Wednesday, October 1, 2014

How to Manage Your Retirement Funds Yourself

Recently, this blog has covered the issue of converting your retirement savings into retirement income.  I have discussed rolling over your 401(k) into an IRA, choosing a good investment adviser and how to select an annuity for retirement income.

However, what if you do not want to hire an investment adviser, buy an annuity, or let someone else manage your money?  What are the do-it-yourself options for selecting the best investments and funds?

Use a Discount Broker

Discount brokers like Schwab and TD Ameritrade have large menus of products that are geared towards people who feel confidant in their ability to choose their own investments.  Both of them have NTF (no-transaction-fee) funds from which you can choose.  However, this does not mean that there are no hidden costs involved with the selection of these funds.  For example, Vanguard and Dodge & Cox will not pay the necessary fees that would make their funds available to consumers for free.  Since these two companies operate some of the best-performing funds, you could lose out on potential future performance if you opt for a less successful fund simply because you do not want to pay an up-front fee.  Consequently, while you can get NTF funds at the discount brokers, you also need to decide if you would be better off paying a fee in order to put your money into a fund that has a better performance record.  Make sure you take the time to do your research.

Purchase an ETF

A few month's ago, I wrote a blog post about Warren Buffet's advice for retirees.  It was based on a speech he gave at one of the annual meetings for Berkshire-Hathaway.  In his speech, Warren Buffet recommended that most retirees would do best at handling their investment savings if they simply purchased ETFs (Exchange Traded Funds) in a variety of industries over a ten year period.  In this way investors would take advantage of dollar cost averaging and they would also be diversified over a number of different industries.

In a recent Money Magazine article titled "The One Retirement Move You Must Get Right," the authors also suggested that do-it-yourself investors should consider purchasing ETF's.  It's a good investment strategy that doesn't require you to pick individual stocks and cross your fingers that you have chosen winners.  So, both Warren Buffet and Money Magazine concur ... go with ETF's.

Set Up an Automatic Monthly Investment Account

Another approach to handling your own investments is to set up an automatic monthly investment account.  Some discount brokers offer their clients the opportunity to invest monthly in funds for free or for just a few dollars a month.  It is a great way to invest and spread the expense out over a long period of time.

Pay a Fee to Get the Fund You Want

Another option is to select the highest performing fund that interests you and pay the fees, which can range from $17 at Scottrade, $50 at Ameritrade or $76 at Schwab.  These fees can be well worth it to you if you are going to get a higher rate of return or save on annual expenses.

As I mentioned before, you will have to do the research to see which investment options are the most affordable and practical for you, while offering you the best rate of return.  Ask the different brokerage firms to send you information on all the funds and ETF's that you are considering.  Read all the information thoroughly.  Once you feel confident, form a plan and move forward with your choices in an organized, consistent manner.

You may also want to read these recent articles:

Should You Rollover Your 401(k) into an IRA?
How to Choose a Good Investment Adviser
How to Choose an Annuity for Retirement Income


"The One Retirement Move You Must Get Right," Money Magazine, July 2014, page 44

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  1. This is such an excellent article. Not every one feels comfortable sharing their finances with an investment adviser. Terrific suggestions here.

  2. You make a good point that a lot of people do not want to share their personal information with an investment adviser. Thanks for your comments.

  3. Hi Deborah! We featured this post in our Weekly Digest because you mentioned really great tips, especially for retirees who want to do it on their own. Also, I agree that before taking any step, research must be done.

    You can read our Weekly Digest here

    1. Thank you so much for featuring this article in your Weekly Digest. I'm pleased to leave your link here so that other people might choose to visit your site, as well.

  4. To take Systematic investment Planning advantage you must keep invested for long term. Historically it is seen that SIP works best when invested for long term. Earlier, advisers used to suggest 3 to 4 years as long term. world’s best retirement calculator


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