady stream of income from the annuity, and your 401K and IRA should see much lower volatility than most portfolios.
The bad news is that your retirement income is very vulnerable to inflation. For instance a 5 year period of a moderate inflation say 6% would reduce your standard of living by as much as 1/3 since the income from your portfolio would be very hard pressed to keep up with inflation.. This is the tradeoff that you make with a conservative portfolio.

[Rose3408]

THANK YOU, THANK YOU, THANK YOU Clifp and Katsmeow for coming to my rescue! You are both fabulous! I was up until 2 AM trying to come up with those percentage numbers for you. Whew!

Your data is absolutely correct. Again, thank you for figuring those percentages out for me and I'm sending {{{hugs}}} your way.

I attached a listed of my 401k options at Fidelity at work. And as mentioned earlier, with the IRA which is also with Fidelity I have many options to choose from.

I know my portfolio is quite "conservative" but having gone through a divorce and the inability to save as I should have for a number of years. Surviving as a single individual today can be quite challenging, especially if you own a home, plus there was also two job losses within the the 12 yrs, however, I knew once I was in a better financial as situation I could focus one again on "saving like mad" and contributing my income toward retirement savings. And since I only have 10-12 yrs and the market is so crazy, and knowing I will need these funds to financially survive since it's just little old me, I tend to be more on the conservative side in choices.

I did make one VERY big stupid mistake a few years ago. I had a good portion of my funds in American Funds and $$$ like everyone else and panicked, ran to my financial adviser who gave me very bad advise. He told me since I was so concerned about losing so much $$$ to pull out the $$$ in the American Funds and put it into the Modern Woodmen Flexible Premium Deferred Annuity I presently have; you can send me a cyber slap here. As a single women with no really good financial advise I trusted him. I only wish I knew of this forum then.

But that was then and this is now, and we can only move forward. I would like to also open up a Roth IRA haven't didn't where yet, and totally lost on fund direction. I attached a snap shot of my fund choices at work for the 401k.

Again, you are just awesome and brought a big smile to my face for providing me your assistance.

[jerome len]

I just converted a 401k to a Roth IRA and did it at Vanguard. If you invest a minimum of 50k with them they'll review your entire portfolio for you for $250.00. And, it's worth it.

You're into a lot of stuff and need someone to really help you make good decisions that you can trust. Vanguard is the cheapest and will take everything you have and put it into their evaluation. I did this a couple of years ago and learned a lot.

I'd be interested if others agree with me. you're right.....your single, you need to save, you need to know your risk and you need to know your costs. I still have accounts at Vanguard and Fidelity.....both are good but I trust the Vanguard people and deal with and their costs, in most cases, are the lowest.

Good luck

[Nords]

Quote:

Originally Posted by Rose3408 THANK YOU, THANK YOU, THANK YOU Clifp and Katsmeow for coming to my rescue! You are both fabulous! I was up until 2 AM trying to come up with those percentage numbers for you. Whew! Your data is absolutely correct. Again, thank you for figuring those percentages out for me and I'm sending {{{hugs}}} your way. I attached a listed of my 401k options at Fidelity at work. And as mentioned earlier, with the IRA which is also with Fidelity I have many options to choose from. I know my portfolio is quite "conservative" but having gone through a divorce and the inability to save as I should have for a number of years. Surviving as a single individual today can be quite challenging, especially if you own a home, plus there was also two job losses within the the 12 yrs, however, I knew once I was in a better financial as situation I could focus one again on "saving like mad" and contributing my income toward retirement savings. And since I only have 10-12 yrs and the market is so crazy, and knowing I will need these funds to financially survive since it's just little old me, I tend to be more on the conservative side in choices. I did make one VERY big stupid mistake a few years ago. I had a good portion of my funds in American Funds and $$$ like everyone else and panicked, ran to my financial adviser who gave me very bad advise. He told me since I was so concerned about losing so much $$$ to pull out the $$$ in the American Funds and put it into the Modern Woodmen Flexible Premium Deferred Annuity I presently have; you can send me a cyber slap here. As a single women with no really good financial advise I trusted him. I only wish I knew of this forum then. But that was then and this is now, and we can only move forward. I would like to also open up a Roth IRA haven't didn't where yet, and totally lost on fund direction. I attached a snap shot of my fund choices at work for the 401k. Again, you are just awesome and brought a big smile to my face for providing me your assistance.

Clif, Katsmeow, thanks for your forensic persistence. I couldn't connect those dots, especially with figuring out the annuity contribution to the overall AA.

I don't know how to say this tactfully, so I'm just going to say it.

Rose, in my opinion you're asking for advice that you're not yet ready to use. As near as I can tell from your posts in this thread, you're asking us to recommend which funds you should add to your 401(k). And then you're going to want to know what funds you should hold in the rest of your portfolio to balance out the decisions you've made for your 401(k).

But you've already talked about panicking during adversity and trusting a bad advisor. What makes you think our advice is going to be any better? More to the point, what makes you think that you're going to stick with our advice when the market drops 15-20% this summer, shortly after you implement our suggestions?

I've been on this board for a while, and we've seen this issue before from posters who haven't thought out their investment plan or their asset allocation. They don't take the time to educate themselves by reading the books that we recommend here, but they ask plenty of questions about the subject. They don't take the time to work through the Bogleheads Wiki on investing, but they ask all sorts of questions about what funds to buy for their accounts. They have all sorts of questions about asset allocation but they can't articulate their holdings or their percentages. They use vocabulary like "safe" or "conservative" without appreciating the context of those terms in an investing environment. They know an annuity is "bad" but they want to pick 401(k) funds instead of addressing the entire portfolio issue.

In some cases, they get their feelings hurt because they think they're "not doing it right" or "newbies". But what's really the issue is that they're not taking the time to educate themselves. They're blindly grasping for advice and trying to implement the first reasonable suggesting they get with little or no comprehension of why they should do it.

I suggest that you do yourself a favor. Hold off trying to pick funds for your 401(k) until later this year or even until early 2013. Take the time between now and then to read through the Bogleheads Wiki about getting started on a new investment plan: Getting Started - Bogleheads . Read the material and then ask questions about it, instead of trying to skip to the last step and buy our fund recommendations. Once you feel comfortable with the process and the vocabulary, then design your own investment plan and ask questions about asset allocation. As you go through this exercise, you'll start to figure out for yourself which funds fit your criteria and your investing tolerance. You won't have to pingpong back & forth among a conflicting set of suggestions from anonymous Internet strangers.

Best of all, the process of educating yourself will give you the confidence to stick with your plan through a bear market. The way you're doing it now is cheaper than using a financial advisor, but it's not better.

Whichever method you choose of optimizing your portfolio, I wish you success. If you choose the method you're trying right now, then I wish you good luck-- you're gonna need it.

If you decide to work on the Bogleheads wiki then I look forward to your new thread on the subject. In any case, I'm done with this thread... and hopefully you are too.

[Rose3408]

Nords -- As much as I appreciate your post, you made quite a bit of assumptions. You should never assume. You must have forgotten to read that chapter. I suggest before posting your rude comments you do yourself a favor and read a book on being a better person. There are two great ones - "The Bible" and "You Can Heal Yourself."

No. 1 - It is because of this forum and the wonderful knowledge and compassion of the posters, plus reading the books everyone has recommended (thank you) which sit before me, that I learned about my existing portfolio and rolling the money from Am. Funds and into the Annuity was a bad choice. It is because of reading the books I came back with my questions. Thank you for making me feel like an idiot and unwelcome.

No. 2 - In this post I did not ask anyone to pick funds for me. In my earlier posts I may have, but after reading the books I learned so much, especially about not putting too many eggs in one basket. I started to put together a pie chart if you will, determining the percentages of what I had and where. I was having some difficulty in doing so, and for that I apologize, but I thought I could come back here with my questions. Apparently, thanks to you I was wrong.

No. 3 - Of course I am going to stay the course when the market drops, that is why my post reads, "I made a bad choice." But I also learned so much more from the books and although Annuity's are no the best of choices, there are many to choose from, and in my case I was lucky enough in the Annuity choice made and and it will provide for some a small steady income, albeit quite small. Of course my my funds with Am. Funds would have prevailed better if I only rode out the storm. But I'm ok with my decision because as I indicated earlier, it is my 401k will be the larger of any of my investments.

No. 4 - It is because of reading the books I came back to forum to ask my questions. I am very grateful for Clif, Katsmeow's kindness, patience and understanding in assisting me. How do you know since my very first posts I didn't read the books? In all your readings and education were you never taught "not to assume?"

No. 5 - I like to see the good in everyone, which is obviously your investment savvy and being book smart. However, comments like "your gonna need it" only shows your true colors and rudeness and it's comments like these that turn people away who don't wish to return to this forum. Are we not here to help and share our knowledge? You remind me of those professors back in college who expect you to come to class the first day knowing the material and forgetting you're there to teach and help them. They would always get upset when you would try to ask questions. We're not asking for the answers, we are asking questions to learn, albeit we may not be all as smart as you and ask the questions correctly - remember, there are no stupid questions.

No. 5 - Nords -- I'm glad you're done with this thread! Thank you. We can look forward now to other more passionate and kind members like Clif, Katsmeow and others who have responded.

[clifp]

I'll stay out of the debate between yourself and my good friend Nords.

I don't think that annuity is an awful choice, I'd encourage you to take the monthly income stream rather than the lump sum, since you have already paid the fees associated with establishing the annuity.

However since you have the security of having a steady income from the annuity + social security, I'd encourage you to figure out a way to hedge against future inflation risk. If inflation takes off you'll be hit by a double whammy; not only will the purchasing power of your income stream from the annuity be reduced, but your 50% holdings in PIMCO will drop because of the rise in interest rates which are very likely to go hand in hand with inflation.

In today's economy there is no good way to do this. (I should add that I like many others have been predicting a rise in interest rates for a couple years and have been dead wrong). However, stocks generally do pretty well in a period of moderate inflation and as such provide a decent hedge.

Looking your 401K choices, I see that you have the option of the Spartan 500 Index fund, this fund owns shares in the S&P 500 and has very low expenses. I'd suggest putting at least 25% of your 401K money into it. The guys managing PIMCO are the best in the world IMO, but even so I don't think they will be able to avoid losses if interest rates rise.

It sounds like you learned a lesson in 2008 to not panic and sell at the bottom. The one disadvantage of the Spartan 500 index fund is that I can almost guarantee that sometime in the next 10 year the fund will see a drop in price of 20-30% (and possibly more).

The key to making money in the stock market is treat this as a buying opportunity. Think of it like you would shopping; imagine that you bought your favorite food one day, and the next day the grocery store has buy one get one free sale. You can look at this two ways; damn I wasted money yesterday or how great I can stock up on my favorite food, better make room in the freezer.

[Midpack]

Rose,

With due respect to both parties, Nords really didn't deserve your reply. I don't know him and he and I will never meet, but he is one of this forums treasures. He spent some time in several posts trying to help, even in the one that you took badly. Your original post wasn't in a form that anyone could use to answer meaningfully. Nords questions and comments were not out of line, why for example did you choose Freedom 2020 for your IRA and then choose something else for your 401k when you could have just chosen Freedom 2020 there too? There may be a reason, but it's not obvious! Is there a tilt you're going for? PHLAX is a sector fund and therefore an unusual choice for a newer investor, sector funds are never recommended in lazy portfolios that I've seen. What's the thought there? No reply you've gotten was mean spirited, they were all trying to understand and then help.

Picking an asset allocation and then the funds to fill it out seems to newer investors to be the hard part. While it takes some knowledge, the more difficult part of investing is having the discipline to not panic when an asset or all of them lose money. It will happen periodically, 2008-2009 taught a lot of people very costly lessons as many people sold at the wrong time and then were forced to reinvest after missing a lot of the run up that followed the earlier plunge. You have to know why you hold each asset and how they work together to have the discipline to avoid panic. Part of that is knowing how markets move up and down and that it's just part of the pay of the land. Doing nothing is often the best course - most people can't grasp that.

Knowledge and how nice a member seems to be with their wording, don't necessarily correlate. You can easily be misled with the best of intentions by both parties.

I hope you take this as intended. Again, every reply you got was with the best of intentions, including Nords. I'd suggest you read them all again, and remember everyone here has tried to help you asking nothing in return...there's no place I know of that will freely provide so much sound advice. You could pay a financial advisor 1% of your portfolio per year and likely get inferior advice.

[Rose3408]

Midpack & Clifp - I totally agree that I have received some wonderful feedback and advice which I so greatly appreciated; hence my many thank you's.

And as much as you agree with his comments, which I can appreciate and understand, especially his extreme knowledge and committed contribution to this forum, however, you can give advice without being condescending and self directing, after all, you did it and were kind and thoughtful in your posts, not to mention, helped me in solving my questions and figuring out the percentages. Let's be honest, he would continually "tell me" how I should be figuring the % out without helping, and he tends to "talk at you," instead of talking to you; big difference.

Quite honestly, in looking now at all his other posts he continually does it. We're just all here to help one another and we can do so in a pleasant manner. But maybe his just his manner and means well.

So I will agree to disagree and thank everyone here once again for their wonderful input and help.