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LPL @ 1.25% or Dave Ramsey ELP/American Funds?
Old 02-06-2013, 11:05 PM   #1
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LPL @ 1.25% or Dave Ramsey ELP/American Funds?

Newbie here.

Nest egg:
$370K IRAs & $57 Nationwide annuity w/ LPL @ 1.5% yearly charge
$132K in American Funds 401K
$200 in (2) rental houses to be sold in next year or two

Found this website & decided the 1.5% LPL had to go. By the FIRE calculator, we can't live on less than a 4% yearly withdrawl of what will wind up as a ~ $1 million nest egg at retirement in 2015. To get to this, I have a few more income years & DH will have SS & we'll sell our residence, leaving us with a vacation home and RV lot & RV to use in retirement.

I know nothing about investing but enjoy Dave Ramsey on my daily drive so thought to contact his local investment ELP (endorsed local provider). The ELP,(Capital Choice) offers American Funds only. This sounded good to me as my American Funds 401K returned 14% last year. Vs. 10% for my LPL account & 7% for DH's more conservative LPL account. With the ELP's American Funds,
we pay 2% up front but then never again.

Since my LPL advisory fee is scheduled to be charged Feb 8, I called & had the LPL accounts converted to cash today with the plan to put it into the ELP's American Funds tomorrow. Of course, my LPL guy got wind & called & is willing to decrease to 1 1/4% and wants me to come in to discuss. Says being limited to American Funds isn't good. The ELP said fine, let me know
what you decide but says his advantage is saving the yearly advisory fee & putting it to work instead. We're budgeting to live on $60K /yr in retirement, shooting for 2015. DH will be 64 and able to draw ~ $1600 SS right away and I'll be 55 so not able to get SS for 7 years.

I know the Dave Ramsey ELP isn't Vangard or Fidelity but it seems like a step in the right direction. I'm a super busy veterinarian during snowbird season here in Arizona (typing this at midnight) but as soon as it slows down, I intend to spend some time here!

Advice is much appreciated.
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Old 02-07-2013, 02:35 AM   #2
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We're stuck with American Funds in DH's 403b, but don't have to pay the sales charge due to the volume his employer does with them. I was VERY happy when I got a new job (used to work for the same place) and could choose Fidelity funds instead. Sales charges are sales charges. They drag down performance. I like Dave Ramsey's philosophy but that whole ELP business seems like a bit of a pyramid scheme. If it were me, I'd cancel if you can and find some good low cost funds to invest in.

I rolled over my 403b from the American funds to an IRA and put it into a Vanguard target retirement fund. Been very happy with the performance. YMMV.
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Old 02-07-2013, 06:45 AM   #3
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In addition to advisor fees you also need to look at mutual fund expense ratios.

You don't really say what your AA is but if you want simple and effective I would move everything to Vanguard. Wellington had a sensible AA for most people and an expense ratio of 0.27% a year.

Compared to the 1.5% advisor fee you are currently paying and probably ~0.50% or more expense ration on American Funds you would be ahead by $4k a year.
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Old 02-07-2013, 01:29 PM   #4
Confused about dryer sheets
 
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Thank you so much lhamo and pb4uski, your input really helps. I know nothing and need to learn but your comments have given me a half-a$$ed plan And tho the ELP man comes across as a good guy, it does seem a bit pyramidy, lhamo.

So will leave everything with the LPL guy for now. Just put the first rental house up for sale, we'll invest the proceeds at Vanguard. Trial by fire, I'll just have to learn how to do it. I visited their website today, a target retirement fund fills the bill of simple and hopefully effective. Once I get the hang of it, I'll transfer everything from LPL.

Thanks again and I hope / need to spend many hours here over the next 2 years!
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Old 02-07-2013, 01:49 PM   #5
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Why not start with this book
The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns (Little Books. Big Profits): John C. Bogle: 9780470102107: Amazon.com: Books

And look around the site - there is a thread someplace with a reading list.
All the best.
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Old 02-07-2013, 01:57 PM   #6
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You can find my opinion of American Funds (and their loads) in this thread.

WWYD- Husbands craptastic 401k plan

As you roll money out of the rental houses, etc... Consider investing in low expense ratio index funds at Vanguard, Schwab, or Fidelity. Paying a 1.5% fee to a financial manager means the funds need to perform 1.5% better than the market overall to justify. And paying loads means you have to recover the up front fees (loads) before you even break even.

While you're still employed, you have to keep the 401k/American Funds. But roll them out when you retire, (trustee to trustee transfer to a self directed IRA.) The folks at Schwab, Vanguard, Fidelity (you pick) can help you with the process.
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Old 02-07-2013, 02:50 PM   #7
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Yumadons,
Welcome to the board.
It looks like you are comparing two poor options: Paying an ongoing 1 1/4% fee to your FA plus the expenses on his funds OR pay another advisor through his own high-fee American funds and a 2% load.

It appears that you realize these are both poor ideas. The best approach is to do it yourself with low-cost funds if you have the ability to do so. It's not hard, but it sounds like it might take more time than you think you can devote to it now.

Given those two options I'd stick with your present advisor, but the sooner you do this yourself the better off you'll be. When you retire that 1.25% annual fee to your advisor represents a reduction of your annual spending money of 31% (you need to pay all advisor fees, taxes, etc out of that 4% you'll be withdrawing. Your friendly FA will be getting 31% of your withdrawals). You guys can't afford that. And this same loss of capital is occurring right now.
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Old 02-07-2013, 04:01 PM   #8
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For grins and giggles years ago I made an appointment with one of Dave Ramsey's ELP who spent a fair amount of time with me. I provided the investment information and discussed my retirement plans with him. At that time I was managing my own investments directly with each mutual fund company individually (I didn't know there was any other way at the time). Business and investing is not my background so I was trying to be as cautious as possible by investing in companies like Vanguard and TRPrice and studying posts here and at Morningstar. I don't like paying someone to do a job I can handle with a little common sense and some trusted guidance. I also don't like paying to buy into a fund (loads) or pay high annual fees when other quality options are available.

On a followup meeting the ELP presented me with a very nice bound book that included charts on how my investments were doing and also his investment recommendations. He didn't have much to add or change and confirmed that I probably didn't need his help but he was glad to be of service if I was interested. I thought that was refreshing (but then maybe I'm a little naive too. I don't know).

Because I didn't want to switch my investments to loaded funds I compared his fund recommendations to Vanguard and TRP funds (Fidelity would have been good too) for something similar that was no-load. I also bounced questions on a couple of forums for additional input.

Never did use the ELP but I appreciated the nice book, the additional education in investing, the potential investment funds with which to compare, and an investment plan to study.

The best place I have found to guide me in developing my retirement investment plan has been through the good folks here. My knowledge is still limited and I don't always understand the more complex posts (still being a bear with little brain) but they have either directly or indirectly helped me gain FI on a modest income.

Cheers!
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Old 02-07-2013, 09:35 PM   #9
Confused about dryer sheets
 
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Quote:
Originally Posted by walkinwood View Post
Why not start with this book
[The Little Book of Common Sense Investing: Amazon.com: Books[/url]

And look around the site - there is a thread someplace with a reading list.
All the best.
Cool, thank you Walkinwood. Just ordered it with an Amazon gift certificate that needed using up. I went to the Bogle site the day I found this one but got sidetracked in the Forums. This should condense it down & then back to the site
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Old 02-07-2013, 10:53 PM   #10
Confused about dryer sheets
 
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Quote:
Originally Posted by rodi[url
http://www.early-retirement.org/forums/f28/wwyd-husbands-craptastic-401k-plan-63390.html[/url]

As you roll money out of the rental houses, etc... Consider investing in low expense ratio index funds . . . The folks at Schwab, Vanguard, Fidelity (you pick) can help you with the process.
Craptastic, craptacular, read the whole thread. I was just glad for a tax free place to stick $22K no - match when a corporation bought the clinic in 2006. Before that, our only break was a whopping $6K each in IRAS & DH's 401K. Will read about index funds, thanks
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Old 02-07-2013, 11:08 PM   #11
Confused about dryer sheets
 
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Originally Posted by samclem View Post
Yumadons,
Welcome to the board.
It looks like you are comparing two poor options: Paying an ongoing 1 1/4% fee to your FA plus the expenses on his funds OR pay another advisor through his own high-fee American funds and a 2% load.

It appears that you realize these are both poor ideas. The best approach is to do it yourself with low-cost funds if you have the ability to do so. It's not hard, but it sounds like it might take more time than you think you can devote to it now.

Given those two options I'd stick with your present advisor, but the sooner you do this yourself the better off you'll be. When you retire that 1.25% annual fee to your advisor represents a reduction of your annual spending money of 31% (you need to pay all advisor fees, taxes, etc out of that 4%
you'll be withdrawing. Your friendly FA will be getting 31% of your withdrawals). You guys can't afford that. And this same loss of capital is occurring right now.
Yup. Thanks for the welcome & spot-on advice samclem. We thought we were being such good doobies the past 20+ years by having a FA & saving while everyone else was spending. Better than a sharp stick in the eye but too bad neither of us was financially inclined. Now for the next 20 years . . .
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Old 02-07-2013, 11:25 PM   #12
Confused about dryer sheets
 
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Quote:
Originally Posted by Badger View Post
The best place I have found to guide me in developing my retirement investment plan has been through the good folks here. My knowledge is still limited and I don't always understand the more complex posts (still being a bear with little brain) but they have either directly or indirectly helped me gain FI on a modest income.

Cheers!
Indeed Badger. I plan to put down the crazyguyonabike site & substitute this one for a while. Will even economize by forgoing this summer's Natchez Trace to Key West ride & slumming on Hilton Head in our already-paid-for RV & lot instead
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Follow-up: LPL @ 1.25% or Dave Ramsey ELP / American Funds
Old 02-26-2013, 10:08 PM   #13
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Follow-up: LPL @ 1.25% or Dave Ramsey ELP / American Funds

Just a follow-up and BIG thanks to all here whose suggestions got our ship turned around in time. Walkinwood, we both read "The Little Book of Common Sense Investing." Samclem, you stopped us from going into American Funds with 2% load. Pb4uski, we moved the IRAs to Vanguard yesterday! Also signed a contract on our first house sale (MLS listing Sunday, contract Monday!).

We've got a week or two now til our Vanguard phone appointment to decide where to put it. Need to do more reading here and will rely on their questionnaire & "free advice session" for bringing >$100K, but probably 3-fund portfolios. Not as daunting as it seemed mere weeks ago. Friends with Vanguard & T Rowe Price also convinced us that we're "good enough, smart enough, and doggone it . . . "
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Old 02-27-2013, 07:36 AM   #14
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Yup.............

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