Retirement questions....What are you doing to prepare?

[Cheetahwoman7]

Re: Retirement questions....What are you doing to prepare?

Hi Steve,

I picked up the list of venders for our 403(b) program. Almost all are annuities, but there are a few "custodial" accounts, which I assume means that I have more choice than just an annuity. The gal that handles the program for our District, didn't seem to know much. All she was able to tell me was I had to set up an account with whichever vendor I wanted before they can process my application and start taking $$ out of my check.

What really got to me is that on this vendor's list there's NO CONTACT INFO!!!! The gal at the office said it was so they wouldn't be accused of recommending any of the program vendors specifically and so that we would go through an independent financial planner. Oh, and there's several people who call themselves independent financial planners who would love to "help" you select a vendor that would work for you. Problem is, many of them are former school/district employees who have found out they can use their friendships to sell products that may not really work out well. I've talked to one of these people before and they know less than I do!!!!

I also found out that most everything has to go through the County Office of Education, and that STRS (State Teacher's Retirement System) must approve any "vendor". Guess there's some hoops they have to jump through to get on the "list".

Here are the vendors that have custodial accounts:

Ameriprise Financial Inc.
CalSTRS 403(b) State Street Bank (guess they're getting a cut on their own pension plans)
Conseco Annuity Assurance Company (don't know what kind of custodial acct. they have)
First Investors Corporation
Franklin Templeton (FINALLY, one I recognize)
FTJ FundChoice, LLC
Jefferson Pilot Financial
The Legend Group
PFS Investments, Inc
Pioneer Investment Management, Inc.
Plan Member Services (IRM Distributors)
Security Benefit Group
Thrivent Financial for Lutherans (my mom's insurance company)
VeriTrust Financial, LLC
Waddell and Reed Inc.

That's it! No other's on the list that deal in custodial accounts. I've only heard of two of them. There's about 50 others on the list that only sell annuities.

Any suggestions as to where to go from here? Seems anyone connected with giving out information on this program doesn't have much of a clue. I'll go down to the County Office of Education this week and see if I can't get more info.

CJ

[disneysteve]

Re: Retirement questions....What are you doing to prepare?

I picked up the list of venders for our 403(b) program. Almost all are annuities, but there are a few "custodial" accounts, which I assume means that I have more choice than just an annuity.

I don't know most of those either, but a few are financial services companies that do offer other investment options, like mutual funds. Ameriprise does. PFS is Primerica which is a large company. A couple of the others probably do too. Jefferson Pilot is now part of Lincoln Financial, so they may have something too.

It's lousy that they make you do all the legwork. It would be nice if they gave you more info or at least some direction as to where to look depending on what you wanted.

DW's plan was simple. They have an investment advisor with Janney Montgomery Scott who handles the plan and the choices available are all funds offered by Oppenheimer, which offers a full range of funds - domestic and international stocks, bonds, sector funds, etc. All I had to do was browse their website and research the funds. Too bad your place is making it so difficult.

Just stay away from annuities no matter what.

[Cheetahwoman7]

Re: Retirement questions....What are you doing to prepare?

Ok, I just went online to the CalSTRS site and found that they list all the available venders that I can use. They have it set up where you can compare vendors, have contact information and be taken to see how the funds have been doing on a 1, 5, and 10 year basis.

Here's the best thing though. CalSTRS is a vendor themselves and they have, hidden away, the VANGUARD FUNDS. Here's the list of the mutual funds they offer:

Citi Institutional Liquid Reserves Fund CILXX
Vanguard Total Bond Market Index Fund VBTLX
Dodge & Cox Stock Fund DODGX
Vanguard Institutional Index VINIX
Vanguard Total Stock Market Index Fund VTSAX
Fidelity Growth Company Fund FDGRX
Prudential Jennison Equity Opportunity Fund PJIAX
Delaware Trend Fund DGTIX
Blackrock Aurora Portfolio SSRAX
Brown Capital Small Company Fund BCSIX
Artisan International Fund ARTIX
Vanguard Short-Term Bond Index Fund Admiral VBIRX

Any suggestions on these?

CJ

[safari]

Re: Retirement questions....What are you doing to prepare?

I really like Dodge & Cox Stock Fund (DODGX); I am investing a large portion of my 401(k) into that fund. It's closed to new investors, so you can only access it throw your employer's plan.

[meaghanchan]

Re: Retirement questions....What are you doing to prepare?

Any suggestions on these?

Do you have an asset allocation plan set up? Meaning, have you figured out how much % of your money you want in stocks and how much in bonds? More in stocks means more potential for growth, but also more risk. Their are a couple good asset allocation calculators you can find online, or you can go with one of the 'rule of thumb' formulas. I've heard two variations- your age in bonds or your age-20 in bonds. So I'm 24- by that formula I should have 4-24% of my assets in bonds and the rest in stocks. But it depends on your risk tolerance- imagine yourself in a bear market like after the tech crash. If your portfolio lost 20% of its value- would you be OK, confident that it's going to go back out, or would you take your money out? You have to get yourself at a level where you would keep your money in, because otherwise you're buying high and selling low (at the bottom of a crash)- not a formula for success.

Once you have an asset allocation plan figured out, I would find out more about the individual funds. Look at 10-year performance and look at expense ratio. Expense ratio is one of the best predictors of future performance. A fund can do well or a fund can do badly- but if you're paying more than 1% in expenses, you're losing 1% a year regardless of whether your fund does well or badly.

Once you've done that, I would divide your money between the good funds in your plan according to your asset allocation. So you might have 30% in VBTLX (Vanguard total bond market, which I know is a bond fund with low expenses), and 70% with either DODGX (Dodge and Cox stock, which I think is a great fund despite the slightly higher expenses) or VTSAX (Vanguard total stock market index, which has very low expenses.)

I would also recommend an international fund of some kind... for 10-35% of your stock portfolio. My target is 25% of stocks being interntional. You can either do that in your 403b, with ARTIX (Artisan International fund, which I don't know anything about) or you can do that in your IRA, with any international fund you want.

Sorry for the book- hope this was slightly helpful!

[disneysteve]

Re: Retirement questions....What are you doing to prepare?

meaghanchan gave you great advice. Without knowing anything else about your finances, it's hard for any of us to tell you what to pick, but at least you've got some solid choices.

If you are just starting out and have no other outside investments, Vanguard Total Stock Index is a great core holding.

[Ima saver]

Re: Retirement questions....What are you doing to prepare?

I like the vanguard total stock market index personally! (VTSAX)

[Elgin526]

Re: Retirement questions....What are you doing to prepare?

What is the minimum income amount you think you'll need monthly to retire comfortably or in the manner to which you're accustomed?

That's hard to answer since no one knows what health care will look like in 30-35 years. I'm shooting for 3 million to retire on, and we'll just cut our coat to fit the cloth, so to speak.

What are your specific retirement goals/plans?

With 30 years to go (give or take) we don't have any firm plans. Right now we are talking about building a log cabin home in rual PA. That's DH's dream. I told him I was okay with it as long as we get to spend 4-8 weeks "someplace warm" each winter and the log cabin has a jacuzzi (I loathe the cold!). We've both traveled while young (including international) so while we will travel some, it won't be the priority it is for a lot of other retired people.

Do you have your money in various types of saving programs? If so, which and why those particular programs?

Right now all we have is my 401k and DH's pension. My 401 is in an aggressive mutual fund, between what I put in and the company match, I'm putting in 17% of my gross income. DH's pension is through his union rather than the company so with luck it will actually be there in 30 years. But once we get some debt paid off we'll be starting an IRA for him, just in case!

What are some of your concerns when it comes to retiring?

Health care. Health care. Health care. Oh, and if I'll live to see the Cubs win the world series....

What things will need to happen for you to get there?

We'll need to keep puting $$$ in my 401k at least at my current rate (more would be better) and make an average of 8% return. If I do that I should retire with around $3 million, not including DH's pension and SS (if any). We will need to retire with no debt (shouldn't be a problem but one never knows what's around the corner).

Will you downsize your home?

Well, our current home is only 1300 sqft! But we will not have a large or expensive home when we retire.

Move to a different location?

Yes. Either someplace in PA or "somewhere warm". My vote is for the Carolina's.

Anything else?

That's all I can think of!

[Ima saver]

Re: Retirement questions....What are you doing to prepare?

Come and see us! I live on 10 miles away from Carolina (north) in the North Georgia mountains. There are lots of log cabins (really houses) around here. We even lived in one for 11 years. (They are neat, but lots of maintenance)
Our house is over 3200 sq. ft. I would not mind smaller, but dh likes bigger, bigger!!

[Elgin526]

Re: Retirement questions....What are you doing to prepare?

Come and see us! I live on 10 miles away from Carolina (north) in the North Georgia mountains. There are lots of log cabins (really houses) around here. We even lived in one for 11 years. (They are neat, but lots of maintenance)
Our house is over 3200 sq. ft. I would not mind smaller, but dh likes bigger, bigger!!

I might just take you up on that! I've only been to the Carolinas once, I was just driving through and it was mostly at night. But I have a cousin who moved out there and she just loves it, as does every one I've talked to.

[Cheetahwoman7]

Re: Retirement questions....What are you doing to prepare?

Well, as far as current investments, I have $$ in four main mutual fund families: Franklin Templeton, Invesco, Nicholas Funds and 20th Century. One of those is in the international health care sector, another is a some what aggressive fund (dynamic, they call it), the others are pretty much balanced funds.

I think I would like to do a bit more international investing, another aggressive fund, then put the majority into something that can give a pretty balanced return. I'm only about eight years from retiring, so I don't want to invest a majority of this $$ in something that might go bust. I won't have any time to make it up in earnings. That being said, I'd still like to play around with some diversified funds that take a bit more of an aggressive approach.

Meaghanchan, I haven't thought of percents yet, as far as how much I should put in each fund. I would like to get some prospectuses (prospecti??? heheheehe) and find out a bit more about each fund before I give anyone my money.

Oh, and one more thing. Going through CALStrs they don't charge a % in fees, it's a straight $50 a year. With me just beginning to invest with a 403(b), that might be a bit costly at first, but a bargain as the $$ go up in the program. Then again, I don't know if all the fees are waived in each of the individual funds that CALStrs represents or if that's an additional fee....better go check.

Also, I went down to the County Office of Education today to find out more about the program. They gave me the same paperwork that my District office had given me, but explained alot more. I found out that if any of the approved companies have it, I can also apply to participate in a 457 plan at the same time I have a 403(b) plan!!!! I think that means I can double how much is put away tax defered yearly.

Time to go investigate a bit more!

Thanks for all the help so far,
CJ

[meaghanchan]

Re: Retirement questions....What are you doing to prepare?

Here's a link to Vanguard's Asset Allocation questionnaire, so you can start to figure out your desire asset allocation. Many people consider your stock/bond mix the most important decision you can make about investing for retirement. There are other asset allocation calculators you can find online, if you want a second opinion!

Vanguard Asset Allocation investor questionnaire

Are those other mutual funds you have in an IRA or are they in a taxable account? I ask this because they don't seem to necessarily be allocated with a specific plan in mind. Are these funds you thought because they were doing well or because they fit your target allocation? If they are in tax-advantaged accounts, and you find they don't fit your target allocation, you might think about trading them for some funds that do fit your overall target better. If there are tax consequences for selling, though... Well, you'll have to think about that too.

[Cheetahwoman7]

Re: Retirement questions....What are you doing to prepare?

One of the funds is an old IRA that I have. I was thinking of rolling over the $3,150 that I have in another IRA that's not earning anything at the bank and putting it in that account. The others are funds that I researched A LONG time ago that I liked. I've never done any "target allocations" so to speak. I would just look at funds that were doing well, had a good history, were no load, and charged low % for their fees.

All except one have done well. Got out of the one that didn't do well and changed it into that Dynamic fund. It's holding it's own, but still not a star performer.

Hmmm, guess I have to find out more about my own funds as well as any new funds for the 403(b).

CJ

[disneysteve]

Re: Retirement questions....What are you doing to prepare?

I think I would like to do a bit more international investing, another aggressive fund, then put the majority into something that can give a pretty balanced return.

I haven't thought of percents yet, as far as how much I should put in each fund.

You've been making an extremely common mistake with your investments.

Imagine getting into your car and saying, "I want to drive to California." You have no map, no GPS, no directions. You just start driving with the hope that you will eventually end up at your destination.

You are doing something similar with your investments. You're opening accounts and purchasing funds with no plan or direction. You need to use some retirement calculaor to come up with an estimate of how much you need to save to have the lifestyle you desire. Then you need to work with the asset allocation planners to devise a plan to get you there.

Many people end up owning a hodgepodge of mutual funds, half the time not even knowing or understanding what they have. They may own multiple funds that hold similar investments. Or they may be taking on way too much risk, or not nearly enough. It is important to check a fund's return and fees, but just good returns and low fees isn't enough reason to invest. It also needs to fit your overall portfolio.

There are plenty of good online resources. I'd also suggest investing in a subscription to Money magazine. They regularly have articles on asset allocation, retirement planning, etc.

[Cheetahwoman7]

Re: Retirement questions....What are you doing to prepare?

Hi Steve,

I have a subscription to Money magazine...that's how I found the mutual funds that I invested in. I'm willing to reallocate my $$ and set up a more substantial plan. I did have a plan when I first started to invest, but through the years I haven't kept up on my investments like I should have. Guess my life got a bit in the way.

I called one of my mutual funds today and asked for them to send me a listing of all their current funds, what they invest in, and how they're doing overall on a 1, 5, and 10 year basis. Once I get that info, I'll see if there are any funds that I'm interested in, then ask for the full prospectus. They also offered me the use of one of their financial allocation planners for free. Again, once I have a chance to look over which funds I might be interested in, I think I'll take them up on that offer. They should be able to give me more direction. That doesn't mean I'll put all my $$ into their fund, but it should help me decide in which types of funds I should distribute them.

I'll call another one of my mutual funds tomorrow, and hopefully, by the end of next week I'll have all the info on the funds I currently invest in and what all of their offerings are so I can better balance my portfolio. Once that's done, I'll look into the 403(b) options.

Thanks for all the help,
CJ