Reality check on my retirement savings strategy please?

Question

In the last 2 years I have moved all of my IRA$ into high yield bond funds that invest in B rated bonds, ARK and HYF.
I am 43 and have $160K currently yielding 9.5% and paying $1,260 per mo., which I reinvest in the funds.
I am contributing about $1,400 per mo. that I invest in HYF, which is currently paying the highest yield
I reason that 9.5% is as good as you might expect from the appreciation from an average collection of equity funds, and at the rate I’m going I will have over $700K in ten years
I think the conventional wisdom of a balanced portfolio of diversified investments with an annual rebalancing seems to be somewhat structured to optimize the maximum amount of trades and therefore commissions for brokers.
And if you consider the meltdown that occurred following 9/11 you realize that timing is very important to the value of ones equity investment.
I’m comfortable we the choices I’m making but would love to hear input from anyone who thinks there are huge holes in my plan

Answer 1

I think your plan sounds very smart. No sense in spending your hard saved money on a broker's commissions. If we all do our homework, we can invest our own money and make it much safer than stocks and mutual funds and big fees. 9.5% is a great return considering the market in the last 6 years. sure you could make more, but at what risk level. My clients who thouht they could make more and were all about the doulbe and triple promises offered forgot that they were never safe and guaranteed, and lost huge amounts of retirement savings. Now that the market is coming back, they have to start rebuilding from a lot lower account. The only hole in your plan is getting Long Term Care Insurance. As great as 700K sounds in 10 years, what if you have a car accident, stroke, or heaven forbid a cognitive impairment like alzheimers? That 700K will be gone in no time and all the money you saved will be going to pay for your care. You are young enough that a good Long Term Care Policy would only cost you about $150 a month. Protect your money, your legacy, and your family and get this protection now!

Answer 2

Taking far more risk than is reasonable. If a 9/11 like event occurs high yield bonds go unpaid & that fund all but vanishes. Actually - would take a lot less than a 9/11 to do that. The companies in those funds are not in good financial condition. That's why they have to pay some much on thier debt. Up to you but the reasoning is horrifically faulty. Just last yr would have made double 9.5% or more with much less risk in solid holdings you could actually sleep on. Don't worry about commissions - etf/closed end portfolio can do that with little cost. Worry about the risk you are taking. Forget prosper - 1st answer. ADX PEO EFA IAU EWA & a couple of others can be held for yrs.

Answer 3

Anyone that answers this question without knowing your tax bracket, write-offs, AGI, age and income is not being very responsible. Also, there are MANY other options available to you, other than a 401k's and an IRA, which I'm assuming you mean a Traditional IRA. What they're overlooking could have drastic consequences at retirement. More specifically, if you're covered by an employer's plan and choose not to use it, you are limited or prevented from deducting any IRA contributions. That means that you, potentially, have to track basis on an IRA for 30 plus years? That's next to impossible, and the IRS reporting is burdensome and impractical. Please, leave financial advising up to the professionals. Contact someone that does this for a living.

Answer 4

I think your plan is very sound, however, you could be making a little more interest by investing some money in high interest loans at www.Prosper.com. The company is about a year old and is growing at an amazing rate. Read about it here from the New York Times. I would suggest investing some money into prosper
.http://www.nytimes.com/2006/02/13/technology/13ecom.html?ex=1297486800&en=a0ac72b7453152ab&ei=5090

Answer 5

Your strategy sucks.

You can easily make 19% without risk.

I suggest you to stay away from bonds. You are too young for that.

Top 4 Answerer.

Answer 6

Heres an article i found http://siteFwd.com/6VR on retirement planning and the best plans to take.