stepford
Thinks s/he gets paid by the post
More important than all this financial advice, with a name like mtbikelover what kind of bikes do you have and where do you like to ride?
Hi! New and looking for advice on how much cash to hold
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mtbikelover
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Haha! I ride an old Gary Fisher. It’s one of those things where I know I can afford a more up to date bike with all the bells and whistles but I love my Gary Fisher so much. It fits me perfectly and I don’t want to change. I’ve upgraded a few parts but kept it pretty much the same.
And since I live in Wisconsin, I just ride some great singletrack trails in the Southern Kettles. When we move to Colorado for retirement, we will go to Moab and hit a lot of the mountain biking out there. I can’t wait!
stepford
Thinks s/he gets paid by the post
Sounds like us. My wife and I love our 20 year old mountain bikes, but when we took them out to Moab a few months after we retired we got pretty well beat up. This inspired us to go out and buy new bikes which improved the next trip there considerably. Bashing around on bikes seems like a fine retirement goal to me.
target2019
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Obviously you have enough, and are comfortable with decisions like this.
It's your money. You get to do whatever you choose with it.
If you consistently don't like the advice coming from your advisers, you should get rid of them. Either find new advisers who are more aligned to your thinking, or do the job yourself.
"
At 1,951 feet above sea level, Timm's Hill is the highest point in Wisconsin. At this scenic park you can climb the observation tower for a 30-mile view of the vast Northwoods. To the south you'll look down on placid Bass Lake 160 feet below."
A mountain bike lover in a state with no mountains. Oh well. But seriously there are some awesome trails in WI. I grew up in Northern WI on the shores of Lake Superior. Great scenery. Good luck on your journey to CO and ER.
target2019
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mtbikelover
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I’ve used the mtbikelover handle for many years. I first started biking in PA and WV but then work took me to Wisconsin. You are right...not mountains. But they still have some great trails with hills that are tough to climb and fast to go down with rocks, roots, tight turns, etc. So it works for now until we retire.
Golden sunsets
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Here's another view. With 69% already in equities, and retirement 4 years away, I'm not sure I would want to have more of my AA devoted to equities, especially with this frothy market. 70% equities and 30% fixed income, seems like a good AA to me. If some of that Fixed Income is currently invested in cash instruments yielding 2-3%, then the debate for me would be when should I transfer some of that cash to longer maturities, and now would not be the time.
jollystomper
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+1
Rather than what to do with the cash, the first questions should be are you comfortable with your AA. as in the quote, personally I would not move my AA above 70% being so close to retirement.
If you are happy with your AA and what your FA is providing, no reason to sweat that 1% fee against the cash... I call that the "cost of sleeping well at night". I have a large cash position (about the same as the OP has) so that I can cover expenses and not be forced to sell equities before I choose to take SS... certainly I could invest more of it in equities for a chance at a better return over the years, but that is my "sleep well at night" fee.
easysurfer
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Mtbikelover,
Like hiring any professional, I think the first question to ask is does the service provided justify fee?
Speaking for myself, when I retired (years ago), I hired a fee only planner that charged by the hour to help with some of the number crushing and felt that was justified. About a couple of years ago, the planner went the subscription route. Where instead of hiring by the hour there was retainer type subscription fee. I decided, that service didn't justify the cost so said thanks but no thanks.
Plus, I'm comfortable and believe in DIY investing passively rather than active anyhow.
As for your husband having sleepless nights nervous about DIY investing. For me, I'd have sleepless nights having parts of my hard earned money run by a FA rather than myself.
Like hiring any professional, I think the first question to ask is does the service provided justify fee?
Speaking for myself, when I retired (years ago), I hired a fee only planner that charged by the hour to help with some of the number crushing and felt that was justified. About a couple of years ago, the planner went the subscription route. Where instead of hiring by the hour there was retainer type subscription fee. I decided, that service didn't justify the cost so said thanks but no thanks.
Plus, I'm comfortable and believe in DIY investing passively rather than active anyhow.
As for your husband having sleepless nights nervous about DIY investing. For me, I'd have sleepless nights having parts of my hard earned money run by a FA rather than myself.
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gwraigty
Thinks s/he gets paid by the post
And you're paying him 1% to do something that you could have done yourself.
I understand you came here seeking a second opinion. I would DIY, there is no greater satisfaction IMHO than managing the success that we brought in financially rather than paying someone taking a hit to our principle.
1% of I think you are stating 2MM is 20k annually. To compare, I manage ~2MM for my family and we combined pay about ~$2500 a year to manage that.
I learned about investing about 8 years ago and got really serious about 6 years ago. Averaging over 20% annual returns. FIRE the FA and never look back. The opportunity cost is killing you and that is where DIY always out shines and out performs the FA, only you care about your missed opportunities most.
1% of I think you are stating 2MM is 20k annually. To compare, I manage ~2MM for my family and we combined pay about ~$2500 a year to manage that.
I learned about investing about 8 years ago and got really serious about 6 years ago. Averaging over 20% annual returns. FIRE the FA and never look back. The opportunity cost is killing you and that is where DIY always out shines and out performs the FA, only you care about your missed opportunities most.
OldShooter
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@mtbikelover, I am not going to join the native drumbeaters trying to convince you to ditch your FA. You have made your position clear on that. I would, however, like to flag a few things that I'd suggest you watch for:
1) The FA seems to think the he/she can successfully pick stocks. This is most charitably characterized as naive. It is also hazardous to your financial health.
2) Is the FA charging you the 1% fee on cash and near cash? This is not defendable; the FA has no way to add a whit of value to these holdings. I am involved with one nonprofit where the FA charges no fee on cash and near-cash. I have heard of others where a discounted fee is charged. If you are paying full price you are being cheated.
3) You say "I have some stocks that are up 40% in the 14 months we have been with him." That's really no surprise. Market prices are so "noisy" that it is relatively easy to come up with some winners. What has been proven to be impossible is to come up with a $$ preponderance of winners by picking stocks. IOW, pay absolutely no attention to individual stocks in the portfolio; watch only the total return of the equity portfolio versus the total return of a broad benchmark like the Russell 3000 or the ACWI (All Country World Index). In fact, I have arranged for the FA I mentioned to report quarterly on the equity portfolio against the ACWI. To say that involved some kicking and screaming is an understatement. What most FAs want you to look at is the overall return of the portfolio. But it is impossible to measure the FA's performance using a composite number.
You're well informed and thoughtful. Just keep your eyes on the big picture and make sure the value you're receiving from this FA is worth the fees, including the likely market underperformance. (Like others here, I am skeptical of this, but none of us have a vote.)
1) The FA seems to think the he/she can successfully pick stocks. This is most charitably characterized as naive. It is also hazardous to your financial health.
2) Is the FA charging you the 1% fee on cash and near cash? This is not defendable; the FA has no way to add a whit of value to these holdings. I am involved with one nonprofit where the FA charges no fee on cash and near-cash. I have heard of others where a discounted fee is charged. If you are paying full price you are being cheated.
3) You say "I have some stocks that are up 40% in the 14 months we have been with him." That's really no surprise. Market prices are so "noisy" that it is relatively easy to come up with some winners. What has been proven to be impossible is to come up with a $$ preponderance of winners by picking stocks. IOW, pay absolutely no attention to individual stocks in the portfolio; watch only the total return of the equity portfolio versus the total return of a broad benchmark like the Russell 3000 or the ACWI (All Country World Index). In fact, I have arranged for the FA I mentioned to report quarterly on the equity portfolio against the ACWI. To say that involved some kicking and screaming is an understatement. What most FAs want you to look at is the overall return of the portfolio. But it is impossible to measure the FA's performance using a composite number.
You're well informed and thoughtful. Just keep your eyes on the big picture and make sure the value you're receiving from this FA is worth the fees, including the likely market underperformance. (Like others here, I am skeptical of this, but none of us have a vote.)
mtbikelover
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Thanks for not telling me to ditch him! The 1% is charged on cash if it is something waiting to be invested. If it was part of our overall strategy to keep a certain amount in cash and never move it, that would not be charged any fee.
And just to clarify - we have $1.5M with him. My current employer 401K is with fidelity and can't be moved and my husband has an annuity from the other FA that also can't be moved until next year. The total on those is $800k. I also have 529 plans for my kids that total $215k. The FA gives us advice on that $1M also but we don't pay the 1% on that.
Maybe when my husband retires and no longer has to have a management company handling his company's 401K we will discuss managing the money on our own. But for now, we are staying with our FA.
The Onceler
Dryer sheet aficionado
What fisher? Pre-trek? I have a 1995 Mt Tam. Super light and great geometry. Love it. XTR v brakes now and some other mods but still the same bike.
mtbikelover
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It’s pre-trek. KaiTai. I think it’s 2000 or 2001.
Oh, what was the FAs plan for cash? You mentioned a sale. Do you ever do IPO? Usually FA's get money by pushing specific products but not always. Pinterest and Zoom IPO tomorrow. I know some people getting in on that action. I'll update you later on how it turned out. They called this gambling, and I agree, I think I might gamble a bit too, but am really waiting for Slack to IPO. It's on my bucket list to buy on an IPO day that I feel will launch.
OldShooter
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Misinformation here. Investing in IPOs is, statistically, a losing strategy. Probably (hopefully?) the OP's FA knows this. And, @kgtest, you should understand that the only IPOs that get offered to small retail investors are ones so stinky that the brokerage house's institutional clients and heavy hitter clients won't take the deal. So if you are not in the latter two categories, you better be careful. Like by keeping your money in your pocket.
FA's getting paid based on AUM are Registered Investment Advisors or Investment Advisor Representatives, IOW fiduciaries and are not paid for pushing products. The only "FAs" that get paid for pushing products are registered representatives who are held to the very weak "suitability" standard and who have no legal obligation to act in the clients' best interests. Unfortunately, anyone with $15 headroom on a credit card can go to VistaPrint and get "Financial Advisor" printed on some business cards.
Agreed. Dont do the IPO. I tried today but wasnt willing to pay more than what other people apparently were. Ive never veen able to actuslly execute a limit order on an IPO day in that regard it is losing. I am really just curious where they decide to out the cash. It seems OP has little risk to just go VTI with the 125k and call it a day. Just buy the entiee market and rise and fall with the other boats jn the sea. That is my final answrr 125k on VTI.
OldShooter
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Just to be clear, an IPO is priced and sold, usually to a favored few. Once it is sold out, then it is just like any other stock on the market. There is a bid price and an asked price and there is trading. The goal of the initial pricing is to hit a number that does not result in the stock going up substantially in the secondary market. This would mean that the underwriter has left money on the table.
If you are writing limit orders, you are in the secondary market. You are not buying the IPO.
Roger that. No wonder ive basically stuck to indexing. So...how do I get access to the IPO like Slack. Do you need to be a who's who? Oh sorry about the spelling this autocorrect on my phone is terrible. Couldnt figure out how to edit from mobile app but i got it now
OldShooter
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Of course. Tiny retail customers like you and me will never be given access to anything decent in the national market. The underwriters will first offer the deals to their institutional and heavy-hitter clients. Only if that group refuses to buy/deems the deal too stinky, will the retail brokers start calling their small clients. Why would you want to write a few hundred tickets if you could write just one and in the process stroke & reward a big client?
I have made money on a couple of local IPOs, very small time stuff, back when I was doing more local private-placement type investing and had a good relationship with a couple little local brokerage houses. But anything national, anything good, I didn't have a prayer. Still don't.
But to console yourself, do a little research on IPOs. I have not done it for a while, but I'm pretty sure the answer is still that they usually turn out to be bad investments. It is only the home runs you hear about. There are more strikeouts that don't make the news.
So as to your original question, I'm 46 and I hold 1 year in cash equivalent. I use to feel like I needed 2 years, but with the amount of dividends being thrown off I don't think that is necessary.
So for example if we need $50k/yr, and I make $25k in dividends in my taxable account.. thats $50k to cover the first year at which time I'd have $25k to cover the next 6 months at which time I'd have another $12.5k to cover the next 3 months
The biggest difference being once I did retire, I stopped re-investing all my dividends and cap gains (from mutual funds) in my taxable accounts and they go automatically to my money market, so that provided me the extra coverage to only keep a 1 year cash reserve on hand. Also since those dividends count against my ACA AGI, best to use those for expenses.
So for example if we need $50k/yr, and I make $25k in dividends in my taxable account.. thats $50k to cover the first year at which time I'd have $25k to cover the next 6 months at which time I'd have another $12.5k to cover the next 3 months
The biggest difference being once I did retire, I stopped re-investing all my dividends and cap gains (from mutual funds) in my taxable accounts and they go automatically to my money market, so that provided me the extra coverage to only keep a 1 year cash reserve on hand. Also since those dividends count against my ACA AGI, best to use those for expenses.
