Retirement Planning Options

[formerwaitress]

I've been reading through many of the posts on here, but am still uncertain about what I should do with my 403b. Here's my situation:

I started a new job/career recently and am trying to figure out how I'm going to invest for my future. I'll try to make this as easy to read and understand as possible.

Current retirement holdings = ~$45k (I have more substantial investments in non-retirement accounts.)

Old job 401k: 100% in Fidelity Contrafund = ~ $20k
(I knew I wouldn't be at this job for long and felt this was the best fund offered by Fidelity, so I put all my eggs in this one basket and still feel it was the best choice I could've made, so no regrets there about the lack of diversification in that 401k. I will not roll over this account to my new Vanguard account.)

Roth IRAs are divided almost equally among:
Artisan Int Fund
T. Rowe Price Emerging Markets
Vanguard 2045 Target Retirement

Since my new 403b will be with Vanguard, I see no reason to keep the Target fund. Plus, I think I could do better with my money and would like less money in bonds, since I'm 33.

I would love to roll over the Vanguard Target fund to a Roth IRA with Fidelity's Contrafund, since it has done so well and I'm no longer able to contribute to it through my old 401k. Is this a bad idea? The other (easier) option is rolling it over to another Vanguard fund, but I'm not sure I'm comfortable having so many eggs in one basket. One of my major non-retirement funds is Vanguard's Wellington fund, so that already wipes out one of my 403b options. I'm not willing to divide the assets between my other two Roth IRA holdings because then I feel overexposed on very aggressive funds.

Also, after reading one of the other threads, I thought about creating a Roth IRA from the Philip Morris stock. I've started researching the stock and like the idea of how stable the company is. Also, considering the number of people I see smoking on a daily basis, I can't imagine this company going out of business any time soon.

Any thoughts? Thank you in advance for your advice!

[Ombud]

Why Vanguard??

[Ombud]

So here's my thought: as long as you control where it is (ie: not thru your job), why not a lin cost investment firm ( Schwab, Fidelity, TD Ametrade), where you can buy & sell from anyone at a low cost (7.95-8.95)

[phil5185]

I would love to roll over the Vanguard Target fund to a Roth IRA with Fidelity's Contrafund, since it has done so well and I'm no longer able to contribute to it

Don't roll it to a Roth IRA, roll it to a Trad IRA - if you go to a Roth the money will be fully taxable - no need for that, the tax won't be due for 38 year, no hurry. In Trad IRA you can own the Van Target 2045, or Contra, or whatever you like. (I see nothing wrong with the Target 2045 except that it's a bit short, how about the 2055?

For your new 403b, either the Van SP500 Index Fund or the Van Target 2055 would be a good choice. As for the Philip Morris, I would not use it. But I avoid the added risk (uncompensated) of individual stocks, I use index funds, ETFs, to spread risk and get a good diversification.

[formerwaitress]

"So here's my thought: as long as you control where it is (ie: not thru your job), why not a lin cost investment firm ( Schwab, Fidelity, TD Ametrade), where you can buy & sell from anyone at a low cost (7.95-8.95)"

My 403b is through Vanguard, so I can't control that, but I can control where I put my Roth IRA contributions. I already use one trading company for some individual stocks or I go through the company holding the stock, but I go directly through mutual fund companies for mutual funds, not stocks.

"Fidelity Contra Fund
Vanguard Wellington Fund
SP500 Index Fund (Vanguard or other)
Sequoia Fund"

I have 2 of these 4, so I'll have to consider other options. I'll probably select the SP500 Index as part of my 403b, and will look into the Sequoia fund for the Roth IRA rollover. Thanks! Oh, and I have read through portions of the Long Term Investor thread, but haven't had time to page through all 70 pages of it.

[formerwaitress]

Nov 25, 2012 23:16:19 GMT -5 phil5185 said:

I would love to roll over the Vanguard Target fund to a Roth IRA with Fidelity's Contrafund, since it has done so well and I'm no longer able to contribute to it

Don't roll it to a Roth IRA, roll it to a Trad IRA - if you go to a Roth the money will be fully taxable - no need for that, the tax won't be due for 38 year, no hurry. In Trad IRA you can own the Van Target 2045, or Contra, or whatever you like. (I see nothing wrong with the Target 2045 except that it's a bit short, how about the 2055?

For your new 403b, either the Van SP500 Index Fund or the Van Target 2055 would be a good choice. As for the Philip Morris, I would not use it. But I avoid the added risk (uncompensated) of individual stocks, I use index funds, ETFs, to spread risk and get a good diversification.

I can't really afford a tax bill just now, but I assume my tax rate will be much higher when I retire versus now, which is why I considered switching it. But I think I'll just leave it alone and let it grow. I haven't tried ETFs, so I have to look into that. Thanks!

[formerwaitress]

Nov 26, 2012 16:31:18 GMT -5 @di said:

My thought is that (and I wish I would have done this when I was your age), you should have at least 2 opposite Utilites (A Nat Gas. & An Electric) and that you should Set them Up on A D.R.I.P. {Dividend Reinvestment Plan} and then Leave them alone.

With A D.R.I.P - Dividends will buy more shares each time a Dividend is payable. Utilities are historically (and continue to be) very nice in the realm of Dividends, also they typically tend to increase the Dividends year over year or at least hold steady.

4 of our Favorites are -
FE (First Energy) - ED (Con Edison) -- Electric
NFG (National Fuel Gas) - NWN (Northwest Natural Gas) -- Nat. Gas

A D.R.I.P. will give you more shares which, will give you more Dividends, which will give you more shares, and so on and so forth for as long as you have the D.R.I.P. in effect.
In 30/35 years you could have a massive padding of Cap. Appreciation and Residual Income. Which is always nice when you approach retirement.

Others may argue against this Idea, or Dividends in general due to the current uncertainty - But there is no doubt that they will continue to be very relevant going forward..

Anyway, just a thought.

Disclosure - I am Long FE, ED, NFG. I do not Currently hold NWN. I do not have anything on a D.R.I.P.

Thank you! I actually have an energy company that's a DRIP, though it's not a retirement fund. I'm not sure if I want another energy company or if I'd rather diversify and add another DRIP (I have several), so I'll have to consider that too.

Thanks for all the great responses! I still have much to consider.

[Trongersoll]

If you currently have a relatively low tax rate, RothIRA is, in my opinion, the way to go. If your tax rate is near the top of the range the Traditional IRA is the way to go. Personally, I am all for setting up an IRA with a company like Schwab. They will let you D.R.I.P. almost any stock you hold without going throught the stock's company.

I personally love ETFs for people who aren't into the whole trading thing. My current favorites are SDY, SPY (S&P 500, hard for the average person to beat), and VGK(getting the europeans to send us some of their money). Also if you are looking to make small investments more frequently Schwab doesn't charge for their own ETFs. SCHD is similar to SDY.

I'd also consider other foreign ETFs like a Pacific Rim not including Japan Dividend ETF, or a South or Central America Dividend ETF, or many an Austrailia one. Basically whatever part of the world has the most potential for growth over your lifetime.

Another ETF that i like is CARZ, a car is the probably the single most expensive purchase people make repeatedly.

The Defense industry may be do for a decline, but I doubt that the GOV. will let any of the better players go out of business. It is a matter of Nat. Security. I like XLS and LMT for defense.

Other individual stocks i like are FE (mentioned by a few here) and GE. VZ seems pretty ok. UNP is the number one railroad. And i like CAT, but i'm not sure why. Maybe its boys & toys thing.