Options for Old 401k Accounts
From the June 2011 newsletter:
If you have ever switched jobs, you probably have more than one old 401k (or 403b) account with past employers, with the occasional unexpected statement as your only reminder that they even exist. You suspect just leaving it there is not what you should be doing, but what is the best strategy with old 401k accounts?
When leaving a job and starting a new one, you generally have four options with your old 401k (exceptions always apply):
Online Investment Advisors: Asset Allocations
The other day, I introduced three online investment services and evaluated them versus a target date fund. As promised, this post goes a little deeper into the asset allocations recommended by these services.
This glide path chart is where I left off:
Online Investment Advisors: MarketRiders, Betterment, and Plantly
Technology is definitely one of my addictions. So much so that my wife accuses me of LOOOOOVING the internet. Long before Mint came out, I used Yodlee to track my financial accounts. And in running Mariposa, I use web-based software whenever I can–I’ve even built a few integrations using their APIs.
So I’m a big believer that online services will one day provide investment advice for many investors in a more cost-effective way, similar to TurboTax for tax services. Hopefully, this will allow more investors to get the independent guidance they need.
Roth IRA Basics
From the August 2010 newsletter:
It almost seems like the US retirement system was designed to keep people like me employed. There are no less than four major types of accounts people can use for retirement–and there are plenty more out there. Of these, the Roth IRA is this year’s hot topic, because now everyone can convert Trad IRAs into a Roth (high earners were previously excluded). However, the income limit for contributions still applies.
Choosing a Target-Date Fund
Last week, I wrote a guide to choosing a target-date fund for a popular personal-finance blog, Get Rich Slowly. The guide compares target-date funds from Fidelity, T Rowe Price, and Vanguard using various criteria, including their glide paths.
In the comments, there were questions about expanding the comparison beyond those 3 fund families. So, here’s the glide path chart expanded to 5 fund families (source: Morningstar 7/8/2010):
3 Money Tips for Entrepreneurs
From Blankspaces’ June newsletter:
So you’re working on the next great Web 2.0 startup, or you’re finally shedding your corporate past to work for yourself. You spend all your free time thinking about your business, how to get more clients, and even dabbling in SEO. Well, let’s take a few minutes to make sure your financial house is in order. Here are 3 simple money tips for entrepreneurs, self-employed workers, or anyone going through a career transition.
1. Don’t invest your rent money
If your income is not stable yet and you expect to dip into savings to pay rent or other living/business expenses, that money should not be invested in the stock or bond market. Any savings you expect to use within a year or two should be in very safe, “cash” investments. We’re talking about the boring stuff here: savings accounts, CDs, and money market funds. You’ll need the money soon, don’t gamble it away.
Glide Path: A Target-Date Fund’s Secret Sauce
You probably have never heard of the term “glide path,” but you’ve definitely thought about it before. The rule of thumb of holding 100 minus your age as a percentage in stocks is probably the most well known glide path. Even if you’ve never thought about what percentage of stocks and bonds to hold over your lifetime, you instinctively know that your allocation to stocks should decrease as you get older. A glide path is nothing more than a relationship between your asset allocation and age.
Currently, the easiest way to implement a glide path as part of your investment strategy is to buy a target-date fund. These funds automatically shift your portfolio from stocks to bonds and cash as you get older. However there is no industry standard glide path, so each fund company uses its own, making your choice of fund company quite important. Let’s take a look at the glide paths of the three biggest target-date fund companies and an index provider: Fidelity, T Rowe Price, Vanguard, and Morningstar.
« Older
