Advisor said I may run out of money

[Symplelife]

I met with a financial advisor who told me that unless I work full time until I'm 64 I will run out of money by the time I'm 85 (I'm 57 now). He also wanted me to roll all my money into funds with his company as well as keeping my annuity with them. My question is - I understand that inflation will eat up some if what I make from the combination of the annuity and SS (which I plan to take both at 65) , but is it possible to just "run out of money"? Also, how wise is it to have all your money tied up with one company? Should I diversify with several companies and also look into tax exempt funds to help reduce costs when I do retire? I would like to stop working this year and work part-time (realistically making half of what I do now) and not fund the annuity.

 

[LARS]

The short answer is, of course, you can run out of money. Will you? Without some numbers like investable assets, pensions, ball park expenses it is impossible to give you any advice.


Sent from my iPad using Early Retirement Forum

 

[SteveNU]

Have you run your numbers through firecalc?

http://www.firecalc.com


Sent from my Nexus 7 using Early Retirement Forum mobile app

 

[photoguy]

He also wanted me to roll all my money into funds with his company as well as keeping my annuity with them.

Of course he did.

Running out of money is a real concern, but you need to get an unbiased perspective preferably by going through the exercises yourself. Second best would be to find an independent advisor who isn't selling anything (may be hard to find).

 

[pjm-7]

What kind of numbers did the advisor run for your expenses? If you can work part-time and cover your expenses, the advisor's numbers may be out of line. Many advisor programs state that you need 70-90% of your income in retirement. I know from my own experience I live on about 30% of my pre-retirement income.

 

[YVRRocketSurgery]

My questions:
Is the OP's adviser a fiduciary?
How detailed of an understanding does the OP have on their cash flow? What's potentially coming in and what's going out. This is kind of step 1 IMO.

 

[Gumby]

I met with a financial advisor who told me that unless I work full time until I'm 64 I will run out of money by the time I'm 85 (I'm 57 now). He also wanted me to roll all my money into funds with his company as well as keeping my annuity with them. My question is - I understand that inflation will eat up some if what I make from the combination of the annuity and SS (which I plan to take both at 65) , but is it possible to just "run out of money"? Also, how wise is it to have all your money tied up with one company? Should I diversify with several companies and also look into tax exempt funds to help reduce costs when I do retire? I would like to stop working this year and work part-time (realistically making half of what I do now) and not fund the annuity.

Before I did anything, I would want to see exactly the calculations performed and assumptions made that show me "running out of money". Then I would want to understand in detail why those calculations and assumptions are correct (or not). Then I would run my own model and compare the answers.

 

[Rustic23]

If you are seriously seeking some feedback, you are going to have to come forth with more data. i.e. What does Firecalc say? What are your expenses? How much do you have in savings? How is it allocated? Do you or wife have pensions? How much of your expenses will SS cover? What are you retirement spending plans? How do you plan on handling medical? How much of your retirement funds are COLA'd, if any. I might have left our some, but you should get the jest of it. You can't expect any meaningful advice without providing the data that one would base it on.

 

[MRG]

OP,

You said FA, unless he's working for you(fiduciary) he's working for someone else. If that's true he cares only about how much of your money he can make his. Post some details of what types of investments he had you in(symbols, annuity name...) and you will get lots of ideas on how to make the most of your money.

 

[Symplelife]

Expenses were at 90% Factored 20% tax bracket and 2% inflation. The advisor was a fiduciary.

 

[Symplelife]

I would have the annuity paying about $2400 per month @ 65. SS = $1500. Expenses would be mortgage and utilities $1600 per month, food $600 per month. Health insurance is an unknown - currently about $500. Savings would be around $175,000.

 

[Bflotomny]

My questions are: what is running out of money...assuming you have SS that doesn't end. And exactly how much money will your life style require at 85y/o and beyond. Assuming the mortgage #1 is paid off, mortgage #2 (on the summer home) is paid off. How many cars will you need at +85y/o. How many will you be able to drive. If you had the kids at 20y/o their 65y/o they don't need your help. Fixing up the house...what the he## for so the new owners can remodel to their taste. So I ask again: What is running out of money mean?
The wall street sharks would have us believe that we need 10 times or 100 times our last pay check at 85 so they can play with your money when your in the retirement home eating green Jello

 

[Symplelife]

Plan is to have mortgage paid off by 65 so the expense would be lowered by $1000. He kept that figure in though for his calculations. Also wondering if I should look at tax deferred mutual funds for the $175,000 in savings.

 

[rayinpenn]

The good news if you and several others follow your advisors advice He Will Never Run Out
Of Money...

My first rule...
Never use an advisor who tries to sell you something

My second rule
Always follow rule #1



Sent from my iPad using Early Retirement Forum

 

[CaliKid]

Lot of focus on the financial advisor here. Seems like a much more important topic would be 1) how much the OP has and 2) how much the OP spends? Avoiding all the advisor costs in the world won't help if a person simply doesn't have enough money to support their lifestyle.

 

[Katiek]

I would recommend carefully tracking expenses for at least a full year to get a realistic estimate of expenses. You list some, but what about transportation, property taxes, repairs, personal items etc. Make sure you have a realistic understanding of how much your life costs, and how those categories may change in retirement. Then you can compare it to your reliable monthly income including a safe withdrawal rate from savings.

But as others have said, I'd be careful about purchasing any investments proposed by any advisor who can make money based on your purchase decisions, including any funds with "loads" or other annuities. Come back and check here with anything he proposes and you'll get some feedback with people who don't have a financial interest in the decision.

 

[robnplunder]

Like others have said, go to firecalc.com and do some number crunching. Likely (and hopefully), your adviser was wrong. Annuity + SS + house paid off + etc tells me that you may be ok.

 

[Sunset]

OP - Do you consider yourself knowledgeable about finances ?
From what you ask, I think you should spend lots of time at the library borrowing books on how to invest, and NOT do anything with the FA until then.
I say this probably not to be "mean" but a couple of things stand out in your questions:
- "as well as keeping my annuity with them" -> Please explain did you buy an annuity from them or are you paying into what will be an annuity, or was the FA wanting to sell you an annuity.

- "wondering if I should look at tax deferred mutual funds for the $175,000 in savings. " -> This suggests to me you have not been saving for retirement and don't have one of (Roth, IRA, 401K) , Please let us know if you have these or one of them.
It also suggests to me you don't know how tax deferred funds are used, and the limits per year to investing in them.

 

[donheff]

Well, your advisor can't help you much since about 85% your funds for living are coming from an annuity and SS. Even if he or she could beat the market by some marginal amount, that won't turn $175K into $1M while you are withdrawing. You can pretty much set aside the income from your savings for emergencies and long term care. You need to figure out whether you can live on your annuity and SS. Is the annuity COLAd? That will make a big difference. Start looking at expenses and what you can do to lower them.

 

[pb4uski]

Expenses were at 90% Factored 20% tax bracket and 2% inflation. The advisor was a fiduciary.

What does expenses at 90% mean? 90% of your gross or 90% of your take-home? In any event, using a % of your income is a poor way to do it unless you live from paycheck to paycheck... in which case your take home pay less any savings you do from your take home pay might be a reasonable approximation.

There is no 20% tax bracket. At the level of income implicit in your post your taxes should be minimal... certainly much lower than 20%. I'm guessing ~9% effective rate for federal income tax based on the info you provided plus state depending on where you live. You can get a good idea through the income tax calculator at tax-rates.org. Your advisor should know 20% is too high but if he doesn't then fire him. The lower tax assumption should make a big difference.

 

[ERD50]

OP - Do you consider yourself knowledgeable about finances ?
From what you ask, I think you should spend lots of time at the library borrowing books on how to invest, and NOT do anything with the FA until then.
I say this probably not to be "mean" but a couple of things stand out in your questions:
- "as well as keeping my annuity with them" -> Please explain did you buy an annuity from them or are you paying into what will be an annuity, or was the FA wanting to sell you an annuity.

- "wondering if I should look at tax deferred mutual funds for the $175,000 in savings. " -> This suggests to me you have not been saving for retirement and don't have one of (Roth, IRA, 401K) , Please let us know if you have these or one of them.
It also suggests to me you don't know how tax deferred funds are used, and the limits per year to investing in them.

Very good, but I disagree with one part - the OP should not need to "spend lots of time at the library borrowing books on how to invest".

Answering a few of the questions that members here have asked, and reviewing those numbers with a FIRECalc run should take minutes, and a few extra minutes for the explanations. Based on that a reasonable AA can be determined, a few index funds and that part is set.

-ERD50

 

[ivinsfan]

OP come on back a give some more info, as to your original question, Yes of course it's possible to "just run out of money" to meet your monthly expenses.

 

[Big_Hitter]

what kind of stochastic model does your FA use? mine has a pretty robust model

 

[jkern]

I would have the annuity paying about $2400 per month @ 65. SS = $1500. Expenses would be mortgage and utilities $1600 per month, food $600 per month. Health insurance is an unknown - currently about $500. Savings would be around $175,000.

You have left out several expenses for a typical budget.

* Property taxes
* Home insurance
* Transportation (insurance, maintenance, gas, registration)
* Medical/Dental
* Home Maintenance
* Entertainment, recreation and travel
* Gifts
* Clothes
* Replacement (cars, appliances, furniture, tv, computer, roof, etc.)
* Special events such as a child's wedding
* Buying stuff (are you planning to never buy a non necessity?)

 

[HadEnuff]

OP, don't be in a hurry to turn over your money to your FA. It will almost certainly set you back on commissions and fees, which sounds like just the opposite of what you need right now. Don't be in a hurry to dismiss what he says, or to dismiss him. He may be right about the most important point:running out of money, or being strapped in your 70s. Face it, if you "run out of money" at 85, your late 70s and early 80s are going to be no picnic.

so....
Do you have access to a detailed analysis of your lifestyle expenses for the past few years, and some idea of how they will be impacted by your retirement plans?

Use FireCalc, or some calculator(s) to make your own assessment

and of course, this link:http://www.early-retirement.org/for...-answer-before-asking-can-i-retire-69999.html

lots of very smart people here to help you figure this out.