Post # 1
My husband and I are in our late 40s heading into our 50s. Over the years we have put money from every paycheck into a 401k plan. My husband recently retired from his government job after 25 years and receives a retirement check. Im working but only part time due to being a cancer patient. His retirement check and my paycheck pay our regular bills: house payments, utilities, and life insurance. My husband now works another job, since he wasnt quite ready to fully retire and draws another paycheck and from that pay day we put money into a second 401k. Anything that doesnt go to 401k goes into our regular checking acount.
I was recently with a financial advisor who said that while our 401k accounts were decent, if we want to retire fully in 10 years , that we need substantially more money in our accounts. He suggested investments.
Im pretty savvy when it comes to money and I understand ETFs, stock buying, share prices, and P/E ratios.
However, Im terrified of choosing the wrong stocks to invest in. I know we could do an index fund or even a mutual fund, but considering our ages, would those types of investments be a good bet, since they have lower returns, or would a diversified portfolio of our own choosing be more adaptable for us since we are nearing the age of full on retirement.
I would like advice from investment savvy bees.
Thank you in advance.
Post # 2
We have recently read and saw data (https://earlyretirementnow.com/ is a good site) that actually supports a full stock portfolio as you near retirement and we are moving our investments in that direction. When we first started investing, we picked individual stocks and would never do that again. We simply do index funds now (that are essentially a blend of stock, so we see it as stock). And then we diversify by picking different markets (US funds/international, etc) and are currently looking into real estate funds. Vangaurd has funds that are already targeted and balanced for certain age groups too that are simple to invest in. Whatever you do, you certainly dont’ want your money in just a money market account/bonds where the growth barely beats inflation.
Post # 3
Financial professionals aren’t good enough at picking stocks to beat the market on average. So the odds of you being able to pick individual stocks that outperform the market is slim to none. Don’t try.
Buy low-fee ETFs that track the whole market. ETFs have tax advantages over index funds and also generally have lower expense ratios. But both index funds and ETFs are good.
What are your 401ks currently invested in, and how much do you have in them now? Ideally you want 25x the amount you spend annually by retirement.
I’d caution you against the all stocks plan suggested above – that’s exposing yourself to a lot of risk. A good starting point for figuring out your allocations would be inputting your data and risk tolerance into a questionnaire like this one: https://www.wealthfront.com/questionnaire. I wouldn’t pay to use Wealthfront, I’d just use this to get an idea of what your target allocations should look like. I also recommend the free site Personal Capital, which is great for tracking your assets and playing around with retirement calculators. Once you link your accounts, they also suggest target allocations and tell you where you’re paying too high fees.
Post # 4
I used to work with a guy who had made millions from investing in the stock market (he also lost millions in the recession). His advice was to only invest was you can afford to lose, with stocks and shares you’re essentially gambling, yes you can make a lot of money, but you can also lose it all too. I personally, would not be gambling with my entire pension. My cousin’s husband also makes a lot of money in stocks and shares, but during the recession he lost most of what he had accumulated and it’s taken him until now to make the money back that he lost. If you’re set on investing do not invest your entire pension, it’s far too risky.
Post # 5
ariesscientist : We wont be investing our pensions in anything. Those will remain untouched. Right now we can afford to spend 1000.00 on investments outside of our retirement accounts.
I suppose an ETF fund will be a safe option for us.
Post # 6
Our 401ks both offer multiple investment choices, some more conservative and others more aggressive. Can you not just switch to a slightly more aggressive investment strategy within your current 401k plans?
Post # 7
Have you thought of non-traditional investments? And by that I mean, not 401K?
We own a lot of investment properties that give us a monthly income, each gives (after taxes, etc) of $500-1000. Sure, being a landlord is some work, but if you are partially retired anyway then it’s should be fine. It’s certainly not a full time job for me. Theoretically between our properties and savings, we could cash all out, sell the properties, and live a simple, retired life but we aren’t quite there yet since we are in our 30s. Just illustrating it’s been worth it for us
Post # 8
ariesscientist : In general, not investing is more of a risk than having a balanced investment portfolio.
With risky investments like individual stocks or cryptocurrency you are gambling. But with a diversified portfolio in low-fee funds that track primarily developed markets, you can reliably expect decent returns over time – assuming you don’t make poor choices like selling when the market is down, and you’re willing to hold onto your investments for a long time. Someone who lost money in the last recession and hasn’t more than made it back by now — after a record bull market — likely either panicked and sold, or was very poorly diversified.
Post # 9
princessanon0125 : I’m another fan of index fund investing. I use it for my 401k, IRA, and our taxable brokerage account. There are different options for stocks, bonds, real estate, etc with varying rates of return and risk. I don’t think late 40s is too late to start investing – you all could still have another 40+ years to live! You have to figure out your risk tolerance to decide what your portfolio blend should be (aggressive vs. conservative) but if you have extra savings each month I think investing it is better than just letting it sit in a savings account. Don’t bother with individual stocks though – it’s risky, expensive, and time consuming.
Post # 10
dgirl715 : Unfortunately no. Its a government controlled 401K. We are meeting again with the financial advisor this week. Hopefully he can put us on the right track.
cuppercake : Investment property has never interested us. We have aging parents, and because of familial circumstances, we are going to be saddled with two extra homes that we will have to deal with when they pass. Thats one of the main reasons we havent chosen investment properties at this point.
LilliV : I know that leaving it alone is doing nothing. We have been putting it off for a while, I think we just thought that we would wait until the kids were out of the house and now its time. I dont think we are going to be aggressive. We just want to add a little more money to our retirement accounts. Im looking at some Roth IRAs and some ETFs. I hope the financial advisor can help us with a well rounded portfolio.
Post # 11
Of you’re a bit risk averse you are better off sticking with ETFs than buying individual stocks. ETFs typically take a small management fee but lots of providers are offering very low rates these days, like less than 1%. It’s worth paying a fee to bave that extra safety that comes with spreading the risk across multiple stocks.
Mutual funds are a waste of money.
If you want to play around with stocks a bit but not throw all your money into that kind of arena, maybe check out QuestTrade or WealthSimple Trade. I’m not sure about Quest, but on WS you can create your account and make a watch list of stocks before you aftuactu put any money in, and you can invest really small amounts on WS as well. You can put as little as $200 into your cash account on there and buy as little as one $0.99 stock if you want (which is obviously pointless but I’m just saying there is more room to play around with less terrifying amounts of money just to get a feel for it).
Your advisor is right that you need to invest. If you aren’t comfortable at all with managing your own investments though, it is probably worth it to just set up accounts through him and have him manage investments for you based on your risk profile.
Post # 12
princessanon0125 : are you already maxing out the 401k? If not that’s the easiest way to set more aside if you don’t want/need it until retirement and since it’s already set up you don’t have to think too much about investment options since it will just follow the plan already in place.
Post # 13
LilliV : We are maxing them out. We have some extra cash that we want to put toward something thats a little more aggressive than a 401k. Im not talking about super aggressive, just a little more than whats happening with our 401K.
sboom : I dont mind managing our own. Im actually pretty good at financial matters. He asked for our tax returns to look for possible deductions we had missed, but he couldnt find any because Im super on top of deductions, credits and such. I have been researching Mutual Funds and I agree that they are a waste of money and fees. I already have an app on my phone that tracks some things we are interested in. ETFs seem to be a safer but better paying than what we have now.
Something else we are looking at is, some upcoming IPOs. Nothing over the top, maybe a few hundred shares alongside a couple of ETFs. Im hoping our advisor can point us in the right direction.