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Thoughts on diversifying investments
Old 01-25-2017, 12:32 PM   #1
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Thoughts on diversifying investments

Retired 1/4/2017

Should get my pension Lump sum 3/1. Will represent about 22% of investable assets today. My 401k is currently with Vangaurd as that is who my prev employer used. Now of course, I can move it to any other institution as a 401k if I want. It represents about 42% of investable assets today.

I have some IRAs (backdoor for path to Roths, one for each my DW and I) and brokerage account in Fidelity which collectively represent maybe 7% IA.

So I went to my old FIDO guy who I lost access to 2.5 years ago because I yanked a big rollover out of there and fell below the min balance to keep him, and waved this pension lump sum in front of him. Of course he said he would be glad to help invest it, then immediately asked about my 401K. When I told him the cumulative balance, he said they have a promotion for new investments and if I gave them my pension lump sum, I'd get $600, and if I brought in the 401k, $2500. Neat chunk of change, but in reality as a percentage of the whole, not that much. Not a huge motivator.

So in my head right now is to deposit the LS into one of the existing FIDO IRAs and ask him, given the bigger picture, to offer a recommendation on investments. I'll keep the 401K with Vanguard for now. I have no problems with Fidelity, I like their website and tools, and the advisor seems pretty good. Vangaurd, not so much.

Then, just to make him do a little work, I'll ask him what he would recommend if I brought the 401K to him too.

In the next few weeks I have to spreadsheet all my holdings for him so he can see where we are. I might share some of that here because I know it is relevant, but I would value any thoughts/suggestions.

DW will work for another 3-4 years BTW, and the plan is not to have to draw anything from the portfolio until 2 years from now. Right now I am favoring keeping the LS invested in Fidelity and the 401K in Vanguard. DW's 401K is in Vanguard as well.

Ideas and thoughts welcome.
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Old 01-25-2017, 12:35 PM   #2
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Old 01-25-2017, 12:43 PM   #3
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Originally Posted by doneat54 View Post
Retired 1/4/2017

Should get my pension Lump sum 3/1. Will represent about 22% of investable assets today. My 401k is currently with Vangaurd as that is who my prev employer used.

Ideas and thoughts welcome.

Just a small comment of clarification: you can't actually move the 401k to Fidelity. You can roll it over into an IRA at Fidelity, but it won't retain some of the features you might have as 401k (for example, in some states, 401ks are better protected against liability claims than are IRAs or some 401ks allow penalty-free withdrawals before age 59 1/2 whilst IRAs do not)

PS: Congrats on your FIRE!
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Old 01-25-2017, 02:43 PM   #4
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I would not bother with advice from the Fidelity person. My inclination would be to keep all the money with Vanguard and if the 401k has good features like a stable value fund or penalty free withdrawals after 55 just leave it as is.

Having the pension instead of the lump sum would have been a good diversified, but you now might look at some rental real estate.


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Old 01-25-2017, 02:50 PM   #5
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I have never seen what I consider good advice from Fidelity. Usually the advice is a lot of actively-managed funds with high expense ratios. Fidelity advisors will not even hint that Fidelity has decent passively-managed index funds.

So, collect the cash bonuses at Fidelity if you must, but only invest in their very-low-expense-ratio, passively-managed index funds.

You won't be able to get more diversified than that anyways because those index funds will own every possible stock and every possible bond.
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Old 01-25-2017, 03:31 PM   #6
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I have never seen what I consider good advice from Fidelity. Usually the advice is a lot of actively-managed funds with high expense ratios. Fidelity advisors will not even hint that Fidelity has decent passively-managed index funds.

So, collect the cash bonuses at Fidelity if you must, but only invest in their very-low-expense-ratio, passively-managed index funds.

You won't be able to get more diversified than that anyways because those index funds will own every possible stock and every possible bond.
I guess everyone's results may vary. I've gotten great advise from Fido including use of no fee I Share ETF's. They even advertise them front and center on their web pages. Fido also has tools on their website to create your own asset allocation if you want a more software based solution.
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Old 01-25-2017, 11:34 PM   #7
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If your 401K at work has low or no fees and low fee funds to invest in, then you may want to keep it there, as it is protected from lawsuit.

Your IRAs and any 401Ks rolled into IRA's are subject to lawsuit depending upon the level and your State.

Of course if your 401K is lousy and expensive, it could be a lot cheaper to roll it over and get umbrella insurance.
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Old 01-26-2017, 08:32 AM   #8
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Originally Posted by euro View Post
Just a small comment of clarification: you can't actually move the 401k to Fidelity. You can roll it over into an IRA at Fidelity, but it won't retain some of the features you might have as 401k (for example, in some states, 401ks are better protected against liability claims than are IRAs or some 401ks allow penalty-free withdrawals before age 59 1/2 whilst IRAs do not)
IMO not a small clarification, but a very meaningful one. Thanks for the info.

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Old 01-26-2017, 08:33 AM   #9
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Old 01-26-2017, 11:38 AM   #10
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I guess everyone's results may vary. I've gotten great advise from Fido including use of no fee I Share ETF's. They even advertise them front and center on their web pages. Fido also has tools on their website to create your own asset allocation if you want a more software based solution.
Here is a nice blog article about a Fidelity advised portfolio:
From 28 Funds to 3: Simplifying to a Three Fund Portfolio - Physician on FIRE
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