Roth Ira

[martyb]

I could use a little help & advice here. I'm a fed employee who will have a DBP starting in 5 yrs at age 55. I don't get any matching money, but I still max my TSP. Haven't always been allowed to do the max, but I am now & will till I retire. If I'm lucky, I'll only see about $250K in my TSP when I'm done. Maybe a similar amount in the wife's 401 by the time she retires...we got started late on these items. Where I need input is with regard to my desire to begin funding to the max a ROTH IRA for both myself & DW. She will keep working for at least 8 more yrs, so we can fund it for at least that long, even when I'm RE. I realize that since I'm only starting the ROTH at age 50, that it won't have time to really explode compounding-wise, but I think it should still make some pretty good money if we don't touch it till much later down the road. I've looked at the Vanguard and Fidelity sites, but would really like some input from folks who use either company, or somebody altogether different. Also, for a guy in my shoes, with a solid couple of pensions (reserves pension will kick in at 60) how do you think I should allocate the IRA $$?) Should I stick to a Lifecycle type deal, or what? I'm just looking to pad things financially however I can, and I figure it would be nice to have money in several pots to draw from when needed or desired. BTW, my Social Security will be negligible, probably no more than $3600 per year. I've got my 40 quarters, but I fall under the WEP for govt. employees and haven't contributed substantially to SS since 1981. At least that's what THEY say lol! Any thoughts are appreciated. Oh yeah, the DW will get SS when she's eligible, but that's 16 yrs down the road.

 

[W2R]

I could use a little help & advice here. I'm a fed employee who will have a DBP starting in 5 yrs at age 55. I don't get any matching money, but I still max my TSP. Haven't always been allowed to do the max, but I am now & will till I retire. If I'm lucky, I'll only see about $250K in my TSP when I'm done. Maybe a similar amount in the wife's 401 by the time she retires...we got started late on these items. Where I need input is with regard to my desire to begin funding to the max a ROTH IRA for both myself & DW. She will keep working for at least 8 more yrs, so we can fund it for at least that long, even when I'm RE. I realize that since I'm only starting the ROTH at age 50, that it won't have time to really explode compounding-wise, but I think it should still make some pretty good money if we don't touch it till much later down the road. I've looked at the Vanguard and Fidelity sites, but would really like some input from folks who use either company, or somebody altogether different. Also, for a guy in my shoes, with a solid couple of pensions (reserves pension will kick in at 60) how do you think I should allocate the IRA $$?) Should I stick to a Lifecycle type deal, or what? I'm just looking to pad things financially however I can, and I figure it would be nice to have money in several pots to draw from when needed or desired. BTW, my Social Security will be negligible, probably no more than $3600 per year. I've got my 40 quarters, but I fall under the WEP for govt. employees and haven't contributed substantially to SS since 1981. At least that's what THEY say lol! Any thoughts are appreciated. Oh yeah, the DW will get SS when she's eligible, but that's 16 yrs down the road.

Wow! Lots of questions. I am also a federal employee, and didn't get my Roth IRA started until 2006. I plan to retire in 2009. Better late than never! I am going to leave my small Roth alone, with some moderately aggressive investments, and let it grow for a while after I retire.

I have my Roth IRA with Vanguard, and love it. I can do everything online. Because most Vanguard funds require $3000 minimum investment, and because Lifecycle funds don't appeal to me, what I have been doing is to buy a different fund with my Roth contribution each year with the goal of being reasonably diversified in a few years. In 2006, I bought Windsor (VWNDX), and in 2007 I bought European Index (VEURX). I haven't decided what to buy in 2008. I suppose that diversification of your overall allocation in all accounts matters most but to me, its simplest if I try to diversify both my TSP and my Roth.

With Vanguard, if you buy less than $10K of an index fund there is a $20 fee, I think. Be sure to check the "fees and minimums" section for any fund you are considering.

 

[travelover]

I use both Fido and Vanguard and would recommend either, for low fees and good choices.

Asset allocation is a complex topic and has been covered here and on Bogleheads forum exhaustively. I'd start with the nice summary that Nords and Martha have compiled in the FAQ section.

 

[martyb]

Maybe my queston should have been: I am almost 50 yrs old. Since I will have two Defined Benefit Pensions (40K at age 55 & 18K at age 60) and plan to have roughly 500K total in mine & DW's 401k's, should I be more or less conservative in my allocations for a ROTH IRA I am about to open for myself/DW at ages 50/46? Should the DBP's mean I should be much more aggressive/risky? Also, what are the pros & cons between Vanguard & Fidelity? Sorry the original post was so rambling. Guess I'm gettin' old LOL!

 

[travelover]

I'm in a similar situation as my pension covers all my living expenses, though it is not COLAed. There seems to be two main views on this situation. One view is that since you have a pension, you can afford to be more aggressive. The second view is that since you have the pension, you can afford to take less risk. Another factor is whether you plan to leave an inheritance. So it gets back to the "what ever feels right to you and allows you to sleep at night" saw.

I think Vanguard's ERs are generally lower, though Fido has some very low ER Spartan index funds. Vanguard seems to have a wider range of index funds. Both good companies in my mind.

 

[RetireeRobert]

Maybe my queston should have been: I am almost 50 yrs old. Since I will have two Defined Benefit Pensions (40K at age 55 & 18K at age 60) and plan to have roughly 500K total in mine & DW's 401k's, should I be more or less conservative in my allocations for a ROTH IRA I am about to open for myself/DW at ages 50/46? Should the DBP's mean I should be much more aggressive/risky? Also, what are the pros & cons between Vanguard & Fidelity? Sorry the original post was so rambling. Guess I'm gettin' old LOL!

So, will your two pensions (and eventually the little SS) cover your living expenses?

What is your/DW's risk tolerance profile?

How will your two pensions/SS keep up with inflation?

How are you assets in the 401ks/TSP allocated?

Think about these questions. If inflation offset is going to be a concern down the road, then you want to consider how your 401k/TSP in combination with the Roth IRAs will be able to provide inflation offset. You can then do asset allocation considering ALL your pots and income sources.

I have been a Vanguard customer for a couple of decades and am thoroughly satisfied. I also use TDAmeritrade and Charles Schwab and am also satisfied with them. Fidelity has a good reputationas does T. Rowe Price. I think you can't go wrong with any of them. Compare services/products/fees for the type of stuff tht interests you.

Good luck. I think your getting on the ball at ages 50/46 is going to leave you two sitting pretty!