Saturday, January 19, 2008

My annual meeting with my financial advisor

My credit union offers many benefits to its members including investment services. Of course, the credit union makes no guarantee about the rate of return, but does host the third party investment company right in the credit union building. Last year, I made the decision to rollover my 403b. In addition, I was not happy with the performance of my Roth IRA, a mutual fund I had stared with the previous investment firm hosted by my credit union. To make sure I was on the right track financially and to find out my options, I called my credit union and made an appointment with an investment representative. He laid out some options, gave me a recommendation and told me if I wanted to invest in index funds for my Roth IRA, I would have to do that myself.

He did recommend the TransAmerica IDEX Growth Asset Allocation Portfolio for my 403b rollover as I am young and have many years for the stock market to grow my money. My 403b was quite modest as it was my first retirement investment and I invested my money in 1999-2001, buying in when the prices were high and then the market took a downturn. I lost nearly half the value of the portfolio and since I moved to a different job in 2001, watched it grow over the next six years back to its original value. The portfolio I bought into was a front-load mutual fund. As my reading has shown me, maybe that was not the best choice, but I liked how the portfolio worked.

As it turns out, my advisor showed me that my net gain was
-0.5% on the TransAmerica fund. Considering the front load was 5.5%, I nearly broke even the first year. Not too bad really so I am pleased. I wonder what this year will look like?

We discussed my current situation (cash, 401k, other retirement accounts) and he recommended that I fully fund my Roth IRA. I have funded half my Roth IRA in 2007 and was hoping to make it to $3,000 this year. I am contributing 10% pretax to my 401k and the company matches to 6%. Since the money in the Roth IRA grows tax free and can be withdrawn in retirement tax free, my advisor suggested I max out the Roth IRA.

I am a bit squeamish about not putting money into my 401k, but I have heard that recommendation before. Suze Orman recommends the same strategy but I have not fully absorbed it. After my discussion with the financial advisor, I am considering dropping my 401k contribution to 8% and applying the extra money to the Roth IRA. I would not max it out but I would be contributing more into the index fund I have chosen.

Otherwise, my financial advisor said my situation looked good with my cash reserves, not buying too much house, having term life insurance (just the policy through work) and my contribution of 16% of my income to retirement funds. He indicated anything over 10% is excellent but not to contribute so much it makes me feel constrained. That I do not feel therefore, I am on the right track for me. I was glad to meet with my advisor and I will see what next year brings for me!

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