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Originally Posted by Wallymo
I'm 53, and had all my retirement in Schwab's "retirement 2035" account. My son is a business major and went over the individual investments that make up the retirement 2025 account. Turns out that 18% of my retirement investment was in bonds.
At my son's recommendation, I changed my allocation to 100% in Vanguard Institutional Index I ("VINIX"), which tracks the S&P 500.
It's a few days later, and I'm a bit nervous. I've read this string for years, but don't post on it as I don't have the disposable income to make trades for singular stocks. Any advice from the group here? Do you think it was the correct choice? You guys have such a deeper knowledge base than I do. My goal is to have my current account double twice in the next 15 years (which would be boosted by my yearly contribution of ~$30k). That should hopefully be enough for my and my wife's retirement. Based on family history, I'm likely to die before I hit 75 but my wife will live to be 100.
Thanks in advance!
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There’s a lot of unknowns here and it’s not like you’re 20.
Here’s my position based on what you have posted here.
Like RainMan said, what hurts is if it draws down close to retirement. And if you want to really hit returns, you need to be in stocks and you need to let them run. In order to do that, IMO you have to have pretty sizeable cash savings to keep the heartburn down when the S&P drops 1%. Here’s what I’d recommend in your case
1. Make sure all consumer debt is eliminated. I’d listen to a car, but if you’re really trying to increase equity, car payments are a lot.
2. Put aside 6 months living expenses in a safe account. (Not stocks). Most brokerages have a money market that pays well. That’s where mine is. If you have something that comes up, you can swing it easy. And it’s also hard enough to get to that you won’t just blow it. It’ll get a return and if you don’t use it you can take the money that earns and put in stocks, but I think it’s important to have a chunk of available cash if you’re going to eat risk.
3. Put cash in the market. If you have a 401K at the job, put it there first. The tax shelter matters. The limit at your age is 30,500 if I’m reading that right. Your wife if she’s working will have a similar limit. If you’re eligible for an IRA, put it in there next. Then open a taxable brokerage, and there are no limits on those.
If you want to follow S&P, I’d do VOO. It follows it directly and the expenses are lower. If you’re only going to own one thing my vote is VOO. Here’s where my stuff is (not an advisor):
Of every dollar I contribute:
37.5% VOO
37.5% VUG (more volatile than VOO but has a higher historic return)
25% SCHD (won’t return like the other 2 but is a more stable set and has a good dividend that is a different batch of stocks than the S&P somewhat.
No rebalancing. I have a small amount in some stocks I like but almost all goes into the above.
I’d stay out of small and mid caps at your age.
There are a million other components to make a real world recommendation but that’s probably close to what I’d do if I were you.
A big part of investing is being OK with it in your dime. If you’re going to put it in and get heartburn about it, take it back out and put it in the target date fund. If it’s going to cause discomfort, it probably won’t work over the long term. My solution to that is cash holdings for “in case shit” money. Sometimes shit happens. If I’m prepared for that, it’s helped me worry less about my stock holdings.
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Originally Posted by KCUnited
Is this a 401k?
If so then Schwab should let you adjust for your risk tolerance within your 2035 account. I've got a similar 401k through Vanguard and can adjust the risk levers, which is % going into stocks vs bonds. Thus shifting more towards safer investments as you get closer
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I think what he has is a target dated fund which doesn’t adjust individually.