One step out the door and scared

[tfine98]

Hello, all,

New to the board. Perhaps in an enviable financial position to many here.

I'm 64, working wife 66. Portfolio: $1,800,000. No kids.

We own our million dollar house outright. (That doesn't buy a mansion here in Seattle these days.)

We're about to ER. FireCalc model doesn't predict any failures if we take $90,000/year (which is what we've been living on) with a conservative 50% stock portfolio.

We plan to postpone SS until 70: $33k to 2020 and $43k until 2022.

We have no long term care insurance and are in good health.

And we have a small business in addition to our day jobs from which we are retiring that is generating a $80k profit for the next few years. The nature of the business is such that we won't be able to sell it.

Biggest issue: Although the numbers work in FireCalc (and Flexible Retirement Planner, the only other Monte Carlo tool I've found that I like - free for non-commercial use) I'm scared. Such a big decision. Especially on the possible tail-end of a bull market. We're looking forward to retirement. But we've made some big mistakes financially in the past and so I'm seeking encouragement and suggestions from this community.

Second: Our biggest mistake was sticking with a Morgan Stanley portfolio manager all through the recent bull market and totally missing the run-up. It's totally our fault for not being more aggressive in pushing him more to explain the non-existent growth over the years and then overcoming our inertia and leaving. (I still wonder if there's any legally actionable malfeasance here...) And, frankly, I'm still quite miserable, really beating myself up emotionally on missing the final doubling of our portfolio before retiring ... but trying to get my head-screwed on straight rather than looking backwards.

That final doubling would have bought us considerable wiggle room in retirement, maybe allowed a vacation home, etc.

We have moved to a more trusted private FA. He charges 1% and has worked out well for a long time for our extended family, several of whom are relatively sophisticated business people and trust him. But, it galls me to pay someone almost $20,000/year to give us practically the same (maybe identical) advice he gives the rest of our extended family who have our approximate financial situation. Heck, for $20,000 a year, he ought to serve us breakfast in bed every weekend, and then some! He *is* all service, doing the minimal trading he'll suggest through our TD account, asking to see our wills, etc. But we don't need that much hand holding. We have our legal affairs in order. But, if he makes us just 1% a year more than we can do ourselves, or prevents our losing that much, he's worth it. But we also know that very few to no one beats the indexes regularly. He has suggested some instruments that are a bit more safe than the standards.

I don't feel up to learning how to make decisions on our investments, although I'm capable: strong technically, degreed in the science/tech world and could learn the ropes. Getting away from the previous manager was our highest priority. The new one is good for the time being. Perhaps after we retire next year we'll make a change.

Our question: other than totally self-management, are there FAs who for considerably less money (perhaps on an hourly basis) are hands-off but simply review our portfolio and make recommendations. Perhaps meeting once or twice a year and reviewing our status? Do such people exist? What caveats?

Clearly I’m not sophisticated in this arena.

My apologies if this is too long an introduction, or to broad or inappropriate in some way for this forum.

TIA,

[prudent_one]

Welcome!

First thing I would say is stop looking back at what might have been. You are in a great situation right now, no need to kick yourself any longer over what you could have done differently.

Second, you seem conflicted about paying an advisor. On one hand, you aren't comfortable handling it yourself right now, even while saying you don't need much hand-holding. And on the other hand you are unhappy about paying 1%.

Your fear is natural - none of us knows what might happen in the future. Would you be more at ease if you had a more conservative allocation? You didn't mention what it is currently.

You might be able to find an advisor who will charge an hourly fee to consult. You can research on NAPFA.org for fee-only advisors. But even those might be reluctant to set up an ongoing relationship where you pay for a handful of hours yearly when they really would like you to have your assets under management for +/- 1%.

We found one near us who gave us a thorough review and some general planning tips for a one-time $800 fee. 80% of what we were told simply confirmed our own analysis, the other 20% were suggestions I was not going to follow. (One was to move into a larger home right before retirement so our asset base was more diversified to include some real estate.) Did I get any blockbuster great ideas? No. But what I did get was an independent confirmation that our situation was in good shape, and that had a lot of value to me.

Perhaps you could start there. Find a fee-only advisor on NAPFA who will give you a solid analysis of your situation and some forecasts into retirement for around $1000. Maybe seeing those results will help you be more at ease.

[Rustic23]

Take a look at Scott Burns articles. He is a 'finance guru', MIT graduate, and his writings make since to me. https://assetbuilder.com/knowledge-c...rs/scott-burns

I use his advice for investing. A balanced portfolio, using index funds. I use only four! While I live more on pensions, I find his advice makes since. Can you make more, maybe, will an fee adviser make you more, maybe, or maybe not.

There have been several orther 'I'm scared' threads on hear. Common advice follows the line, "If you know your expenses, planned for emergencies, and FIRECALC says you are good to go, you are good to go"

Nothing anyone says here will take the un-easiness away. We had a paid off house, disposable income triple our core expenses based on SS and pensions. (most with COLA), full medical coverage, and enough in IRA's to cover an emergency budget. i.e. get rid of all the toys and just eat and keep the house warm. It was still a step to stop taking income, and kick back. It took about two years before I really began to realize this is going to work. Going on ten years now.

[HadEnuff]

Well, first of all, welcome. 2nd of all, I'm only a week or so ahead of you in introducing myself here as I only recently found this forum myself.

Are you saying that you plan on keeping your business running that is generating 80K/year, for a few more years? If so, I think that is a great idea if you are as nervous about retiring as you say you are. The fact that I or someone else might find your position enviable is not the point, the point is that YOU have misgivings, which are valid and sensible.

IF you were to ask me for any advice, I would advise you to become comfortable with managing your own money, or at least reading some available literature, stating with Bernstein's "The Four Pillars of Investing"...there are other recommendations as well if you browse these forums.
Don't beat yourself up about what you did or didn't do. You are in great shape and you didn't get there by being stupid.

I'm a little more than one foot out the door myself, and although every calculator I run gives me a 97% success rate, and all that, face it, it's still scary.
Good Luck! We'll make it.

[DrRoy]

I had a professional advisor at one of the big investment companies for 10 years. I did not have as bad an experience as you. What I saw was that sometimes his ideas were better than mine, and sometimes mine were better that his. It seemed to be just random, and that there was no point in paying someone 1% when in the end I did not feel that I was getting the benefit of it. I ended the relationship and now I self manage. I am big enough at Fidelity that I have a private advisor for free. He is no worse than the one I used to pay for and is available if I feel the need. He checks in from time to time as well. I also tried a second, private advisor on the side while with the first one. He had great analysis of the market, but the results of his investment picks were poor, so I fired him too. If you do not want to do it all yourself, you can go the CFP route. I found that among the few I located that would work for a flat fee, several told me that I did not really need it.

[Katiek]

Welcome, As everyone else has said, it's natural to feel worried, no matter how well prepared you are. It's a big change and change is hard, but you've put yourself in a good position for the future.

I don't have much advice to give you on a financial advisor, since I've never used one. But I do echo what others have said about not kicking yourself over the past. You may not have gotten the full run up that you might have, but you didn't lose money during that period either with wild investments.

I don't think learning to handle your own investments is that hard. Many here like a relatively hands off, simple portfolio of low cost index funds. Bogleheads forum has some great advice, especially for Vanguard investments. You may want to visit there if you haven't already done so.

[38Chevy454]

Welcome to the forum. As several said, don;t beat yourself up over the past, can't change that and TBH you are great shape from financial perspective anyway.

My advice would be read and educate yourself here on the board and you will be able to make the change to self-directed portfolio. No need for the FA once you have better educated yourself. I bet your FA does not spend more than 20 hours/year on you, so $1000/hr is not too bad of wages!! I am sure he would like to keep that going.

Go retire and have fun.

[steveark]

I just retired today, effective in two weeks. I'm 60. have about $3 million in savings and investments and own my paid for house in addition to that. Three paid for cars, no debt of any kind. Grown kids all existing without help from me. I also have lined up a contract part time two day a week job that will pay me $75,000 a year plus expenses doing the part of my former job that I like the most with none of the parts I dislike the most. I'm excited, but a little nervous since I have been in the same job and location for 38 years! Something nobody does anymore, except for me I guess. I started as an engineer and left as Vice President and General Manager and although I loved most every day of my career the last two years haven't been nearly as much fun. It stopped being my favorite hobby and I stopped needing additional money at almost exactly the same time and the solution became obvious. Go do something more fun and don't worry about money you don't need. So that's the plan. As far as FA's. I think I'll do the fee advice thing after I set up my own plan and then see how it gets critiqued. But I don't feel good about sharing one or two percent annually going forward just to have someone hold my hand. But that's just me. Good luck!

[MBAustin]

Welcome! I second the advice to read Burns and Bernstein - even if you stay with your FA, you'll be in a better place to make good decisions because ultimately they are your decisions, not the FA's.

What we have done is to have an independent FA manage a small proportion of our portfolio (just into 6 figures) and I DIY the rest (with help from the Vanguard Flagship rep). This generates enough of a fee for the FA that we get an hour phone call or meeting yearly to talk about what's going on in the markets, etc., plus he is familiar with the rest of our portfolio and if something happens to me, he has agreed to help DH on an hourly fee basis as he's not comfortable with all of the details. We are fortunate and frankly surprised that FA has never mentioned, much less pressured, us to take on more of our assets - we've been with him for about 6 years now.

I don't know how your current FA would react if you said you wanted to go DIY on 75% of your portfolio and have him continue with the rest.

[24601NoMore]

Hi, Tfine98. I can relate - we're very close to RE and equally "scared" / apprehensive.

Few people have the projected income stream you do, so you're in a very fortunate and good position from the sounds of it. It also looks like you will cover a big part of your expenses ($80K out of $90K) for at least a few years, and being 64 and 66 significantly reduces your healthcare insurance costs as your spouse is eligible for Medicare and you will be shortly - so, no $15K/year insurance premium costs to worry about.

Reading your post, I'm candidly thinking "why on earth WOULDN'T they RE - NOW?".

We're very close to pulling the trigger at 52 and 58. A bit more assets than you, but NO INCOME coming in post-retirement. Zero. Zip. Nodda. Not a drop aside from "interest" (at < 1%), dividends and investment gains. And, we are a heck of a lot further from Medicare and SS than you are.

At $1.8M, you can gen $72K yearly at 4%. That's an $18K delta from your expenses, and you have $1.8M in the bank. That's a HUNDRED YEARS of expenses covered (albeit, not counting inflation, but still..you're good).

I'd recommend building a spreadsheet that projects your investment returns, interest, dividends and "safe" money by year. I think you'll find that you are more than covered. You don't even need to take significant risk with the $1.8M to get 4% / 72K - just buy some direct bonds or Dividend stocks and don't worry about the day to day balance - as long as you can gen the interest income, you're covering 90%+ of your expenses AFTER the $80K/yr income dries up.

Us? 30+ years of retirement (hopefully) with ZERO income from businesses, pensions, etc is a much bigger concern..plus, neither of us is in great health (wife had a near fatal heart attack 2 years ago with 100% blockage in her LAD artery and I have my own issues to worry about and incur expense on..)

Also - check out Rick Ferri at Portfolio Solutions. I'm looking seriously at them even though I've been investing seriously for 30+ years and consider myself an above average investor. They charge ~.3% AUM and Rick is a very accomplished author / well known 'expert' from the Bogleheads community. (Check out his books on Amazon). I don't know them and can't vouch personally for the guy, but he does look to have a very fair product at .3% AUM.

While no-one knows all the detail that you do about your own finances, I think you are MORE than good to go.

[24601NoMore]

Adding to my last post..your yearly income from investments will of course depend on how much are comfortable putting into equities, FI, CDs, etc.

I'm personally "overly" conservative and tend to be way too heavy in cash. That lets me sleep better at night, but kills my overall returns (and reduces my yearly income).

[Hermit]

Welcome!

I had a DIY asset allocation and then had Vanguard do a financial plan for me. I didn't have a lot of my assets with Vanguard, so I paid something like $100 for their plan. I also had a free plan done by a friend that worked for Merrill Lynch. All the plans said close to the same thing in terms of asset allocation. Vanguard was quite specific both in my 401K and in the assets I had with Vanguard for a concise overall investment plan. That is the plan I have been using for the 2 1/2 years I have been retired and it is working for me. I may have Vanguard redo my plan in a few years with the thought of being a little more conservative. That's all the investment advice I need. I don't buy or sell based on the market, I just rebalance. It is really pretty simple.

[Backpacker]

We've been very blessed to find a local FA that charges by the hour. He is FIRE'd at 50+/- so he has definitely go the chops to prove his worth. He merely dabbles in the financial advising.


Keep searching - I am sure you can find one in your area that fits for you. You must be doing something right if you've amassed 1.8M.


Very scary indeed, we are about 2 years out and I flip from giddy with excitement to sick to my stomach with worry

[tfine98]

Thanks to everyone for your encouraging and supportive replies.

I'm beginning to relax a bit. And looking forward to only working in our small business rather than a FT salaried job too.

[Turn_the_Page]

The fee-only FA that I met with earlier in the year started with the 1% business sales pitch. I finally got him to agree to do a one-time workup for ~$800. Personally, I didn't need it, but it made the DW feel better. Point it, search around a bit and be sure and ask them if there are alternatives.

It can be a tough time. I'm pulling the trigger next year and I can relate.

Check out Bogleheads.org. The forum is great. Lots to read and you can get some good advice there. Check out the WIKI. You can even find model portfolios.

https://www.bogleheads.org/forum/index.php

https://www.bogleheads.org/

[Bir48die]

Quote:

Originally Posted by steveark I just retired today, effective in two weeks. I'm 60. have about $3 million in savings and investments and own my paid for house in addition to that. Three paid for cars, no debt of any kind. Grown kids all existing without help from me. I also have lined up a contract part time two day a week job that will pay me $75,000 a year plus expenses doing the part of my former job that I like the most with none of the parts I dislike the most. I'm excited, but a little nervous since I have been in the same job and location for 38 years! Something nobody does anymore, except for me I guess. I started as an engineer and left as Vice President and General Manager and although I loved most every day of my career the last two years haven't been nearly as much fun. It stopped being my favorite hobby and I stopped needing additional money at almost exactly the same time and the solution became obvious. Go do something more fun and don't worry about money you don't need. So that's the plan. As far as FA's. I think I'll do the fee advice thing after I set up my own plan and then see how it gets critiqued. But I don't feel good about sharing one or two percent annually going forward just to have someone hold my hand. But that's just me. Good luck!

I have a F/A on 40% of my portfolio. I do have an investment group that works on the other 40%. That piece is in a riskier pool. I'm 60 and out in three months. I'm petrified but excited. I'm a natural born worrier so that doesn't help things. However, I like many of you have rid myself of my debt. So, I do have this ability to go from $65k to 100k to cover basic and variable expenses. I think flexibility is key to having peace of mind.

[OrcasIslandBound]

What a great career and a great finish. Regarding the f/a, if you select a portfolio of something reasonably diversified, lots of choices, use index like investments with low fees and don't do anything silly like buy all tips or long term bonds or all stocks, you can skip the f/a. You'll discover later that they just have their own opinions and aren't right anymore than you are. They are just a waste of time and money.

Sent from my Nexus 4 using Early Retirement Forum mobile app