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I will be retiring in one year at age 63. I have a good retirement package from my employer and have managed my 401K plan fairly well to current balance of $1.1M. 90% of my 401K is invested in a stable income fund at 3.55%, 10% is in company stock which has been flat for the past couple of years.

Jun 22, 2012 by Robert from Bloomington, IN in  |  Flag
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5 votes

Hi Robert, congrats on your pending retirement. It appears you've done a great job saving for your retirement. I tell my clients retirement readiness consists of 3 things: health, wealth (retirement savings), and happiness (how you will spend your time in retirement & stay engaged socially, spiritually and mentally). So if you haven't already, I'd give those three key areas some serious consideration.

Once you've retired, you still need an investment plan/strategy to make sure your savings will support you (and your spouse if married) for the rest of your life. There are a lot of options, opportunities and risks to be aware of. I'd encourage you to hire an advisor who will work with you on a fiduciary basis (which means the advisor has to put your interests first, legally and ethically and morally). You only get one shot at retirement, so you want to make sure anyone providing you advice is truly on your side.

Mike

Comment   |  Flag   |  Jun 22, 2012 from Orland, IN

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Hi Robert, I'll add my congratulations, as well. and I agree with Michael's comments. I would recommend you find a fee-only financial planner and advisor to work with you on this, rather than pursuing any course based on posts. It's worth realizing, however, that retirement these days usually spans two lives (assuming you're married) over thirty years - and a lot can/has happened in three decades. Michael's right: It's time for you to work with someone; and, better if it's someone held to a fiduciary standard. My recommendation: A 'pure' fee-only CFP professional who is a registered investment advisor who isn't brokering product.

Comment   |  Flag   |  Jun 22, 2012 from Moorpark, CA

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Robert -- with 90% of your funds in a stable value fund, I'm guessing you are "risk intolerant" -- losses worry you a lot. Just a guess. Historically stable value funds have behaved as their name suggests with higher yield than a money market. Insurance companies provide these products and therefore there is risk in them. The risk may not have surfaced yet and may not in your lifetime, but it is there. The credit rating of the insurance company could come into play if there is another market meltdown. Smart, prudent diversification is always a good thing. It may be in order. Your company stock should be diversified also. I agree that working with a fee-only registered investment advisor makes sense. In addition to CFP's, there are other credentials that demonstrate knowledge and commitment to providing good advice -- the CPA-PFS and CFA among them. As within any profession, there is variation in skills and fundamental knowledge. The book "Risk Less and Prosper: Your Guide to Safer Investing" may be particularly useful for you to read because it is about risk and it will help you interview prospective advisors. Hope this helps.

Comment   |  Flag   |  Jun 22, 2012 from Ridgefield, CT

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Good answers here. I would only add that 3.55% is an outstanding return for a stable value fund these days. Before you pull your money out of the 401k and roll it into an IRA, consider what your other investment alternatives would be. You will hard pressed to find a better yield without assuming more risk.

That said, 90% is far higher than I would recommend for an allocation to a stable value fund. Under most conditions, I would allocate at least 30-40% to dividend-paying stocks ,REITs, or other vehicles that offer both growth and income with a tolerable amount of risk.

Comment   |  Flag   |  Jun 22, 2012 from Dallas, TX

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Robert, just want to mention to make sure and evaluate the Net Unrealized Appreciation of your Employer stock before you roll your 401k over. You mentioned that it has been flat for the past couple of years but if you have gains in that stock there is a really cool opportunity to get that stock out of your plan at the price you have paid for it over the years and get better tax treatment. May or may not be beneficial in your situation but that is one piece you will want analyzed.

1 Comment   |  Flag   |  Jun 22, 2012 from Abilene, TX
Stephen Paul Tanner

Good point.
Robert -- NUA can provide tax advantages for those who expect to be in the same or higher tax bracket in retirement. Robert's company stock totals over $100k ($1.1 million * 10%). In addition to his tax bracket as a key determinant of whether utilizing NUA makes sense is the cost basis of the stock. If at the stock was acquired at significantly lower prices, the opportunity is worth exploring. If not, there will not be an opportunity. I have a white paper which explores the opportunity and includes a case study i. It can be found at http://www.granitehillcapital.com/pdf/Taking%20Your%20401k%20Lumps.pdf

Flag |  Jun 23, 2012 near Ridgefield, CT

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3 votes

Let's be clear on the question; What should I do to protect my investments after I retire? Being that I do not know your particular situation, I am going to give you a couple of bullet points to follow as a start. 1] First, I recommend that individuals who are preparing to retire start to look at thier reallocation options 2-4 yrs prior to retirement not one year before[especially in these volatile times]. 2] There are a number of variables that will drive the decision of how and where to allocate your assets upon retirement. They are the usual measuring tools like, risk, goals needed, legacy planning goals, income needed, what probability of success you are comfortable with[75%, 85%, 90%]. I think you get the idea. Theres is alot to considered here. 3] Is investing your primary goal or is savings the goal or a combo of both. Think about these points and then maybe sit down with your advisor to see what he says. Good Luck, Dan

Comment   |  Flag   |  Jun 22, 2012 from Asbury Park, NJ

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