Ask Me Help Desk - Investing for retirement from the military

Quote:

Originally Posted by wlcovusmc

I am a Gunnery Sergeant in the Marine Corps with just under five years to retirement. Early on in my career, my wife and I began investing in seperate IRA's through Pioneer investments (PINDX). We also invest monthly in a regular taxable fund (the same one). We started our investment in 2001 ($333.33) monthly and currently have approx. $65,000 combined. We have $11,500 in a money market through Navy Federal Credit Union and zero credit card debt. We own a house which we owe $99,000 on and it's current market value is apprx $149,000.

We are concerned that Pioneer may not be the best fund to have. We ended up with it through IRA&SPCA (now called First Command). Our goal is to have those IRAs supplement my military pension (estimated $2100 a month) down the road. I don't know if there is a better investment choice and if there was if I can just roll my IRAs to a new fund or if I will be penalized. Any help would be appreciated, I am currently deployed and immediately after this deployment, my wife and I have to start doing some serious planning, 2012 is coming up quick!!! Thanks.

I think you can definitely do better than PINDX. According to Morningstar, it is a large cap equity fund, and it rates 4 stars, which means its overall performance is above average. That's good, but... it carries a front end sales load of up to 5.75%, and has annual expense ratio of 1.5%. Those are some pretty heavy anchors that drag down its performance - you can do better on both counts.

I suggest you research no-load offers from some of the major investment houses, including Vanguard, Fidelity, and T.Rowe Price. All of these guys offer lots of choices. You can open an account for free, on line, and direct that your current IRA assets be rolled directly into the new account. Basically you work through the new investment house and have them do all the paperwork on the rollover -- that way you are not subject to any penalties from the IRS.

I would suggest that given you have just a few years to retirement you begin to diversify your holdings, so as to include some small cap stocks, some bonds, and some foreign stocks. You can easily do this through the myriad mutual fund holdings at any of the above institutions. As you do your research you will see they all have on-line tools to help you determine the appropriate mix of stocks (large cap and small cap), bonds, and foreign investments for your situation and risk tolerance. You may decide to choose one of the "life cycle" type funds, which have a pre-set mix of investments that is supposedly "tuned" to the number of years you have to retirement.

As for some specific recommendations: I am partial to no-load index funds for the bulk of one's investment - they tend to have the lowest expenses and there is a lot of research that shows that they tend to have results that are superior to the majority of actively managed funds. Once you have done some research, feel free to come back with any specific questions you may have about any particular funds.

Good luck with your deployment - stay safe!