Author Topic: Help me help my mother  (Read 2139 times)

Brokefuturedoctor

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Help me help my mother
« on: June 08, 2016, 08:13:13 AM »
My mother is starting a new full time job which has a 403b plan, luckily with some Vanguard fund options. She is almost 48, a pharmacist, and doesn't have a lot saved up for retirement at this point (about 40k in rollover IRAs from previous 401k/403bs). She does not have a timeline for retirement at this point and has told me that she would be fine with working part time indefinitely as long as she can.

She doesn't like handling investing, so she is looking for my opinion because I have been trying to educate myself lately. I am not quite sure how to guide her at this point in terms of allocation percentages for her 403b. The Vanguard funds are listed below as well as the two bond funds (not really thrilled about them) offered by the plan.

Bonds:

Legg Mason BW Global Opportunities Bond Fund Class IS
https://nb.fidelity.com/public/nb/bshsi/fundDetail?fundId=OUTB&planId=88926

Metropolitan West Total Return Bond Fund Plan Class
https://nb.fidelity.com/public/nb/bshsi/fundDetail?fundId=OU8E&planId=88926

Stocks:

Vanguard FTSE Social Index Fund Institutional
https://nb.fidelity.com/public/nb/bshsi/fundDetail?fundId=OKWQ&planId=88926

Vanguard Mid-Cap Index Fund Institutional Shares
https://nb.fidelity.com/public/nb/bshsi/fundDetail?fundId=OMRJ&planId=88926

Vanguard Small-Cap Index Fund Institutional Shares
https://nb.fidelity.com/public/nb/bshsi/fundDetail?fundId=OMZE&planId=88926

Vanguard Institutional Index Fund Institutional Shares
https://nb.fidelity.com/public/nb/bshsi/fundDetail?fundId=OFVH&planId=88926

Balanced

Vanguard LifeStrategy Growth Fund Investor Shares
https://nb.fidelity.com/public/nb/bshsi/fundDetail?fundId=OMCJ&planId=88926

Vanguard LifeStrategy Conservative Growth Fund Investor Shares
https://nb.fidelity.com/public/nb/bshsi/fundDetail?fundId=OMCI&planId=88926

Vanguard LifeStrategy Moderate Growth Fund Investor Shares
https://nb.fidelity.com/public/nb/bshsi/fundDetail?fundId=OMCL&planId=88926

Money Market:

Vanguard Prime Money Market Fund Admiral Shares
https://nb.fidelity.com/public/nb/bshsi/fundDetail?fundId=OQFB&planId=88926

Vanguard Federal Money Market Fund Investor Shares
https://nb.fidelity.com/public/nb/bshsi/fundDetail?fundId=OQQL&planId=88926

My current advice to her would be to put all of her money in the Vanguard Institutional Index Fund Institutional Shares, and then we could balance out her retirement portfolio with bonds with her rollover IRAs that are already with Vanguard. Also, the plan has a match of 50% up to 4% I believe. I don't know what that means as I have not dealt with 401k/403bs yet in my own life.

Please share your thoughts, concerns, questions, and opinions!


« Last Edit: June 09, 2016, 06:28:31 AM by Brokefuturedoctor »

RWD

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Re: Help me help my mother
« Reply #1 on: June 08, 2016, 09:43:02 AM »
My current advice to her would be to put all of her money in the Vanguard Institutional Index Fund Institutional Shares, and then we could balance out her retirement portfolio with bonds with her rollover IRAs that are already with Vanguard.
This is fine advice. VINIX is a good fund.

Also, the plan has a match of 50% up to 4% I believe. I don't know what that means as I have not dealt with 401k/403bs yet in my own life.
I assume this means if she puts in 4% her employer puts in 2%. Though I suppose depending on how it's worded it could mean the employer puts in up to 4% if she puts in 8%.

In any case, with VINIX as a fund option she should be contributing as much as possible to her 403b. If she turns 50 this year she should be eligible for catch-up contributions, which would allow up to $24k per year (plus employer match).

Hvillian

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Re: Help me help my mother
« Reply #2 on: June 08, 2016, 01:16:22 PM »
Agreed that VINIX is a good choice.  Is she willing to contribute a high enough percentage of her income to fund retirement in 10-20 years (even with part time work)?

Brokefuturedoctor

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Re: Help me help my mother
« Reply #3 on: June 08, 2016, 01:57:15 PM »
Agreed that VINIX is a good choice.  Is she willing to contribute a high enough percentage of her income to fund retirement in 10-20 years (even with part time work)?

I think that is sort of doubtful at this point. She is more interested in getting a house by the beach than being fully retired. She is also fairly adamant about helping me financially through medical school which I of course greatly appreciated. My only worry is that she changes her mind and wants to retire before I can repay the favor and she has not savings (or not adequate savings) to retire on.

Her current goal is to come up with enough money within a year to make a down payment on a house. She is currently renting.

desk_jockey

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Re: Help me help my mother
« Reply #4 on: June 08, 2016, 05:40:37 PM »
I think that is sort of doubtful at this point. She is more interested in getting a house by the beach than being fully retired. She is also fairly adamant about helping me financially through medical school which I of course greatly appreciated. My only worry is that she changes her mind and wants to retire before I can repay the favor and she has not savings (or not adequate savings) to retire on.

Unless you are planning on subsidizing 30 years of her retirement, her first priority should be $24k per year into the 401k.

Rocket

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Re: Help me help my mother
« Reply #5 on: June 08, 2016, 06:25:58 PM »
Yes, I would be concerned about your mothers retirement.  40k at 50 is pretty much no savings.  Buying a house doesnt sound realistic unless a very low cost area.

Brokefuturedoctor

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Re: Help me help my mother
« Reply #6 on: June 09, 2016, 06:27:51 AM »
I agree with you two completely; that is definitely one reason why I am starting early. Also, she will be 48 this year (almost 50 was slightly misleading), so she cannot quite make the $24,000. I am highly advising her that she contribute the max she can which is $18,000 this year and to max out her IRA contributions at $5,500.

She is in the 28% income tax bracket, so I am going to help her set up a traditional IRA that is separate from her rollover IRA. I am unsure of how the taxes are handled with the rollover.

This leads me to an additional question. Apparently, her rollover contained the remnants of a 401k (tax-deferred) and some sort of nontaxable Roth 401k or IRA. She wasn't exactly sure. If these get rolled into one account though, how are taxes handled? Do you pay the taxes on the 401k at the time of rollover making the funds nontaxable? Perhaps this is more of a question for Vanguard.