Undereducated and misdirected in life. Help.

[cloud9nd]

Hello, I have looked at this site for about a year now on and off and I have gone through some life changes the last couple of years and in 2020 I was going to buy a different home and did not and always have a desire to do better in life.

I'm 42.5 YO. Wife is 54. Both make about the same income now. I have only associates degrees and she has experience and titles.

We don't have much for 2 older adults but I would like to learn to do more and better with what we have.

I come from a family that had money but they were dead and the money was gone before I knew them. My parents were blue collars and not great with money other than staying out of major debt at best.

I'm not book smart and I'm not really financially savoy I just know saving makes a difference.

I'm here hoping to learn from smarter people that have wisdom to share that I should have and hope to find earlier in life.

I don't have much, but I would like our money to work for use as in passive income of some kind that is something to bank off of or just be able to rely on it eventually.

Though she is older we plan to retire together in 13 years.


She stepped down 2 years ago and took a major pay cut in her career and is really not career driven anymore. She just wants to have less stress.

We technically have $330,000 between savings and 401k accounts to "play with".

I tried an investor and it has been a horrible experience. in 6 years we have made no money, paid taxes and paid his fees. I'm pulling out of that soon. I already pulled most money away from him. I asked in March before the crashes to move to gold and was told no.

I have met with several investors locally and I am disappointed with all of them and they seem to share the same ideas.


Our home is worth more to us sold than holding on to. I'd like to sell it and buy a smaller home somewhere that is cheaper as well. This would add around 100-150k to our amount to get working for us now.

So we carry no debt at all and I have a hobby car to sell with old collections and things which still is not much in the scope of things.

I'm hoping to learn what I can do with the money rather than just invest with some.

I had a business for a while and was successful and enjoyed it but employees are tough when it comes to skill and quality these days.

I have a pension that in 13 years if I complete with give me 28+ years on it. I would not draw until I am 65 unless needed.

I don't do much 401k since I plan to retire early I don't want my money locked in anything. I just get match. Both of us do.

Our yearly expense on everything EXCEPT food and entertainment is 9500.

It should stay the same or less if or when we move.

What can we do better? If nothing changes for 13 years we will save 40+k a year.

So far nothing has worked for making us money, only saving and that is not how I want it.

Any help is appreciated.

 

[mystang52]

I never give specific financial suggestions. I had some difficulty understanding some of your information. If I read it correctly, you are not contributing to a 401K, despite an employer match. Think about it: if it's a dollar-for-dollar match that's a 100% return. If they match even 10%, that's still a great return for a guarantee (savings accounts are paying at most 1/2 of 1 % these days). So you shpuld be contributing to your 401K's.
If you're not financially savvy, you should not be investing in anything other than reputable mutual fund
Beyond that, I suggest you just save as much as you can, and make sure you are spending wisely.

 

[travelover]

Welcome. Investing is not difficult, especially now. I'd suggest to move your money to a place like Vanguard or Fidelity and put it in a Target Retirement Fund appropriate for the year you plan to retire, like 2034. The target fund automatically adjusts the percentage of stock and bonds as you age and has low fees.

If your 401(k) plan allows for it, you can withdraw from it after age 55, so if it has reasonable fees, it makes sense to invest there as well, especially if you get a match.

 

[RunningBum]

I like travelover's suggestion. Or if you think you are suited to it, you could invest in rental real estate to create some passive income. You'd have to have some ability to judge whether people would be good renters, and some basic repair skills that would hold down maintenance costs. I don't have the interest of mentality for that so I don't have any additional suggestion on how to get started but there are others here who do this.

 

[cloud9nd]

Thank you all, sorry I know it was not clear.

2- 401k's minimal continuations for matching only.

-110+k of 401k combined
-230+ksavings
-House is about 350k value at best right now. Strange because most neighbors are 550+k. I'm the poor guy.

-Have a little more here and there, but not accounted for in this idea to use it, more of a safety net.

She gets full SS in 13 years and I we would have to buy insurance for years that I am retired until I am 65 so 10 years.

2034 retirement for both.

-Projected saving annual: 40K
-SS for her 67yrs
-Insurance bought for me for 10 years
-Use account money up to 1500 a year until I collect SS at 62
-SS for me 2041 62 yrs
-Pension for me- 2044 65yrs

 

[FI_by_2023]

You are doing great! The number one item in retirement planning is expense control. You are killing it in this area!

The target 2034 fund is a great suggestion. The biggest thing with investing is navigating the noise....thinking others are beating market, hearing how great a stock is doing as well as doomsday predictors. Use this forum and boggleheads to keep a steady-hand during times when you are tempted to make a decision to get out of market. ...just ask group before making a decision.

Investing is one of the few professions you can become great at with limited knowledge and experience.

Downsize your house at retirement age and you will be all set with the additional equity to cover several years spend along with your 2034 portfolio and eventual pension... all assuming you are keeping spend under control.

 

[Sunset]

OP - inside your 401K , what is the money invested in ?

Your outside/taxable savings you had with an investor, what is it currently invested in ?

I'm wondering as you said you "...already pulled most money away from him.." so wondering if you are sitting their with everything as cash ?

 

[JoeWras]

Hi cloud9nd. I just want to give you some encouragement. You say:

I'm not book smart and I'm not really financially savoy I just know saving makes a difference.

Well, there are plenty of PhD educated people out there who cannot grasp what you have already mastered. They don't know that savings makes a difference. Amazing. So, you are on the right track! There are plenty of people with nothing more than a high school degree who can get finances right. I know, my parents were a good example. My dad worked hard in the trades his entire life. A very worthy vocation.

You'll get plenty of excellent detail advice from others. Good advice can be found here.

 

[cloud9nd]

OP - inside your 401K , what is the money invested in ?

Your outside/taxable savings you had with an investor, what is it currently invested in ?

I'm wondering as you said you "...already pulled most money away from him.." so wondering if you are sitting their with everything as cash ?

In the bank currently until I speak with Fidelity and vanguard this week.

 

[cloud9nd]

I appreciate the help everybody!

 

[Amethyst]

Great advice. I would just add that 42.5 seems quite young to me. Please don't think of yourself as Old, behind the curve, etc.

Like you, my much older husband and I also come from blue-collar families that managed not to pass on any debt. We need to celebrate this more, instead of only looking at the inheritances we did not get.

You are doing great! The number one item in retirement planning is expense control. You are killing it in this area!

The target 2034 fund is a great suggestion. The biggest thing with investing is navigating the noise....thinking others are beating market, hearing how great a stock is doing as well as doomsday predictors. Use this forum and boggleheads to keep a steady-hand during times when you are tempted to make a decision to get out of market. ...just ask group before making a decision.

Investing is one of the few professions you can become great at with limited knowledge and experience.

Downsize your house at retirement age and you will be all set with the additional equity to cover several years spend along with your 2034 portfolio and eventual pension... all assuming you are keeping spend under control.

 

[CRLLS]

You guys are doing great. Just a back of the envelope calculation: If invested, that 330K will easily double in the next 13 years before retirement. Saving 40k per year will get another $520k plus growth. 660 + 520= $1.18 mill. Not a whole lot. But certainly a nice nest egg. That alone will support your stated expenses without having to downsize the home. When you add in pensions and SS, you should be able to support your current lifestyle, and then some, in retirement.

I agree, as most here will tell you, don't give your money away to an advisor. You can do well enough or even better with either index funds or target funds. I prefer the index funds since the expense ratio is generally lower. I do think a 2034 target fund is too early considering the differences in your ages.

If you haven't already, open a Roth and get the clock started. It will give you more financial knobs to turn in the future.

 

[cloud9nd]

Since it is 13 years I'm wondering what you all think about annuities?

 

[CRLLS]

There are all kinds of annuities. Are you thinking a SPIA? I caution you about thinking only about "13 years". You are looking at 40+ years more life on average, and possibly 60 years.

 

[JoeWras]

Since it is 13 years I'm wondering what you all think about annuities?

Annuities are a complex topic. The word "annuity" covers anything from a CD-like instrument, to extremely complex instruments that merge insurance and stock results. All annuities tie up your cash for a long time, or forever. Go slow on this idea.

Some of us park our ultra-safe bank money in some of the on-line banks while we transfer to our investment plans. I'd rather do that first than put it in any kind of annuity. Even if you decide to get annuities, don't ignore the stock market. You should expose some of your investments to equities no matter what.

 

[38Chevy454]

Cloud9nd, you are doing better than I think you believe you are. One thing to be sure, do not downgrade yourself because you don't have the four year degree. Many people are very successful in life and retirement without that degree. The important part is to apply what you can learn, and increase your learning through life. Keep up the high savings rate, let compounding work its magic. Just keep saving and ignore the market volatility. Formulating an investment plan and sticking to it will help you through the ups and downs.



Back on your question, for sure keep the 401k to maximize the company match. that's free money, and it also helps take the total off top for income taxes. When you say you have tried an investor, i assume you mean a financial advisor (FA)? Sorry to hear that your net results are less than you thought, those AUM (Assets Under Mgmt) and investment administrative fees, combined with potential taxes, are likely sucking away much of what you though were gains. You can do it yourself! Save not only the FA's fees and the potentially high investment fees by becoming a DIY investor. You are capable, just read a bunch on here and other sources to get that self-education. Invest in low fee widely held funds. On your 13 year timeframe I would be pretty heavy in stocks. Up until I was approx 50 years, I was 100% stocks in my investments, and only then started slowly reducing to 85/15 and now my target is 70/30. Although recent great stock market returns I am more like 80/20. I am personally not any kind of annuity fan. There may be some small areas where it is the right choice, but IMHO I do not see that for you now or even into first part of retirement. The target date funds are a good suggestion, although they may be more conservative than my suggestions. Going with self-directed at Fidelity or Vanguard is a good choice. They both should be able to help you open accounts and then you can make investment choices.



Having your pension is great. That is like an annuity in that you will receive a regular payment of income. Add in SS, and your required withdrawal to meet your budget may not be as bad as you think. Depends on budget of course, sounds like you have done well to keep your living costs down.


If you have considerable amounts in after tax savings, as a traditional brokerage account vs pre tax IRA, you can help yourself to learn about tax laws and effects of how short vs long term cap gains are taxed. Also dividends and tax issues. In pre tax account you are shielded from that until you start withdrawals. Your title for this thread "undereducated and misdirected" can both be fixed and you will come out better in the end. Nobody is perfect in their investments and life choices, the key is to make a lot more good choices than detrimental choices. Getting away from your FA, getting on the forum here, and making changes for the future will help ensure you have a good retirement.

 

[HI Bill]

Welcome! At 42, you shouldn't be considering 'playing with' your retirement investments. Losses at you age could quickly become permanent. Most here avoid annuities due to high costs and restrictions.

Since you're risk-adverse, I'd recommend going with Fidelity or Vanguard, and buying one target date retirement fund which most closely matches the year of your planned retirement such as VTHRX (Vanguard Target Retirement 2030 fund; this is a low-cost balanced all-in-one fund that currently has 40% total stock market, 28% total international stocks, 23% total bond market, and 9% total international bond index). I'd keep 6 months of cash in Vanguard's FMFXX money market account or their soon-to-be-opened very short term bond fund for emergencies.

 

[travelover]

Since it is 13 years I'm wondering what you all think about annuities?

No, just no. There are a lot of reasons, especially inflation, but just no.

 

[Chuckanut]

I tried an investor and it has been a horrible experience. in 6 years we have made no money, paid taxes and paid his fees. I'm pulling out of that soon. I already pulled most money away from him. I asked in March before the crashes to move to gold and was told no.

Honestly, the above is painful to read. Six years into one of the biggest bull markets in our lives and you have made no money?!?!?!?! I need to take slow deep breaths, do some calming yoga, and have a few shots of whiskey. Thank goodness my physical isn't today. My doctor would probably call the EMTs and order them to take me to the nearest emergency room. GASP!

Humbledollar.com <---- spend the next three months reading an article a day.

Or get on Bogleheads and look up the lazy man's portfolio.

https://www.bogleheads.org/wiki/Lazy_portfolios


Actually, do both.

 

[UnrealizedPotential]

Cloud9nd,
One thing I think you could benefit immediately from is regularly reading a financial columnist. Some years back I read Kenneth Hooker and I also learned a bit from Ben Stein, although I am not sure he would be the best example. Maybe someone can recommend one for you.

 

[Palmtree]

I would recommend reading one or more of the following.

Andrew Tobia's book, "The Only Investment Book You'll Ever Need. It is funny and a quick read."

J.L. Collin's "Simple Path to Wealth" Very good advice written like he was talking to you across the kitchen table.

The basics in financing/investing is Jane Bryant Quinn's classic "Making the Most of Your Money Now". It's a huge reference book that can be used again and again throughout a financial lifetime.

 

[RetireeRobert]

Congratulations on having "no debt". That by itself gives you a greater degree of financial freedom than lots, perhaps most, people have.

I would also agree with the suggestion to look to the Boglehead's "lazy man's' portfolio." Simple and over time very effective at growing wealth.

Stay away from the type of "investor advisors" you indicate you have interacted with. Lots of expense connected to them, not the least of which expense is "lost principal" or lost time value of money.

So, keep it simple: stay out of debt
grow you investable funds with the simple and easy to implement
"lazy man's portfolio".

Just those two steps should serve you well. I also agree, stay away from annuities.

 

[cloud9nd]

Thank you all I really appreciate the advice, I'm trying to learn fast as I can I don't understand why this is an issue for me considering I'm able to figure out trends I know when to invest in things I really just don't know how like I told the investor I wanted to get into gold right before the crash and you told me it's not something we do.

I thought I'm paying someone for a service like if I hire a mechanic or a painter that's the job they do for you

the whole thing confuses me I don't understand why it's an issue for me but I'm just not getting the picture of investing I have most of the tools I have some money and I can't figure it out it's very frustrating.

I'll try to learn what I can and get away from these people but it's like looking at math when you're a kid and you don't understand the problem I don't know how else to explain it it's very bizarre.

I'm sure over the last 6 years with a couple hundred thousand or more I should have been able to figure something out or somebody working for me could have used the money to make me some money.

Plenty of rich people can make money out of a few hundred thousand I'm sure..

 

[cloud9nd]

Honestly, the above is painful to read. Six years into one of the biggest bull markets in our lives and you have made no money?!?!?!?! I need to take slow deep breaths, do some calming yoga, and have a few shots of whiskey. Thank goodness my physical isn't today. My doctor would probably call the EMTs and order them to take me to the nearest emergency room. GASP!

Humbledollar.com <---- spend the next three months reading an article a day.

Or get on Bogleheads and look up the lazy man's portfolio.

https://www.bogleheads.org/wiki/Lazy_portfolios


Actually, do both.

This is what I don't understand is how to get away from them. Where do I put the last 401K we have with them currently so I'm not paying them fees anymore?

We have one account left with him which is a 401k of my wife's I've been telling her to get away from him.

We don't know where to take her 401k that is just sitting out there. I told her to roll it into her current 401k.

But I would like to take our finances to one place and get it figured out I can't seem to do that.

Today I asked him on the off chance just to see what he'd say if he could do any investing for us since the markets are obviously going crazy in certain areas.

he said they don't do those kinds of investments I'd have to do it myself through an account he can open for me. I also see Edward Jones and others aren't allowing people to take their money anyway that they've been making in the market recently.

 

[Out-to-Lunch]

I may have missed it upthread: Who is the current custodian of the 401(k) account in question?

If this is an old 401(k), you can roll it over to a traditional IRA, or, likely to the new 401(k), as you suggested. (Not all 401(k)s allow rollovers to them, but I believe most do.)

Also, you say you "have a 401(k) with him" (meaning the investor). You could also just terminate the relationship with him, and leave the money in the 401(k).