Author Topic: 140k IRA rollover advice  (Read 2213 times)

robotclown

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140k IRA rollover advice
« on: October 28, 2014, 03:28:41 AM »
My dad has an old IRA account from work that he has to roll over into a self-directed IRA and is looking for advice on what to invest in.  (He's 50)  He won't be adding more to this particular IRA since he has a 401k.  He also wanted to know whether to do lump-sum or DCA.  He plans to leave it invested for 10 or so years.

He sent me a big list of mutual funds to look at, and I crossed out most of them because of their obscene expense ratios, and recommended a couple Vanguard ones.  He settled on VWIAX and VTWNX (this gives a 50/50 stock/bond split that slowly gets more conservative) , and was planning to do a lump sum until the recent market turmoil gave him second thoughts.  I recommended he dollar-cost average in then, if for no other reason than piece of mind.

Then he asked what I would do.  I said I would buy big blocks of KO, WMT, XOM, JNJ, etc, set it to reinvest dividends and not look at it again for 10 years.  Now he's kicking that idea around, but I worry it may be a bit too aggressive for him.


So, which plan would you recommended to someone with a ten-year horizon and an aversion to market volatility? 

wtjbatman

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Re: 140k IRA rollover advice
« Reply #1 on: October 28, 2014, 07:04:49 AM »
Normally I'm a fan of blue chip dividend paying stocks, but not for someone who's going to just invest the money and forget it. You need an exit strategy with dividend paying stocks, but you don't need one when doing something like the three fund portfolio. He could do do a reasonable 60/40 AA and invest in 45% US Total Stock Market, 15% Total International Stock Market, and 40% Total Bond Fund. Low cost, great diversification, and virtually no upkeep. He should just log on and rebalance once a year.

Don't even want to mess around with rebalancing? Literally invest it and forget it? He could invest in the Vanguard Wellington fund (60/40 AA), or even invest in Vanguard Target Retirement 2025 (70/30). Those retirement funds are a tad aggressive to start, but he could just pick a target retirement fund with a higher bond allocation and start there.

Gone Fishing

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Re: 140k IRA rollover advice
« Reply #2 on: October 28, 2014, 08:35:51 AM »
What is it in now, cash?

GGNoob

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Re: 140k IRA rollover advice
« Reply #3 on: October 28, 2014, 09:22:14 AM »
Normally I'm a fan of blue chip dividend paying stocks, but not for someone who's going to just invest the money and forget it. You need an exit strategy with dividend paying stocks, but you don't need one when doing something like the three fund portfolio. He could do do a reasonable 60/40 AA and invest in 45% US Total Stock Market, 15% Total International Stock Market, and 40% Total Bond Fund. Low cost, great diversification, and virtually no upkeep. He should just log on and rebalance once a year.

Don't even want to mess around with rebalancing? Literally invest it and forget it? He could invest in the Vanguard Wellington fund (60/40 AA), or even invest in Vanguard Target Retirement 2025 (70/30).

I agree with this. Either do the cheap 3-fund portfolio, the Wellington, or a single Target Retirement fund. There's no reason to pick 2 different balanced funds and I wouldn't go for the blue chip stocks.

Assuming this money is invested now, then it wouldn't make any sense to DCA. But since he just wants to invest it and basically forget about it for the next 10 years, just do the lump sum investing.

teen persuasion

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Re: 140k IRA rollover advice
« Reply #4 on: October 28, 2014, 09:54:46 AM »
DH just changed jobs, and began the process of rolling his $120k 401k to a vanguard IRA.  The previous employer's plan wouldn't do a direct funds transfer, he had to wait for a check (made out to vanguard) to arrive snail mail, then mail that on to vanguard, all while the market was lurching about.  The 401k account lost a few thousand in value before they liquidated it and issued the check, then it took some time for the check to get thru USPS to vanguard.  By that point, the market was beginning to rebound, so he missed buying at the bottom, but still got it in and got some gains afterwards.

All told, it probably was about two weeks time to transfer.  If I'd known the market would get so unpredictable at the time, I would have first moved the 401k funds to a stable value fund, and then do the same at the other end and see before investing, but I wouldn't want to remain out of the market very long. 

How the transfer takes place could affect the speed of the transfer;  I was surprised it took so long for us.

Cromacster

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Re: 140k IRA rollover advice
« Reply #5 on: October 28, 2014, 10:02:55 AM »
If I'd known the market would get so unpredictable at the time...

You wouldn't bother posting on here because you'd be a multimillionaire living large on some island?  Atleast I would if I knew such things.

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robotclown

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Re: 140k IRA rollover advice
« Reply #6 on: October 28, 2014, 11:50:43 AM »

Don't even want to mess around with rebalancing? Literally invest it and forget it? He could invest in the Vanguard Wellington fund (60/40 AA), or even invest in Vanguard Target Retirement 2025 (70/30). Those retirement funds are a tad aggressive to start, but he could just pick a target retirement fund with a higher bond allocation and start there.

Yes, that's basically what I went with at first.  Wellesly Income (39 stock/61 bonds) and 2020 retirement (61 stock/39 bonds)  that pretty much rebalances itself. 

What is it in now, cash?

It's in some money market fund getting 0.000001% interest. 


Assuming this money is invested now, then it wouldn't make any sense to DCA. But since he just wants to invest it and basically forget about it for the next 10 years, just do the lump sum investing.

Agree on the lump sum, but he's been investing X dollars per month for his whole career; he's never dropped a huge pile into the market all at once.  If DCA gets him to move it out of the money market fund without panicking when the market slides at some point, I can get behind that.