Retirement Planning: Fisher's 500K Portfolio Breakdown

Fisher Investments offers a range of resources for individuals with a $500k retirement portfolio, including a free downloadable guide called 'The 15-Minute Retirement Plan'. This guide addresses key questions related to retirement planning, such as how to calculate the amount of money needed for retirement, how to establish a primary investment objective, and the impact of cash distributions and inflation on retirement savings. Fisher Investments also provides a retirement calculator tool to help individuals visualize their finances in retirement and determine how much they should save to achieve their retirement goals. The company emphasizes the importance of understanding investment goals, income needs, and time horizons when planning for retirement, and offers personalized money-management solutions to help clients reach their financial objectives.

Stocks, bonds, and other securities

Fisher Investments offers a range of resources to help individuals with $500k or more prepare for a comfortable retirement. These resources include guides such as "The 15-Minute Retirement Plan", "The Definitive Guide to Retirement Income", and "When to Retire: A Quick and Easy Planning Guide". These guides address key questions and concerns that many individuals face when planning for retirement.

When it comes to stocks, bonds, and other securities, Fisher Investments emphasizes the importance of asset allocation, which they believe drives up to 70% of potential returns over time. They suggest that a well-diversified portfolio should include a mix of stocks, bonds, cash, and other securities.

Stocks represent partial ownership in a business and have historically been one of the best and most consistent investments for generating higher long-term returns. However, stocks can also be subject to high volatility in the short term. On the other hand, bonds are loans made to a company or entity that provide more reliable income with less short-term volatility, but they have historically yielded lower returns than stocks.

Mutual Funds and Exchange-Traded Funds (ETFs) are also mentioned as options for investors. Mutual Funds allow investors to pool their money with other investors to benefit from a professionally managed and well-diversified portfolio, while ETFs are similar but with prices dictated by the market during market hours.

Additionally, Fisher Investments highlights the importance of understanding the pros and cons of different investment income sources, such as annuities and real estate, to make informed decisions when planning for retirement.

Mutual funds and exchange-traded funds (ETFs)

Mutual funds are investment funds that pool money from multiple investors to purchase a variety of securities, such as stocks, bonds, and other assets. These funds are typically actively managed by a fund manager, who buys and sells securities within the fund to try to beat the market and maximise returns for investors. Mutual funds have been around for a long time, with the first one launched in 1924. They usually have higher minimum investment requirements, often ranging from $500 to $5,000, and can only be bought and sold directly with the fund provider at the end of each trading day. The price of a mutual fund is determined by its net asset value (NAV), which is calculated after the market closes.

On the other hand, ETFs are a more recent addition to the investment landscape, with the first ETF debuting in 1993. ETFs are also investment funds that hold a collection of securities, but they are traded on stock exchanges like individual stocks. This means that ETFs can be bought and sold throughout the day, just like stocks. ETFs are typically passively managed, tracking a market index or sector index, and have lower expense ratios compared to mutual funds. While some ETFs have a minimum investment requirement, many can be purchased for the cost of a single share, making them more accessible to investors with limited funds.

In terms of fees, mutual funds tend to have higher fees due to their active management and higher operational costs. Actively managed funds, like many mutual funds, tend to have higher fees and higher expense ratios compared to passively managed funds. ETFs, on the other hand, are usually passively managed and have lower fees. Additionally, the creation and redemption process of ETFs can result in tax advantages for investors, as they tend to realise fewer capital gains than actively managed mutual funds.

When deciding between mutual funds and ETFs, it's important to consider your investment goals, risk tolerance, and the level of actively involved you want to have in managing your investments. Mutual funds may be a good choice for those who want a more hands-off approach and are willing to pay higher fees for the expertise of a fund manager. ETFs, on the other hand, offer more flexibility and liquidity, making them attractive to active traders and those who want more control over their investments.

Real estate and REITs

Real estate can be a way to generate retirement income. However, there are benefits and drawbacks to investing in real estate. Simpler real estate investments can provide cash flow from rentals, but there are also many expenses to consider, including repairs, maintenance, property taxes, mortgage interest, management fees, and legal fees. There are also the costs of the time you spend managing properties.

A Real Estate Investment Trust (REIT) is another option. REITs are companies that own or finance real estate through pooled funds to produce income for the fund owners. While REITs can offer investors dividends and long-term capital appreciation, they can’t always be relied on for regular income streams—REIT dividends can be cut just like with any stock. Additionally, REIT dividends are not taxed like equity dividends, which investors should be aware of.

When deciding how to invest for your retirement, it's important to understand your investment goals, income needs, and time horizon. All retirement investment strategies require you to assume some level of financial risk in exchange for potential returns.

Retirement savings accounts

There are several types of retirement savings accounts, each with its own unique features and benefits. Here is an overview of some of the most common types of retirement accounts:

Traditional 401(k) Plans

These are company-sponsored retirement accounts where contributions are deducted directly from an employee's paycheck before taxes are calculated. This type of plan may include a percentage match from the employer, boosting the potential for investment returns. Funds in a traditional 401(k) grow tax-free until withdrawals are made, typically after the age of 55, at which point they are taxed as regular income.

Roth 401(k) Plans

Roth 401(k) plans share similarities with traditional 401(k)s but with a key difference in tax treatment. Contributions are made with after-tax dollars, and both the contributions and any gains are not subject to future income or capital gains taxes. However, employer matches must be directed to a Traditional 401(k) as they are considered pre-tax income.

Traditional IRAs

Traditional IRAs (Individual Retirement Accounts) are self-established by individuals specifically for retirement investing. They offer tax-deferred benefits, allowing contributions and gains to grow tax-free until withdrawals are made, similar to a traditional 401(k).

Roth IRAs

Roth IRAs offer a different tax structure compared to Traditional IRAs. Contributions are made with after-tax dollars, and future withdrawals can be made tax-free. However, contributions may be subject to income and other limitations.

Other Types of Retirement Accounts

In addition to the above, there are other types of retirement accounts to consider, such as defined contribution plans (including 403(b) and 457 plans) and defined benefit plans, which typically guarantee an income stream for retirees.

It is important to carefully consider your investment goals, income needs, time horizon, and risk tolerance when selecting a retirement savings account. Fisher Investments provides resources and expertise to help individuals navigate these decisions and develop a comprehensive retirement plan.

Annuities

Fisher Investments offers a guide called "The Definitive Guide to Retirement Income", which discusses the truth about annuities, among other topics. This guide is intended to help individuals find answers to stressful questions about retirement planning, such as how much retirement will cost and how to generate the necessary income.

Frequently asked questions