I'm guessing 100% stocks isnt the right answer
September 17, 2010 7:02 PM   Subscribe

how would you manage your mom's 401k after her retirement?

we considered hiring a financial manager, but we'd like to first try to manage it ourselves, but carefully. Hence the appeal for some advice.

We're not total noobs when it comes to money management, but I'd like to know what some others here have done. Specifically: what kinds of assets and in what proportions? Whats safe for a post-retirement 401k?

posted by jak68 to Work & Money (3 answers total)
IANAFP Determine her post retirement costs and sources of income such as social security. If she needs additional funds to cover things like chronic medical/pharma bills or perhaps trips and visits then set a budget of withdrawals from the 401(k) that will fill in the gaps. Suggest using an online tool such as Mint for budgeting.

There are a number of different sources for setting asset allocation, but that can best be determined when you figure out what your withdrawal rate will be. You might do some investigating at such sites as Bogleheads.
One of the issues you will need to address is the fact that the world is awash in savings so the return you get on your investments will be trending lower over a fairly long term. Again, how much you need to withdraw will push you into an investment strategy that will determine the allocations you make.

You might look at Vanguard, for example, for investing since it is definitely one of the cheaper ways of managing an investment portfolio.

This will take time. But it's a lot more fun playing with other peoples money.
posted by ptm at 8:05 AM on September 18, 2010

I second Bogleheads' forums. I also recently read the following books that I would recommend:

Saving for Retirement without Living Like a Pauper or Winning the Lottery by Gail MarksJarvis
The Bogleheads' Guide to Retirement Planning

MarksJarvis' book is somewhat dumbed down; in some areas as bad as "Put 70% in X, and 30% so that would mean if you have ten cupcakes, buy seven chocolate and three vanilla". But I found it a worthwhile read nonetheless.

Obviously, both of these are more focused on retirement planning but they do touch upon retirement. Furthermore the fundamental principles they underline (eschewing third parties to manage your money; selecting low cost fund wherever possible) certainly apply to retirement. And they certainly cover the allocation proportions: big cap v small cap / bonds / international equities and so on for different ages and situations. They should give you the tools you need to evaluate whether the funds in your mom's 401k are suitable, what the ERs (expense ratio) are and help you gauge whether a roll over into an IRA with low expense fund (e.g. Vanguard, Fidelity) is advisable.

Finally, if you opt for a professional advisor, MarksJarvis covers how to find one (although she counsels against).

Disclosure: I'm basing all my advice on what I've read in those two books and on Bogleheads. I do not have much practical experience to speak of.
posted by NailsTheCat at 9:44 AM on September 18, 2010

thanks, i'll check out these sites.

looks like asset allocation is the key to managing risk and volatility.
posted by jak68 at 12:44 PM on September 18, 2010

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