In need of Financial Expertise

[testtubes]

Looking over all of the posts on this board two things have become very clear to me.
1- there are a ton of people in here that have real financial expertise when it comes to the decisions that have to be made with regard to early retirement and
2- I'm not one of them

When it comes to finances, I would fall under the catagory of "Challanged".
I did however, have both ears open in 1988 when someone said, " put all you can in your 401K account".

Now I am 54, and hoping to retire early which would be in Sept. 07 at 55, or longer if the numbers don't add up.

This is my question:
I need opinions on the best way to invest $900k, that will result in a monthly income, and what are realistic expectations.

I am interested in protecting at least 80% of the principle till age 62 (7years) when I will start drawing SS.

My wife already draws a pension from teaching of about $1600/month, and my company will pay 75% of my health insurance for life.

I am looking for any advise as to what company to invest with, ratios, and anything else someone with zero financial expertise should need to know.
Thanks in advance

 

[lswswein]

Hi testtubes
Its easy for us to give advice but its your money. The best thing you could do is to start reading and learning. Do look at the posts in the best of boards http://early-retirement.org/forums/index.php?board=19.0
Also there are quite a few posts on the subject - you can search for them.

A good list to start reading is
http://diehards.org/readbooks.htm

remember for all you know we could all be 14yr girls from missoula

-h

 

[brewer12345]

I secind the suggestion that you read up before doing anything. Plan on doing it yourself, not paying someone else to screw it up do it for you. I would also suggest that you leave the money in your 401k for now and hold off on doing anything with it until you have done your reading and asked lots of questions here.

 

[LOL!]

Let me try to make the reading and learning more palatable to you. When you stop working for your employer, you will have a new job: working for yourself. Your income will come from your investments and SS. Working for yourself is real easy, but you still have to put a few hours of time in. One cannot spend 10 minutes or an hour on a message board or with a financial advisor and expect to get a year's salary out of it. But you can read a couple hours a week for the next couple of years and you will know enough to make your job of retirement a piece of cake.

 

[My Dream]

Let me try to make the reading and learning more palatable to you. When you stop working for your employer, you will have a new job: working for yourself. Your income will come from your investments and SS. Working for yourself is real easy, but you still have to put a few hours of time in. One cannot spend 10 minutes or an hour on a message board or with a financial advisor and expect to get a year's salary out of it. But you can read a couple hours a week for the next couple of years and you will know enough to make your job of retirement a piece of cake.

Well put LOL, I'm presently taking your advice, but find it very hard to wait those next couple of years especially when I'm a results oriented type person. I know be patient grasshopper. I am trying though.

Thanks

MD

 

[rogerc1944]

If you are impatient to figure a strategy, you need to determine how much money you'll need each year until you're eligible for Social Security. If you really want real safety, consider a money market account through one of the big institutions. For example, Vanguard's Prime Money Market is durrently paying a little over 5%. That would give you back more than $45k/year. Of course, rates go up and down so there is no guarantee that rates won't fall. Sooner or later, they will! Your 900k, however, would be protected. The other major downside of such an extremely conservative approach is inflation. A period of high inflation could greatly reduce the value of your funds but so would low inflation over a longer period.

The best approach is really a well diversified portfolio that takes into account your personal fears and dreams. To determine just what these are takes a lot of work and study and planning.

 

[clifp]

Well put LOL, I'm presently taking your advice, but find it very hard to wait those next couple of years especially when I'm a results oriented type person. I know be patient grasshopper. I am trying though.

Thanks

MD

Your best investment is your financial education. Here is why.
Many people with your significant sum would end up talking to annuity salesman that hang around teacher lounges. A really bad investment like an annuity can cost you 3%/year in lower returns. On roughly a million bucks that is $30,000/year. The majority of Americans will end up either investing in too conservative of investments (like bank CDs) or with added expenses like mutual funds with a load and/or financial advisors.
These can easily cost you 1.5-2% per year or ~$15,000.

If spend 2 hours week over the next year learning, that is 100 hours of financial education. The pay off is annual savings in the $15-30,000 range or $150-$300/hour. Now if you are doctor or lawyer this may represent a paycut but for most people this is big raise.

Since you've accumulated $900K in your 401K you probably have made some decent investment choices, don't make any dramatic changes. (Unless 100% of your 401K is in the stock market than we should talk).

By the way investing doesn't have to be complicated or time consuming (once you understand the basics).

Here are some links to the Couch Potato portfolio
http://www.dallasnews.com/s/dws/bus/scottburns/columns/archives/1995/910924SU.htm
and
more at scottburns.com

 

[Alex]

First step - read the "Bogleheads guide to investing". This is an easy to read book that I cannot recommend highly enough. It is written in a style that anyone can understand but it never talks down to the reader. Everyone I have ever lent it to, has read it from cover to cover. I think that is very telling, because reading books about investing usually requires that a large drool cup be in close proximity.

(by contrast nobody I've ever given Bernsteins "the intelligent asset allocator" has ever finished it. except me ).

After you've read up, if you feel the need for more advice, come back and fire away!!!!There are alot of very smart folks here.

 

[albundyz]

testtubes:

I'm only a year older than you, but in the same situation, i've got 8 months before I have to make any big decisions.

I don't know if you live near a big city, but I work in a large city near a library and i was amazed at all the books available for both investing and for retirement in general.

Some people like to read those kind of books, some don't. If you're interested check it out. I've learned a lot. You might also just keep reading the posts on this message board. Over time almost every possible question is asked.

My fav book so far is Work Less, Live More by Bob Clyatt. The book Coffeehouse Investor was short and good, too. Both were sitting on the shelf at the library.

Hey, wanna make lots of friends? ask everyone if you should take Social Security at 62 or 66 or 70.........just kidding

 

[pjdaddy]

testtubes,

Our situations are nearly identical. I'm a couple years younger than you, and have 3 years to go until my wife reaches the magical number of points for early retirement.

I'll second what many have said regarding "The Boglehead's Guide to Investing" as an excellent starting point, and frequenting the boards both here and at www.diehards.org.

I would also suggest that you look closely at the expenses of your current 401K, and determine whether you would be better served by rolling over into another account when you retire. For example, I have a Vanguard account that was established with my previous employer, and enjoy an overall expense ratio of 0.16% on those holdings. My 401K account with my current employer has expenses of 0.95%, with the majority of the available fund selections in excess of 1%. The difference in administering a $900,000 balance at these expenses is a bit over $7000 per year. Money that's lots better off in your pocket.

The information and knowledge that I've gained in reading the books and boards previously recommended by others far exceeds what I gained in working with a financial advisor.

 

[2B]

Money taken out of a 401k "after retirement and age 55" is taxed as ordinary income and avoids the need to do an IRA 72t to avoid the 10% penalty. Leaving some of the money in the 401k may be a good strategy to bridge until age 59 1/2.

I also recommend reading Scott Burns and asking questions here.

 

[Moemg]

For real begginers at Financial planning I'd recommend "Financial Planning for the Utterly Confused " by Joel Lerner.It walks you threw all of the basics.

 

[Mr._johngalt]

For real begginers at Financial planning I'd recommend "Financial Planning for the Utterly Confused " by Joel Lerner.It walks you threw all of the basics.

It doesn't cover spelling apparently.

JG

 

[kjpliny]

It doesn't cover spelling apparently.

JG

lol...my pet peeve is the commonly overlooked one: "definately".
/cringe

 

[2B]

What's wrong with this forum? Why don't we have spellcheck?

 

[cute fuzzy bunny]

We do!

It just doesn't notice a grammatical error, which the what the above is.

I'm surprised a mensa member cant tell the difference!

"Threw" is a perfectly properly spelled word, its just not the grammatically correct "through".

 

[Mr._johngalt]

We do!

It just doesn't notice a grammatical error, which the what the above is.

I'm surprised a mensa member cant tell the difference!

"Threw" is a perfectly properly spelled word, its just not the grammatically correct "through".

"which the what the above is" ?? "cant"?? "its"?? Obviously,
my absense didn't elevate CFB's IQ. He and Nords could start a
club together. How about "Densa"?

JG

 

[d]

absense

? can't find this in my non-mensa dictionary. please advise. thank you.

 

[cute fuzzy bunny]

Hello! You've been ineffectively zinged by the chief resident moron...Johnny "[moderator edit]" Galt!

My kid was whacking on the keyboard while I was typing.

Whats your excuse for being an *******?

 

[bosco]

We do!

It just doesn't notice a grammatical error, which the what the above is.

I'm surprised a mensa member cant tell the difference!

"Threw" is a perfectly properly spelled word, its just not the grammatically correct "through".

Regettably, I have to agree with JG (could be a first).

Although 'threw' and 'through' are both words, but they are not the same word. They are etymologically completely different. Therefore if someone says "threw the looking glass" unless they tossed a mirror, the have misspelled the word 'through', not made a grammatical error. They have made a misspelling because they meant 'through' but spelled 'threw'. To characterize it as a grammatical error implies that the error was in sentence structure. In fact, the error was in transcribing the language (in a proprely formulated sentence) correctly into written form.

 

[2B]

Now this is a highjacked thread.

 

[Nords]

He and Nords could start a club together. How about "Densa"?

All things considered, JG, perhaps you should take a look at these discussion boards:

http://socialize.morningstar.com/NewSocialize/asp/AllConv.asp?forumId=F100000035

http://socialize.morningstar.com/NewSocialize/asp/AllConv.asp?forumId=F100000001

They're topics you feel comfortable with, you'll meet people there who haven't heard your stories yet, and perhaps your ex-wife won't feel compelled to follow you. You could make a fresh start.

Best of all, I don't post at M* anymore.

 

[cute fuzzy bunny]

Regettably, I have to agree with JG (could be a first).

Although 'threw' and 'through' are both words, but they are not the same word. They are etymologically completely different. Therefore if someone says "threw the looking glass" unless they tossed a mirror, the have misspelled the word 'through', not made a grammatical error. They have made a misspelling because they meant 'through' but spelled 'threw'. To characterize it as a grammatical error implies that the error was in sentence structure. In fact, the error was in transcribing the language (in a proprely formulated sentence) correctly into written form.

While its debatable and your thesis may be correct, I'll bet $100,000 that our dear cunningham engaged in no such though process. He saw a junior poster make a small error and decided it created an excellent opportunity to be a jerk. His actions created no benefit for anyone nor did it improve the discussion. Which is pretty much par for the course.

Good luck Nords...he's a troll of a different kind. He wants attention and creation of self worth, which means he needs to stir the pot where he's known and will get the desired responses.

He didn't get that at raddr's board and he wont get that at morningstar. The former dismissed him because he has no actual investment knowledge coupled with a short list of interesting stories; the latter will dismiss him because there isn't a particular shortage of dimwitted political trolls.

He doesnt have anywhere else to go, and no actual life. So here we are.

 

[Moemg]

John ,Sorry next time I'll use a dictionary .Actually I saw your picture in there under the word JERK .

 

[cute fuzzy bunny]

I'm sorry that happened Moemg...it was quite uncalled for...but I think you've established the root cause.