The Unspoken Reality

The problem with your question is not what we spend, but what we 'need' to spend....

I 'look' at my portfolio more than I need... it is quick and painless to do it while I search on the net... but I do not do that much... I can go 6 months without doing a thing except look which I could not do and no problem..

I do not keep track of spending (except I actually did do this at work the other day when I was bored)... I do not keep track of my 'gain' except what Vanguard and my 401(k) tells me...

I actually spend more time on my friends and family's portfolios as they ask me what to do....
 
Learning about investing is a different story. When I finally woke up and took charge of my financial affairs, I spent a fair amount of time for about five years--maybe an average of 5 hours a week--educating myself. After I found out how simple it was (asset allocation and slice-and-dice with no-load index mutual funds and rebalance once every year or two), I set it up and didn't mess with it anymore. Like I said, 15 minutes every year or two to do the essential stuff. I still read about investment as I find it very interesting, but basically only for amusement.

The basics are simple. Anyone who tells you otherwise is playing you for a sucker, and as PT Barnum was alleged to say, it is immoral to let a sucker keep his money.

In that vein, have you heard about my Faith-Based Investment services? Give your money to me and PRAY you get it back.
 
Since you asked, the more money I have, the more comfortable I am handling all details on my own.

You have to understand why inflation risk is more important than investment risk and find out what your comfort with paper losses is. Or put another way, what are you REALLY afraid of? Remember, it isn't a loss until you sell it. Buy income streams cheap and let the day-by-day 'value' go up and down. Remember, there were only 3 ten-year-in-a-row periods in the last 100 years where 'the market' (historical equivalent to the S&P 500) was 'underwater'--and it was still producing dividends all that time. If ten years in a row scares you, diversify to include small caps, value stocks, and 50/50 US/foreign for equities and 60/40 equities/fixed income assets (bonds, or rather bond funds). All this will reduce the number of years it takes to recover from a down market--or a crash.
 
Target retirement funds, and/or Lifestyle funds, may make sense for you if you do not have the inclination or perhaps abilities to spend the time managing things. They are "simple" and they make things simple", and you sound like a candidate fior the KISS school of personal finance management.

Go with a low cost provider such as T Rowe Price or Vanguard. That way you get professional management at substantially less than 1% fee. Once set up with such fund or funds, they would also ease things for a surviving spouse should something happen to you (if you are married).

I myself manage my own affairs, and I enjoy it. Spend perhaps 5-10 hours a month directly at most.

As a matter of course, I am always reading investment/personal finance/retirement publications and websites anyway, as I enjoy such. These hours would be in addition to the 5-10 hours mentioned above, as would annual tax preparation.

Recommended Reading:
Vanguard's newsletters
Money Magazine
Kiplinger's Magazine
The Battle for Investment Survival, book by Loeb
Anything you can find on the subject of "Asset Allocation"
 
Ed_The_Gypsy said:
Remember, it isn't a loss until you sell it.
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Sorry Ed... but very bad advice and is just not true... it is a LOSS, just not a recognized loss...

An example.... you have bought $1 million of stock... and it has dropped to $500K.... go to the bank and say "I want to put up my $1 million of stock as collateral on a $1 million loan"... you have not sold it, so it is not a 'loss', so they should be willing to do it.... but hey, they look and say 'your stock is only WORTH $500K, so that is all we are willing to do'...
 
I guess this calls for a revisit of the 5 year rate of returns thread. Unless someone sold the securities, nobody has made any money at all, ever...
 
I own a minimal set of funds, and spend less than 2 hrs/month actually managing them. I certainly wouldn't pay money to an advisor.
 
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TromboneAl said:
....... but I can't remember where I was. I think 2007 was 58%.
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I heard a great chat up line the other day .....

Hi there, I've just taken an experimental drug to improve my memory. Tell me, "Do I come here often?"
 
cute fuzzy bunny said:
I guess this calls for a revisit of the 5 year rate of returns thread. Unless someone sold the securities, nobody has made any money at all, ever...
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When I compute returns, I alway use current market value for current and period market value for prior periods.

Is this common practice (i.e. in computing 5-year returns)?
 
If you rebalance more than once a year, you probably need to get a life.

To me it's a big headache. The biggest problem I have is trying to determine what assets some of these funds actually have. If all you care about is maintaining a certain % stock-to-bonds, then it's easy, particularly if you put your money in basic index funds like many on this board. But as soon as you start getting a little creative with where you put the money, it can get pretty confusing, i.e. domestic vs foreign in pure stock funds; domestic stock vs foreign stock vs bonds vs cash in a balanced fund. And if you have a pension, will you consider it like a bond fund or cash.

You can pay someone 1% to do it for you, but how do you know if they're doing a good job of AA, their additional cost nowithstanding? Going through all this more than once a year would make me suicidal. :duh:
 
Last month I was dragged to a series of 3 financial seminars that ended up with a "personal" evaluation session where the planner did his best to tell us why we desperately needed his services. While it was interesting and I did learn a few small things at the seminars, they were essentially for folks in their 30's with many years to go, not the near retirement group that was there. I could never get him to actually explain what would be delivered for the 1% fee of managed money.

I didn't think to say that would be 25% of what we planned to withdraw each year, but that would have been a great line. All I could get were vague inferences to help with life insuarance planning (that I did question - why would two people in their 60s with grown and gone children need life insurance??) and estate planning. As to the 401(K)s, he said they would roll them all to IRAs at ING and make sure they were fully diversified. Basically we should not worry our little heads as they would take care of everything.

Funny thing is that I thought we had been doing that for the past 25 years or so fairly well. Unfortunately, my wife is fearful that she would nto be able to handle it alone, so I guess she will get scammed once I am gone. She would not even let me ask the perennial question - if you are so good at what you do, why are you still here doing it and not on your yacht? A rephrasing of the quote "Where are all the customer's yachts??"

So, no, I don't think we will be taking on a financial planner anytime soon.
 
restonham said:
Last month I was dragged to a series of 3 financial seminars that ended up with a "personal" evaluation session where the planner did his best to tell us why we desperately needed his services. While it was interesting and I did learn a few small things at the seminars, they were essentially for folks in their 30's with many years to go, not the near retirement group that was there. I could never get him to actually explain what would be delivered for the 1% fee of managed money.
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Sounds like an insurance guy, not an advisor.

All I could get were vague inferences to help with life insuarance planning (that I did question - why would two people in their 60s with grown and gone children need life insurance??) and estate planning.
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Well maybe he was referring to LTC. If you don't have a large estate, you probably don't need a lot of life insurance as a wealth transfer tool........

As to the 401(K)s, he said they would roll them all to IRAs at ING and make sure they were fully diversified. Basically we should not worry our little heads as they would take care of everything.
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he would make more than 1% doing that..........;)

Funny thing is that I thought we had been doing that for the past 25 years or so fairly well. Unfortunately, my wife is fearful that she would nto be able to handle it alone, so I guess she will get scammed once I am gone.
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Why not teach her while you are alive?

She would not even let me ask the perennial question - if you are so good at what you do, why are you still here doing it and not on your yacht? A rephrasing of the quote "Where are all the customer's yachts??"
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Would you really want an advisor that has a yacht? Where do you think said advisor got the money to get a yacht?? :D
 
QT said:
No one seems to ever discuss how much work it is or how much time it takes to keep track of and manage their investments leading up to and while in retirement.

Can you please comment on how much time per month you spend on research, tax angling, monitoring, bookkeeping, rebalancing, etc?
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I spend anywhere from 5 minutes to 2 hours per day on ER planning and money management, depending on what I want to do. Every morning I begin this while drinking my first cup of coffee. This is part of my day that I look forward to - - it gets me out of bed in the morning.

I suppose that I COULD just ignore it all and work the rest of my life, but why? I have a plan, and it gives me great joy to see it slowly falling into place, just as planned. That is what I am doing each morning, pretty much. If there are bumps in the road, or if I feel that it's time to reassess, then sometimes I want to stay up late at night and tweak my plan.

I don't think people can fully realize their potential unless they seize control of their lives and make it happen. It is also a lot of fun! Nobody is as interested in my financial well-being as I am.
 
Taking your question as sincere, I think you would benefit from educating yourself. For me, the more I learned, the easier it got.

I like Solin's book. You can easily get by with 3 or 4 index funds, rebalance them every year or two, and ignore them in between. Your results longterm will probably be similar to those of a good advisor. Tax consequences are not that complicated for most, and any good book can set you straight.

A fee of 1.5% of your nest egg is 38% of your annual income in many retirement scenarios. You have to decide if that is a good investment for you.
 
Rich_in_Tampa said:
A fee of 1.5% of your nest egg is 38% of your annual income in many retirement scenarios. You have to decide if that is a good investment for you.
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Gee Rich, that tiny little management fee sounds pretty harsh when you put it that way.
 
tightasadrum said:
Gee Rich, that tiny little management fee sounds pretty harsh when you put it that way.
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OK, how about this: that 1.5% leaves a whopping 98.5% of your nest egg intact to grow again the next year. ;)

But seriously, folks, it is amazing how your perspective changes as you approach the decumulation phase.
 
restonham said:
. All I could get were vague inferences to help with life insuarance planning (that I did question - why would two people in their 60s with grown and gone children need life insurance??)
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We expect to continue to have life insurance in our 60's to enable me to maximize my pension. I read about this option some while back and took out life insurance 7 years ago at age 48 while it was still affordable based on my expected final salary pension options at age 55. I can get a larger pension if I opt for a 25% survivor benefit as opposed to 50%. Since this difference ($8K/yr) is much larger than DW taking out a $500K insurance policy then this is what we have done. Assuming I snuff it first she will get 25% of my pension plus $500K lump sum.

So far so good. It is a variable insurance with me selecting the funds it is invested in (100% stock funds). We have paid in $35,427 to date and its cash value is $26,636 so it has cost us $1,256/yr for $500K insurance to date. The funds have performed very well so we'll be sticking with it I think.
 
Thanks!

Thanks for all the good info. We've already logged onto Bogleheads and are thinking hard about the 1% fee issue. Sounds like it 's really not much work to do it myself, and I'm especially glad to hear that qualified funds (IRAS, 401Ks) don't need to have their cost basis tracked or archived, since that's a huge chunk of my savings and investments.

Also, contrary to the few posters who are very suspicious about me being a "troll", it just isn't true. I have nothing to sell or gain out of this except to make good decisions and keep more assets in my pocket for retirement. So for all of you who are less quick to jump to erroneous conclusions, thank you very much.

QT

coolsmiley.gif
 
QT said:
Thanks for all the good info. We've already logged onto Bogleheads and are thinking hard about the 1% fee issue. Sounds like it 's really not much work to do it myself, and I'm especially glad to hear that qualified funds (IRAS, 401Ks) don't need to have their cost basis tracked or archived, since that's a huge chunk of my savings and investments.

Also, contrary to the few posters who are very suspicious about me being a "troll", it just isn't true. I have nothing to sell or gain out of this except to make good decisions and keep more assets in my pocket for retirement. So for all of you who are less quick to jump to erroneous conclusions, thank you very much.

QT

coolsmiley.gif
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Why do you think it costs 1% a year??
 
Alan said:
We expect to continue to have life insurance in our 60's to enable me to maximize my pension. I read about this option some while back and took out life insurance 7 years ago at age 48 while it was still affordable based on my expected final salary pension options at age 55. I can get a larger pension if I opt for a 25% survivor benefit as opposed to 50%. Since this difference ($8K/yr) is much larger than DW taking out a $500K insurance policy then this is what we have done. Assuming I snuff it first she will get 25% of my pension plus $500K lump sum.

So far so good. It is a variable insurance with me selecting the funds it is invested in (100% stock funds). We have paid in $35,427 to date and its cash value is $26,636 so it has cost us $1,256/yr for $500K insurance to date. The funds have performed very well so we'll be sticking with it I think.
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I understand completely. I did not provide enough info to explain that I am not saying that life insurance is unnecessary, but that in our specific case, I thought the financial advisor was off base. We did about the same thing you did. I picked up a 20 year term policy at 50, also when rates were quite reasonable, with the expectation that I would not need insurance after 70 as our assets and pension would be large enough. As a retired Fed, the reduction for the full 55% survivior benefit for my wife is 9% of my pension. After looking at the numbers, it makes a lot more sense for me to keep it that way rather than drop the 55% to 25% and save about 4.5%. The big thing for us is that Fed pensions are inflation protected (like SS). Assuming she will live 20 years or so after I shuffle off, there is no way an insurance policy could make up the difference. I guess you have whole variable life rather than term, as renewing a term policy at 70 would be prohibitively expensive.
 
QT- The way your original post is phrased, it sounds as if you are offering your services. That's why people are being harsh about it.

When I read your latest post, it now sounds as if someone else has offered to do this for you for 1% (I'm assuming 1% assets under management). If so - RUN AWAY- RUN AWAY. This fee is far in excess of what should be reasonable. For example, if you had $1million in assets, you would pay this person $10,000. For what? With a Vanguard Target Retirement fund, and a CPA to do your taxes, you would pay probably less than $2500 a year. Is it really worth $7500 a year to have someone staple reports together and put them in a filing cabinet? Because that's the only other thing this person would do.
 
QT said:
No one seems to ever discuss how much work it is or how much time it takes to keep track of and manage their investments leading up to and while in retirement.

Can you please comment on how much time per month you spend on research, tax angling, monitoring, bookkeeping, rebalancing, etc?

What books, websites, or software helps you understand and deal with these chores? Do they seem like chores, or is it easy once a methodology is established?

Would you pay a 1% (or less) fee to have someone else (competent, professional, and in your corner) deal with all this stuff?

Does it feel like the more money you have, the less comfortable you are with handling these details?

Thanks for your thoughts!

4 years and counting down!!

QT
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The first time a person does something, there is a learning curve. But if a structure is in place, when the same thing is done a second time, the actions might take less than 10 minutes.

Examples-
ex1:
I have spent hours, probably more than 1000 over the last 10 years on portfolio construction and asset allocation. Learning how to pick mutual funds for example.

My IRA is around 6 years old. Much time was spent at that time picking the funds and learning the amounts to send to each to get started.

Now I have a strict asset allocation I follow. I have a watch list of funds and criteria to choose funds. I did a rollover about 2 months ago. It took me longer to fill out the paperwork (2 hours) than it did to choose the funds (30 minutes).

ex2:
I took me 3 days this year to learn how to calculate the IRR of my portfolio. I plugged numbers in a spreadsheet, checked them, realized errors (or interpretations) made adjustments and kept going.

next year the same calculations will take me minutes. It will take longer to get the end of year amounts from 2 different 401ks, 2 different roths and 2 different rollovers than it will to actually calculate. The spreadsheet will give me the numbers needed once the last cell is entered (seconds).
 
A854321 said:
Is it really worth $7500 a year to have someone staple reports together and put them in a filing cabinet? Because that's the only other thing this person would do.
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Are you speaking from experience, knowledge, or opinion?
 
restonham said:
I I guess you have whole variable life rather than term, as renewing a term policy at 70 would be prohibitively expensive.
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Correct. Taking out whole variable life was a big decsion but so far it has been doing just great.
 
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