Portfolio Advice Welcome

[FloridaJim57]

This will probably be my first, last, and only post on this board as I know very little about investing and really am not in a position to comment on topics as they appear. I am posting to ask you folks your advice on how to invest the money currently in my IRA with Fidelity in a money market account. I am retired one year (65 years old), married (wife of 42 years is 63 years old). We are both on Social Security. We own a small condo in Florida which is our home which is paid off. I have no debt at all. With my social security, my wife's social security, and my tiny pension, I have more than enough to meet our monthly cost of living such as food, electricity, condo monthly maintenance and annual taxes, car insurance, fun, etc. I have about $130,000 in cash in my checking and savings account. I also have about $412,000 in an IRA with Fidelity in a safe money market account. I would have had more saved up in cash, but, my wife was struck with breast cancer twice and the doctors recommended a chemotherapy mix that was labelled "experimental" which means that the insurance company would not pay for it. But, my wife is fine now, so no complaints there. I figure to take future big expenses like new car, vacations, etc. from the $130,000. Also my wife is on my COBRA plan which is about $800 a month, until she is 65 and medicare eligible. Anyway, I was looking for advice on how to invest the $412,000 in my IRA. I am getting all kinds of advice, some of it seems very risky to me. My wife and I are planning on speaking to a fee only financial advisor next month, but, I would welcome some suggestions to compare to his. i don't have any of my own. I know this is kind of long for the small amount of money I have, and for that I apologize. Thanks for reading.

 

[mistermike40]

I'll leave the financial advice to others here more knowledgeable than myself (I use two low-cost index funds and a bond fund, invested conservatively). I just wanted to say I'm glad your wife is doing well As we get older, health and time become our most valuable assets.

 

[FloridaJim57]

Thank you

I'll leave the financial advice to others here more knowledgeable than myself (I just use two low-cost index funds and a bond fund, invested conservatively). I just wanted to say I'm glad your wife is doing well As we get older, health and time become our most valuable assets.

Thank you very much for your kind words about my wife. Yes, she is checked twice a year and she is all okay. The rounds of chemo took a lot out of her though, I bring her for B12 shots every ten days or so. She also takes Tamoxifen for about eight years.

 

[OldShooter]

Start here: "The Coffee House Investor" by Bill Schultheis https://www.coffeehouseinvestor.com/ and read it prior to your meeting with the advisor. The smarter you are as a customer, the more the advisor will be able to help.

(According to another poster, there is an update to Bill's book due to be published in Novermber, but I would not suggest that you wait. You can always buy that one too if you like the first version. I'll be doing that when it comes out.)

The other thing to remember is: Don't hurry. In a year or two you won't remember how long it took you to make a good decision. If you rush into a bad one, though, you will remember it for the rest of your life.

 

[Sunset]

You are welcome to stay as there is lots of other stuff people discuss besides $$$.

You don't say where you have your "$130,000 in cash in my checking and savings account" . If you don't have a savings account online like ally.com , you are missing out on earning some interest.

I have a checking account at a regular bank, plus I have a savings at Ally bank https://www.ally.com/

I can move the money between them in blocks of cash, so I earn interest at Ally, while the money waits to be spent.

Do follow OldShooter advice on reading.

I will give my opinion, since you asked.

My recommendation for the IRA of $412,000, is that it is NOT safe in a "safe money market account" over the long term, literally you will lose buying power as inflation will be more than the safe earnings. Lucky for you, inflation has been low, so you've probably only lost 1->2% purchasing power each year.
You do need to invest the money in the stock market.

Be cautious of the Investment Advisor, some like to fill their pockets with commissions or load fees, none of which I would pay now that I know better.
Glad to see you are thinking fee only advisor.

In your shoes, I would invest in broad based funds/etfs , at this time of the crazy market, I'd go with something simple like 50% in VTI (you can look it up).
30% in BND, and 20% in VXUS.
This will generate dividends of approximately ($3,420 + $1,483 + $1,994) = $6,897 per yr.

These ETF's also come in Fund equivalents, but ETF's are free to purchase at most brokerages, where these Vanguard funds (free at Vanguard) cost money to purchase at some brokerages.

You may notice Advisors will want to spread your money over 25 various funds, but that is really just to make it look confusing and complex.

Due to the crazy high stock market currently, I would literally want to put the money into the various funds slowly over time, as slow as $10K each month, perhaps on the 15th of the month.
Now if the market drops 30% I'd want to stash the rest in right away.

A key point in having money in the market, is to NOT sell after it drops a lot in price.

 

[bloom2708]

I would do 40% Total US stock index. 60% Total US Bond index. Adjust to 30% if not risk takers. Adjust to 50% stocks if "risk takers".

Keep your cash. Use 4% for of the IRA each year for "fun money".

With SS + Pension covering all your needs, you can afford to have some fun.

 

[HI Bill]

I also have about $412,000 in an IRA with Fidelity in a safe money market account.

Hi! Money market investments and CDs are not a safe investment, unless the need is very short-term, as the rates they pay are far below the Fed's goal inflation rate of 2%.

For long-term investments (years to decades), having your $ in a low interest-rate paying account means that your buying power will be significantly eroded over time. Let's say you start investing in a money market account in 2020, inflation is 2%, and your earnings rate is negligible.

• By 2030, you'd have lost 18% of your original buying power.
• By 2040, you'd have lost 34%.
• By 2050, you'd have lost 44%.

The easiest way to keep up with inflation at the lowest risk is to buy a target retirement date mutual fund.

 

[Ncc1701]

This would be my conservative asset allocation if I were you:

Vanguard Wellesley Income VWIAX 50%
Amplify Growth and Treasury SWAN 30%
S&P 500 Top 50 XLG 20%

 

[copyright1997reloaded]

OP, I honestly get worried when I read posts like yours.

Why? Because we've had a 10+ year bull market, with the SP 500 going from roughly 1000 in September 2010 to roughly 3380 today, so a triple plus over that time. So here we are with that huge run up and you are all in cash...and NOW considering moving it to investments with more risk. This gets me nervous because it reminds me of conversations with people in late 1999/early 2000 who had been all in cash and were finally asking about investments in the market.

Having said this, others have pointed out some useful guidelines for investing. My only advice is given where we are, to do so s-l-o-w-l-y, e.g. over 24 months or so.

Even though you are getting next to nothing on money market funds, I am not much for a lot of exposure in treasury notes/bonds, especially anything with a longer duration. The real (after inflation) return on 30 year treasury bonds is negative .34. I can't see any reason (other than trying to match liabilities w/i pension funds) for purchasing these given the yields (e.g. .71 nominal on a 10 year note).

 

[pb4uski]

Jim, since your SS and pension is more than your cost of living, you are in the "won the game" zone... in other words, if that money evaporated to zero overnight you would still be fine financially.

So in your situation there are two schools of thought. One is that since there is no need for the money to grow then there is no need to risk it... in which case you would invest it is safe investments like CDs... but you will get a low return. The other extreme is that since you don't need the money you can accept a lot more risk then invest it all in equities. And obviously, since both extremes have a 100% success rate, anything in between would be a-ok too.

So for the safe version you could invest in a short-term bond fund or CDs. For the other extreme you could invest in their domestic equity fund, FZROX. Or an inbetween would be one of their balanced funds.