Help, investment advice...please...

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Topic Author
Helpmebogle
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Help, investment advice...please...

Post by Helpmebogle »

Hi, Everyone:

I am 68 years old, newly retired, and nervous about investing in retirement.

My wife (67 years old/retired) and I have rolled-over our employer 401k accounts into Fidelity IRAs. In those accounts, we have greater than $1,000,000. We are both receiving Social Security (full benefits) and employer pensions, which is more than enough to cover our day-to-day expenses. We both have Medicare Part A/B, and are both covered under my previous employer's supplemental health insurance.

Over time, we have become conservative investors with our cash holdings, and simply can't justify paying an investment advisor thousands and thousands of dollars each year to suggest a diversified retirement portfolio - something we can do ourselves.

So, now, my questions:
    I am a strong believer in 2- or 3-fund investment portfolios (easy to manage/rebalance; diversified; no advisor management fees). What is preferred, a 2-fund or 3-fund investment portfolio?
      What is preferred, a portfolio based on mutual funds or ETFs?
        What fund source is preferred: Fidelity, Blackrock iShares, or Vanguard?
          For Fidelity (mutual funds), I was considering Fidelity Total Market Index Fund (FSKAX), Fidelity Total International Index Fund (FTIHX), and Fidelity US Bond Index Fund (FXNAX); for Blackrock iShares (ETFs), I was considering iShares Core S&P Total Market ETF (ITOT), iShares Core MSCI Total International Stock ETF (IXUS), and iShares Core Total US Bond Market ETF (AGG); for Vanguard (ETFs), I was considering Vanguard Total Stock ETF (VTI), Vanguard Total International Stock ETF (VXUS), and Vanguard Total Bond Market ETF (BND).
            Being conservative, what allocation is appropriate for us?
              I am currently somewhat apprehensive about bond investments (rising interest rates). Other than what I have listed above, can one suggest a more appropriate/better bond fund? Or, should bond funds not be considered at this time?

              Any help you can provide is welcome.

              Thanks, and stay safe!

              John
              livesoft
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              Re: Help, investment advice...please...

              Post by livesoft »

              Since you are a client of Fidelity and have only tax-deferred account(s) to think about, just pick ONE SINGLE Fidelity Freedom Index fund and invest 100% of your money into that fund. I am using FQIFX myself. Look it up and see what its asset allocation is. You can use it for awhile and if you find that you don't like it, just switch to a different Fidelity Freedom Index fund that you like better. In an IRA there is no consequence and no cost to switch.

              All your other questions are moot if you select ONE SINGLE Fidelity Freedom Index fund for your money.
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              chassis
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              Re: Help, investment advice...please...

              Post by chassis »

              I like etfs because of liquidity and intra-day pricing and transacting.

              I like Fidelity.

              I have held an account at Vanguard and didn't like it. I have used T. Rowe Price, H&R Block, Schwab, Prudential, Mass Mutual and TIAA. None are as good as Fidelity.

              Don't do bonds. They are not performing now as you mentioned. Rates are rising, this means face value is dropping. The rates themselves are far inferior to equity returns. So, while holding to maturity avoids the face value problem, the total return is poor.

              The decades-long bond bull market was based on high-ish rates being palatable vs equity returns, leftover from the Volcker era, and dropping rates. Neither of those facts are today's reality.
              jimkinny
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              Re: Help, investment advice...please...

              Post by jimkinny »

              livesoft wrote: Sat Jun 19, 2021 12:23 pm Since you are a client of Fidelity and have only tax-deferred account(s) to think about, just pick ONE SINGLE Fidelity Freedom Index fund and invest 100% of your money into that fund. I am using FQIFX myself. Look it up and see what its asset allocation is. You can use it for awhile and if you find that you don't like it, just switch to a different Fidelity Freedom Index fund that you like better. In an IRA there is no consequence and no cost to switch.

              All your other questions are moot if you select ONE SINGLE Fidelity Freedom Index fund for your money.
              +1
              livesoft
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              Re: Help, investment advice...please...

              Post by livesoft »

              chassis wrote: Sat Jun 19, 2021 12:29 pmDon't do bonds. They are not performing now as you mentioned. Rates are rising, this means face value is dropping....
              [...]
              Neither of those facts are today's reality.
              Speaking of facts, bond funds like Vanguard Total US Bond Index fund (VBTLX) have gained more than 2.4% in the past 3 months. Here is a factual chart that shows that:

              Image
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              BL
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              Re: Help, investment advice...please...

              Post by BL »

              Agree that a single balanced fund such as Livesoft suggested above is a good choice. Be sure it is a low-cost index fund as mentioned. It is easier to find the regular Freedom funds at Fidelity which cost much more, but look harder and you will find the Index funds.

              I use only Vanguard, which has many good low-Expense-Ratio (ER) balanced funds.

              If you decide you want some help in setting it up, Vanguard PAS is low-cost (0.3%/yr) and lets you know, before you sign up, what funds or ETFs they would put you in. You listed most of the V funds/ETFs they would use. They would ask questions and suggest a stock/bond proportion. Advice ranges from a minimum of 30% stocks to a max of maybe 70% stocks. (Conservatives would perhaps choose 50% or less stocks (equities).

              Your fixed income could be in bonds,CDs, money market or savings accounts, I-bonds (10k/year/person purchase limit). Nothing pays well these days (well, I-bonds have a 3.54% rate for the first 6 months if purchased before this November), but they will be more secure than equities. Some buy enough SPIA (single purchase immediate annuities) to cover minimum expenses, but waiting a few years gives you an advantage. There are some articles here about using MYGAs (multi-year guaranteed annuities) that are sold and guaranteed by insurance companies, but I know nothing about them.
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              ruralavalon
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              Re: Help, investment advice...please...

              Post by ruralavalon »

              Congratulations on your recent retirement :) .

              The Fidelity index mutual funds, BlackRock iShares ETFs and Vanguard ETFs which you listed are all good choices.

              In your IRAs at Fidelity, being ages 67-68 and both retired with pensions plus Social Security benefits covering your day-to-day expenses, you could simply use Fidelity Freedom® Index Income Fund - Investor Class (FIKFX) ER 0.12%. The asset allocation is conservative, about 20% equities/80% fixed income.

              If you want a different asset allocation, alternatives for a simple one-fund portfolio include BlackRock iShares Core Allocation ETFs (AOK), (AOM), (AOR), or (AOA), ER 0.25%, 30/70 to 80/20 allocations.

              In IRAs for utmost simplIcity I would set up automatic reinvestment of distributions.

              What is your current tax bracket in retirement, both federal and state?

              Since you both have pensions plus Social Security benefits, you could consider Roth IRA conversions during the years before Required Minimum Distributions (RMDs) start at age 72.
              "Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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              Duckie
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              Re: Help, investment advice...please...

              Post by Duckie »

              BL wrote: Sat Jun 19, 2021 1:01 pm Agree that a single balanced fund such as Livesoft suggested above is a good choice. Be sure it is a low-cost index fund as mentioned. It is easier to find the regular Freedom funds at Fidelity which cost much more, but look harder and you will find the Index funds.
              OP, the index funds are here.
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              AllMostThere
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              Re: Help, investment advice...please...

              Post by AllMostThere »

              Duckie wrote: Sat Jun 19, 2021 3:28 pm
              BL wrote: Sat Jun 19, 2021 1:01 pm Agree that a single balanced fund such as Livesoft suggested above is a good choice. Be sure it is a low-cost index fund as mentioned. It is easier to find the regular Freedom funds at Fidelity which cost much more, but look harder and you will find the Index funds.
              OP, the index funds are here.
              I spent twenty minutes other day trying to educate my Sister on the Fidelity Target Date Index Funds. Fidelity definitely does not make it easy to find their Indexed Target Date Funds. Again, twenty minutes to find them.... :oops: I will bookmark this post for future reference. Thanks.
              It is not about how much you make; it is about how much you keep and how well you invest it. - Author Unknown | Dream as if you’ll live forever. Live as if you’ll die today. - Author James Dean
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              oldcomputerguy
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              Re: Help, investment advice...please...

              Post by oldcomputerguy »

              ^ It appears that Fidelity has recently changed their mutual fund screener page to more closely resemble the setup used in their ETF screener page. That being the case, I would only add that it's easy to request index funds only in their screener. From the top level, under the "Quick Criteria" tab, the "Management Approach" area has three selections: "All", "Active", and "Index". Selecting "Index" will make the screener return only index funds. (This might be useful for those who wish to search for individual index funds for a three-fund approach rather than the Freedom Index funds, which the link that Duckie thoughtfully provided links to.)
              There is only one success - to be able to spend your life in your own way. (Christopher Morley)
              Topic Author
              Helpmebogle
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              Re: Help, investment advice...please...

              Post by Helpmebogle »

              Thanks, everyone, for your advice.

              I did, however, find ruralavalon's post interesting; specifically, the investment offerings by BlackRock iShares Core Allocation ETFs (AOK, AOM, AOR, or AOA). So, my question is this: WHAT ARE PEOPLE'S THOUGHTS REGARDING USING THE 1-FUND APPROACH RATHER THAN A 2- OR 3-FUND INVESTMENT APPROACH IN RETIREMENT?

              The investment approach seems like a great way to reach a specific asset allocation with just ONE fund. Plus, it's well diversified, and no rebalancing is required, as the fund is rebalanced by BlackRock semiannually.

              John
              ruralavalon wrote: Sat Jun 19, 2021 2:15 pm
              If you want a different asset allocation, alternatives for a simple one-fund portfolio include BlackRock iShares Core Allocation ETFs (AOK), (AOM), (AOR), or (AOA), ER 0.25%, 30/70 to 80/20 allocations.
              Topic Author
              Helpmebogle
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              Re: Help, investment advice...please...

              Post by Helpmebogle »

              Helpmebogle wrote: Sun Jun 20, 2021 10:43 am Thanks, everyone, for your advice.

              I did, however, find ruralavalon's post interesting; specifically, the investment offerings by BlackRock iShares Core Allocation ETFs (AOK, AOM, AOR, or AOA). So, my question is this: WHAT ARE PEOPLE'S THOUGHTS REGARDING USING THE 1-FUND APPROACH RATHER THAN A 2- OR 3-FUND INVESTMENT APPROACH IN RETIREMENT?

              The investment approach seems like a great way to reach a specific asset allocation with just ONE fund. Plus, it's well diversified, and no rebalancing is required, as the fund is rebalanced by BlackRock semiannually.

              John
              ruralavalon wrote: Sat Jun 19, 2021 2:15 pm
              If you want a different asset allocation, alternatives for a simple one-fund portfolio include BlackRock iShares Core Allocation ETFs (AOK), (AOM), (AOR), or (AOA), ER 0.25%, 30/70 to 80/20 allocations.
              _________________

              Can anyone provide comments/suggestions/insight regarding my question "in bold" above?
              Boatguy
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              Re: Help, investment advice...please...

              Post by Boatguy »

              OP—-Do you have a reason for both of you taking SS benefits at FRA rather than considering delaying the high wage earner until age 70? Was your wife born in 1953 or 1954? If 1953, you can get spousal benefits while still allowing you SS benefits to grow until age 70. In any event, take a look at opensocialsecurity.com.

              If you should find that there’s a better claiming strategy, it might not be too late to revert.
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              retired@50
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              Re: Help, investment advice...please...

              Post by retired@50 »

              Helpmebogle wrote: Sun Jun 20, 2021 10:43 am Thanks, everyone, for your advice.

              I did, however, find ruralavalon's post interesting; specifically, the investment offerings by BlackRock iShares Core Allocation ETFs (AOK, AOM, AOR, or AOA). So, my question is this: WHAT ARE PEOPLE'S THOUGHTS REGARDING USING THE 1-FUND APPROACH RATHER THAN A 2- OR 3-FUND INVESTMENT APPROACH IN RETIREMENT?

              The investment approach seems like a great way to reach a specific asset allocation with just ONE fund. Plus, it's well diversified, and no rebalancing is required, as the fund is rebalanced by BlackRock semiannually.

              John
              ruralavalon wrote: Sat Jun 19, 2021 2:15 pm
              If you want a different asset allocation, alternatives for a simple one-fund portfolio include BlackRock iShares Core Allocation ETFs (AOK), (AOM), (AOR), or (AOA), ER 0.25%, 30/70 to 80/20 allocations.
              _________________

              Can anyone provide comments/suggestions/insight regarding my question "in bold" above?
              Assuming you're okay with the Fidelity glide path for their target date funds, I'd stick with the Fidelity Freedom Index fund option, for a couple of reasons.

              1. It's got a lower expense ratio then the Blackrock product(s) (.08% versus .25%). That's 1/3rd the price!
              2. It's a mutual fund instead of an ETF, which will be easier to redeem as you age.
              You may not think this is a big deal now, but as you age your financial skills and abilities will fall off.

              If you're NOT okay with the Fidelity glide path for their target date funds, then using a constant allocation fund (such as Blackrock or Vanguard LifeStrategy Funds) could be a viable solution.

              Regards,
              If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
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              celia
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              Re: Help, investment advice...please...

              Post by celia »

              Helpmebogle wrote: Sat Jun 19, 2021 12:18 pm My wife (67 years old/retired) and I have rolled-over our employer 401k accounts into Fidelity IRAs. In those accounts, we have greater than $1,000,000.
              So far, this sounds like you should first figure out a Roth conversion plan. If you don’t withdraw or convert before RMDs start, when they do start, you can easily be pushed into a higher tax bracket. AND if both of your pensions will continue when one of you dies (only the higher SS will continue), then the surviving spouse will likely be pushed into a higher tax bracket (and other financial things will happen). That is because the survivor will then have to file as Single. The space in tax brackets for Singles is half as much as for MFJ.

              That is where I would start before choosing funds to invest in.

              Let’s start by finding out if your heirs will be people or charities.
              A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
              Golf maniac
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              Re: Help, investment advice...please...

              Post by Golf maniac »

              I agree with the 1 fund approach for simplicity such as the Fidelity Freedom Index fund. You can do the income fund which is fairly conservative but does have some risk and can lose some value (as I have seen since I use it as one of my funds). RMD’s are going to be a concern so maybe converting some of the IRA over to Roth would make sense to reduce the RMD. It sounds like you may never need the investments so starting to think about estate planning also makes sense.
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              celia
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              Re: Help, investment advice...please...

              Post by celia »

              Helpmebogle wrote: Sat Jun 19, 2021 12:18 pm Any help you can provide is welcome.
              Here is a recent thread about figuring out if you should convert in early retirement or not:

              viewtopic.php?t=400601

              I would also caution about having a one-, two-, or three-fund portfolio since that will limit your ability to re-balance. Having all your accounts invested the same doesn’t make sense to me from a Tax-Efficient Fund Placement perspective. Even if all your assets are currently in tax-deferred, once you start doing Roth conversions, you will only want stock funds there to maximize future tax-free growth. When your SS and pensions are more than you need for living expenses, the excess can go into a Taxable account and hold stock funds that can get a step-up in cost basis when you die as well as foreign stock funds that may give you a Foreign Tax Credit. And if your Tax-deferred grows too much, you can put bond funds in there to hold down the growth and future RMDs.

              Remember that your tax-deferred accounts will continue to grow as long as the amount you withdraw each year is less than the amount of yearly growth. So don’t project your future income and taxes on today’s account values, but on your age 73 value, which might be a lot more than today’s. RMDs start at around 4% a year and the percentage increases each year after that while the account value also increases until your late 80s.

              So, although your original question was about choosing investments, that is a lower priority compared to looking ahead 10 years or so and considering doing Roth conversions first. You now have an opportunity to level out your projected Taxable Income over the following years where you won’t have that option once RMDs start.

              Many of us aim for a level income (and taxes) over our remaining years instead of having a few years of “lower income” followed by “higher incomes” for the rest of our lives. Keep reading in the forum and look for the experiences of those who are retired and what they wish they had done differently.
              A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
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