Author Topic: Help w Retirement decision  (Read 2011 times)

loumar9168

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Help w Retirement decision
« on: May 10, 2018, 08:19:55 AM »
New to retirement and investing,
Iím almost 70 years old and just learned that soon Iíll be required to RMD a certain percentage of my retirement funds. I have close to 192k with Nationwide under a program which guarantees a 3.5 return peryear.
My son has suggested I move this money to Vanguard Investments and to elect index funds or ETFs.
Iíve called Vanguard but of course they are not allowed to advise me which way to go.
I also receive around $4600 every month from military retirement, Florida pension, disability from the military and have about $10k in checking and savings with local credit union.
Nationwide suggested I leave funds where they are, T Rowe Price and Vanguard suggested I open an account with them.
Iím hoping someone in this MMM group can suggest an unbiased course of action.


myrrh

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Re: Help w Retirement decision
« Reply #1 on: May 10, 2018, 08:59:16 AM »
Are you talking about opening a new account just for the RMD money? Do you have an intended use for it or is it planned to go to heirs, assuming no long-term care expenses? It sounds like your regular expenses are covered with your various pension funds.

Vanguard, Fidelity, and T Rowe Price are the usual suspects for investment accounts. They have good low-cost options with varying degrees of helpful customer service and pressure to move under an advisor (who may prefer high cost funds because they are more lucrative to him).

My funds are with Vanguard and I've been happy with it. Their customer service takes somewhat of a hit because they are very focused on being as low cost as possible, but there is zero pressure to use high cost funds and I haven't needed to call very often (at most once per year or so), so the hold times don't impact me much. There are a few things I wish you could do more easily online (charitable gifts, giving another person full access to your account such as a spouse.) You can give someone limited access using the website, and I think (can't remember for sure) you can change your beneficiaries online. Many of their mutual funds have a minimum investment of $3000 but you can mostly get around that using ETFs. If you are comfortable choosing your own investments, I'd choose Vanguard in a heartbeat.

I haven't used T Rowe Price at all and it's been awhile for Fidelity so I can't talk about those firms.

If you want investment advice we can do that too, or you can lurk in the bogleheads board and get a good idea really quickly.

robartsd

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Re: Help w Retirement decision
« Reply #2 on: May 10, 2018, 09:22:46 AM »
My funds are with Vanguard and I've been happy with it. Their customer service takes somewhat of a hit because they are very focused on being as low cost as possible, but there is zero pressure to use high cost funds and I haven't needed to call very often (at most once per year or so), so the hold times don't impact me much. There are a few things I wish you could do more easily online (charitable gifts, giving another person full access to your account such as a spouse.) You can give someone limited access using the website, and I think (can't remember for sure) you can change your beneficiaries online. Many of their mutual funds have a minimum investment of $3000 but you can mostly get around that using ETFs. If you are comfortable choosing your own investments, I'd choose Vanguard in a heartbeat.
Our IRA's are with Vangaurd as well. I don't think I've ever needed to call them. Granting full access does require some forms that are notarized and mailed in (the notary requirement was added sometime between 2008 and 2016 - previously it just required signing the form and mailing it in). As I'm still in accumulation and no taxable investment accounts, I haven't dealt with charitable gifts yet. I can confirm that beneficiaries can be managed entirely online.

I like the automatic reinvestment in mutual funds - you don't get that in ETF's. For investing $1000-3000 in a Vangaurd account, I recommend their target date funds. At $3000 there are many more fund options available (but target date funds are still a good value for getting exposure to both domestic and international stocks and bonds). At $10000 most Vangaurd funds are available in Admiral class shares. As my accounts grow I plan to build a 3-4 fund portfolio from Admiral shares (currently I only have Admiral shares of total US stock market in my Roth IRA).

robartsd

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Re: Help w Retirement decision
« Reply #3 on: May 10, 2018, 09:30:41 AM »
Rolling the Nationwide account into a traditional IRA at Vanguard would give you the option to invest it as you wish and could easily return better than 3.5% (of course with the risk of some down years). Moving the funds to a traditional IRA at Vanguard would not be a taxable event and would not affect the need to take RMD - it would just give you different investment options for the 192k. It might be worthwhile to sit down with a tax professional to plan your tax strategy for this money.

Ryancanderson23

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Re: Help w Retirement decision
« Reply #4 on: May 10, 2018, 02:33:40 PM »
At your age, and with a pension to live on, I would stick with Nationwide if they are guaranteeing 3.5%.  No need to assume more risk.  For the RMD, you could just put it into a vanguard index fund like your son suggested.

MDM

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Re: Help w Retirement decision
« Reply #5 on: May 10, 2018, 06:36:28 PM »
loumar9168, welcome to the forum.

Nationwide suggested I leave funds where they are, T Rowe Price and Vanguard suggested I open an account with them.
Yes, and I assume you are unsurprised.

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I have close to 192k with Nationwide under a program which guarantees a 3.5 return per year.
Really need more information about this program.  You are old enough that this might have been established long ago enough for it to be "not too bad."  But any investment offered by an insurance company (e.g., Nationwide) is immediately suspect, because too many of them are great for the insurance company but not for you the individual investor.  E.g., see Equity-indexed annuity - Bogleheads.

Some information that would help people assess your situation:
- Are you subject to any penalty from Nationwide if you take all $192K from them now?
- How much of the $192K would be subject to tax if you converted it all to a Roth account now?  Note: you probably won't want to do this, but it's useful information.
- How does Nationwide decide how much interest you earn each year on the $192K?
- Approximately what Adjusted Gross Income (last line on page 1 of form 1040) do you expect for 2018 if you do nothing with the Nationwide account?

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Iíve called Vanguard but of course they are not allowed to advise me which way to go.
They will if you sign up for their advisor service.  Cost is 0.3%/yr on your investment with them, or $576/yr for a $192K investment.

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I also receive around $4600 every month from military retirement, Florida pension, disability from the military and have about $10k in checking and savings with local credit union.
How much do you spend per month?

loumar9168

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Re: Help w Retirement decision
« Reply #6 on: May 12, 2018, 08:59:05 AM »
Good info, Still reading. Pushed to top so I can find it.

Bicycle_B

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Re: Help w Retirement decision
« Reply #7 on: May 12, 2018, 12:55:27 PM »
@loumar9168, glad you are researching this.  It might help if you brought the actual name of this 192k "program", and also mentioned any specific terms you can find.  It could be a number of different things, including but not limited to various types of annuity.  Keep investigating! 

Other data points that help people assess the options are:
1. Your typical expenses per year
2. Your personal desires as to whether or not it's important to you to leave inheritance to anyone

These don't affect the current investment, but they help to determine which alternatives might fill your personal needs the best.  The expense part helps the reader to understand whether your other income sources are plenty, meaning that this $ is available for options that maximize returns but have risk, or whether this money is part of the basic minimum you need for your lifestyle, which would imply that high safety options should be used even if they deliver less income.  It's up to you how much you wish to disclose, of course.

Zoot

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Re: Help w Retirement decision
« Reply #8 on: May 12, 2018, 03:03:09 PM »
Paging @Nords for his certain-to-be-excellent advice for this military pension and RMD situation.  :)

loumar9168

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Re: Help w Retirement decision
« Reply #9 on: May 14, 2018, 04:20:24 PM »
Still reading the comments that were provided... many requested more information and here it is.
The 192K are under the State of Florida Deferred compensation 457 plan.
I have 2 house; I live in one with wife and my daughter lives in the other one. She pays the mortgage when she can. Mort is $950 @3.5%. My house is @4% and another $950.
My life insurance Term is $270 quarterly, Wife has whole life for $112 quarterly.
Both vehicles are paid off.
Additional more in credit union
Savings $4400
Checking $6000
Money market $4450
Traditional IRA $3055
18 mo. IRA Share Cert $9627.
I'd like to travel some around the USA, but not to the point of spending all. Perhaps I could get a small RV. Who knows!!
Will appreciate any suggestions.
 

robartsd

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Re: Help w Retirement decision
« Reply #10 on: May 14, 2018, 05:18:27 PM »
I'll assume that you are listing your joint assets with your wife.

The 192K are under the State of Florida Deferred compensation 457 plan.
Traditional IRA $3055
18 mo. IRA Share Cert $9627.
I have to admit that I'm not sure what you mean by 18 mo. IRA Share - but I'll assume it is some sort of Traditional IRA. Assuming these are all in your name, they will all need RMD (If in your wife's name then RMD would be based on her age instead of yours). You may be able to aggregate the accounts and take all the RMD from just one (I'm a long way from needing to learn details of RMD's). I'm fairly certain you could roll them all together into one Traditional IRA which would simplify your management of them.

Depending on your investment goals, you may want advice on what is invested in these accounts. If so, list specific investments held as well as investments available. I'd be generally inclined to roll it all together into an IRA at Vanguard and build a 3 or 4 fund portfolio there using index funds. I hope this is what your son would recommend.

My life insurance Term is $270 quarterly, Wife has whole life for $112 quarterly.
What is your purpose for carrying life insurance? I'm assuming your pensions are to you, what happens if you die before your wife, do the pensions pay out for the rest of her life at the same rate?

You've mentioned a daughter (who's housing you are subsidizing) and a son (who is interested in giving you investment advice). Do you have other children. I assume you want to continue to provide support for your daughter and want to be "fair" in providing an inheritance for any additional children.

What are the mortgage balances on your 2 homes and approximate market value of them?

Savings $4400
Checking $6000
Money market $4450
So just shy of $15k in non-retirement accounts (essentially all cash). I'd call this your emergency fund - it is probably sufficient.

dude

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Re: Help w Retirement decision
« Reply #11 on: May 15, 2018, 07:02:47 AM »
My wife's 401k is with Nationwide and they are terrible. Very high fees (for her plan anyway). For the privilege of investing in Vanguard's S&P 500 Index Fund, which has a 0.05% expense ratio, she's got to pay an additional 0.99% Nationwide management fee on top of it. All of the other funds offered are stupidly expensive. I've tried to get her to advocate for a better plan at work, but she keeps saying that one of the managing partners has a relationship with the Nationwide guy and probably won't change it. So her and the other employees continue to get screwed.

Nords

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Re: Help w Retirement decision
« Reply #12 on: May 18, 2018, 12:28:34 AM »
Paging @Nords for his certain-to-be-excellent advice for this military pension and RMD situation.  :)
Thanks, Zoot!

Hereís a few points to consider, Loumar.
- Youíve listed your income and your assets, yet the only expense that I see (so far) is the $950 mortgage on your house, and perhaps the mortgage payment on the house your daughter is in. 
-  Itíd help if you gave an idea of your total annual expenses.  No details are necessary, just the total you spend each year.  That way weíll know whether youíre living within the 4% Safe Withdrawal Rate method or risking outliving your assets. 
- You have lots of guaranteed annuity income with a $4600/month inflation-fighting military pension, Social Security, and more tax-free inflation-adjusted VA disability compensation.  Youíre able to take more risk in long-term investments like the stock market.  You donít need more annuity-like income from a GIC.
-  If you have a retirement account with an insurance company, Iím pretty sure youíre paying more in expenses than you need to.  Iíd get out of the Nationwide GIC, roll the account over to Vanguard, and invest in an index fund or a balanced fund (like Wellesley).  Vanguard will probably calculate the amount of the RMDs for you and help you choose a withdrawal plan.
- The savings on your annual expenses (and the extra income of your RMDs) will go a long way to funding your travel budget
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