Stuck and a bit scared to proceed

[Petunia 100]

Thank you Petunia. See I need to look up what a broad market index fund is to be honst. I do know what re balancing is actually and had done that online with some investment before we went to target date

Mutual funds can be either actively managed or index. With an actively managed fund, someone is choosing which stocks/bonds to buy and sell. The goal is to beat the returns of the market. It's not easy to do, because buying and selling costs money, and because some of the picks will not turn out to be good ones.

An index fund does not attempt to beat the market. Instead, it holds every stock/bond in its market. This keeps trading costs extremely low and eliminates the risk someone will make bad picks and underperform the market.

So an S & P 500 Index Fund will hold every stock in the S & P 500 Index. Whatever the S & P Index does, an S & P 500 Index Fund will do almost the same (there is the loss of the annual expense ratio).

I am a fan of Target Date funds, if the particular fund is a good one. They aren't all created equal. Some are too expensive. Some seem to be full of the worst offerings of the particular fund family. But some, such as those at Vanguard, are excellent.

[Petunia 100]

That is fantastic that your bounced back so well! Plus that makes your advice very valuable to me since you have been there and done that! I will 100% go for the Roths since they grow tax free.


Does anyone have any opinions on Principal since that is whom we have an appointment with. The friend that suggested the adviser we will see is a HUGE Dave Ramsey fan and learn through this person because they were endorsed by Dave Ramseys program.

Principal sells expensive load funds.

Dave Ramsey has horrible investing advice. It's borderline criminal, in my opinion. It's a shame too, since he has the ear of millions. He is in a position to really help people build secure retirements. Instead, his advice is to hire an expensive salesperson, invest 100% in stocks now and in retirement, and withdraw 8% per year. This is a recipe for disaster.

[Petunia 100]

We had our home paid off by age 26 and have never done debt besides the house. We also had a higher income for about 5 years while I was a full time earner. It also helps living in a low cost of living area. The biggest thing though was no non mortgage debt. I do use my credit card to keep our scores up since we haven't had a mortgage in many years but pay in full monthly.
Every week $ is electronically funneled to savings and has been for years. I'm a tightwad and since I haven't been able to work full time in years I take my job of making the money we do make behave and stretch seriously. I am a dunce on investing but am proud to say I have been able to help lots of our friends learn to do things more frugally and get a budget on track.

You are an awesome saver. I hope you stick around, because I could use a lot of help and advice in your area of expertise.

[Blessed]

Principal sells expensive load funds.

Dave Ramsey has horrible investing advice. It's borderline criminal, in my opinion. It's a shame too, since he has the ear of millions. He is in a position to really help people build secure retirements. Instead, his advice is to hire an expensive salesperson, invest 100% in stocks now and in retirement, and withdraw 8% per year. This is a recipe for disaster.

I really know nothing about him or his advice to be honest. The friend that uses the adviser we plan to consult is a HUGE fan. The plan helped them get out of some very heavy debt. Other than that I am clueless. I know our friend is invested in mixed mutual funds. I dont know much but I always thought you didnt want to withdraw more than 4% a year in retirement.

[Blessed]

You are an awesome saver. I hope you stick around, because I could use a lot of help and advice in your area of expertise.

Thanks Petunia. That is a nice compliment. I'd be glad to help anyone however I can.

[dontgopoor]

Blessed,
I think that Bucky Badger is right on target with her advice for you. Think long term.

I will add that you should be be very careful with the "investment pro." Feel free to post the guidance you're given and ask how they make money from their work with you (and post that answer too).

Real "investment pros" don't have to work, they are good enough to make a living investing their own money. So you'll likely meet a "sales pro" that will use marketing techniques to sell you something that's good for them and maybe not for you. But maybe that's to be seen.

Also, if/when you do invest your $300k, you'll want to invest that amount in small chunks over a long period of time. You'll need to do a little research or get guidance on how long of a period and what size investments. And based on history, I'd wait until after October 2012 - Sept/Oct are historically very volatile months. But you'll want to research this more.

[sblatner]

I think you want a fee only advisor if you think you need an advisor. Someone who charges you by the hour or by a percentage of the portfolio you put with them. You don't want to work with anyone who gets paid because they sell you something with a fee - a loaded fund. It is okay to talk to the Principal gal but really get the facts on how she is paid. If she sells you a loaded fund, I think the fees are deducted from the funds you give her. If you give her $100k and she invests it in a loaded fund with a 5% fee, you will probably only invest $95k and $5k goes to her.

I bet if you called Vanguard, they could help you figure out where to invest your funds. You could even get a list from them and come back here and get advice on whether people here think it is a good mix.

Remember to keep an emergency fund and to not invest all of the savings you have.

Do you have kids? Are you saving for college?

[BuckyBadger]

Dave Ramsey does have obscenely bad investment advice. Some of his advice is debatable (i.e. I wouldn't recommend giving up an employer match in a 401k even if an individual still had some debt remaining) but makes sense depending on your perspective. His investment advice and recommendation of managed funds doesn't make ANY sense at ALL to ANYONE! He's good about getting people out of debt, but if you're already out of debt I don't think he really had much to add...

Managed funds have higher fees than index funds and almost never perform enough better to make up for the difference. Usually they don't perform at all better. And that 1% (or more) extra compounded over 30+ years is a GIGANTIC bite taken out of your funds.

Vanguard index funds are the way to go. The fees are fractions of a percent.

Stick to either Target Date funds or stick to the Big Three (Total Bond, Total US Stock, Total Int'l Stock) and remember to rebalance periodically and keep Bonds out of taxable accounts. Target Dates do the rebalancing for you.

If the market takes a dive right before you're ready for retirement and you're in 80% stocks, yeah, you're going to be screwed. But it's your own fault for not being way less invested in stocks by that point in your life. It's not the market's fault. All those stories about near-retirees losing it all in the stock market were because they had too much in the market! "Your age in bonds" is a nice safe rule of thumb that will keep you from getting hurt when it comes time to retire.

[Petunia 100]

I really know nothing about him or his advice to be honest. The friend that uses the adviser we plan to consult is a HUGE fan. The plan helped them get out of some very heavy debt. Other than that I am clueless. I know our friend is invested in mixed mutual funds. I dont know much but I always thought you didnt want to withdraw more than 4% a year in retirement.

He has helped a lot of people get out of debt, which is awesome. Clearly he really knows how to motivate people.

Yes, the standard advice is to withdraw no more than 4%. Some advisors suggest as much as 5%. I've never heard of any reputable advisor suggesting more than that.

According to the famous Trinity Study, a withdrawal rate of 8% for a portfolio of 100% stocks over a 30 year period will result in failure 59% of the time. (Failure being defined as running completely out of money in your lifetime).

[Petunia 100]

If the market takes a dive right before you're ready for retirement and you're in 80% stocks, yeah, you're going to be screwed. But it's your own fault for not being way less invested in stocks by that point in your life. It's not the market's fault. All those stories about near-retirees losing it all in the stock market were because they had too much in the market! "Your age in bonds" is a nice safe rule of thumb that will keep you from getting hurt when it comes time to retire.

I am always skeptical when people say that they have "lost it all". If it is true, then they must have chosen individual stocks and somehow all of their picks went bankrupt.

But yes, I agree. By the time you are ready to retire, you should have several years worth of withdrawals in very low-risk investments.

[Blessed]

Blessed,
I think that Bucky Badger is right on target with her advice for you. Think long term.

I will add that you should be be very careful with the "investment pro." Feel free to post the guidance you're given and ask how they make money from their work with you (and post that answer too).

Real "investment pros" don't have to work, they are good enough to make a living investing their own money. So you'll likely meet a "sales pro" that will use marketing techniques to sell you something that's good for them and maybe not for you. But maybe that's to be seen.

Also, if/when you do invest your $300k, you'll want to invest that amount in small chunks over a long period of time. You'll need to do a little research or get guidance on how long of a period and what size investments. And based on history, I'd wait until after October 2012 - Sept/Oct are historically very volatile months. But you'll want to research this more.

I will come back and share the advice we are given. Great idea!!! Thanks for the tip on waiting until Oct.

I think you want a fee only advisor if you think you need an advisor. Someone who charges you by the hour or by a percentage of the portfolio you put with them. You don't want to work with anyone who gets paid because they sell you something with a fee - a loaded fund. It is okay to talk to the Principal gal but really get the facts on how she is paid. If she sells you a loaded fund, I think the fees are deducted from the funds you give her. If you give her $100k and she invests it in a loaded fund with a 5% fee, you will probably only invest $95k and $5k goes to her.

I bet if you called Vanguard, they could help you figure out where to invest your funds. You could even get a list from them and come back here and get advice on whether people here think it is a good mix.

Remember to keep an emergency fund and to not invest all of the savings you have.

Do you have kids? Are you saving for college?

All very good advice and I do thank you. We do plan to keep $36K in saving for an emergency fund. I didn't include that in the $300K just to make it simple. We have 1 kid that will need college yet and we have $40K set aside for that. I didn't include that in the $300 either. At the rate the kid is going he will very likely be getting a few scholarships. He is a junior but the school had no more classes to offer in math. He is taking advanced math and accounting classes at the local college for high school and earning college credit with the school paying for it. Can't beat that He plans to be a cpa at this point and time. That could change.

Dave Ramsey does have obscenely bad investment advice. Some of his advice is debatable (i.e. I wouldn't recommend giving up an employer match in a 401k even if an individual still had some debt remaining) but makes sense depending on your perspective. His investment advice and recommendation of managed funds doesn't make ANY sense at ALL to ANYONE! He's good about getting people out of debt, but if you're already out of debt I don't think he really had much to add...

Managed funds have higher fees than index funds and almost never perform enough better to make up for the difference. Usually they don't perform at all better. And that 1% (or more) extra compounded over 30+ years is a GIGANTIC bite taken out of your funds.

Vanguard index funds are the way to go. The fees are fractions of a percent.

Stick to either Target Date funds or stick to the Big Three (Total Bond, Total US Stock, Total Int'l Stock) and remember to rebalance periodically and keep Bonds out of taxable accounts. Target Dates do the rebalancing for you.

If the market takes a dive right before you're ready for retirement and you're in 80% stocks, yeah, you're going to be screwed. But it's your own fault for not being way less invested in stocks by that point in your life. It's not the market's fault. All those stories about near-retirees losing it all in the stock market were because they had too much in the market! "Your age in bonds" is a nice safe rule of thumb that will keep you from getting hurt when it comes time to retire.

See you are giving me all kinds of stuff I need to know. I will be much more informed for the meeting next week. You are all helping me feel a bit more confident that I could do this on my own possibly. My husband does not handle any part of the finances btw. I'm sure he would if I asked but it has always been this way. I guess since we both grew up with parents doing it the same way.

I can't see why anyone would give up the employer match. That is FREE $! How can you not want free $ ????

[Nika]

One of my problems with investing is that in 2008 we lost $40K. We are no where even close to recovering what was lost.

SP500 has recovered, why didn't your investments, did you pull out?

Investing can be intimidating field to venture, but no one will care about your money more than you.

Start with the small amount and do it. That is the way to learn. Take, say 5K, choose a stock or a fund and give it a try. As you learn and grow more comfortable, you can ease in more of your money into the market. In addition, you can put few thousand into SP500 for long term and forget about it.

Definitely utilize tax advantageous accounts, especially maxing out Roth IRA for both of you each year. 25K in retirement and 300K in taxable accounts makes no sense.

You guys are doing such a great job saving, but not taking advantage of tax breaks that are available to you.

[Petunia 100]

All very good advice and I do thank you. We do plan to keep $36K in saving for an emergency fund. I didn't include that in the $300K just to make it simple. We have 1 kid that will need college yet and we have $40K set aside for that. I didn't include that in the $300 either. At the rate the kid is going he will very likely be getting a few scholarships. He is a junior but the school had no more classes to offer in math. He is taking advanced math and accounting classes at the local college for high school and earning college credit with the school paying for it. Can't beat that He plans to be a cpa at this point and time. That could change.

Wow. You are a super saver, all right.

When you meet with the Principal rep, don't agree to anything. Insist you need time to review the advice and think it over.

Are you familiar with MorningStar? Do you ever notice advertisements for different mutual funds, and they will tout their star rating? MorningStar is the outfit which assigns those star ratings. You can look up any mutual fund and see the expense ratio, performance, etc.

http://morningstar.com

[BuckyBadger]

SP500 has recovered, why didn't your investments, did you pull out?

Investing can be intimidating field to venture, but no one will care about your money more than you.

Start with the small amount and do it. That is the way to learn. Take, say 5K, choose a stock or a fund and give it a try. As you learn and grow more comfortable, you can ease in more of your money into the market. In addition, you can put few thousand into SP500 for long term and forget about it.

Definitely utilize tax advantageous accounts, especially maxing out Roth IRA for both of you each year. 25K in retirement and 300K in taxable accounts makes no sense.

You guys are doing such a great job saving, but not taking advantage of tax breaks that are available to you.

I don't agree with investing in specific stocks, not even $5k, especially in the OP's situation.

Feel free to take $10k and play around with individual stocks AFTER everything else is in index funds and appropriately allocated. Consider this "fun" money if you want and don't make it more that you could stand to see disappear overnight.

A single stock can go to zero. Your indexes never will.

I agree with everything else that you said, though!

[Blessed]

SP500 has recovered, why didn't your investments, did you pull out?

Investing can be intimidating field to venture, but no one will care about your money more than you.

Start with the small amount and do it. That is the way to learn. Take, say 5K, choose a stock or a fund and give it a try. As you learn and grow more comfortable, you can ease in more of your money into the market. In addition, you can put few thousand into SP500 for long term and forget about it.

Definitely utilize tax advantageous accounts, especially maxing out Roth IRA for both of you each year. 25K in retirement and 300K in taxable accounts makes no sense.

You guys are doing such a great job saving, but not taking advantage of tax breaks that are available to you.

No we didnt pull out. We had it it in stuff that we shouldnt have because I understood none of it. I picked them all by just choosing the stocks with the highest 10 year average. Nothing was at all balanced and too much was foreign and risky stuff based on the 10 year average. Nothing was in bonds etc. I'm going to admit pure stupidity here but after we saw how much we had lost I just let it all sit and didnt even look at it. About 18 months ago we changed everything that was left over to the target date funds. They really dont seem to grow besides the 6% that goes it. Nor do they seem to lose.

Wow. You are a super saver, all right.

When you meet with the Principal rep, don't agree to anything. Insist you need time to review the advice and think it over.

Are you familiar with MorningStar? Do you ever notice advertisements for different mutual funds, and they will tout their star rating? MorningStar is the outfit which assigns those star ratings. You can look up any mutual fund and see the expense ratio, performance, etc.

[/URL]

I will do exactly as you advise with the rep. I am too easy by far . That stops now. I have heard of MorningStar but am Not really familiar. Thanks for the info.

I have an appointment with our attorney today to do some updated wills. I am also going to ask him who he trusts and uses since I do really value his opinion.

What really got me going on the fact we need to do SOMETHING is running a retirement calculator and seeing what the cash we already added to what we plan to save monthly, have plus the investments we have really add up to for retirement income. Even with dh getting a modest pension it was not a picture I am comfortable with. I have no faith we will see SS money so that isn't a factor in my figuring. So now to figure out how to change the retirement picture.