bobmsmythe

Hey, good answer. Didn't see it before I responded myself.

Bob

bobmsmythe

This is generally the way to go for long-term retirement planning for those with mid-level incomes. The same general advice holds, though, in that you should diversify away as much risk as possible, usually by making sure some money goes into bonds and some into stocks, as well as holding some in cash. I will say that it sometimes makes sense to "move" money around in order to rebalance your diversification. That is, assume you start out deciding you want to put 15% of your money into a small-cap fund, 40% into an indexed fund, 30% in a municipal bonds fund, and 15% in cash. These portions of the economy don't move together, which is part of the point of balancing the portfolio. Thus, assume that the small caps are even, the general index is up, and bonds are down. You might find your 15/40/30/15 has become 15/43/26/16. You probably want to move some money from stocks and cash into bonds to rebalance. Don't do it more than about once a year, though. Also, when picking a mutual fund, make sure that you see what charges apply. Especially during a bear market, you don't want to see your investment disappear into activity fees.

Bob

bobmsmythe

Just posting to move this back up, in case there are more questions.

Bob

zf0enix

Bob, this may be out or your area of expertise, but what are the expectations on the real estate market nationwide? I know that there are rumors of the bubble getting ready to pop, but I'm just curious. I'l looking at buying some rental/rehab properties but don't want to get caught with my pants down, not being able to sell or occupy.

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BigBlueWrecking

I am a financial planner that also deals with insurance, and I avoid jockey's like the plague (just kidding wour advice has been on the mark). I will interject for a minute about a VUL:

A VUL has certain advantages. 1. The money is invested in mutual funds rather than CD's (Whole Life) or Money Market funds (Universal Life). Just know that when the market is going down (like the last few years) your insurance could be in trouble and you would have to dump more money in to keep it in force.

Another advantage is that you have access to the money through loans and a tax free return of principal. This allows the money to grow tax deffered, and most good insurance companies allow you to loan the money out at 0% interest and you never have to pay it back as long as the policy stays in force. If the policy lapses, the whole amount is viewed as a taxable distribution minus premiums.

Be very cautious with this product. If you plan on using to fund retirement, you should really max out your qualified plan first. This is for wealthy people to get tax free distributions later in life. The only way to do this right is to pay as much into it as the insurance will allow (otherwise known as the seven pay premium). If you are struggling to make the minimum payments, you are in the wrong product.

On a side not, insurace is a very important part to everyone's financial plan. It gets a bad reputation because of some slick willy salesmen back in the 80's, but can make or break your family. I can't tell you the different life a kid will have if upon your death he has 200K or 2K. Retirement, Insurance, Investments, and Estate Planning (wills and the such), all have to work together for a plan. Too often emphasis is put on one and not the other. I will check this thread more often to see if anyone has any quetions about insurance or Estate planning (or investing) that have not been answered.

bobmsmythe

I think it depends on the region. I know that SF has burst to some extent, and there's some anecdotal information to suggest that the northeast is softening. Overall, though, it's not really going to "burst" until the price of money stops getting cheaper. So long as people can keep refinancing their mortgages, things will keep up fairly strong. On the other hand, once the effects of this tax cut sink in, the downward pressure on interest rates will probably reverse as the government borrows more money. That will probably be the trigger. I don't know that I expect a hard crash like the 80s, though, probably a more gradual softening.

Bob

bobmsmythe

Thanks for the help, BBW. And I agree that insurance is important for planning for your family's future. I'm glad it ain't what I do, though.

Bob