USAA Mutual Fund Roth IRA questions ...

[❤ mollymouser ❤]

I've decided to open a Roth IRA with USAA with $5,000 and was looking at their website for mutual fund options.

www.usaa.com/inet/pages/mutual_funds_main

This is my first foray into the scary world of investments, and it's taken risk-averse me 6 months to decide to actually open an IRA that's (gasp) invested in the stock market. And since my wonderful DH is insured with USAA for life insurance and car insurance, I decided that I'd like to open my Roth IRA with USAA.

I am 46 years old. That being said, any thoughts on which fund to select?

I was thinking about the USAA Target Retirement 2030 fund ... thoughts?

[❤ mollymouser ❤]

2030 fund ... Since your retirement is beginning to approach, your portfolio will consist of a projected target allocation of 60% equity and 40% fixed income.

[❤ mollymouser ❤]

I will be 62 in 2027 and plan to start collecting SS then (if this matters).... so I'm looking at 16 years of investing time.

[Deleted]

Molly,

To do the review right you really need to look at your situation holistically. Besides DH's pension and SS do you have other investments? Does DH have a savings vehicle in addition to the Federal pension?

My concern is that between the Federal pension and SS you will effectively collecting 2 or 3 annuities. So think of them as a kind of super bond with steady payments but no increase in value over time.

Depending on how big DH's pension is maybe that's o.k. My concern over the long run in a long retirement (say 25 or 30 years) is that inflation may strip away your purchasing power. So to counter that effect you should look at something heavier in equities; with a % in SP 500, mid cap & international (perhaps 3 layers of mutual funds 60/30/10)?

You do understand how the Target funds work, right? You understand that over time they shift the % of equities over to bonds so when you retire at age 65 you may be 20% equities and 80% bonds. You can play around with this ratio by selecting a further out date, say 2040 to keep a higher % in equities so the equity value keeps growing vs being devoted to producing income. If I had a high income pension and no other investments this would be the way I would lean.

Keep in mind most people in this forum don't like passive income investing (index mutual funds). However Phil really likes the Target funds and I think they have value under the right circumstances. DH's and my situation is a little complicated so we actually have to THINK about active asset allocation.

Without researching the specific fund the USAA's target funds are probably o.k. Do take the time to research the performance and expenses with Morningstar and compare them to Vanguard's similar products at www.Vanguard.com.

Also check and see if you can get a freebie "financial review" with USAA. They will push USAA products (which you should research as above) but they may help you think about where your portfolio needs to go.

Good luck!

[Deleted]

It is not the cheapest of the target retirement plans, but it is not that back at 0.62%. I think that is a good choice.

[❤ mollymouser ❤]

Jun 6, 2011 9:53:45 GMT -5 @bonnap said:

To do the review right you really need to look at your situation holistically. Besides DH's pension and SS do you have other investments? Does DH have a savings vehicle in addition to the Federal pension?

My concern is that between the Federal pension and SS you will effectively collecting 2 or 3 annuities. So think of them as a kind of super bond with steady payments but no increase in value over time.

In addition to SS and my wonderful DH's military retirement, my wonderful DH is also invested in the military's TSP (it's like a 401K) and, we also have other "long-term savings" and IRAs ... all extremely conservatively placed in CDs since my wonderful DH considers the stock market to be "gambling." (But he said that I could invest $5,000 per year in a Roth in a mutual fund!)

If my wonderful DH is able to stay in the military until he ages out (age 54 ... 9 more years), his starting retirement pay will be more than $6,000 per month (with COLAs, as determined by Congress) ... and we should be more than able to live comfortably on that since we're debt free and have no children.... plus our other retirement funds, I'm thinking. (And he may continue working in a civilian job of some sort.)

Maybe I will switch off every year ... with the 2030 fund and the 2040 fund?

[Deleted]

"all extremely conservatively placed in CDs"

Oh Molly, this is really painful isn't it?

Sure, for now go ahead and invest the $5k in the 2030 and or 2040 as you propose. The USAA funds are all no loads so you can change them down the road if you want.

In the meantime BOTH you and DH need to start some investment reading so you can feel comfortable about why one invests. You can probably skip "The Millionaire Next Door" it's one of my favorites but based on your posts I don't think you need the lesson of living below your means.

Then "A Random Walk Down Wall Street" I think your DH will especially like this book.

Then "The Four Pillars of Investing" which is a lighter read than "The Intelligent Asset Allocator"

72k/yr isn't bad income in today's dollars even for CA. That's what we will be living on in 2012/2013 when DH retires (and we'll be in the SF Bay Area). But in 10 years that money likely won't go so far. Think about what food and cars cost in 2001, for example. Stretch that out to 1991 and the problem should be even clearer. Given the deficit problems I would be very surprised if Congress agrees to anything more than a 2% annual increase over the next several years. DMIL, a retired SES member got a 0% increase this year.

The retired Navy pilots I knew/know (DFIL and my best friend's father) never made anywhere near the kind of money they made as a pilot. At age 55 you're just not in demand the way a 40 year old would be (for example as a commercial pilot). Both of them worked more at a hobby level; DFIL was a sail plane instructor and my friend's father got into computer support. Don't get me wrong, they loved what they did but it really wasn't a money maker; it kept them from annoying their wives too much!

Good luck Molly. You are a wonderful and sweet person and both you and DH deserve a rich and wonderful retirement.

[Deleted]

Jun 6, 2011 23:30:12 GMT -5 ❤ mollymouser ❤ said:

Jun 6, 2011 9:53:45 GMT -5 @bonnap said:

Maybe I will switch off every year ... with the 2030 fund and the 2040 fund?

I don't think that would be necessary or helpful.