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Help! I have no idea what I am doing.

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Tricky205
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Help! I have no idea what I am doing.  Reply with quote  

If anyone can offer some advice, I would really appreciate it. First, I will admit I am horrible with money. I just turned 40, married, with three children under 10 yrs old. I recently changed jobs, and rolled the $108,000 I had in a 401(k) into a managed IRA account with Thomas & Sons, through Schwab. Most of that was profit sharing contributions from my employer who would contribute roughly around 11% of my annual salary regardless of what I contributed. I still have about $80,000 in law school loans I'll be paying on for another 15-20 years. Right, after law school (back in 2000), I consolidated my loans and I am locked into an 8.5% interest rate on the Stafford Loans. I can't refinance that rate. As a state attorney, I could not afford to make the loan payments (over $900/month) so, I went into private practice and over the years have finally started making the kind of money we all were led to believe was waiting for us right after law school. Needless, to say I now have three kids, a mortgage, loans, and know I need to get retirement planning on track. I am a self-employed partner in a firm.. We have a 401k, but as a partner there is no matching for contributions. Since Dec. 2013, my Schwab account that the guy I met with their recommend has grown to $113,000. I'm not impressed. They apparently focus on dividend returns, I was getting a better rate of return with the mutual funds I picked with my old 401k. I also suspect, there was some shady activity going on with my old firms plan admin. and their handling of the plan proceeds. After, I rolled my $108,000 out in Dec.2013. They contributed another $5900 in my account in March, and did not even tell me about it. I discovered it a couple of months later when I received something from MassMutual. Looking back at my account on line, there appear to be questionable allocation of the contributions and delays in accounting for some $401k loan payments that were withheld from my pay checks. Today, I just received a letter from them saying their auditors our auditing their plan and want to to inform them if I believe the 108,000 distribution did not match my records. I'm planning on hiring an accounting to look through my account history and see if this should be brought to the DOL. I don't want to open a can of worms, but they have over 100 employees on their plan and this could be affecting much more than just me.

Has anyone heard of Thomas & Sons, is it worth me leaving my 108000 there or look for other options. Also, if I do need to make a move any suggestions on where to put it. I have read from many of these threads that S&P500 funds with a long steadfast growth is a good plan. I still have the $5900 in the old 401k, which is now. It is now around $6,2000. I just want to put it somewhere and let the market do its magic. ANY ADVICE, CONSTRUCTIVE OR OTHERWISE, IS GREATLY APPRECIATED. Question
Post Wed Sep 10, 2014 2:30 pm
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Tricky205
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Sorry it is ThomasPartners.  Reply with quote  

Shows how much I know!
Post Wed Sep 10, 2014 2:36 pm
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oldguy
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I would switch to a no-load provider. About 85% of the managed funds UNDER-PERFORM compared to the un-managed SP500 Index. The SP500 has chugged along at about 11%/yr (on average) almost forever. And the fees/costs are minimal. The reason - fund managers are selecting companies from that same stock population (SP500), they are managing (trading) trying to trade out the losers, grab the winners. The cost of trading, the cost of having money on the sideline part of the yr, plus the overhead costs of managers - create a heavy headwind, 4% to 5%. And it's VERY hard to get a 16%/yr return from a population of 500 stocks that is averaging 11%/yr - as I said, only 15% do it - nad it's not the same 15% every yr. It's easier - and better- to simply accept the 11%/yr that the generic market gives you. All of the no-load fund companies have an Index Fund - Vanguard, Fidelity, etc.

http://politicalcalculations.blogspot.com/2006/12/sp-500-at-your-fingertips.html
The most recent 30-yr block (ending Aug 1) had a 11.54%/yr return - most 30-yr blocks average about 11%/yr.

If you're self-employed a SEP might be available to you. Eg, your $110k plus a new $10,000/yr for 25 yrs at 11%/yr is $2.6M, $4.5M in 30 yrs.

Re the $80k 8.5% note - when you get some equity built up in your house, maybe you can refi for 30 yrs, fixed rate <4.5%, take about about $80k, and pay-off the SL. (Ie, convert the $80k from 15 yrs, 8.5% to 30 yrs @4.5%) The payment will be about $400/m, about half of your current SL payment).

US mortgages are among the cheapest sources capital in the world - where else can JoeBlow wander into a bank and say 'I want to borrow $250k to buy a house and I want 4.5% and I want 30 yrs to repay it and I want a guaranteed fixed rate". So use it where/when you can.
Post Wed Sep 10, 2014 4:47 pm
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littleroc02us
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Oldguy is right on track with his information about the S&P500. If you would have put it into an unmanaged fund for the past year, you'd have around 120k instead of 113k. If you get a chance sometime you should read the book "Buffet rules of investing", where he talks about how managers are basically just people who take a large portion of your investments in fees.

My one concern for you is that if I were in your situation, I'd put investing on hold for a couple of years and really pound away at your 80k in student loans. I know most people feel like they should keep them around for the full term, but my philosphy is to pay them off first which is a gaurenteed return on investment, which frees up a ton of cash to invest. Yes you could keep those loans around forever and put your money into the market, but what if we have a 5 year bad run and now your investments are down 50%. Personally, I'd rather have the guarentee.

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Fri Sep 12, 2014 3:37 am
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