50 year old, Rolling Over sizable 401k, Should I dump my Financial Planner?

[retire2020]

However, it seems like you do not have much saved on a $200K salary...

+1. Dump your adviser. Read 'Four Pillars of Investment' and 'Random walk down the wall street', educate yourself on basics and go to Vanguard....You can then decide yourself whether advise you receive is good/bad.

 

[krldrummerboy]

We use Fidelity for post tax + IRA accounts and Vanguard for my 401k. We enjoy far lower fees than you do. Our investments are mostly indexes with about 45% stocks and the rest bonds. We've had this strategy since the great recession and have done well. I wouldn't dream of paying the fees for a service that is so likely to underperform us. Oh, and we have nearly quadruple of what you have accumulated on a smaller salary, although we're older at 58.



Sent from my iPhone using Early Retirement Forum

Thanks everyone for your thoughtful responses. A few people have commented on my low savings relative to salary. Just wanted everyone to know that I am a committed saver. I started working later in life, took years learning a currently valuable skill, and have been making progressively higher income for the last 10 years. In those 10 years I have purchased a home, paid off all my and my spouses college debt, had two kids, now credit card debt, and saved what looks to be $500k by the end of this year. All in 10 years. I plan on taking a lot of the advise learned here and hope to stay on the forums so that I can be FA free when comfortable. Keep the comments coming if you got em'.

Thanks a lot!

 

[krldrummerboy]

MRG
Some folks are confusing portions of my post. My ameriprise account is primarily being used for retirement mutual fund investing. The only fees are those wrapped in the funds. I posted their fund picks and the consensus is that the expense ratio fees are too high at 2% and that the back end loading is "evil". I don't argue this at all. The 1.5% annual fee would be for a separate account that is dedicated for active stock trading that they will manage as long as $100k is kept in the account. Stocks should not have built in fees like mutual funds. That was their offer. I did not accept it, wanted to research it, and ended up here. We can rip Ameriprise for sure.

 

[MRG]

MRG
Some folks are confusing portions of my post. My ameriprise account is primarily being used for retirement mutual fund investing. The only fees are those wrapped in the funds. I posted their fund picks and the consensus is that the expense ratio fees are too high at 2% and that the back end loading is "evil". I don't argue this at all. The 1.5% annual fee would be for a separate account that is dedicated for active stock trading that they will manage as long as $100k is kept in the account. Stocks should not have built in fees like mutual funds. That was their offer. I did not accept it, wanted to research it, and ended up here. We can rip Ameriprise for sure.

OK so Ameriprise is taking the 12B1 fee(1%) on your funds expense ratio and then charging 1.5% on the stock. Then you have the cruel and evil back end loads.

Still a bad deal for you. There will be other changes that get tacked on when you leave but ignore them. Run. Run..

 

[FreeBear]

Age = 50 male
Desired retirement age = 60 - 65

All the other comments re your FA are spot on, no need for me to add anything.

I'll take a different tack, per Steve Covey: "Begin with the end in mind".

So, you want to retire in 10-15 yrs. You have liquid assets, but only 50K net worth when you subtract your mortgage.

Key questions:

- How much do you spend yearly (actual, not guessed)?

- How much will you spend in retirement (projected)?

- How much savings do you need to retire at target age? At what Safe Withdrawal Rate (SWR)? I'd suggest 4% or lower (ie spend 4% or less yearly, inflation adjusted, of total savings in retirement). Your FA should have told you this, but the number will be much less if you minimize or eliminate advisor fees.

- How much do you need to save each year to get to retirement? All this depends heavily on your life expenses and your investment expenses (financial advisor, fund fees). Firecalc and other simulators are greatly helpful figuring this out.

I think retiring in 10-15 years will be a big order, but possible if you run a tight ship by reducing expenses and saving aggressively. But you need yearly goals... The process will have to be managed aggressively. You many or may not choose to use a FA, but success or failure to reach retirement is primarily in your hands.

FB

 

[RE2Boys]

I would not be in a huge hurry moving your accounts given the back-end loads you may incur. Usually, when it happened to me (was once with Merril Lynch but now DIY), the back-end loads decreased each year and totally disappeared at some point. I'd wait until the back end load is zero, possibly 1% before consider moving the assets.

The after tax brokerage could be moved to Vanguard in kind, though I'd expect Ameriprise will charge a transfer fee. Would not advise giving Ameriprise any new money. Open a Vanguard or Fidelity account.

It appears you have an annuity in your traditional IRA, that is a totally separate issue and discussion, it may be best to keep, maybe not, depends on terms and why you purchased it.

If your moving to DIY, not all accounts need to be at one place, my wife and I have accounts at Vanguard, TR Price (brokerage only), Fidelity (401k), and Franklin Mutual, and the government TSP. Slowly consolidating.

 

[DrRoy]

We use Fidelity for post tax + IRA accounts and Vanguard for my 401k. We enjoy far lower fees than you do. Our investments are mostly indexes with about 45% stocks and the rest bonds. We've had this strategy since the great recession and have done well. I wouldn't dream of paying the fees for a service that is so likely to underperform us. Oh, and we have nearly quadruple of what you have accumulated on a smaller salary, although we're older at 58.

I am quite close to this situation. I also recommend that you look into Fidelity. They have matched the low Vanguard fees for the most part and can provide whatever level of service you want, sometimes with no management fee. I would not pay a percentage of assets to anyone, but at least get it below .3%. I transferred major funds to Fidelity this year and the tax basis came along, so you should be good there also.

 

[krldrummerboy]

Re2Boys
Thanks for your inputs. I am a little worried about the annuity, too. I have been communicating with some others outside of this forum. The annuity is from a roll-over from my previous job. This was purchased about 8 years ago. I believe my spouse has the same one for her current 403B which we contribute to every month.

I have heard that this is not normal and frowned upon by some investors. Can you please clarify why?

 

[Whisper66]

Re2Boys
Thanks for your inputs. I am a little worried about the annuity, too......I have heard that this is not normal and frowned upon by some investors. Can you please clarify why?

Again, you will find good input from supporters and non-supporters of annuities on this board. From what I've read, some types of annuities are better than others and good annuities make sense in some situations but not others. I don't have an annuity and never seriously considered them but a search of "annuities" finds many threads on the topic here and on Boggleheads such as:


https://www.bogleheads.org/wiki/Category:Annuities - (general discussion of types)

https://www.bogleheads.org/forum/viewtopic.php?t=43291

http://www.early-retirement.org/forums/f28/7-reasons-not-to-buy-an-annuity-70014.html

http://www.early-retirement.org/forums/f28/annuity-thoughts-69229.html

http://www.early-retirement.org/forums/f28/questions-for-lifetime-annuity-holders-77733.html

 

[pb4uski]

PB4USKI
I was expecting some negative responses to the word Ameriprise, but a resounding hate. Wow. I will think hard about what to do next. Two posters recommended Vanguard. Perhaps, I could simply roll everything into Vanguard and let them re-position my current mutual funds?

Why is Vanguard so recommended? My wife had a bad experience with her 403B and is hesitant.

Here's a tough question: Is is fairly straight forward to transfer all of my Ameriprise holding into a brokerage acct? I worry that my tax history and dates and all that will get lost. For this reason I would worry about transferring to my personal brokerage. Would it be better to have a different advisor, like Vanguard, handle all that? Is there some complexity here?

To be clear, my response would have been the same for any FA who charges 1.5% and put clients in high expense funds with back end loads... though I concede that IME Ameriprise is known for high fees and high expense funds so the very mention of their name puts my BS meter on high alert.

I have used Vanguard for over 20 years and most appreciate their low fees and appropriate and consistently good investment advice. As you may or may not know, Vanguard is essentially a cooperative... the investment manager, fund administrators and distributors are all owned by the funds... like a mutual bank or mutual insurer... there are no shareholders to be satisfied which is part of the reason that their fees are so low (along with economies of scale).

I concede that Vanguard's service can be spotty... often it is very good and sometimes it is poor... luckily I have had really good Flagship representatives who have been good at sorting out the times I have received poor service and these days I just contact them directly unless I have something simple.

PB4USKI
A few more comments.
The fees I am paying are not quite as bad as you make them out to be. Just to clarify, I do not pay any fees on the current mutual funds I have in that there is no monthly or yearly fee and there is no transaction fee. These fees are "hidden" in the returns. So, in your comparison PVSBX fee (expense ratio) is 2% yearly where Wellington fee is 0.18%. Is this accurate or am I missing something?
The 1.5% fee would only be on the assets in the brokerage account that they set up to buy and sell (manage) individual stocks.

I am in no way defending them. Just trying to clarify my post.

So, the question, is the 2% fee for PVSBX outrageous for a mutual fund? MRG used the term Evil when talking about 1% 12B1 and another 1% for the fund (which I assume is expense ratio)....

Thanks for the clarification... and yes, IMO 2% is outrageous for a balanced fund.

Here is a better, more successful source of investment advice for you.

http://blogs.wsj.com/moneybeat/2016...nst-wall-street/?mod=yahoo_hs#:bBaad-w6yXW0PA

 

[petershk]

Welcome to the group!

First I think it's vital that you gain a good understanding yourself before taking any action on recommendations (including mine).

So I think the questions asked previously about what you need to retire, how much you spend, etc are vital.

For investing I think it's vital to understand taxes, fees and inflation... more important than market returns because you can control them more . I recommend reading jlcollins series on it... it also covers some elements of retirement.

http://jlcollinsnh.com/stock-series/


Now my personal advice which should be taken with grains of salt.

The biggest revelation for me was understanding that the way investments work is like a job.

If you have 500K for example, you can expect that job to pay you around 20K/year inflation adjusted forever. That's using the 4% rule" which you can find out about and easily adjust.

If you're gainfully employed, your income is a second job ... if not, you have to live on that income your asset job brings in.

So I remove the 500K and replace it with 20K/yr.

Why? Because that's my basis for figuring out what I am willing to spend on services, fees, etc.

Financial services tend to charge based on assets managed... so 1.5% on 500K is 7.5K. If there's an average 1% fund fee on top that's another 5K bringing the total to 12.5K.

If I look at 500K that's doesn't seem like that much... if I take the income view (20K) I'm giving over half my pay away for someone else to manage it. So that's a pretty big chunk.

Then I can ask myself what I get for that? If they can beat the market consistently by 50% maybe it's worth it. If they keep me from doing really stupid things maybe it's worth it. Personally I try to keep those numbers as low as possible.

I also include CPA, legal advice, insurance people, taxes, etc. Anyone who "helps" me manage my money is paid by that 20K... and what's left over after all those costs is what my job actually pays.

Then I look at what hurts my pay the most and try to get rid of it. Taxes are hard to get rid of, inflation is hard to control, stock returns I don't think I can change much. So that leaves fees and advice rates.

The good news is this forum chargers 0% for AUM and many members give equally good advice if not better . Since it's a bunch of retired people with little or nothing to do all day they can afford to be honest as well.

Keep digging... I'm sure you'll figure out what works for you best!

Sent from my HTC One_M8 using Early Retirement Forum mobile app

 

[scrinch]

petershk is making a good point. If you look at 2% mutual fund fees or 1.5% stock advice fees as a percentage of total capital, it may seem small. But if you look at it as a fraction of the 5-7% you earn on that capital each year, it becomes a large portion. Experience shows that FA's funds/stocks do not routinely beat the overall market. So if you can do your own investing and match the market, you are better off by 1.5-2% per year. If you can't invest on your own, or you are afraid that you will panic at the wrong time, then by all means engage a FA, but get one who does not have a conflict of interest in managing your money (selling their own products or receiving commission). And certainly you can get good steady advice for much less than 1.5%. You might try Schwab or Fidelity if you are uncomfortable with Vanguard. I have accounts and am happy with all three of these.

 

[cooch96]

I didn't read the whole thread, but Ameriprise is fleecing you. Conning you. Get smart on investing basics and pull out your money. Do it this month.

This forum harshly convinced me to do exactly this almost two years ago and I burned a relationship with an old family friend doing so. I'm very grateful to this forum for this. Friends shouldn't con and fleece their clients.

 

[MBSC]

My IRA ($75k)= RVS RAVA 4 SELECT Q
Wife 403b ($80k)= RVS RAVA 4 SELECT Q

I am a little worried about the annuity, too. I have been communicating with some others outside of this forum. The annuity is from a roll-over from my previous job. This was purchased about 8 years ago. I believe my spouse has the same one for her current 403B which we contribute to every month.

I have heard that this is not normal and frowned upon by some investors. Can you please clarify why?

Variable annuities are already tax-advantaged so there is no additional savings from having them within tax-advantaged accounts.

Those investing in a variable annuity through a tax-advantaged retirement plan will get no additional tax advantage from the variable annuity. Under these circumstances, consider buying a variable annuity only if it makes sense because of the annuity’s other features, such as lifetime income payments and death protection.

Source: http://www.diversify.com/diversify-...m/34-variable-annuities/34-variable-annuities

The prospectus is below. Notice the number of times "fee" and "expense" are mentioned.

RiverSource Retirement Advisor Variable Annuity 4 SELECT Q (qualified account):
http://financialprofessional.riversource.com/content/RiverSource/pdf/6503.PDF

 

[krldrummerboy]

MBSC
I stopped counting the word "FEE" after page 5. I got to 89 times. Didn;t count "EXPENSE". I may throw up

 

[krldrummerboy]

Big_Hitter
My 401k is Vanguard which is looking to be a good thing. So, i wont be taking out. Will keep the account and get things moving over to it

 

[gcgang]

Hi, I am a first time poster, but very interested in learning more about retirement investing. Specifically, whether or not I should stick with Ameriprise or go it on my own...

HISTORY:
My Ameriprise planner has been good for me, but, she is flighty (she manages a lot of wealthy silicon valley engineers I suppose) in that trades are delayed and promises to summarize meetings are sometimes forgotten. She has messed up the year to allocate my Roth as well as my kids Coverdell IRAs (which caused tax issues). This was more her assistants fault, be she is ultimately responsible. The growth seems okay, except for the last few years (more market then her I suspect). I mostly trust her decisions and dont tend to think about the account after our yearly update (we meet once a year, my decision).
She wants me to roll-over my 401k to her (makes sense). She says that then the account value will be high enough for her to start actively trading stocks for me (if I bring the brokerage cash up to $100k.....which I can just about do). This will cost me 1.5% annually from the brokerage account value. She says that this is the new Ameriprise model in that mutual funds have been stagnant and that stock trading has better results. I wonder if this is more a fee driven philosophy.

It sounds like you currently have subpar service, either due to incompetence or negligence. Did the FA offer to "make up" for what her mistake cost you? I know she can't write you a check, but she could forgive some fees. Unless the fees are all in the funds now. But still, she should do something.

I can see that you'd be "saving" money under her new format, paying 1.5% instead of the funds' assumed 2%. But what makes you think she could competently trade stocks? I trade my own stocks, but actually have very few trades, mostly just tax loss selling when the opportunity presents itself. Trading that generates realized gains is a further drag on your returns. I'll buy you a burger if she has any sort of audited track record.

You didn't mention any planning services she provides, did you? Some sort of Monte Carlo analysis for your retirement goal would seem to be a basic service any decent FA would provide. Good FAs actually can provide added value, although many people on this forum are proof that it's not that difficult to do yourself.

Congratulations on your saving and young family, and for getting serious about how to handle your investments. I think you'll realize that you are able to handle yourself, and will enjoy much better returns as a result.

 

[krldrummerboy]

GCGANG
Thanks for your input. Their fees are tied up in their funds. They dont charge for things like yearly fees, consultation fees, etc... I dont think things are as bad as some are making it out to be. To say that I am getting swindled is an overstatement. But the underlying message, that I can do as well or possibly better on my own, is valid. My opinion at this point is that she is a well-intentioned adviser that works for a not-so-great company if the person is willing to put the work in on their own (like you all). So, it's better that I move out.

I looked at the Morningstar fund comparison of $10k growth over 3 years (which is normally how long I have been holding). I found this in a blog recommended by one of the posters here. The results show she is under-performing when her investments are averaged:

VWELX = 12280
S&P = 13533
Ameriprise = 11726
My old funds = 13195
my Vanguard 401k = 13315

What this shows is that the S&P beat Ameriprise, Wellington, and me. But, I was in second place simply buying essentially DIA and SPY. She lost about 13% of my money over 3 years as compared to S&P. Ouch!

My 401K is in Vanguard (FCNKX,VIMAX,VMRGX,VSMAX) and my 3 year return is better than DIA/SPY and not quite up to S&P.

Again thanks to everyone for opening my eyes. I feel foolish for not analyzing her results more closely years ago. A simple strategy kills it.

 

[BigBob]

Don't beat yourself up over it. At least you have time to recover and have learned from the mistake. I think that we all have made some similar mistakes, and I, personally, have learned a lot from the folks here.

 

[Big_Hitter]

Big_Hitter
My 401k is Vanguard which is looking to be a good thing. So, i wont be taking out. Will keep the account and get things moving over to it

just checking - rolling a 401k into an IRA seems to be a kneejerk reaction for some people

 

[Whisper66]

......I think that we all have made some similar mistakes, and I, personally, have learned a lot from the folks here.

Well said! We all live and learn.


Sent from my iPhone using Early Retirement Forum

 

[Texas Proud]

GCGANG
Thanks for your input. Their fees are tied up in their funds. They dont charge for things like yearly fees, consultation fees, etc... I dont think things are as bad as some are making it out to be. To say that I am getting swindled is an overstatement. But the underlying message, that I can do as well or possibly better on my own, is valid. My opinion at this point is that she is a well-intentioned adviser that works for a not-so-great company if the person is willing to put the work in on their own (like you all). So, it's better that I move out.

I looked at the Morningstar fund comparison of $10k growth over 3 years (which is normally how long I have been holding). I found this in a blog recommended by one of the posters here. The results show she is under-performing when her investments are averaged:

VWELX = 12280
S&P = 13533
Ameriprise = 11726
My old funds = 13195
my Vanguard 401k = 13315

What this shows is that the S&P beat Ameriprise, Wellington, and me. But, I was in second place simply buying essentially DIA and SPY. She lost about 13% of my money over 3 years as compared to S&P. Ouch!

My 401K is in Vanguard (FCNKX,VIMAX,VMRGX,VSMAX) and my 3 year return is better than DIA/SPY and not quite up to S&P.

Again thanks to everyone for opening my eyes. I feel foolish for not analyzing her results more closely years ago. A simple strategy kills it.

You cannot compare a balanced fund with a 100% stock fund... in up markets the stock fund will always win... in down markets the balanced fund will always win (well, unless it is run really badly)....

 

[skibum]

I agree with petershk to consider expenses as a cut of the portfolio withdrawal rate, roughly 4%. By this measure the expenses noted are > 50% of portfolio take home pay.

The impact of expenses over time is considerable, see bogleheads example below. I encourage the OP to work thru the bogleheads wiki to create a financial plan and appropriate portfolio.

You have a great opportunity now to develop a sound financial future. It takes some time to develop and execute a plan, but is well worth it to understand and control what you can.

Results are simulated. The saving phase simulates a participant with a salary of $45,000 at age 25, linearly increasing to $85,000 by age 65, making yearly contributions of 6% of salary at age 25, increasing by 0.5% per year to a maximum of 10% and with a 50% company matching contribution up to the first 6% of salary. In retirement, $63,750 (75% of final salary) is deducted at the beginning of each year. The blue-shaded area shows ending savings with an after cost investment return of 9% assumed at age 25, linearly decreasing to 6% at age 80 and remaining constant thereafter. Inflation is assumed to be a constant 3%. The tan-shaded area assumes 1% greater return each year due to reducing the costs of investment by 1%. All amounts are in present-day dollars. Source: AllianceBernstein, as presented to the DOL/SEC Hearing On Target Date Funds And Similar Investment Options.

 

[krldrummerboy]

Big Hitter
I am keeping my 401k in Vanguard. As it turns out the company that is buying us also uses Vanguard. So it should be pretty cool

 

[krldrummerboy]

Texas Proud
I think the only balanced fund was VWELX. The Ameriprise funds were only the Roth mutual funds listed in my original post. Anyways, it seemed like a good comparison and was something that I was capable of doing.

Well, there's no going back now. I told Ameriprise my intentions and I didn't get a lot of push back.

Now, I need to figure out the best way to transfer. I believe Vanguard can do it, but, there is the annuity and the Coverdell's. That may not be as easy. I have transferred mutual funds a few times without big issues. I plan on talking to our CFO and seeing if I can get a recommendation for a good vanguard contact in a local office (san jose).