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I guess I'm in shock! (my introduction)
Old 01-09-2014, 07:05 AM   #1
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I guess I'm in shock! (my introduction)

Hi all,

I just joined here last night and this is my first post.... I found this board a month or so ago...

Anyway, I'm 62, and my wife and I just had our first meeting with a "financial advisor". The things he said sort of flabbergasted me and really motivated me to start reading and resulted in me finding this group.

I suppose his advise, (which would go against most of what is said here), would be the topic for another post.

I'm intending to retire at 65, if I can make it physically for that long? I work in a rough industrial job and I'm not at all sure that I will physically be able.... so applying for disability might be in the cards for me. I'll just have to see how it goes?

The wife is 61 and hopes to work until 65 if her company holds together for that long.... that's very "iffy"!

Thanks for putting together such a great group!

Jerry in Pennsylvania.
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Old 01-09-2014, 07:12 AM   #2
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Welcome to the forum Jerry!

As you have noticed, there is some useful information here among the internet ramblings.
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Old 01-09-2014, 07:18 AM   #3
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Welcome, JerryinPA! Nice to have you here.
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Old 01-09-2014, 07:59 AM   #4
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Welcome to the forum. We can help with numerous comments on what you heard from your FA. A good book to start with is Andrew Hallam's Millionaire Teacher. It is very simple to understand for someone that's just getting started in the investing world. It explains index investing and provides some guidance on diversification. It's available at some libraries and on Amazon.

Most people here do not use a FA and follow some sort of index based investing approach. Remember that you are paying your FA's car note with the fees you are paying him (or her) and his firm. It's in his best interest to have you work until you die. Most FAs end up skimming almost 25% of your spendable income from your portfolio. Please post what your FA told you.
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Old 01-09-2014, 09:11 AM   #5
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Welcome to the forum. Shock can be an excellent motivator to get things done, and to get them done correctly ! There is alot of wisdom on this board so feel free to use the search engine, read the FAQs and ask your questions.
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Old 01-09-2014, 10:02 AM   #6
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Welcome to the forum. We can help with numerous comments on what you heard from your FA. A good book to start with is Andrew Hallam's Millionaire Teacher. It is very simple to understand for someone that's just getting started in the investing world. It explains index investing and provides some guidance on diversification. It's available at some libraries and on Amazon.

Most people here do not use a FA and follow some sort of index based investing approach. Remember that you are paying your FA's car note with the fees you are paying him (or her) and his firm. It's in his best interest to have you work until you die. Most FAs end up skimming almost 25% of your spendable income from your portfolio. Please post what your FA told you.
Well, the short version of what this Financial Advisor said was:

1. We have plenty enough assets and very modest expenses so that we should be fine... except for one vulnerability...

2. If one of us dies and loses one of the Social Security incomes... so...

3. We should insure against a loss of one SS income by purchasing a variable annuity, deferred for 12 years. This was 30% of our assets.

4. Then, 25 % of our assets should stay under our control in various CD's, IRA CD's, 401k funds, etc.

5. The remaining 45% of our assets should go into a managed portfolio with a large brokerage he is associated with... with a 1% annual management fee.

I get a bad feeling about this.....

JerryinPA
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Old 01-09-2014, 10:21 AM   #7
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Originally Posted by JerryinPA View Post

3. We should insure against a loss of one SS income by purchasing a variable annuity, deferred for 12 years. This was 30% of our assets.


5. The remaining 45% of our assets should go into a managed portfolio with a large brokerage he is associated with... with a 1% annual management fee.

I get a bad feeling about this.....

JerryinPA
You should....sounds like the FA is adding to his retirement rather than helping you. A VA is not and investment, it is an insurance product with high fees and a risky promise.
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Old 01-09-2014, 10:27 AM   #8
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Originally Posted by JerryinPA View Post
Well, the short version of what this Financial Advisor said was:

1. We have plenty enough assets and very modest expenses so that we should be fine... except for one vulnerability...

2. If one of us dies and loses one of the Social Security incomes... so...

3. We should insure against a loss of one SS income by purchasing a variable annuity, deferred for 12 years. This was 30% of our assets.

4. Then, 25 % of our assets should stay under our control in various CD's, IRA CD's, 401k funds, etc.

5. The remaining 45% of our assets should go into a managed portfolio with a large brokerage he is associated with... with a 1% annual management fee.

I get a bad feeling about this.....

JerryinPA



You are very astute to have had a bad feeling.

I would run, not walk, from this person.

Browse this forum for all of the threads discussing annuities, and you should be quickly convinced that they are something to be avoided.

The only type of Annuity I would even consider is a SPIA. And even then, I would probably not do it.

But I have a decent % of my investment portfolio in Individual Bonds, Preferred Stocks, and ETDs. Each year the portfolio throws off enough money so that combined with SS, provides enough for living expenses.
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Old 01-09-2014, 10:44 AM   #9
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Quote:
Originally Posted by JerryinPA View Post
Well, the short version of what this Financial Advisor said was:

1. We have plenty enough assets and very modest expenses so that we should be fine... except for one vulnerability...

2. If one of us dies and loses one of the Social Security incomes... so...

3. We should insure against a loss of one SS income by purchasing a variable annuity, deferred for 12 years. This was 30% of our assets.

4. Then, 25 % of our assets should stay under our control in various CD's, IRA CD's, 401k funds, etc.

5. The remaining 45% of our assets should go into a managed portfolio with a large brokerage he is associated with... with a 1% annual management fee.

I get a bad feeling about this.....

JerryinPA
You are right to have a bad feeling about this. This person is looking at you like a sheep to be sheared. Get away from the advisor and spend some time learning enough to figure out your best course.
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Old 01-09-2014, 10:50 AM   #10
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Originally Posted by JerryinPA View Post
Well, the short version of what this Financial Advisor said

4. Then, 25 % of our assets should stay under our control in various CD's, IRA CD's, 401k funds, etc.

JerryinPA
I'm shocked he'd allow you to control 25% of your own assets.
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Old 01-09-2014, 11:16 AM   #11
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Welcome Jerry. I agree with others who have said that you should be concerned by what this adviser told you.
Everything that you posted should be "red-flagged" by you, so just start learning why your concerns are warranted.
You've got some reading to do now and it will be liberating for you in the long run.
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Old 01-09-2014, 01:18 PM   #12
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Quote:
Originally Posted by JerryinPA View Post
Well, the short version of what this Financial Advisor said was:

1. We have plenty enough assets and very modest expenses so that we should be fine... except for one vulnerability...

2. If one of us dies and loses one of the Social Security incomes... so...

3. We should insure against a loss of one SS income by purchasing a variable annuity, deferred for 12 years. This was 30% of our assets.

4. Then, 25 % of our assets should stay under our control in various CD's, IRA CD's, 401k funds, etc.

5. The remaining 45% of our assets should go into a managed portfolio with a large brokerage he is associated with... with a 1% annual management fee.

I get a bad feeling about this.....

JerryinPA
Thanks for the short review.

Agree with other posts, RUN....(item #3 annuity, #5 1% annual fee).

Amazing, could have predicted what your FA would recommend before you told us. I'm sure others had the same feeling.

So sad, people approach FA for advice, and get "taken". The key word is
Fiduciary, and honest people?
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Old 01-09-2014, 01:27 PM   #13
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I, like many others on this board, manage without a FA. I do however, follow Scott Burns, Scott Burns - AssetBuilder Inc., Registered Investment Advisor and use his guidance for an index fund portfolio. He makes it simple.
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Old 01-09-2014, 02:14 PM   #14
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Welcome, Jerry. Good instincts!

I, like Rustic23, like Scott Burns' approach and use variants of his index portfolios for a good chunk of our investments.
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Old 01-09-2014, 04:01 PM   #15
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As others have said, there's one red flag after another in your FAs recommendations. And guess what, it's basically the same thing he tells all his clients, it's not tailored to you as he may have led you to believe. The managed portfolio is the same for everyone too, though he may let you think it's tailored to "your needs."

Unfortunately a 1% management fee is not unusual, but it's also totally unnecessary. And there's not a lot of love here for annuities, especially right now while they're a horrible deal (low payouts).

Don't do anything with the FA for now, don't fire him, don't call (or return calls) but don't act on any of the recommendations - yet.

If I were you, I'd focus on reading about passive investing, books by Bogle, Bernstein, (Scott) Burns, Schultheis. If you want something easier to start, Google "lazy portfolios" and check out several of them. It doesn't have to be much harder than that.

If it all seems greek to you, or you just don't want to handle your own investing/finances, you may be more comfortable with an FA, but you will pay dearly for the "privilege." There are good FAs, unfortunately there are many more self-serving FAs, and it's usually pretty hard to find the good ones. In any event, you don't want to accept those recommendations as they are.
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Old 01-09-2014, 04:12 PM   #16
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You are right to have a bad feeling about this. This person is looking at you like a sheep to be sheared. Get away from the advisor and spend some time learning enough to figure out your best course.
+1

One benefit of this forum is that we have come to retirement in a huge variety of ways: some had big salaries and stock options, some LBYM'd for decades, some were rif'd with buyouts.........the list goes on.

I was so busy until the week I retired that I didn't find this board until then; but it has been a VERY practical and inspiring education. You can find a lot of carefully reasoned insight here from your new peers.

Re. your FA and the variable annuity: again, listen to the folks here. From my personal experience, these annuities can be very expensive, serving the purposes of the insurance co. (and the salesman) much more than your needs. (Had two from my job in CA; had to wait seven years to avoid the back-end sales charges when I moved to OH and wanted to roll them over into an IRA.)

Dear SIL "fell for" a variable annuity when she asked her FA to get her out of individual stocks because of mediocre performance (1-2 years ago). He put her in a v. annuity before she discussed it with DH and me. She's 66, wanting to retire at 70; now she can't "get at this money" for another 5 years, and she's paying an avg. of 3.5% in fees.

She can't afford it, but she didn't know it. He didn't tell her anything about the costs...........we had to wade through the 3/4"-thick annuity manual (which came with her paperwork) to get full info. re. the cost.

Now she's in Vanguard with her other savings, like us. This forum provides a lot of advice on low-cost, yet profitable, investment options.

Best of luck, and welcome!

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Old 01-09-2014, 04:16 PM   #17
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Quote:
Originally Posted by JerryinPA View Post
Well, the short version of what this Financial Advisor said was:

1. We have plenty enough assets and very modest expenses so that we should be fine... except for one vulnerability...

2. If one of us dies and loses one of the Social Security incomes... so...

3. We should insure against a loss of one SS income by purchasing a variable annuity, deferred for 12 years. This was 30% of our assets.

4. Then, 25 % of our assets should stay under our control in various CD's, IRA CD's, 401k funds, etc.

5. The remaining 45% of our assets should go into a managed portfolio with a large brokerage he is associated with... with a 1% annual management fee.

I get a bad feeling about this.....

JerryinPA
RUN!!!!

Your feeling is spot on. For one thing, how does a VA or his managing your assets address the risk of loss of one of your SS?

IF you need to insure for such an event (and it is unclear if you need to or not) then I could see some sort of life insurance as being a possible solution but I don't see where a VA or his managing your assets mitigates that risk.

If one of you were to pass, how much (as a %) would your income drop. Keep in mind that the surviving spouse would continue to get the higher of your two SS checks.
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Old 01-09-2014, 09:05 PM   #18
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If you haven't discovered the Boggle Heads forum it is also a good one to follow. You can post your portfolio along with your financial/retirement goals and get great expert financial planning advice for FREE.

Here is the Boggle Head forum site: http://www.bogleheads.org/forum/index.php

Here is an explanation of how to post your portfolio info for review: http://www.bogleheads.org/forum/view...php?f=1&t=6212

Good luck and welcome to the ER Forum!
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Old 01-10-2014, 06:07 AM   #19
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It looks like you've already gotten all of the anti-anniuty advice I could give. The whole VA industry is a giant ripoff. Stay away.

The "traditional" safe withdrawal rate is 4%. If you pay your FA a 1% fee, they are taking 1/4 of your available spending. Since indexing historically beats 60 to 80% of managed funds, giving away an additional 1% pretty much guarantees failure.

You haven't said how much investment experience you have. I suspect it's minimal so I'll repeat my suggestion to read Millionaire Teacher. It is the most basic (yet complete) book on index investing I've seen. It's a great place to start. Once you see the basics, it's much easier to broaden you knowledge with others. Scott Burns' web site is also a good place to read about "Couch Potato" investing. Since he writes a newspaper column, his articles are not always filled with enough details and background for a novice/first time reader.

Also, you can post your financial specifics and get overloaded with comments and suggestions. There are people here that know more than most FAs currently in business and aren't looking to get anything from you.
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Old 01-10-2014, 06:19 AM   #20
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Dana Anspach (a fee-based financial planner) writes for "Money Over 55" at About.com
She wrote a pretty good article about people like your financial advisor in her review of the movie "The Wolf of Wall Street": The Wolf of Wall Street
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