Author Topic: 20-year Plan & Separate Plan For 57yr Old Father  (Read 1935 times)

brazos2016

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20-year Plan & Separate Plan For 57yr Old Father
« on: June 07, 2017, 11:39:06 AM »
I've tried researching on the site and honestly get a little confused due to the amount of info and recommendations on here now, but I had two pretty basic questions I was hoping to get some input or maybe someone can help steer me to an existing article or thread that has this info that isn't a few years old.

First, I am recently self employed (1yr ago) and have a S-IRA from my previous job that I am continuing to put money in. I am wanting to open a i401k through Vanguard and am a little lost on what to invest in. I just turned 33 and am looking at around 20-25 years before I want to at least be in a position I don't have to work if I don't want to. I'm not a huge risk taker, so not looking to invest in high risk, high reward stuff right now as I don't make enough money to do that. However, I also don't want to invest in something that's going to give a 1%-2% return. Could you make some recommendations on what I look into for an i401k with a 20-25 year plan with Vanguard?

The second question references my dad. My dad turns 58 this October and hasn't been able to plan much for retirement to date. My mom unexpectedly passed away last year at 55 so their income dropped in half. I think he has maybe $80,000 in a 401k my mom had through her job and another $30,000-$50,000 in his savings account right now. I told him he needs to invest the money in his savings account to get it to gain a little for the next several years he plans to work. He is self employed as well. He is pretty healthy and frames houses for a living so he stays in good shape. He will likely work until he's 65-ish so I expect he has about 7-8 years of work left at least. Do you have any recommendations for him in such a short amount of time? He could probably add around $10,000-$12,000/year into a retirement/investment account based on my understanding of his income/bills.

I appreciate your input and help very much.

ChpBstrd

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Re: 20-year Plan & Separate Plan For 57yr Old Father
« Reply #1 on: June 07, 2017, 01:34:30 PM »
For you, it's as simple as 100% VTI.

For dad, he might do better with a 60% stocks (VTI), 40% bonds (AGG), plus or minus 10% depending on preferences.

Some pointers:
>Dad will want to consolidate his accounts into an online brokerage if he hasn't done so already.
>Set dividends to reinvest into more shares. Don't leave any cash sitting around uselessly.
>Efficient tax sheltering is key. You need to set up a SEP IRA or similar to shield up to I think $53k. Dad needs to do the same if self-employed, or contribute as much as possible to his employer's 401k.
>The #1 determinant of retirement success and risk reduction is frugality. For every $1 you permanently cut out of your annual expenses now, you not only save $1 but also reduce the need to save by $25. So if dad cancels his $50 cable package for good, that's equivalent to putting $1250 in savings.
>Dad is in a nightmare scenario. He's a few years from retirement without nearly enough saved and invested. His quality of life will fall dramatically in a few years unless he gets hardcore with the saving. He may be moving in with you unless something is done. If he could target a 40-50% savings rate for the next 7-8 years, retirement might not be so bad.
>Even worse, dad is working in a profession with a high risk of injury. Some long-term disability insurance might be in order here, so that his savinga aren't depleted after a fall, back injury, stray nail, etc. Make sure he's wearing a back brace, steel shank shoes, glasses, gloves, etc.

SeattleCPA

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Re: 20-year Plan & Separate Plan For 57yr Old Father
« Reply #2 on: June 07, 2017, 02:04:21 PM »
Brazos, you might find this free, downloadable book helpful...

http://evergreensmallbusiness.com/the-thirteen-word-retirement-plan/

My idea in writing this is that it gives you or your dad a one sentence financial plan that it's pretty hard to beat without getting really complicated...

Scortius

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Re: 20-year Plan & Separate Plan For 57yr Old Father
« Reply #3 on: June 07, 2017, 03:49:06 PM »
I think it may be worth it to look into the standard 3-fund allocations (US index, foreign index, bonds) that many people use here.  You can simply adjust based on risk for you and your father.  You may want 90-100% equities with 0-30% of those foreign.  Your father may want anywhere from 30-70% equities with again 0-30% of those being foreign.  I'd read the jhcollins series before anything else.

http://jlcollinsnh.com/stock-series/

mxt0133

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Re: 20-year Plan & Separate Plan For 57yr Old Father
« Reply #4 on: June 07, 2017, 04:28:23 PM »
Before you get into the topic of investing the money that he has now.  I would go over the number and see if the expectation of him stopping work at 65 is realistic based on his current assets, expenses, and savings. 

Also it's easy for us to say invest because we have been doing this for a while and have gone through a few downturns.  However, since your dad has not been investing and has all his money in a savings account, other than you mom's old 401k, just telling him to invest it might not be the best thing for him, even tough we all know statistically it is the best chance he has for growing his savings.  Imagine you told your dad that you should invest $130K now.  Then have it go down 20-30% in the next year or two, how is he going to handle that, will he keep adding to it or will he panic and sell?

 

Retire-Canada

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Re: 20-year Plan & Separate Plan For 57yr Old Father
« Reply #5 on: June 07, 2017, 06:19:48 PM »
1. Figure out how much money your dad needs for his most basic lifestyle.
2. Find out how much your dad's social security benefits will be.
3. Calculate the delta he needs to generate from his investments.
4. Come up with a lifespan estimate using general stats and family history so you can figure out how long the money needs to last.
5. Develop invested $$ targets for a few potential retirement ages.
6. Work out a savings plan to get him to each of those $$ targets.
7. See if any of these plans/targets are remotely possible.
8 If so start working towards the most achievable that seems acceptable to him.
9. Educate him on the basics of investment.
10. Develop a very simple investment plan.

He's starting real late at 57 without a lot of $$, but it's better than starting at 67 with the same $$.