Does this allocation sound good?

[pawsplus]

I'm 47 and currently have $47K in my 403(b). I had a meeting w/ the VALIC guy and he recommended changing my allocation to the following:


PROPOSED ALLOCATION:
25% Stock Index
10% Mid Cap Value
15% Small Cap Index
10% International Equities
25% Strategic Bond
15% Fixed Account Plus


CURRENTLY it is:
14% Stock Index
5% Mid Cap Index
30% Small Cap Index
10% International Equities
22% Strategic Bond
5% International Government Bond
14% Fixed Account Plus


Does that sound good? I trust him VERY much but thought it was a good idea to run it by you guys, too. Since I'm a bit behind as far as retirement goes, I want to catch up.

Oh, and I am starting a Roth IRA as of this month, too.

Thanks!

 

[utrecht]

I cant believe Im seeing "VALIC guy" and "trust him very much" in the same post.

Whats "stock index"? Thats a tad general isnt it?

 

[yakers]

get out of VALIC if you can without too much termination fee. Go to 403(b)wise . The Leading Source of 403(b) Information on the Web for more information about 403b issues. My sister has VALIC in Chicago public schools. My wife was a teacher in Los Angeles Unified and I learned more about 403b than I want to say. Worst system imaginable.

 

[pawsplus]

Well, sorry, but that's what we have here (work). I did have TIAA-CREF and they were USELESS, not helpful, and pretty much told me I would have to work until I was dead. My guy at Valic has turned my portfolio around, so thanks very much but I think I'll keep him.

I have no idea what "stock index" is. That's just how it's listed. Never mind - I'll just do what he suggested. He's saved my financial life so yes, I do trust him.

 

[walkinwood]

Well, sorry, but that's what we have here (work). I did have TIAA-CREF and they were USELESS, not helpful, and pretty much told me I would have to work until I was dead. My guy at Valic has turned my portfolio around, so thanks very much but I think I'll keep him.

I have no idea what "stock index" is. That's just how it's listed. Never mind - I'll just do what he suggested. He's saved my financial life so yes, I do trust him.

Please compare what he did for you v/s what you would have done with index funds. Almost anyone could have saved your financial life from 3/09 to today. And almost no one could have saved your finances from 10/07 to 3/09.

 

[Bimmerbill]

What are the loads you will pay switching your accounts around?
What are the expense ratios of your current vs proposed allocation?
How is you VALIC guy compensated?

If he makes money off of the fees you pay when you transfer/sell your holdings, watch out. Its a built in conflict of interest.

 

[ziggy29]

As soon as the OP mentioned the VALIC guy, I figured he'd be about as popular as an annuity salesman here...

 

[yakers]

Get a copy of "Teach And Retire Rich", the best basic investment book for teachers and non-profit employees.
I like the proposed AA more than the current AA, particularly reducing small cap which has been on a tear but may not keep outperforming. Both are decently diversified AAs. Looking at your AA is one of the two key things you have control over. But the other key thing to look at beyond the AA is costs, are these no load funds? What are the expense ratios of the funds and are there any other costs. The costs are so high is some school systems that it is actually better to forgo the 403b tax deferral and just go for an after tax Roth.
For instance, my wife's 403b (LAUSD, notoriously bad choices) had Fidelity Contrafund as a choice. Over the years she had a personal rate of return of 9.7%, not bad over 15 years in that fund But...the commercial version of the Fidelity Contrafund returned 14.4% durning the same period. Maybe you have one of the few decent 403b systems, there are a few, but its really worth your time to do a lot of research.

 

[utrecht]

Well, sorry, but that's what we have here (work). I did have TIAA-CREF and they were USELESS, not helpful, and pretty much told me I would have to work until I was dead. My guy at Valic has turned my portfolio around, so thanks very much but I think I'll keep him.

I have no idea what "stock index" is. That's just how it's listed. Never mind - I'll just do what he suggested. He's saved my financial life so yes, I do trust him.

You invest in things in which you have no idea what they are? People trusted Bernie Madoff and I doubt they understood how their money was invested with him either.

 

[Katsmeow]

Pawsplus

You need to find out what funds are available for you to invest in and what the costs are for the funds. For example, my 401(k) is with Fidelity as is my husband's. However, we each have totally different funds available to us and the expense ratios on the funds available in my 401(k) are much higher than those available to him. I had to look at the expenses very carefully to make choices with as low a cost as possible.

 

[jIMOh]

I'm 47 and currently have $47K in my 403(b). I had a meeting w/ the VALIC guy and he recommended changing my allocation to the following:


PROPOSED ALLOCATION:
25% Stock Index
10% Mid Cap Value
15% Small Cap Index
10% International Equities
25% Strategic Bond
15% Fixed Account Plus


CURRENTLY it is:
14% Stock Index
5% Mid Cap Index
30% Small Cap Index
10% International Equities
22% Strategic Bond
5% International Government Bond
14% Fixed Account Plus


Does that sound good? I trust him VERY much but thought it was a good idea to run it by you guys, too. Since I'm a bit behind as far as retirement goes, I want to catch up.

Oh, and I am starting a Roth IRA as of this month, too.

Thanks!

what else is available?
what is your risk tolerance?
is a 60-40 stocks-bonds allocation appropriate for that risk tolerance?

 

[pawsplus]

Maybe you have one of the few decent 403b systems, there are a few, but its really worth your time to do a lot of research.

I don't have a choice, though. I mean, if I want the 5% match I have to use this. And I sure do want the free $$!!

I spoke w/ my guy again and he said that he was being moderate b/c *I* had said I wanted to be moderate and that's totally true. I tend to be terrified of risk where $$ is concerned. He said that given my age and all, I could afford to be a LITTLE risky. I suggested that we could be as risky as a motorcycle (with a helmet)--not as risky as motocross w/ no helmet, but not as conservative as the hatchback w/ the seatbelt, either.

So we're losing some of the cash stuff and that's going into mid-caps and stock.

RE: the Roth -- now that I'm starting that, would it be better in future to add whatever extra I can to the Roth or to the 403(b)? I.e., I will (hopefully) get a 3% raise this year (didn't last year) and I can put that in either the Roth or the 403(b). Which would be better?

 

[DblDoc]

RE: the Roth -- now that I'm starting that, would it be better in future to add whatever extra I can to the Roth or to the 403(b)? I.e., I will (hopefully) get a 3% raise this year (didn't last year) and I can put that in either the Roth or the 403(b). Which would be better?

pawsplus - this is the usual order to fund your accounts (What You Need To Know About IRAs - Forbes.com)

A general rule of thumb for investing priority is:

No. 1: Invest enough in your workplace 401(k) to receive the full matching contribution available from your employer.
No. 2: Maximize contributions to an IRA.
No. 3: Put more in your 401(k) to reach the annual contribution limit.
No. 4: Invest in a taxable account.

So grab the match, fill your ROTH and then you will need to decide whether to forgo the expensive funds you are limited to in your 403b or invest in taxable. That is a tough call without knowing what funds and expenses you have to choose from in your 403b and what your retirement goals and plans are. There are also rules of thumb for which types of funds go into your tax deferred and which would be better in your taxable if you decide to go that route.

DD

 

[caninelover]

I think the proposed allocation is good. As others have mentioned, it would be a good idea to investigate the proposed funds to understand what the expense ratios are, which may influence some of the choices. But, overall, looks like an appropriate asset allocation.

I would even up the international equities to 15% and drop the domestic equities to 20%, but again, it would depend alot on what funds were offered in those asset classes.

 

[Helen]

I think I'd be more concerned with the expense ratios then I would the asset allocation. My partner was in a 403b with Valic. I did the math and realized she'd be better off going with Vanguard in an after tax account (she didn't get a match) and skipping the 403b.

I second going to the 403bwise.com and reading what they have to say.

 

[Duke of Sands]

If you have no other choices for your 403B you should contact the school's finance office and ask them to offer more choices, e.g. Vanguard. No reason why your contribution could not still be matched.

 

[pawsplus]

If you have no other choices for your 403B you should contact the school's finance office and ask them to offer more choices, e.g. Vanguard. No reason why your contribution could not still be matched.

Vanguard is an option here. However, I'm not convinced that they would be "better" than what I have, particularly as I have a great guy who helps me at VALIC. What do you guys have against VALIC, exactly?? When I was w/ TIAA-CREF I got NO personal attention, no one there gave a damn, etc. I now have a guy who comes to see me to discuss my allocation in person annually and gives a damn. I don't see that flitting around between plans is going to help me.

 

[Duke of Sands]

No personal experience with VALIC but members here usually want to invest almost all of their hard-earned savings as opposed to spending it in fees. If you feel you are getting your money's worth, so be it. But I would be surprised if he can do better than, say just putting half your money in the Total Stock Market Index Fund and the other half into the Total Bond Market Index Fund and forgetting it. It's no more difficult than sending a check and filling in a form available on-line. You owe it to yourself to at least check it out, e.g. here: https://personal.vanguard.com/us/whatweoffer/mutualfundinvesting/quickstart
Good luck!

 

[pawsplus]

What are the loads you will pay switching your accounts around?
What are the expense ratios of your current vs proposed allocation?
How is you VALIC guy compensated?

If he makes money off of the fees you pay when you transfer/sell your holdings, watch out. Its a built in conflict of interest.

I asked him these questions. His responses:

(1) He was super happy that I was asking these question -- he wants me to be as educated as possible and we spoke for some time.

(2) He gets no $$ from fees when holdings are transferred or sold. He gets his money primarily in 3 ways: (a) from when he gets someone to roll over to VALIC (as I did from TIAA-CREF 4-5 years ago b/c they sucked); (b) he gets a small % of the % I put into the accts every month; (c) he is compensated by VALIC based on how well my accounts do. Hence, his main motivation is to make sure my accounts do as well as possible, b/c that's how he makes $$.

(3) He is sending me a file w/ the expense ratios listed, but told me that it's just a fact that a low expense ratio can mean a fund that performs less well--lowest cost doesn't mean best performance. Again, since he makes HIS money based on how well my overall portfolio does, it doesn't do HIM much good to have me lose money or make less. So he balances expense ratios against performance.

(4) He said that all the retirement options my employer offers are pretty good. Fidelity and Vanguard are fine, he said, but are often better for people who already know what they want and don't need as much guidance. VALIC is set up to help those who don't really know what they're doing, and god KNOWS he has done that. I am learning more all the time, even though I'm an English major and math and $$ make me want to curl up and die, and the main reason I am doing that is b/c of my VALIC guy.

I feel very comfortable there.

 

[travelover]

I feel very comfortable there.

Well, that's why they call them salesmen.

 

[DblDoc]

Its his job to make you comfortable there. We have no skin in this game but you are getting consistently expressed concerns about someone giving you expensive financial advice. I seriously doubt any significant portion of his earnings is tied to good performance of his accounts. The "fact" is that the unbiased academic research has consistently shown that costs matter and that the cheaper funds will, in the long run, outperform their more expensive brethren. Spend some time to learn about saving and investing and put your hard earned dollars to better use then funding some VALIC guys retirement rather than yours. If you must use an adviser, and that can be appropriate for some of us, then use a fee based one who charges by the hour - not one who skims a large portion of your retirement earnings every year.

I'd suggest starting here: Getting Started - Bogleheads
For books here: Books: Recommendations and Reviews - Bogleheads or here : http://www.early-retirement.org/for...reading-list-with-a-military-twist-46732.html

Good Luck

DD

 

[LOL!]

C'mon folks why dump all over the OP when they love their VALIC guy? Sure we don't want to pay through the nose for our investments because we would rather read up and understand what's going on. But for folks who don't understand and want to have a real, live person do their investing for them, well, that's gonna cost some big bucks.

Of course, maybe if they took the time, they could find another real, live person who cost much, much less to talk to. I don't see that happening though.

 

[pawsplus]

Well, that's why they call them salesmen.

Not sure what you're are suggesting I DO. There is a reason why there are financial advisors -- it's b/c not everyone can or has the inclination to b/c a complete expert on this stuff! I am going WAY out of my comfort zone to educated myself a bit re: this stuff, but there is no way I'm going to b/c a financial whiz. I'm way too busy being an expert in several other fields.

Do all of you just ignore your financial advisors' advice and just do whatever the hell you want? Seriously

 

[pawsplus]

Its his job to make you comfortable there. We have no skin in this game but you are getting consistently expressed concerns about someone giving you expensive financial advice. I seriously doubt any significant portion of his earnings is tied to good performance of his accounts.

Again: He makes NO money when I transfer b/t funds, change allocations, etc.

He makes most of his $$ by bringing in new accounts (as when he got me to switch to VALIC from the useless TIAA-CREF).

He makes the rest from the performance of his accounts.

But for folks who don't understand and want to have a real, live person do their investing for them, well, that's gonna cost some big bucks.

So tell me what YOU do, huh? If you have a work-related account, are you really making ALL the decisions about every aspect of it w/ no input from a financial advisor? B/c if so, I think you're the ones who are going to be in trouble eventually, not me. Unless, that is, you are actually financial advisors yourselves.

 

[Duke of Sands]

The point is WHO is your advisor, someone that you pay by the hour or per visit,, OR someone who gets a cut of your investments. Like it or not, his actions are always oriented toward what maximizes their income and not necessarily what is best for you. He can't help it, it's the job and it's human nature. He may be nice (indeed HAS to be nice) but he is first and foremost looking out for himself. An independent financial advisor, on the other hand, gets no cut of the action but usually wants to do best by you and you alone so you will return next year.

What to do? Find a book written for you, there are plenty around. Check out the suggestions above (Bogle) or the list herein:
http://www.early-retirement.org/for...reading-list-with-a-military-twist-46732.html
Then, contact Vanguard, Fidelity or one of the other low-cost mutual fund firms and tell them to invest your money in a moderately aggressive way e.g. my prior example of 2 simple index funds. OR if you are too shy for that, use google to find an independent financial advisor in your area. If you are still gun-shy, you could perhaps split your investments 50:50 (Valic vs. the above) and see how each pot does after, say, 5 years.