Help please. Being forced to retire early..

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
lws
Posts: 828
Joined: Tue Apr 25, 2017 6:12 pm

Re: Help please. Being forced to retire early..

Post by lws »

Do nothing for now.
Learn as much as you can before acting.
You started at the right place.
User avatar
Kenkat
Posts: 9539
Joined: Thu Mar 01, 2007 10:18 am
Location: Cincinnati, OH

Re: Help please. Being forced to retire early..

Post by Kenkat »

palanzo wrote: Wed Mar 10, 2021 7:38 pm
Wiggums wrote: Wed Mar 10, 2021 7:33 pm
palanzo wrote: Wed Mar 10, 2021 7:21 pm
I thought you were referring to Comcrap but it seems you are referring to AT&T.

I would carefully consider taking an annuity from this kind of company. Perhaps taking the lump sum and investing your self would be safer.
The pension annuity is issued by an insurance company and not the employer.

There are pros and cons to taking a lumpsum. A person who will not properly invest the money should strongly consider an annuity that covers the couples lifetime.
Which insurance company? Do you trust AT&T and the insurance company?
Pensions are highly regulated. The rules aren’t up to AT&T’s discretion.

Retiree medical benefits are governed under different rules with employers having a lot more discretion over future benefits.
runninginvestor
Posts: 1795
Joined: Tue Sep 08, 2020 8:00 pm

Re: Help please. Being forced to retire early..

Post by runninginvestor »

Watty wrote: Wed Mar 10, 2021 8:54 pm
Poisns1 wrote: Wed Mar 10, 2021 6:49 pm As I understand it my wife's disability is inflation adjusted and she will remain getting it since she's totally disabled but will not get another payment or additional money once she reaches retirement age (62, 67 or 70). She is currently 54.
I know little about SSDI but I would think that she would get a Social Security retirement benefit then. It would be good to research the details of that to figure out what she would get then.
SSDI typically converts to Social Security Retirement benefits program at the full retirement age. Typically retaining the same benefit amount. So hopefully one less thing to be concerned about!

https://www.aarp.org/retirement/social- ... hat%20time.

And another source:
https://www.disability-benefits-help.or ... irement-65
User avatar
beyou
Posts: 6868
Joined: Sat Feb 27, 2010 2:57 pm
Location: If you can make it there

Re: Help please. Being forced to retire early..

Post by beyou »

If an annuity is appealing to you, that does not mean you need to get it from your employer. You could take the cash, and buy an annuity from many insurance companies, shopping around to see who gives you the best deal. You can do a hybrid, take cash, use SOME to buy an annuity, some in mutual funds, spend some. Shop for an annuity to see how much you can get per $ invested, compare to your employer offer. Unless the employer annuity was far more than other options I would take the cash lump sum. And if it is competitive, I would want to know if it’s backed by an insurance company or just the assets of your employer, given your concern about their debt.

Many chimed in NO to paying 1% to EJ.
I would roll the 401k to Vanguard and buy a Vanguard Target Term of Lifestrategy fund. At some point after reading the wiki here and asking questions, maybe you might change the IRA, but these are solid all-in-one funds that contain many diverse asset classes and Vanguard essentially manages for you at lower fees even than PAS as has been suggested here. I see no reason with mainly just a 401k you can’t manage yourself. There isn’t a simpler scenario than having all in a 401k->IRA and an annuity. If you choose to invest the lump sum, you’ll end up with 2 accounts to manage, and then there is a bit more to think about but still doable with a bit if help here.
The Stone Wall
Posts: 158
Joined: Thu Mar 22, 2018 1:18 pm

Re: Help please. Being forced to retire early..

Post by The Stone Wall »

You have many months to finalize your decisions, so invest the time to study the various options. (I am surprised previous posters have not recommended the three fund portfolio to streamline your tax deferred account.) You are in excellent shape, but you do have some planning to do. There is a decent chance that your tax deferred accounts will be greater than $2M dollars by the time of RMD's at 72. That alone will be adding $80,000 to your income stream on top of the pension and two SS streams. It is not unrealistic that your yearly taxable income could be in excess of $150,000 in your 70's only to continue increasing. That will buy a lot of water toys!

You need to spend some time on the I-ORP extended website to understand more clearly what kinds of taxes you will be encountering. Also look at various Roth conversion strategies in that model to lessen the effects of RMD's. You also need to start planning what retirement will look like for you. Many of us spent a few years thinking about retirement prior to the day. You have 7-8 months.
User avatar
CyclingDuo
Posts: 5989
Joined: Fri Jan 06, 2017 8:07 am

Re: Help please. Being forced to retire early..

Post by CyclingDuo »

Poisns1 wrote: Wed Mar 10, 2021 4:30 pm I work for a fortune 30 Telecom company that is going to take my accrued retiree benefits away if I don't retire by the end of the year.

I can't afford to lose my health subsidy (will pay most of my health insurance premiums from retirement up to age 65) so I'm planning to leave by Dec 31 2021.

So the details: I am 55, no debt whatsoever, own my home and personal vehicles. Wife is disabled and gets about 23,700 from SSI Disability. My 3 sources of income/savings below. I estimated that my yearly expenses will be close to 62K

1) Company is offering either lump sum or monthly annuity. Lump sum is around 764K and monthly full annuity about $3187/mo (joint and 50% survivor $2868/mo, joint and 75% $2709/mo).
Sorry about the circumstances and being let go.

One could get really twisted :twisted: and just out of spite, take the $764K lump sum and put it all in T stock which closed at $29.99 today. That would be 25,475 shares paying $2.08 per share in annual dividends for $52,988 per year. :twisted:

Anyway, I understand your emotional thoughts at the moment.

CyclingDuo
"Save like a pessimist, invest like an optimist." - Morgan Housel | "Pick a bushel, save a peck!" - Grandpa
finite_difference
Posts: 3626
Joined: Thu Jul 09, 2015 7:00 pm

Re: Help please. Being forced to retire early..

Post by finite_difference »

Is the pension secured? Is it COLA-adjusted?

If so, the 75% survivor option beats 4% WR on $764k (No COLA).

Having a pension that gives $32k/year with a 75% survivor benefit sure seems like a nice way to encourage you to live as long as possible. If it’s COLA-adjusted, then it’s even better.

I’ll wait for someone to run the NPV calculation if they haven’t already.

The pension + SSDI + later SS. Invest the rest with Vanguard PAS and you should be all set. $400k cash seems like a lot, could probably trim it down to $100-200k by investing the difference.
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh
MostlyABogleHead
Posts: 60
Joined: Sat Mar 16, 2019 1:54 pm

Re: Help please. Being forced to retire early..

Post by MostlyABogleHead »

You need a fee only financial advisor to help you go through the numbers a bit more throughly, look at tax implications if any and set your investments with low cost funds, that you can then execute with Vanguard, Schwab or Fidelity. I recommend talking to Rick Ferri, who offers very reasonably priced fee only advisory services. I have used his services and I highly recommend him.
LeftCoastIV
Posts: 1030
Joined: Wed May 01, 2019 7:19 pm

Re: Help please. Being forced to retire early..

Post by LeftCoastIV »

prd1982 wrote: Wed Mar 10, 2021 5:44 pm One last thing. You should mention this thread to your buddies. Perhaps one or two of them will buy you a drink for saving them so much money.
I'd suggest not doing that. This thread contains OP's personal financial information. Not a lot of good can come from people who actually know OP having insight into his assets, especially if they are in similar work situations with less than they need for retirement.
rgs92
Posts: 3436
Joined: Mon Mar 02, 2009 7:00 pm

Re: Help please. Being forced to retire early..

Post by rgs92 »

Do not roll over the AT&T 401K. The stable value fund pays about 2.4%, and you can't get a return on cash like that anywhere.
And just use the index funds in there for a 3-fund portfolio, using the stable value as the fixed-income position. The expense ratios are extremely small, just a few basis points, like Vanguard.

(I would drop the AT&T Stock fund, it's managed and has an ER of 8 basis points, while the total stock market fund''s ER is just 2 basis points. The Total International Index fund's ER is just 5 basis points. So just use these and the Stable Value to make a 3-fund portfolio.)

If you need money from it, you can withdraw from it directly or do a partial rollover right into Fidelity (which is the custodian so it's very easy to manage and do rollovers as needed).

Given you have a decent nest egg, I would take the $3187 single life annuity which would reduce draws from your portfolio.
The pension is very well funded and safe.

And it sounds like you qualify for medical benefits for you and your wife. (Your age+service = 85, so that should do it to qualify you.) That should be free for you and about $400/month for your wife for a nice plan, and dental too. So you should do OK. Just take money as you need it to live, and you really don't need any advisers beyond advice you can get here.
Murgatroyd
Posts: 488
Joined: Sun Jan 21, 2018 7:23 pm

Re: Help please. Being forced to retire early..

Post by Murgatroyd »

You are currently a major customer at Fidelity. For no charge you can schedule an appointment at an investor center. They have a n excellent retirement simulation tool that can give you good insight into how your different scenarios could play out. We did this about 2 years before retirement and it really calmed my very worried about the future wife.

All the best,
MarkBarb
Posts: 908
Joined: Mon Aug 03, 2009 11:59 am

Re: Help please. Being forced to retire early..

Post by MarkBarb »

DanFFA wrote: Wed Mar 10, 2021 9:02 pm Hey,

So one thing:
If you're going to retire at the end of the year, do it before Christmas IMO. When my Dad's former company was doing similar shenanigans they would give their awful 'gifts' at Christmas time when they wouldn't have to hear about it. This doesn't mean that's what your company will do obviously.

Another:
You will be fine. If you choose to DIY there's a billion different options this group will help you navigate through to get to the finish line! Even if you don't, that's OKAY too!
Or maybe wait until the end of the year to get your severance paid in the following year. Look at how the taxes would work either way. I retired at the end of a year and it was very advantageous to get my severance in a separate tax year.

Your title says "being forced to retire early". You aren't. You may be forced, if you want to call it that, to leave your current company, but you're free to continue working. Don't rule out that option without thinking it through.
User avatar
JoeRetire
Posts: 15381
Joined: Tue Jan 16, 2018 1:44 pm

Re: Help please. Being forced to retire early..

Post by JoeRetire »

NabSh wrote: Wed Mar 10, 2021 8:49 pm So taking annuity over lump sum risk is a risk. I know someone personally who died at 57, 2 years after he took retirement.
I always enjoy discussions that start with "I know someone personally..."

I know someone personally (in this case my aunt) who died at 99.
A professional investment advisor would usually recommend taking lump sum because it means more money for them to invest.
Or because it was the best option for you.
This isn't just my wallet. It's an organizer, a memory and an old friend.
Peaceful
Posts: 471
Joined: Sun Feb 28, 2021 10:44 am

Re: Help please. Being forced to retire early..

Post by Peaceful »

OP: when you say you're "overwhelmed" that's natural given the situation. You're experiencing a cognitive overload. Do not rush your decision making process. You still have time. The most important thing for you to do is not let your emotions drive your decision making.
"Be fearful when others are greedy, be even MORE fearful when others are fearful."
Grt2bOutdoors
Posts: 25617
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Help please. Being forced to retire early..

Post by Grt2bOutdoors »

Poisns1 wrote: Wed Mar 10, 2021 8:08 pm
Outer Marker wrote: Wed Mar 10, 2021 7:44 pm
nix4me wrote: Wed Mar 10, 2021 7:39 pm If it were me, i'd keep the 400K cash, take the lump sum and put everything except the 400 cash in VTI. Then i'd retire. You only need about 2-3% to cover expenses. Sell stock when stocks are high and use cash when stocks are low for your yearly withdrawals. Id put it in Fidelity or Schwab or Vanguard.
That is really dangerous and irresponsible advice. Don't do it. You are financially well situated have no need to take on extreme risk in the stock market.
This appealed to me since it sounded so easy. Alas I understand this is taking way more risk than I'd be comfortable with being in only 1 fund and weighted heavily toward stocks.

To answer the question, I believe that Fidelity pays the monthly annuity/pension since they also provide the 401k service, but I'm not completely positive on this as I haven't retired yet.

I am now leaning towards taking the pension, rolling into an IRA and managing myself, as long as I have advice and support from an excellent forum like this.

My company 401K is with Fidelity and as long as I leave it there, I can take withdrawals from that account penalty free due to the rule of 55. For that reason I was going to leave my 401k as is with Fidelity for the next several years at least.

So I already have an TD/Ameritrade account that I used in the past to buy and sell individual stocks. Can I use that account or does it have to be a specific "retirement/IRA" account to roll lump sump retirement funds to? If I need to open a separate IRA/Retirement account, should I use TD/Ameritrade or someone else with cheaper fees?

Is it too early to ask what kind of funds and allocation rates I should do if I were to take the Lump Sum and rollover to an IRA?
Fidelity doesn’t pay the pension. It’s paid by the administrator of the pension plan itself. This is what you need to do - find out from HR the exact name of the pension plan. Ask them for a SPD - Summary Plan Description which will show you the name of the plan, projected benefit obligation, total assets in the plan, it will show you the projected benefit asset/liability. Be forewarned, the plan is not currently 100 percent funded, meaning there is an asset shortfall to meet all benefit payments for all current and future beneficiaries. I own stock in T and I do read the financial statements-it’s a known fact they are underfunded to meet 100 percent but enough to meet current obligations.

Get that statement from them and then we can walk you through what it means.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
grok87
Posts: 10512
Joined: Tue Feb 27, 2007 8:00 pm

Re: Help please. Being forced to retire early..

Post by grok87 »

Kenkat wrote: Wed Mar 10, 2021 5:24 pm I would look to get some clarification on these two statements which as I understand it would be illegal actions on the part of the company:

I work for a fortune 30 Telecom company that is going to take my accrued retiree benefits away if I don't retire by the end of the year.

Accrued and vested retiree benefits cannot be taken away. They can freeze any future benefits, but benefits already earned are yours.

...company can take away or lessen [pension] payment if they don't do well in the future which is entirely possible.

Once the pension is annuitized, it cannot be changed by the pension plan.

I’d still probably plan on leaving but it’s worth knowing your rights on the way out the door.
agree. my bet is that the change is going forward there will be no newly accrued pension benefits and it will be replaced with 401k
RIP Mr. Bogle.
User avatar
billthecat
Posts: 1052
Joined: Tue Jan 24, 2017 1:50 pm
Location: USA

Re: Help please. Being forced to retire early..

Post by billthecat »

MarkBarb wrote: Thu Mar 11, 2021 9:02 am I retired at the end of a year and it was very advantageous to get my severance in a separate tax year.
What exactly do you mean by severance? Do you mean accrued PTO? Or did you volunteer to retire in exchange for a package? I'm asking because retiring and severance don't normally go together. Normally, you get a severance if you are laid off, or volunteer with a package. Otherwise, if you just quit because you are done, you don't normally get a severance. Just curious, because I'd like to get severance for retiring...
We cannot direct the winds but we can adjust our sails • It's later than you think • Ack! Thbbft!
User avatar
Kenkat
Posts: 9539
Joined: Thu Mar 01, 2007 10:18 am
Location: Cincinnati, OH

Re: Help please. Being forced to retire early..

Post by Kenkat »

billthecat wrote: Thu Mar 11, 2021 12:26 pm
MarkBarb wrote: Thu Mar 11, 2021 9:02 am I retired at the end of a year and it was very advantageous to get my severance in a separate tax year.
What exactly do you mean by severance? Do you mean accrued PTO? Or did you volunteer to retire in exchange for a package? I'm asking because retiring and severance don't normally go together. Normally, you get a severance if you are laid off, or volunteer with a package. Otherwise, if you just quit because you are done, you don't normally get a severance. Just curious, because I'd like to get severance for retiring...
You are not alone, my friend! :wink:
MarkBarb
Posts: 908
Joined: Mon Aug 03, 2009 11:59 am

Re: Help please. Being forced to retire early..

Post by MarkBarb »

billthecat wrote: Thu Mar 11, 2021 12:26 pm
MarkBarb wrote: Thu Mar 11, 2021 9:02 am I retired at the end of a year and it was very advantageous to get my severance in a separate tax year.
What exactly do you mean by severance? Do you mean accrued PTO? Or did you volunteer to retire in exchange for a package? I'm asking because retiring and severance don't normally go together. Normally, you get a severance if you are laid off, or volunteer with a package. Otherwise, if you just quit because you are done, you don't normally get a severance. Just curious, because I'd like to get severance for retiring...
My mistake. I was confusing my situation for the OPs. In my case, I was encouraged to retire after the company I worked for was acquired. If I volunteered to leave, I got a generous severance for my trouble.
mr_brightside
Posts: 897
Joined: Sat Oct 17, 2020 3:23 pm

Re: Help please. Being forced to retire early..

Post by mr_brightside »

DanFFA wrote: Wed Mar 10, 2021 9:02 pm

Another:
You will be fine. If you choose to DIY there's a billion different options this group will help you navigate through to get to the finish line! Even if you don't, that's OKAY too!
+1. You're in a highly desirable position.

Take your time and think it through. I personally would NOT engage with a financial group like EJ. Too easy to DIY.

Lots of options on the table. Stay calm -- rational -- go slow.

Good luck --

--------------------------------------
Boglechicago
Posts: 1
Joined: Fri Mar 12, 2021 8:04 am

Re: Help please. Being forced to retire early..

Post by Boglechicago »

My wife and I ( 55) both worked for the same company and about 15 years ago they offered pension buyouts for a lump sum. I calculated at the time that it was like getting a 4% return forever if you kept the pension, and I thought I could easily beat that investing myself.

So she kept the pension and I took the lump sum.

Now every year when I rebalance the portfolio I look at that line item at the bottom where it shows her expected pension income I am jealous. I probably did really well dollar-wise in the market over the last 15 years, but you get this amazing sense of security seeing that guaranteed payout amount.

My first thought when I read your post was: “take the pension and 75% survivor.” To know that your wife is taken care of financially is a really rewarding feeling, especially if for whatever reason she can’t work. Plus consider the scenario where the doctor finds something on you during a routine checkup and wants to run further tests!! You will be so relieved knowing she has that pension money no matter what.

I trust you have life insurance on you to take care of her if something happens to you. But a lifetime survivor pension payout is even better. (That’s my opinion - but you still have to run the numbers on this exact offer.)

Also, you are 55 and can get another job if you want. And you will still have plenty left for investing so it’s not like you are doomed to living on a fixed income for the rest of your days.

Side note -
I sure hope that 400k isn’t actual cash like in a savings account. Please look into buying $20K of iBonds every year. They are paying 1.68% percent if you buy today and are probably the safest place for your money. Safer than a CD. Seriously.

Last thing- like everyone said - don’t pay some guy 1% to manage your money. I’m sure he is a really nice guy. But always remember he is like that so he can take $10,000 of YOUR dollars EVERY year for about 2 actual days of work. The advice is worth something, but you can get advice that is just as good for many many fewer dollars.
mushripu
Posts: 170
Joined: Fri Jan 26, 2018 7:26 am

Re: Help please. Being forced to retire early..

Post by mushripu »

There is a lot of information on the wiki about investing in general. A fews days time reading is time well spent.
Basic philosophy here at bogleheads is to avoid financial advisors, put money in broad index funds and not have complicated holdings that you shall need advisor for.
User avatar
BrooklynInvest
Posts: 1162
Joined: Sun Jul 28, 2013 9:23 am

Re: Help please. Being forced to retire early..

Post by BrooklynInvest »

bryanm wrote: Wed Mar 10, 2021 4:48 pm Okay, first thing: you're going to be okay. I assume when you say "400 cash" you mean 400k. If that's true, then your total assets right now are at least 1.64 million. Your estimated expenses are 62k a year, and you get ~$24k from SSI. That means you have a 38k gap. If you pulled that from your 1.64 million, it would be a ~2.5% withdrawal rate. Or, in other words, you could pull that for 40 years and be okay, even if you 401(k) returns nothing and you had no lump sum or annuity. You're doing fine.
This seems spot on to me OP. Sorry you're going through this but it certainly seems like you're in good shape.

One question - could you not take the lump sum and annuitize it (or part of it) yourself by shopping around and buying a single premium policy elsewhere?

Good luck OP.
Luckywon
Posts: 2406
Joined: Tue Mar 28, 2017 10:33 am

Re: Help please. Being forced to retire early..

Post by Luckywon »

deleted
Last edited by Luckywon on Fri Mar 12, 2021 9:16 pm, edited 1 time in total.
User avatar
Sandi_k
Posts: 2292
Joined: Sat May 16, 2015 11:55 am
Location: SF Bay Area

Re: Help please. Being forced to retire early..

Post by Sandi_k »

Kenkat wrote: Wed Mar 10, 2021 5:24 pm I would look to get some clarification on these two statements which as I understand it would be illegal actions on the part of the company:

I work for a fortune 30 Telecom company that is going to take my accrued retiree benefits away if I don't retire by the end of the year.

Accrued and vested retiree benefits cannot be taken away. They can freeze any future benefits, but benefits already earned are yours.

...company can take away or lessen [pension] payment if they don't do well in the future which is entirely possible.

Once the pension is annuitized, it cannot be changed by the pension plan.

I’d still probably plan on leaving but it’s worth knowing your rights on the way out the door.
You are correct re: accrued pension. What is ENTIRELY LEGAL is for the company to remove retiree medical coverage for ANY retiree, at ANY time.

If the company says "you must retire prior to 12/31/21 in order to have retiree medical coverage" - given your pension and savings, I'd retire on 10/31/21. Have the holidays off, roll your lump sum into an IRA at Fidelity, and don't look back.

Congrats - you've made it. Now it's time to enjoy it.
User avatar
Kenkat
Posts: 9539
Joined: Thu Mar 01, 2007 10:18 am
Location: Cincinnati, OH

Re: Help please. Being forced to retire early..

Post by Kenkat »

Sandi_k wrote: Fri Mar 12, 2021 1:50 pm
Kenkat wrote: Wed Mar 10, 2021 5:24 pm I would look to get some clarification on these two statements which as I understand it would be illegal actions on the part of the company:

I work for a fortune 30 Telecom company that is going to take my accrued retiree benefits away if I don't retire by the end of the year.

Accrued and vested retiree benefits cannot be taken away. They can freeze any future benefits, but benefits already earned are yours.

...company can take away or lessen [pension] payment if they don't do well in the future which is entirely possible.

Once the pension is annuitized, it cannot be changed by the pension plan.

I’d still probably plan on leaving but it’s worth knowing your rights on the way out the door.
If the company says "you must retire prior to 12/31/21 in order to have retiree medical coverage" - given your pension and savings, I'd retire on 10/31/21.
If they word it right (which they probably will), they can take it away later on as well.
GG1273
Posts: 463
Joined: Sat Sep 29, 2018 3:21 pm
Location: NJ

Re: Help please. Being forced to retire early..

Post by GG1273 »

mkc wrote: Wed Mar 10, 2021 8:51 pm
Poisns1 wrote: Wed Mar 10, 2021 4:30 pm
I'm so overwhelmed with leaving and the opinions of fellow employees to interview a bunch of retirement planners/fiduciaries. I've already had 2 interviews (Advance Capital and Edward Jones) and after the scenarios and fee structure provided, I'm even more confused and even afraid of the fact that I have to pick one and hope that they do the right thing with my future.
No, no, no to either of these.

You do NOT have to choose one of these 2, and please do not. They are both predatory and will not do the right thing for your future. They are all about *theirs*. And not Morgan Stanley, Raymond James, Merrill Lynch, etc.

Look at Fidelity, Vanguard, and Schwab as the primary options. Even if you opt not to DIY, all three have options that are significantly more aligned with your interest that the ones you have talked to already.

Advance Capital and Edward Jones may have been chosen by the employer as a "helper" - OP mentions ATT stock in the asset mix.

I've been through about 8 of these downshifts and have made it through to the other side staying with my MegaCorp but the anxiety can be tough to handle even if good to go financially.

May want to check in with the HR department about Rule of 75 or other numerical number the company has come up with. The last one I went though had a manual about 120 pages thick and check on the health care options available to you beyond COBRA.

Best of luck OP
User avatar
Sandi_k
Posts: 2292
Joined: Sat May 16, 2015 11:55 am
Location: SF Bay Area

Re: Help please. Being forced to retire early..

Post by Sandi_k »

Kenkat wrote: Fri Mar 12, 2021 2:21 pm
Sandi_k wrote: Fri Mar 12, 2021 1:50 pm
Kenkat wrote: Wed Mar 10, 2021 5:24 pm I would look to get some clarification on these two statements which as I understand it would be illegal actions on the part of the company:

I work for a fortune 30 Telecom company that is going to take my accrued retiree benefits away if I don't retire by the end of the year.

Accrued and vested retiree benefits cannot be taken away. They can freeze any future benefits, but benefits already earned are yours.

...company can take away or lessen [pension] payment if they don't do well in the future which is entirely possible.

Once the pension is annuitized, it cannot be changed by the pension plan.

I’d still probably plan on leaving but it’s worth knowing your rights on the way out the door.
If the company says "you must retire prior to 12/31/21 in order to have retiree medical coverage" - given your pension and savings, I'd retire on 10/31/21.
If they word it right (which they probably will), they can take it away later on as well.
Not true with my current employer. I get the pension, but not the healthcare coverage if I do not elect retirement upon separation.
User avatar
Kenkat
Posts: 9539
Joined: Thu Mar 01, 2007 10:18 am
Location: Cincinnati, OH

Re: Help please. Being forced to retire early..

Post by Kenkat »

Sandi_k wrote: Sun Mar 14, 2021 1:53 pm Not true with my current employer. I get the pension, but not the healthcare coverage if I do not elect retirement upon separation.
Sorry, I was not very clear with my post. I should have said:

If your employer promises healthcare coverage at early retirement, depending on how that promise is worded, they still may have latitude to revoke that at a later date, while the pension is far more protected by ERISA, etc. laws.
User avatar
Sandi_k
Posts: 2292
Joined: Sat May 16, 2015 11:55 am
Location: SF Bay Area

Re: Help please. Being forced to retire early..

Post by Sandi_k »

Kenkat wrote: Sun Mar 14, 2021 2:02 pm
Sandi_k wrote: Sun Mar 14, 2021 1:53 pm Not true with my current employer. I get the pension, but not the healthcare coverage if I do not elect retirement upon separation.
Sorry, I was not very clear with my post. I should have said:

If your employer promises healthcare coverage at early retirement, depending on how that promise is worded, they still may have latitude to revoke that at a later date, while the pension is far more protected by ERISA, etc. laws.
Yes, healthcare is not guaranteed. I have accounted for revocation.
Topic Author
Poisns1
Posts: 95
Joined: Thu Apr 13, 2017 2:19 pm

Re: Help please. Being forced to retire early..

Post by Poisns1 »

I did some research regarding the AT&T pension and postretirement benefits funding and found this from the annual report (2020):

Fair value of plan assets at end of year:
Pension 54,606 Post Retirement Benefits 3843

Underfunded status at end of year:
Pension (7,552) Post Retirement Benefits (10,085)

Both the pension plan and the medical expense plan (called “Postretirement Benefits”) are underfunded based on their current actuarial return calculations. The pension plan assumes a 7% return for 2020 and a 6.5% return going forward starting in 2021. Currently, the pension is approximately 65% in various equities (including a 10% position in preferred stock of AT&T Mobility), with the remaining 35% in fixed income.

I'm not exactly sure if this is good, bad or indifferent?

I also went out to Immediate Annuities website and plugged in my AT&T lump sum amount of $764K. The top result stated that with 100% survivor option payment would be $2772/mo. By comparison the AT&T offered annuity/pension is $2455/mo with 100% survivor. So is this saying I'd be better off taking the lump and "buying" my own annuity for retirement?

Both our 401k's are with Fidelity. So if I'm leaning towards taking the lump and doing my own investing, can't I just simply open another IRA account with Fidelity and roll the lump into that account, then choose funds?
ncbill
Posts: 2049
Joined: Sun Jul 06, 2008 4:03 pm
Location: Western NC

Re: Help please. Being forced to retire early..

Post by ncbill »

Poisns1 wrote: Sun Mar 14, 2021 3:34 pm I did some research regarding the AT&T pension and postretirement benefits funding and found this from the annual report (2020):

Fair value of plan assets at end of year:
Pension 54,606 Post Retirement Benefits 3843

Underfunded status at end of year:
Pension (7,552) Post Retirement Benefits (10,085)

Both the pension plan and the medical expense plan (called “Postretirement Benefits”) are underfunded based on their current actuarial return calculations. The pension plan assumes a 7% return for 2020 and a 6.5% return going forward starting in 2021. Currently, the pension is approximately 65% in various equities (including a 10% position in preferred stock of AT&T Mobility), with the remaining 35% in fixed income.

I'm not exactly sure if this is good, bad or indifferent?

I also went out to Immediate Annuities website and plugged in my AT&T lump sum amount of $764K. The top result stated that with 100% survivor option payment would be $2772/mo. By comparison the AT&T offered annuity/pension is $2455/mo with 100% survivor. So is this saying I'd be better off taking the lump and "buying" my own annuity for retirement?

Both our 401k's are with Fidelity. So if I'm leaning towards taking the lump and doing my own investing, can't I just simply open another IRA account with Fidelity and roll the lump into that account, then choose funds?
As another poster mentioned, why not just leave the 401k accounts where they are...sounds like you've got inexpensive investments choices including a stable value fund.

As for buying "stuff" post-retirement...I suggest renting instead...e.g. our family had a lake house with pontoon boat, later a speedboat, & jet skis (stolen & wrecked more than once) but although we owned it for ~15 years ultimately it ended up being used only a few months annually.
Topic Author
Poisns1
Posts: 95
Joined: Thu Apr 13, 2017 2:19 pm

Re: Help please. Being forced to retire early..

Post by Poisns1 »

[/quote]

As another poster mentioned, why not just leave the 401k accounts where they are...sounds like you've got inexpensive investments choices including a stable value fund.

As for buying "stuff" post-retirement...I suggest renting instead...e.g. our family had a lake house with pontoon boat, later a speedboat, & jet skis (stolen & wrecked more than once) but although we owned it for ~15 years ultimately it ended up being used only a few months annually.
[/quote]

Sorry. Yes I want to leave both of our 401k's with Fidelity. I was really talking about the option of taking the lump sum vs the monthly annuity in which case I would most likely want to roll over to an IRA somewhere. Thinking easiest thing would be to open that IRA for the lump sum within Fidelity that way all my accounts are in the same place?

Regarding renting I understand but I'm recently moved from Illinois to Florida and excited that we can use jet ski's and boat etc. year round down here. Didn't want to deal with the off season storage pain in the Midwest Winters but all that is gone now so looking forward to fun year round, especially if I can swing retiring this year and investing the lump on my own..
User avatar
Wiggums
Posts: 7028
Joined: Thu Jan 31, 2019 7:02 am

Re: Help please. Being forced to retire early..

Post by Wiggums »

Poisns1 wrote: Sun Mar 14, 2021 3:34 pm I did some research regarding the AT&T pension and postretirement benefits funding and found this from the annual report (2020):

Fair value of plan assets at end of year:
Pension 54,606 Post Retirement Benefits 3843

Underfunded status at end of year:
Pension (7,552) Post Retirement Benefits (10,085)

Both the pension plan and the medical expense plan (called “Postretirement Benefits”) are underfunded based on their current actuarial return calculations. The pension plan assumes a 7% return for 2020 and a 6.5% return going forward starting in 2021. Currently, the pension is approximately 65% in various equities (including a 10% position in preferred stock of AT&T Mobility), with the remaining 35% in fixed income.

I'm not exactly sure if this is good, bad or indifferent?

I also went out to Immediate Annuities website and plugged in my AT&T lump sum amount of $764K. The top result stated that with 100% survivor option payment would be $2772/mo. By comparison the AT&T offered annuity/pension is $2455/mo with 100% survivor. So is this saying I'd be better off taking the lump and "buying" my own annuity for retirement?

Both our 401k's are with Fidelity. So if I'm leaning towards taking the lump and doing my own investing, can't I just simply open another IRA account with Fidelity and roll the lump into that account, then choose funds?
https://www.bogleheads.org/wiki/Lump_sum_vs_pension

I think there’s a few things to consider when choosing between a lump sum and a pension annuity. Comparing it to immediate annuities is a good start.

A lump sum amount can be rolled over to an Individual Retirement Account (IRA) and avoid taxation when you receive the lump sum. However, any distributions from the IRA will be taxed as ordinary income. If the money isn't rolled over, you'll pay ordinary income tax on the amount of the lump sum.
"I started with nothing and I still have most of it left."
bhough
Posts: 259
Joined: Wed Feb 15, 2017 5:53 pm

Re: Help please. Being forced to retire early..

Post by bhough »

It is scary and hurtful to be in this situation. I'm sorry.

Financially you'll do fine.

I would avoid letting someone else "manage your money". The 1% they get will not do anything to increase your returns.

Please consider buying some TIPS or I bonds. If you don't know what these are, take 30 minutes and read about them. You might also consider buying Zvi Bodie's book "Risk less and prosper". I wouldn't leave that much in cash or savings as inflation may slowly erode your savings. It is up to you with regards to how much (if any) you invest in the stock market.

You can't be that nervous if you are considering "several watersport vehicles". How about renting for the day?

What about lining up another job for 1/1/2022? Would that reduce your anxiety? What if you liked your new job?

Good luck!!
tj
Posts: 9317
Joined: Wed Dec 23, 2009 11:10 pm

Re: Help please. Being forced to retire early..

Post by tj »

Wiggums wrote: Sun Mar 14, 2021 5:00 pm
Poisns1 wrote: Sun Mar 14, 2021 3:34 pm I did some research regarding the AT&T pension and postretirement benefits funding and found this from the annual report (2020):

Fair value of plan assets at end of year:
Pension 54,606 Post Retirement Benefits 3843

Underfunded status at end of year:
Pension (7,552) Post Retirement Benefits (10,085)

Both the pension plan and the medical expense plan (called “Postretirement Benefits”) are underfunded based on their current actuarial return calculations. The pension plan assumes a 7% return for 2020 and a 6.5% return going forward starting in 2021. Currently, the pension is approximately 65% in various equities (including a 10% position in preferred stock of AT&T Mobility), with the remaining 35% in fixed income.

I'm not exactly sure if this is good, bad or indifferent?

I also went out to Immediate Annuities website and plugged in my AT&T lump sum amount of $764K. The top result stated that with 100% survivor option payment would be $2772/mo. By comparison the AT&T offered annuity/pension is $2455/mo with 100% survivor. So is this saying I'd be better off taking the lump and "buying" my own annuity for retirement?

Both our 401k's are with Fidelity. So if I'm leaning towards taking the lump and doing my own investing, can't I just simply open another IRA account with Fidelity and roll the lump into that account, then choose funds?
https://www.bogleheads.org/wiki/Lump_sum_vs_pension

I think there’s a few things to consider when choosing between a lump sum and a pension annuity. Comparing it to immediate annuities is a good start.

A lump sum amount can be rolled over to an Individual Retirement Account (IRA) and avoid taxation when you receive the lump sum. However, any distributions from the IRA will be taxed as ordinary income. If the money isn't rolled over, you'll pay ordinary income tax on the amount of the lump sum.
You could roll it over to an IRA and buy the SPIA within an iRA to have the taxes spread out and avoid the immediate lump sum taxation.
placeholder
Posts: 8375
Joined: Tue Aug 06, 2013 12:43 pm

Re: Help please. Being forced to retire early..

Post by placeholder »

When I retired I took the pension because it was significantly better than an SPIA purchased with the lump sum.
Grt2bOutdoors
Posts: 25617
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Help please. Being forced to retire early..

Post by Grt2bOutdoors »

Poisns1 wrote: Sun Mar 14, 2021 3:34 pm I did some research regarding the AT&T pension and postretirement benefits funding and found this from the annual report (2020):

Fair value of plan assets at end of year:
Pension 54,606 Post Retirement Benefits 3843

Underfunded status at end of year:
Pension (7,552) Post Retirement Benefits (10,085)

Both the pension plan and the medical expense plan (called “Postretirement Benefits”) are underfunded based on their current actuarial return calculations. The pension plan assumes a 7% return for 2020 and a 6.5% return going forward starting in 2021. Currently, the pension is approximately 65% in various equities (including a 10% position in preferred stock of AT&T Mobility), with the remaining 35% in fixed income.

I'm not exactly sure if this is good, bad or indifferent?

I also went out to Immediate Annuities website and plugged in my AT&T lump sum amount of $764K. The top result stated that with 100% survivor option payment would be $2772/mo. By comparison the AT&T offered annuity/pension is $2455/mo with 100% survivor. So is this saying I'd be better off taking the lump and "buying" my own annuity for retirement?

Both our 401k's are with Fidelity. So if I'm leaning towards taking the lump and doing my own investing, can't I just simply open another IRA account with Fidelity and roll the lump into that account, then choose funds?
Pension - 65/35 is a relatively normal allocation for a defined benefit pension plan, nothing out of the ordinary. The plans, both of them have a level of being underfunded, common with many pension plans especially retiree medical. If you noticed, the company coughed up a contribution of $400 million last year compared to half that amount in 2019.

One word of caution with a site like Immediate Annuities, they are assuming you are buying 1 annuity for the amount you put in, but it's not recommended you place all of your monies with any one insurance company because you don't want to have all of your eggs in one place, should the insurance company go belly up the annuity may not be covered by insurance as to loss. I believe the state insurance regulatory agency may offer coverage up to $100K or $250K. If you shop around with a few different companies you may find the pricing to be lower than what your initial quote was for. It's odd that the corporate pension is offering less than the commercial insurers, it's usually the other way around.

If you take the lump sum, you would do a direct rollover to Fidelity Retirement Services as trustee for you. Yes, you can pick funds after the monies are deposited in your IRA rollover account. You could probably invest it at a 60/40 allocation and be able to withdraw as much as your company provided option was offering with the chance of higher withdrawals over time. I would not withdraw more than 3.8% at your age right now anyway.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Topic Author
Poisns1
Posts: 95
Joined: Thu Apr 13, 2017 2:19 pm

Advice moving forward with Lump Sum

Post by Poisns1 »

[Thread merged into here --admin LadyGeek]

I previously posted that I will be retiring this year due to the fact that I will lose my vested retiree health insurance subsidy (up to age 65) if I don't retire by the end of the year.

At the advice of previous retirees I interviewed 2 advisors that wanted nearly 1% to manage my entire portfolio. Needless to say I've changed my mind after my initial post and the at the advice from fellow Bogleheads.

I am now starting to formulate my plan to take the Lump Sum (versus the monthly annuity offer) and I would like advice as to how I could rollover and invest the money in the easiest way possible. I've read most of the wiki's and short Youtube videos and I'm disciplined with my savings so I feel that if my accounts are setup in very simplistic approach from the start, I will be more inclined to stay with my plan throughout retirement (advice from the wiki's and videos).

I would love to take the offered monthly annuity which would make things so simple by just having to manage my 401K and wife's IRA, but I honestly don't trust that the company and pension will remain solvent for the duration of my retirement 30+ years. That said I do like one of the advisors suggestions (below) for taking the lump and investing.

Advisor suggestion: Roll the entire company lump sum ($764K) into an IRA. Invest half of my liquid assets/cash into a non-qualified investment account. Don't touch the IRA money prior to 59.5 (I am currently 55 years old). Live off the invested cash and convert some of the lump in the IRA to Roth (not sure how much and when to take advantage of lower tax brackets?). My wife and I also have 401ks (both at Fidelity) which total ~ 1.3M today. I plan to leave both the IRA and 401k alone and live off the cash until at least age 60 but I can draw penalty free from the 401k if I have the need to. After age 60 I'm guessing that I could live off small distributions from either the IRA or 401k (or both) and defer social security until age 67?

So the details: I am 55, no debt whatsoever, own my home and personal vehicles. Wife is disabled and gets about 23,700 from SSI Disability. My 3 sources of income/savings below. I estimated that my yearly expenses will be close to 65K

Here are my current retirement assets:
* Notes: No debt (house vehicles paid off, no credit debt whatsoever), married filing jointly, 12% federal tax, no state tax (FL residence), His age 55, Her age 54

1) His 401k
401k current value about 1.24M (Asset Allocation 2030 fund 15%, Total Return Bond 7%, Total US Stock (large cap) 12%, AT&T US Stock Fund (large cap 10%, International Stock Index 20%, Large Cap US Stock Index 16%, SM & MD US Stock 20%). TOTAL = 1.14M

2) Her rollover IRA
Current value about 164K
Fidelity Value FDVLX 40%
Fidelity Equity Income FEQTX 30%
Janus Henderson Triton T JATTX 30%

3) 400K combined emergency and lumpy spend Liquid Cash Savings in Credit Union account earning .55 APY annually. Should I invest 1/2 or about 200k in taxable non-aggressive account and live off interest leaving 200k for lumpy spends and large "want" type purchases in retirement?

4) My SS estimates:
Age 62: $2041/mo
Age 67: $2899/mo
Age 70: $3594/mo

5) Her SS estimates:
SSDI income $23,700/year

---------------------------------------------------

1) For now until age 60. 65K estimated yearly spend - $23,700/year SSDI = $41,300 deficit to pull from invested cash, cash and IRA/401K. After age 60 defer SS until age 67 or commence at age 62?

2) I've diversified my company 401k based on both advisors recommendations and I'm hoping to leave the allocations close to what they are right now with minimal rebalancing each year. I'm a bit aggressive with a 62% domestic stock, 25% foreign and 13% bonds ratio over the combination of our portfolio (my 401k and her IRA) since I'm retiring at a young age. I'm hoping to rollover the company offered lump sump into an IRA and invest a bit more conservative with a 60/40 or 50/50 allocation. As with the 401k perform yearly adjustments as I get further into retirement.

3) Would it make sense to take my wife's smaller IRA (164K) and rollover to the newly opened lump sum IRA to make things simpler in that I'd only have 2 accounts to manage versus 3? Is this even allowed without penalty?

3) Does this sound like a good plan and if so suggestions for either a 3 fund portfolio or maybe even a diversified 1 fund portfolio to make a simplistic retirement approach? Advice, suggestions, changes?
RetiredAL
Posts: 3513
Joined: Tue Jun 06, 2017 12:09 am
Location: SF Bay Area

Re: Advice moving forward with Lump Sum

Post by RetiredAL »

Poisns1 wrote: Tue May 18, 2021 2:53 pm

At the advice of previous retirees I interviewed 2 advisors that wanted nearly 1% to manage my entire portfolio. Needless to say I've changed my mind after my initial post and the at the advice from fellow Bogleheads.

I am now starting to formulate my plan to take the Lump Sum (versus the monthly annuity offer) and I would like advice as to how I could rollover and invest the money in the easiest way possible. I've read most of the wiki's and short Youtube videos and I'm disciplined with my savings so I feel that if my accounts are setup in very simplistic approach from the start, I will be more inclined to stay with my plan throughout retirement (advice from the wiki's and videos).

I would love to take the offered monthly annuity which would make things so simple by just having to manage my 401K and wife's IRA, but I honestly don't trust that the company and pension will remain solvent for the duration of my retirement 30+ years. That said I do like one of the advisors suggestions (below) for taking the lump and investing.

Advisor suggestion: Roll the entire company lump sum ($764K) into an IRA. Invest half of my liquid assets/cash into a non-qualified investment account. Don't touch the IRA money prior to 59.5 (I am currently 55 years old). Live off the invested cash and convert some of the lump in the IRA to Roth (not sure how much and when to take advantage of lower tax brackets?). My wife and I also have 401ks (both at Fidelity) which total ~ 1.3M today. I plan to leave both the IRA and 401k alone and live off the cash until at least age 60 but I can draw penalty free from the 401k if I have the need to. After age 60 I'm guessing that I could live off small distributions from either the IRA or 401k (or both) and defer social security until age 67?

I estimated that my yearly expenses will be close to 65K


1) For now until age 60. 65K estimated yearly spend - $23,700/year SSDI = $41,300 deficit to pull from invested cash, cash and IRA/401K. After age 60 defer SS until age 67 or commence at age 62?

2) I've diversified my company 401k based on both advisors recommendations and I'm hoping to leave the allocations close to what they are right now with minimal rebalancing each year. I'm a bit aggressive with a 62% domestic stock, 25% foreign and 13% bonds ratio over the combination of our portfolio (my 401k and her IRA) since I'm retiring at a young age. I'm hoping to rollover the company offered lump sump into an IRA and invest a bit more conservative with a 60/40 or 50/50 allocation. As with the 401k perform yearly adjustments as I get further into retirement.

3) Would it make sense to take my wife's smaller IRA (164K) and rollover to the newly opened lump sum IRA to make things simpler in that I'd only have 2 accounts to manage versus 3? Is this even allowed without penalty?

3) Does this sound like a good plan and if so suggestions for either a 3 fund portfolio or maybe even a diversified 1 fund portfolio to make a simplistic retirement approach? Advice, suggestions, changes?
First, good choice to NOT HAVE a paid Mgr for you money.

IMO, Fidelity is a fine place to park your funds.

Do understand if your 401K allows for age 55 withdrawals. If yes, that can be tapped if necessary. Otherwise with any IRA, you generally have to wait until 59.5 to avoid penalty.

I took my pension as a lump into an IRA and am glad I did. I have it conservatively invested in Index funds, but many use Target Date Funds.

With the cash you have, I would think you are good to go. If you can withdraw from 401K $ at 55, you are very good to go.

When you reach 59.5, you can access that Pension IRA however you please. If you want to do conversions before 59.5, be aware that paying taxes out of the IRA withdrawal proceeds draws the penalty, thus if you do, you should plan on paying the taxes out of your cash. After 59.5, you can pay for conversions with the IRA withdrawal.

If found in retirement that my replacement income needs was way below what my Salary had been.

Change is anyways creates anxiousness. But don't be afraid. All of us now retied people have been there too.
wetgear
Posts: 859
Joined: Thu Apr 06, 2017 10:14 am

Re: Advice moving forward with Lump Sum

Post by wetgear »

1) If you've got the means to do so which on first glance it appears as you do, delaying SS for as long as possible is probably the way to go.

2a) It's best to think of your investments as one large portfolio with a single AA. You currently appear to be thinking about them all in different buckets but that's just unnecessarily complex and makes it harder to give specific advice. Account AA doesn't matter the entire portfolios AA does.

2b) I don't think you actually diversified your 401k, you added more funds to it but didn't add any diversification just complexity. The 2030 fund has all the other funds you have in your 401k already included in it. Target retirement 2040 (likely offered by your plan) has all the same funds too at roughly the same AA as your current mix of 7 funds. You could keep the diversification but add simplification by either using the 2040 TDF or switching to Total US, Total return bond, and International stock index (3 fund).

3) I'm not sure you can actually roll over a spouses IRA into your IRA until they are deceased, might want to google this. While account consolidation offers the benefit of simplicity it doesn't appear to be an option for you currently. I would give a long hard look at changing the funds in your wife's IRA though as it is full of funds with very high expense ratios (ER).

4) Yes a 3 fund portfolio is going to be much easier to maintain moving forward. Remember it's one portfolio with one AA.
ExPatKiwi
Posts: 71
Joined: Tue Dec 24, 2019 7:21 am

Re: Advice moving forward with Lump Sum

Post by ExPatKiwi »

First off congratulations you’re in good shape financially. In many ways I’m in the same position as you I’m looking at a lump sum option of $900k :moneybag today at age 57 and medical insurance to age 65. I’ve looked at deferring the pension as the annuity value increases from $40k/pa today to $75k/pa at age 65. However the lump sum only increases marginally as life expectancy is less at age 65 than it is at age 57 :shock: Also even more important the lump sum also uses discount rates that are the lowest ever today. A 1% increase in the discount rates will decrease the lump sum by 10%. I feel the discount rates will trend up from here which they already have from last year.

I’d simplify your funds to total market FSKAX or target date as someone else mentioned. I’d dump the AT&T stock/fund and get diversified ASAP.

My plan if I retire early is to keep funds in the 401k until I’m 59.5yo then do rollover to my IRA. If you separate from service to retire you can withdraw without penalty from your 401k before age 59.5. In retirement I will pull from my 401k the equivalent of our standard tax deduction $25k and the balance from our cash accounts and pay no federal tax in the process.

Once we hit 59.5 I plan to withdraw from my IRA $100k/pa and do $50k/pa conversions to ROTH as well to the top of the 12% tax band. I’ve also weighed up doing them before age 59.5. but withdrawals from the 401k are automatically subject to 20% federal tax holding so conversions before age 59.5 get hit hard versus the IRA where I can set the appropriate tax withholding.

My plan for SS is to delay it to FRA or age 70. My wife will be filing under me for spousal benefit.

Final thing is yours and your wife’s IRA accounts are individual and cannot be merged…unless someone passes.

Good luck!
Counting down to retirement.
Topic Author
Poisns1
Posts: 95
Joined: Thu Apr 13, 2017 2:19 pm

Re: Advice moving forward with Lump Sum

Post by Poisns1 »

wetgear wrote: Tue May 18, 2021 5:09 pm
2b) I don't think you actually diversified your 401k, you added more funds to it but didn't add any diversification just complexity. The 2030 fund has all the other funds you have in your 401k already included in it. Target retirement 2040 (likely offered by your plan) has all the same funds too at roughly the same AA as your current mix of 7 funds. You could keep the diversification but add simplification by either using the 2040 TDF or switching to Total US, Total return bond, and International stock index (3 fund).

Regarding 2B. I actually had a huge portion in company stock (almost 30%). I sold all my company stock and distributed among the remaining funds in my plan as were the suggestions of a few advisors and one of my neighbors who is a retired banker. You are right I am still highly invested in stocks vs bonds but I was told to stay aggressive in the 401k and be more conservative in my lump sum rollover IRA. I do understand that the AA should be overall and not vary from account to account.

That said if I'm retiring at age 55, I'm thinking that I should in a 60/40 or 50/50 AA? If that's the case I could slowly start periodic rebalances from my current 7 positions and funnel money into the 2030 TDF as that fund is currently close to 60/40 AA?

3) I would give a long hard look at changing the funds in your wife's IRA though as it is full of funds with very high expense ratios (ER).

I've been told the same thing recently. I have to look into what's available in her IRA. That said any suggestions as replacements? Go with 3 fund or keep it simple like 401k and go after 1 TDF similar to the 2030 TDF in my 401k?
Topic Author
Poisns1
Posts: 95
Joined: Thu Apr 13, 2017 2:19 pm

Re: Advice moving forward with Lump Sum

Post by Poisns1 »

Wetgear wrote "I don't think you actually diversified your 401k, you added more funds to it but didn't add any diversification just complexity. The 2030 fund has all the other funds you have in your 401k already included in it. Target retirement 2040 (likely offered by your plan) has all the same funds too at roughly the same AA as your current mix of 7 funds. You could keep the diversification but add simplification by either using the 2040 TDF or switching to Total US, Total return bond, and International stock index (3 fund)."

1) I was hoping to consolidate my company (Fidelity) 401k allocations to make it easier to manage. I looked at selling all positions and moving into the 2030 TDF but this fund has almost 30% in Foreign stock. I've been given advice to hold an AA of 60/40 with 50% US STOCK INDEX and only 10% International Stock. The next closest fund which is the 2035 TDF has 35.33% in International Stock. Both of these funds seem to have International Stock allocations that are too high?

AS OF 4/30/2021; Morningstar Category: Target-Date 2030
Fund Category
Convertibles 0.34%
Foreign Stock 29.45%
Preferred Stock 0.03%
Foreign Bond 2.78%
Domestic Bond 27.10%
Domestic Stock 33.24%
Cash 4.50%
Other 2.55%

Considering that, I'm just leaning towards moving everything into a 3 fund approach by selecting these funds:

50% Total US Stock Index (100% Portfolio in BlackRock US Equity Market F) n/ Expense .01
10% International Stock Index (100% Portfolio in BlackRock MSCI ACWI ex-US) Expense .02
40% Total Return Bond ( Domestic Stock0.01%,Preferred Stock0.00%,Others0.00%,Foreign Stock0.00%,Convertibles2.15%,Cash2.82%,Domestic Bond78.40%,Foreign Bond16.61) Expense .14

Does this sound like a good AA for a 60/40 3 fund portfolio?

2) I would like to move my wife's holdings out of these expensive funds into a similar 60/40 allocation (as BH posters suggested to keep all accounts at the respective AA of 60/40). I believe that I have the freedom to choose any fund including Fidelity funds in her IRA account? Can I get suggestions on which funds to choose which would be similar to the new funds selected in my 401k Fidelity account (60/40 allocation Total Stock Index, International Stock Index, Bond Fund)?

Currently holdings that I'd like to move for lower expenses/fees and diversification:
FDVLX 39.36%
FEQTX 29.42%
JATTX 31.21%
Topic Author
Poisns1
Posts: 95
Joined: Thu Apr 13, 2017 2:19 pm

Re: Advice moving forward with Lump Sum

Post by Poisns1 »

Bumping for assistance/recommendations on new funds and AA changes to my company 401K and wife's IRA
wetgear
Posts: 859
Joined: Thu Apr 06, 2017 10:14 am

Re: Advice moving forward with Lump Sum

Post by wetgear »

Poisns1 wrote: Fri Jun 18, 2021 4:59 pm Wetgear wrote "I don't think you actually diversified your 401k, you added more funds to it but didn't add any diversification just complexity. The 2030 fund has all the other funds you have in your 401k already included in it. Target retirement 2040 (likely offered by your plan) has all the same funds too at roughly the same AA as your current mix of 7 funds. You could keep the diversification but add simplification by either using the 2040 TDF or switching to Total US, Total return bond, and International stock index (3 fund)."

1) I was hoping to consolidate my company (Fidelity) 401k allocations to make it easier to manage. I looked at selling all positions and moving into the 2030 TDF but this fund has almost 30% in Foreign stock. I've been given advice to hold an AA of 60/40 with 50% US STOCK INDEX and only 10% International Stock. The next closest fund which is the 2035 TDF has 35.33% in International Stock. Both of these funds seem to have International Stock allocations that are too high?

AS OF 4/30/2021; Morningstar Category: Target-Date 2030
Fund Category
Convertibles 0.34%
Foreign Stock 29.45%
Preferred Stock 0.03%
Foreign Bond 2.78%
Domestic Bond 27.10%
Domestic Stock 33.24%
Cash 4.50%
Other 2.55%

Considering that, I'm just leaning towards moving everything into a 3 fund approach by selecting these funds:

50% Total US Stock Index (100% Portfolio in BlackRock US Equity Market F) n/ Expense .01
10% International Stock Index (100% Portfolio in BlackRock MSCI ACWI ex-US) Expense .02
40% Total Return Bond ( Domestic Stock0.01%,Preferred Stock0.00%,Others0.00%,Foreign Stock0.00%,Convertibles2.15%,Cash2.82%,Domestic Bond78.40%,Foreign Bond16.61) Expense .14

Does this sound like a good AA for a 60/40 3 fund portfolio?

2) I would like to move my wife's holdings out of these expensive funds into a similar 60/40 allocation (as BH posters suggested to keep all accounts at the respective AA of 60/40). I believe that I have the freedom to choose any fund including Fidelity funds in her IRA account? Can I get suggestions on which funds to choose which would be similar to the new funds selected in my 401k Fidelity account (60/40 allocation Total Stock Index, International Stock Index, Bond Fund)?

Currently holdings that I'd like to move for lower expenses/fees and diversification:
FDVLX 39.36%
FEQTX 29.42%
JATTX 31.21%
1) Yes that seems like a good approach.

2) The equivalent at Vanguard is VTI (total US), VXUS (Total international), and VBTLX (total bond). Fidelity is FSKAX, FTIHX, and FXNAX. Note: You don't need to hold the same AA in all accounts and frequently that's not optimal tax wise, you just need to hold the correct AA for the whole portfolio. This means for a three fund portfolio some accounts may only have 1 or 2 funds.
User avatar
Wiggums
Posts: 7028
Joined: Thu Jan 31, 2019 7:02 am

Re: Advice moving forward with Lump Sum

Post by Wiggums »

Poisns1 wrote: Fri Jun 18, 2021 4:59 pm Wetgear wrote "I don't think you actually diversified your 401k, you added more funds to it but didn't add any diversification just complexity. The 2030 fund has all the other funds you have in your 401k already included in it. Target retirement 2040 (likely offered by your plan) has all the same funds too at roughly the same AA as your current mix of 7 funds. You could keep the diversification but add simplification by either using the 2040 TDF or switching to Total US, Total return bond, and International stock index (3 fund)."

1) I was hoping to consolidate my company (Fidelity) 401k allocations to make it easier to manage. I looked at selling all positions and moving into the 2030 TDF but this fund has almost 30% in Foreign stock. I've been given advice to hold an AA of 60/40 with 50% US STOCK INDEX and only 10% International Stock. The next closest fund which is the 2035 TDF has 35.33% in International Stock. Both of these funds seem to have International Stock allocations that are too high?

AS OF 4/30/2021; Morningstar Category: Target-Date 2030
Fund Category
Convertibles 0.34%
Foreign Stock 29.45%
Preferred Stock 0.03%
Foreign Bond 2.78%
Domestic Bond 27.10%
Domestic Stock 33.24%
Cash 4.50%
Other 2.55%

Considering that, I'm just leaning towards moving everything into a 3 fund approach by selecting these funds:

50% Total US Stock Index (100% Portfolio in BlackRock US Equity Market F) n/ Expense .01
10% International Stock Index (100% Portfolio in BlackRock MSCI ACWI ex-US) Expense .02
40% Total Return Bond ( Domestic Stock0.01%,Preferred Stock0.00%,Others0.00%,Foreign Stock0.00%,Convertibles2.15%,Cash2.82%,Domestic Bond78.40%,Foreign Bond16.61) Expense .14

Does this sound like a good AA for a 60/40 3 fund portfolio?

2) I would like to move my wife's holdings out of these expensive funds into a similar 60/40 allocation (as BH posters suggested to keep all accounts at the respective AA of 60/40). I believe that I have the freedom to choose any fund including Fidelity funds in her IRA account? Can I get suggestions on which funds to choose which would be similar to the new funds selected in my 401k Fidelity account (60/40 allocation Total Stock Index, International Stock Index, Bond Fund)?

Currently holdings that I'd like to move for lower expenses/fees and diversification:
FDVLX 39.36%
FEQTX 29.42%
JATTX 31.21%
I’m retired and our AA is 65/35. I think 60/40 and even 50/50 is fine as well. The returns are very similar. We use the three fund portfolio and I don’t get in there and tinker. I only rebalance once a year. I think the target fund or the life strategy fund is a reasonable alternative. We are doing Roth conversions now.
"I started with nothing and I still have most of it left."
Topic Author
Poisns1
Posts: 95
Joined: Thu Apr 13, 2017 2:19 pm

Re: Advice moving forward with Lump Sum

Post by Poisns1 »

Wiggums wrote: Mon Jul 12, 2021 8:59 am
Poisns1 wrote: Fri Jun 18, 2021 4:59 pm Wetgear wrote "I don't think you actually diversified your 401k, you added more funds to it but didn't add any diversification just complexity. The 2030 fund has all the other funds you have in your 401k already included in it. Target retirement 2040 (likely offered by your plan) has all the same funds too at roughly the same AA as your current mix of 7 funds. You could keep the diversification but add simplification by either using the 2040 TDF or switching to Total US, Total return bond, and International stock index (3 fund)."

1) I was hoping to consolidate my company (Fidelity) 401k allocations to make it easier to manage. I looked at selling all positions and moving into the 2030 TDF but this fund has almost 30% in Foreign stock. I've been given advice to hold an AA of 60/40 with 50% US STOCK INDEX and only 10% International Stock. The next closest fund which is the 2035 TDF has 35.33% in International Stock. Both of these funds seem to have International Stock allocations that are too high?

AS OF 4/30/2021; Morningstar Category: Target-Date 2030
Fund Category
Convertibles 0.34%
Foreign Stock 29.45%
Preferred Stock 0.03%
Foreign Bond 2.78%
Domestic Bond 27.10%
Domestic Stock 33.24%
Cash 4.50%
Other 2.55%

Considering that, I'm just leaning towards moving everything into a 3 fund approach by selecting these funds:

50% Total US Stock Index (100% Portfolio in BlackRock US Equity Market F) n/ Expense .01
10% International Stock Index (100% Portfolio in BlackRock MSCI ACWI ex-US) Expense .02
40% Total Return Bond ( Domestic Stock0.01%,Preferred Stock0.00%,Others0.00%,Foreign Stock0.00%,Convertibles2.15%,Cash2.82%,Domestic Bond78.40%,Foreign Bond16.61) Expense .14

Does this sound like a good AA for a 60/40 3 fund portfolio?

2) I would like to move my wife's holdings out of these expensive funds into a similar 60/40 allocation (as BH posters suggested to keep all accounts at the respective AA of 60/40). I believe that I have the freedom to choose any fund including Fidelity funds in her IRA account? Can I get suggestions on which funds to choose which would be similar to the new funds selected in my 401k Fidelity account (60/40 allocation Total Stock Index, International Stock Index, Bond Fund)?

Currently holdings that I'd like to move for lower expenses/fees and diversification:
FDVLX 39.36%
FEQTX 29.42%
JATTX 31.21%
I’m retired and our AA is 65/35. I think 60/40 and even 50/50 is fine as well. The returns are very similar. We use the three fund portfolio and I don’t get in there and tinker. I only rebalance once a year. I think the target fund or the life strategy fund is a reasonable alternative. We are doing Roth conversions now.
Thanks Wiggums!

1) Can I ask what portion of your 65AA is in US Stock vs. International Stock and do you think that the 2 Fidelity target date funds offered in my 401k are too high of an AA in International Stock at 30% and 35.33%. I've heard about the Life Strategy Funds but now sure if those funds are also "heavily" weighted towards International Stocks?

2) Also can you recommend a 3 fund portfolio (actual fund choices) to move my wife's expensive Fidelity IRA funds to please?
wetgear
Posts: 859
Joined: Thu Apr 06, 2017 10:14 am

Re: Advice moving forward with Lump Sum

Post by wetgear »

Poisns1 wrote: Tue Jul 13, 2021 4:06 pm 1) Can I ask what portion of your 65AA is in US Stock vs. International Stock and do you think that the 2 Fidelity target date funds offered in my 401k are too high of an AA in International Stock at 30% and 35.33%. I've heard about the Life Strategy Funds but now sure if those funds are also "heavily" weighted towards International Stocks?

2) Also can you recommend a 3 fund portfolio (actual fund choices) to move my wife's expensive Fidelity IRA funds to please?
Can you edit your original post to show what percentages of your total portfolio each fund represents? Percentage of individual accounts isn't really useful information. Your AA and % international should be set at the portfolio level not the account level. There is much disagreement here about how much international is appropriate with people arguing anywhere from 0-50% is appropriate but most would agree 20% isn't a bad option. You may not need to hold all 3 of the funds for a 3 fund portfolio in every account and if your wife's IRA is small 1 fund would likely be fine.
Topic Author
Poisns1
Posts: 95
Joined: Thu Apr 13, 2017 2:19 pm

Re: Advice moving forward with Lump Sum

Post by Poisns1 »

wetgear wrote: Tue Jul 13, 2021 6:12 pm
Poisns1 wrote: Tue Jul 13, 2021 4:06 pm 1) Can I ask what portion of your 65AA is in US Stock vs. International Stock and do you think that the 2 Fidelity target date funds offered in my 401k are too high of an AA in International Stock at 30% and 35.33%. I've heard about the Life Strategy Funds but now sure if those funds are also "heavily" weighted towards International Stocks?

2) Also can you recommend a 3 fund portfolio (actual fund choices) to move my wife's expensive Fidelity IRA funds to please?
Can you edit your original post to show what percentages of your total portfolio each fund represents? Percentage of individual accounts isn't really useful information. Your AA and % international should be set at the portfolio level not the account level. There is much disagreement here about how much international is appropriate with people arguing anywhere from 0-50% is appropriate but most would agree 20% isn't a bad option. You may not need to hold all 3 of the funds for a 3 fund portfolio in every account and if your wife's IRA is small 1 fund would likely be fine.
Wetgear I'd love to do that but I honestly don't know how. It confuses the heck out of me. That's why I'm trying to simplify both accounts (my 401k and her IRA) prior to retirement. For example there is about 30% international built into 15% of my 401k balance in the Fidelity Target Date 2030 Fund. Then I have 20% of my 401k in the International Stock Index. The rest of the funds are split among Total Stock, Small/Mid cap, bond etc. I have no clue about the wife's IRA funds and what AA they carry as she picked those years ago when her original stock funds were closed and she was forced to pick new funds.

Here are the main retirement accounts. A 3rd account (IRA) will be opened up with Fidelity before the end of the year and I will transfer my company retirement money into that account. Like you said I would like to have all 3 of these simplified so I can easily monitor the AA. I just don't know how to get from point A to point B? Can you help me sort this mess out and fix everything? Wife's IRA is small and I agree, if I'm looking for a 65/35 or 60/40 AA can you recommend a good 1 fund choice to make her IRA simple? So confused and afraid I'm going to screw this up..

1) His 401k
401k current value about 1.24M (Asset Allocation 2030 fund 15%, Total Return Bond 7%, Total US Stock (large cap) 12%, AT&T US Stock Fund (large cap 10%, International Stock Index 20%, Large Cap US Stock Index 16%, SM & MD US Stock 20%). TOTAL = 1.14M

2) Her rollover IRA
Current value about 164K
Fidelity Value FDVLX 40%
Fidelity Equity Income FEQTX 30%
Janus Henderson Triton T JATTX 30%
Post Reply