Fudge. Apparently I’m sticking with a 401(k), then.
Here’s another question: assuming we have a combined income over $100k and we own our home (never mind that we’re upside down on it), do we need professional financial advice?
Yay for you Daddy Warbucks!
*I kid
nm
Well, yes. I did specify that the penalty-free withdrawal was on contributions. You can withdraw all of the contributions that you’ve made tax-free at any time. The penalties are on withdrawing earnings unless you meet some circumstances (like using the money toward purchasing your first home among other things).
You are right, I didn’t read that correctly. I just wanted to emphasize the difference in what you were actually withdrawing (contributions vs. earnings), since the terminology is precise, but if you’re not familiar with it it could be misinterpreted.
In all seriousness, the lion’s share of that is my wife’s earnings. I’m a Kept Man, at least until I finish school.
… huh. That kind of reads like a sneak brag too. 
What would you ask advice on, that you couldn’t get from SDMB? 
Seriously - that’s not enough to go on. The nature of the advice you seek will determine whether you should pay for it or not. Anything that applies to a sufficiently generic population you can probably deduce for free (assuming you are literate and willing to read). If you have more specific, less common circumstances either in financial or familial or psychological situations, then the chance you would get more value by paying increases. How’s that for vague?
Concur. I do this everyday and it’s a certain subset of the population that can benefit.
On the other hand, you should be able to get a no-cost meeting with a broker almost anywhere. Just take in the data - they’ll try to sign you up - and decide which approach works best for you. That will come about through how complicated your situation is, how much time you want to spend doing it yourself and so forth.
On thing, and I’m not busting anyone in this thread. But any registered professional cannot give advice on a message board. I can’t think of an easier way for a broker’s Series 7 and Series 66 to disappear that being caught doing so.
Taking message board advice on finances - just like legal or medical - is one of those ‘approach with caution and doublecheck’ things.
You should be able to find websites that will allow you to compare funds for size, fees, Morningstar ratings, etc., e.g. Charles Schwab’s page (click Compare) which should offer adequate functionality even if not logged in. (I plugged in three of your choices – MRSPX, RGABX, AIVRX – none had good Morningstar ratings.) (FWIW, Janus left a foul taste in my mouth – they were one of the big firms cheating small customers with their big-customer timing in the 1990’s.)
Be aware that banks are often middlemen for commission-based fund companies. Any funds that pay commission must take them out of returns and/or charge upfront “loads”. You may be better off looking to a no-load, low-fee fund company/brokerage like Vanguard, Fidelity, Schwab, etc. They will provide limited advice/consultation on the phone, and can set up IRA accounts either within single funds, or as brokerage accounts within which you can invest in any number of equities, mutual funds, bonds, etc.
Also, if you want to pay someone for financial advice, be aware of their incentives. Financial advisors who also sell product may have conflicts of interest. Fee-only financial planners may cost you more upfront (charges are likely well north of $100/hour), but they may be more disinterested (in the sense of being neutral) in terms of investment selection.
Everyone’s situation is different so your money management should be tailored to your unique circumstances. Ask a professional who can ask all the right questions to get a clear picture of your entire financial portfolio.
Depends. Are you good with numbers, and willing to do some learning on your own?
My wife and I are in our early 40’s. Together bring in over $200K, and we’ve never sought professional financial advice. I’ve read a couple of very helpful books:
The Intelligent Asset Allocator: How to Build Your Portfolio to Maximize Returns and Minimize Risk
The former book compares stock market performance and variability to some very simple, easy-to-understand coin toss experiments. It also spends a fair bit of time talking in specific terms about risk management, explaining why allocating a moderate percentage of your portfolio in bonds - and then rebalancing your portfolio once per year to maintain that percentage - does a great deal to improve the predictability of your final nest egg size at the expense of a small reduction in expected nest egg size (i.e. risk is greatly reduced at the price of a small reduction in annualized return). My brother and I have spent the past few weeks emailing spreadsheets back and forth, exploring Monte-Carlo “what if” simulations using those principles. Bottom line is that it’s very, very difficult to justify not investing 10-15 percent of your portfolio in bonds even when you’re very young, ramping up to a much higher percentage in the 5-10 years before you plan to retire.
I recommend reading both of those books. If you only have time/interest enough for one, then it should be “The Intelligent Asset Allocator.” If you’re good with numbers, then you can follow up with some fiddling in Excel:
-decide how much annual income you want to have from your nest in retirement. Account for (hopefully) no more mortgage, and also account for inflation, social security, and any pension you may expect to receive.
-Figure out how big a nest egg you’ll need at retirement in order to meet that goal (typically about 25X the annual income you want).
-Figure out how much you need to invest each year between now and then in order to achieve that. You’ll need to assume annualized returns going forward, which will of course be subject to a great deal of debate; a lot of people think that market performance going forward will not be nearly as good as its long-term historical record.
-Owing to uncertainty/variability of annual returns, you’ll want to aim somewhere above your minimum requirement in order to have an acceptable probability of actually meeting/exceeding that minimum requirement. If you really want to go to the next level, you can build a spreadsheet to explore how that year-to-year variability of returns affects your probability of success, and how bond/equity allocation can influence those odds.
If all of that sounds like Greek to you, then yes, you may want to seek professional financial advice.
Thanks for all the responses so far.
I guess it would have been better to ask if a financial adviser’s fee (or vigorish, or whatever) would more than offset any likely savings given that level of income.
I was thinking more along the lines of a “full service” financial services provider than a broker. Not an accountant, necessarily, but someone who will be looking at a bigger picture than just our investments.
Neat. Thanks for that!
Yeah, I was “training” to be one of those commissioned “financial advisors” for a time. I actually have a Series 7, Series 66 (well, they’ve lapsed) and Florida Life & Health sales license (not lapsed) - and I still didn’t have any idea what I was selling. That should tell you about how much training you get, and perhaps about how bad the exams are.
Thanks, commercial disclaimer lady. 
Yes and yes, but we’re both full time workers and full time graduate students who probably don’t have time to manage our financial affairs directly. At least, not any more so than we do now.
I concur with Machine Elf’s recommendation of John Bogles’s book, The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns.
One interesting thing he has recommended is that if you have a secure fixed income from a pension, social security, or other source you should figure how much capital it would take to generate that income and use that as if it was part of your bond allocation.
If you have $2,000 a month coming in from a safe pension, it would take $600,000 in a bond fund at 4.0% to duplicate that income stream. If you have a million dollar retirement fund and you want a 60/40 bond/stock ratio you only need $360,000 in bonds in your 401k.
How is it useful to make such a calculation (of the capital required to replace a fixed income)?
Let me be a bit of a contrarian here, after I say what I agree with. The recommendations for putting your retirement money in an S&P 500 Index Fund are right on. In study after study, the vast majority of managed funds fail to beat an index fund in any one year. Over longer periods of time, the number of managed funds that beat the index are fewer and fewer. Trying to find the “best” mutual fund in which to invest is a fool’s errand. I say this from experience.
Now for the contrarian part. Many people above have mentioned the “100 - your age” for the percentage to put into stocks. Nope! I say you should put 100% of your retirement money in an Index Fund. Any money you’re putting into a retirement vehicle should be money that you won’t need until retirement. You’re 31 years old. You have 30 years to recover from any stock market downturn. The stock market is the only (normal) investment that has consistently beaten inflation over the long term. Money you put into bonds will “smooth out” your returns the experts say. But by “smoothing out” your returns, they are also lowering your returns.
I have never owned bonds in my life. The majority of my retirement money is in Index funds. I rode out the crash of 1989, the crash of the tech bubble around 2000-2001, and the crash of 2008. I have just about enough money to retire now, but I’d prefer to work another 1 - 2 years for a little more of a buffer.
Whatever you decide, good luck. However, the fact that your 401K doesn’t provide any index funds in criminal. I would definitely advocate my HR department for a better choice of funds.
J.
If you had allocated some portion of your investment to bonds, AND engaged in annual rebalancing if your portfolio to maintain those percentages, it’s very likely you would have done even better over the long haul than you did. It’s not just a matter of investing “some” money in bonds; the idea is that you pick a fixed percentage of your portfolio that you want to invest in bonds, and then once a year, every year, without fail, you look at what the market has done to your allocation, and then with steel-minded will, you shuffle money to/from bonds/equities so as to restore your original allocation.
So suppose you declare at the outset “I shall henceforth maintain 20% of my retirement portfolio in bonds.”
A bad year for the stock market comes along, and now because equities have stagnated or lost value, bonds are now overrepresented in your portfolio. January 1 comes along, and you sell enough bonds to buy equities and restore your 80/20 equity/bond allocation.
Maybe some time later a good year for the stock market comes along. Equities have skyrocketed, and now bonds represent far less than 20% of your portfolio. January 1 comes along, and you sell some stocks to buy bonds, getting back to that 80/20 split.
Bottom line? It’s an algorithm that forces you to sell high and buy low, once a year. In terms of attention required, it’s ridiculously easy - you examine your portfolio once per year. In terms of willpower required, it’s more difficult: when the stock market has been doing great, it can be emotionally difficult to sell off equities and buy bonds. But if you read the book and understand what’s going on - and if you run the numbers in a spreadsheet, simulating 10,000 different lifetimes of investing with a particular allocation scheme - you can see it’s worthwhile. You reduce your probability of being wildly successful, and you even reduce the mean expected outcome - but most importantly by far, you also reduce your probability of failing to meet your minimum acceptable nest egg size goal.
Just be aware that advisors often involve another set of fees and some are broker/advisors who might steer you in a direction more to their benefit.
Like others who have posted, starting with Jack Bogle’s books or the BogleHead Wiki is a good prerequisite to talking with an advisor. Their reading list is also helpful.
There is also a very active BogleHead forum but the usual forum cautions apply :D. They have a very picky format for submitting questions, so lurk a bit before asking questions.
Investing does not have to be complicated. I am a fan of the simple Three Fund Portfolio described in the BogleHead Wiki.
Many fund companies pay commissions (part of their “Expenses”) to the intermediary between them and end-customer. The office that operates OP’s 401 account can use those commissions to [del]enjoy a junket in Tahiti[/del] cover their administrative costs. I’ll bet every single one of OP’s choices fall in that category. Very low-expense funds like Vanguard’s do not.
Using the Schwab fund comparison URL I gave upthread, I compared OP’s option JDIRX (Janus Overseas Class R) with JAOSX (Janus Overseas). What does “Class R” do for you? Notice that the former fund has a 0.5% “12b-1 Fee” which increases its annual expense by 0.5%. (That’s 10% after 20 years.) As others imply, that 0.5% will probably wipe out the value, if any, of the fund’s expert managers! If you hold the mouse over “Holdings & Percentages” you’ll see that the holdings of the two funds are essentially identical. Both say “Manager since 2001” – I’d assume it’s the same manager. The only value-added by buying JDIRX instead of JAOSX is [del]the junket to Tahiti[/del] the hard-working 401(k) administrators who have made this wonderful Janus fund available to you.
Unless the status has changed recently, even the lower 0.68% expense of JAOSX may leave room for a commission to Schwab, as I once bought this fund on Schwab’s No-Fee plan.
Because that keeps you from over allocating the amount of your portfolio devoted to fixed income funds. If you have a guaranteed source of income outside of your 401k, there’s no need to duplicate that inside your 401k. That leaves more available for growth. At the age the OP is, that really doesn’t matter much, he shouldn’t have a lot of bonds anyway, and probably doesn’t have a significant guaranteed pension yet either, but after you’re in your sixties it makes a difference.