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Old 11-29-2015, 11:01 AM   #21
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Originally Posted by mystang52 View Post
Maybe you need a CPA instead. You've apparently done well to get where you are without a CFP, but now your concern seems more tax-related.
+1

The political, accounting and legal pro's have truly managed to make taxes complicated enough (in order to create jobs/work for themselves) that an amateur might spend enough time learning the stuff that paying the CPA looks like a good value.

I used to get pro help with taxes. Then, 20 yrs or so ago started doing them myself and became more entrenched with doing them myself with the advent of computerized tax packages. Recently, I've been looking at going back to a CPA. I really dislike doing taxes and I'm not sure how much true understanding of what's going on I continue to have as filling in the blanks in TurboTax is different than really understanding the tax code.

So, for me, CFA = no. CPA = starting to think about using one again.
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Old 11-29-2015, 11:04 AM   #22
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Thanks all. I've been hesitant to use anyone in past. But with pretty sizable 401k's and cash payout from pension I'm looking to get advice on how to best structure all the investments for taxes and income stream. From what I've researched I think I'm going to want to rollover the 401k's to IRA and then have RMD established. Setting up income from then before tax portfolio and then also tapping our other investments for after tax money (except any capital gains we may generate from sales). I want to do it smart as its only one time opportunity to get it right. ...
What you are looking to do is quite easy to DIY with a little research and thinking. This forum is a good sounding board for issues.

If your 401ks have a good stable value fund or some good investment alternatives that have low expense ratios then you may want to leave some money there. This link is a good primer on tax-efficient placement, but generally you want low efficiency assets like bonds in tax-deferred account and tax-efficient assets like equities in taxable accounts. RMDs don't apply until after you are 70 1/2 unless you have inherited the IRAs.

If you don't want to DIY it seems to me you just need to fee-based CFP or a CPA with a Personal Financial Services ("PFS") designation to help you set up a plan and get things properly positioned and then just work the plan from there and revisit every few years. If you have money at Vanguard, I used their financial planning service (which was free to me) and between that an the good resources here that was enough for me.
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Old 11-29-2015, 11:18 AM   #23
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Originally Posted by bobandsherry View Post
Thanks all. I've been hesitant to use anyone in past. But with pretty sizable 401k's and cash payout from pension I'm looking to get advice on how to best structure all the investments for taxes and income stream. From what I've researched I think I'm going to want to rollover the 401k's to IRA and then have RMD established. Setting up income from then before tax portfolio and then also tapping our other investments for after tax money (except any capital gains we may generate from sales). I want to do it smart as its only one time opportunity to get it right.

I'm trying to get as much DIY knowledge as possible to keep more money in my pocket. But also see benefit if paying someone keeps even more money in my pocket. After working so long to build this I'd hate to give too much to Uncle Sam or a CFP.
Before this thread hits a hundred posts, you will have enough good advice to stay with DIY. For example, having access to stable value fund is not something to give up unless you are forced to.

You need a good plan, but can get that without paying monthly fees to a salesman.
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Old 11-29-2015, 11:28 AM   #24
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I would approach it like any other hire. They are working for you. First ask your friends and acquaintances who they use and whether they are happy. Then approach one or two of them and ask them questions that satisfy you that they are a good choice. Be careful not to be sucked in by their "story". It is results that count.

(How they get paid should not be an issue. Of course, you will need to know any fees you are expected to pay.)
I don't think this is practical. Of the people I know, none are qualified (or take the time) to know if they are getting good advice. They only know if they feel good about it, which is a terrible metric. As far as "results", it would take decades to know if a particular FA or stock-picker were getting results better than indexes (on a risk-adjusted basis), and if it were due to chance.

I think the CPA idea is probably a good one, if the person has the PFA designation that pb4uski mentioned.

As has been said often here--by the time you know enough to choose a good FA, you know enough to do the job yourself (and save a lot of money)
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Old 11-29-2015, 11:43 AM   #25
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We went looking for a financial advisor in February, 2009, but in Orange County the ones we contacted were all predicting imminent double digit inflation and suggesting gold (seriously! Not an exaggeration!) Since that left us with a pretty poor view of their economic prediction skills, we wound up using Vanguard Admiral shares and the free Vanguard service to help structure things for best tax advantage. We have quite a bit more money than we had then and still no double digit inflation in sight.
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Old 11-29-2015, 12:25 PM   #26
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We went looking for a financial advisor in February, 2009, but in Orange County the ones we contacted were all predicting imminent double digit inflation and suggesting gold (seriously! Not an exaggeration!) ...
That is actually a bit scary... and some people probably actually fall for that crap. Snake oil salesmen methinks.
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Old 11-29-2015, 02:50 PM   #27
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You've got "7 figures available", so you'd qualify for free Flagship Services at Vanguard. Info at this link: https://investor.vanguard.com/what-w...elect-services
We have some accounts at Fidelity, heard good things there. Talking to someone there is on my list as well. I'll have to research Vanguard to see if any advanatage of one over the other.
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Old 11-29-2015, 02:52 PM   #28
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Maybe you need a CPA instead. You've apparently done well to get where you are without a CFP, but now your concern seems more tax-related.
I had input in the past that CFP, with right credentials, would be better than CPA. Hence why I'm on my current quest. I had thought CPA as well, but advice received was that CPA wouldn't provide as much well rounded advice I guess maybe I should have asked if you had to do it all over again, what would you have done differently. Thanks
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Old 11-29-2015, 03:03 PM   #29
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I had input in the past that CFP, with right credentials, would be better than CPA. Hence why I'm on my current quest. I had thought CPA as well, but advice received was that CPA wouldn't provide as much well rounded advice I guess maybe I should have asked if you had to do it all over again, what would you have done differently. Thanks
The advantages of the CPA (with PFA designation) are:
-- He/she is not going to try to sell you a particular investment
-- They will almost surely bill by the hour rather than using AUM or being on commission
-- They will act in a fiduciary capacity
-- They will be experts in taxation law, and there will be a meaningful credential to prove it

You might be able to find some of that with a FA, or maybe even all of it, but it will be a lengthy search. If you needed handholding in picking assets, then maybe a FA would be better, but it doesn't sound like this is the case.
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Old 11-29-2015, 03:07 PM   #30
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You are retiring early 50s, the financial planner is still working. So who is better at managing money? The only question you should ask is why are they still working.

Seriously, unless you have complicated tax issues, in which case you would need a tax attorney and not a CFP, what would you expect to get from them that you cannot do for yourself, other than big fees of course.
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Old 11-29-2015, 03:10 PM   #31
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Before this thread hits a hundred posts, you will have enough good advice to stay with DIY. For example, having access to stable value fund is not something to give up unless you are forced to.

You need a good plan, but can get that without paying monthly fees to a salesman.
If I can get enough knowledge from DIY I'm all for it. I believe I'm pretty well versed in finance, having my education in Accounting and Finance. I've been working for a large financial company for almost my entire careeer. I started doing my own taxes years ago after I found an error in the tax return that my preparer did.

I think my primary concerns are:
1. Is rollover of 401K to IRA a good decision
2. Should I set up my IRA then with RMD and if so how do I do this correctly
3. How should I structure this investments to provide the best benefits for medical coverage (e.g. subsidy)
4. Any ideas that I haven't thought of to invest the funds (mix of tax free and taxable investments) for now and the future.

I've found lots of great info here with lots of great users. Several months to go and hoping to pull it all together. What I guess the biggest unknown is knowing what I don't know or even considered.
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Old 11-29-2015, 03:18 PM   #32
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You are retiring early 50s, the financial planner is still working. So who is better at managing money? The only question you should ask is why are they still working.

Seriously, unless you have complicated tax issues, in which case you would need a tax attorney and not a CFP, what would you expect to get from them that you cannot do for yourself, other than big fees of course.
Honestly, that logic has prevented me from hiring anyone in the past to manage my funds. I've found though that some people have the means to quit and just enjoy their job so they keep working. I know of a friend of mine who continued to work well into his 70's although he had well in excess of $25MM. His "work" mainly consisted of being on the Board of a couple companies, but he also did consulting. When I asked him why he continued to work, he said he still found it enjoyable, he did it on his own terms and was giving a substantial portion of his wealth to charities he felt worthy. So with that I learned that not everyone enjoys total retirement and can get bored, so a financial planner may be doing well himself. Now I'd love for a planer to show me his net worth, that would probably be something that motivated me to choose them then
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Old 11-29-2015, 03:21 PM   #33
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The advantages of the CPA (with PFA designation) are:
-- He/she is not going to try to sell you a particular investment
-- They will almost surely bill by the hour rather than using AUM or being on commission
-- They will act in a fiduciary capacity
-- They will be experts in taxation law, and there will be a meaningful credential to prove it

You might be able to find some of that with a FA, or maybe even all of it, but it will be a lengthy search. If you needed handholding in picking assets, then maybe a FA would be better, but it doesn't sound like this is the case.
Thanks, I'll expand my interviews to include a few CPA's.
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Old 11-29-2015, 07:32 PM   #34
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I think my primary concerns are:
1. Is rollover of 401K to IRA a good decision
2. Should I set up my IRA then with RMD and if so how do I do this correctly
s other mentioned, you will not have to deal with RMD until 70.5. I may be misreading your post, but amounts in your 401k, will also require RMD withdrawals.
Deciding to convert your 401k to IRA should be driven by your investment options in the 401k and what fees your 401k admin is taking from your portfolio. It may take some digging to find out your admin fees and remember these are in addition to any operating expenses of your investments. I would also verify that any admin fees previously paid by your employer will still be paid once you are retired. Others have mentioned how a bit of effort can give you a well diversified, low cost portfolios. All the major investment houses (Fidelity, Vanguard, Schwab,etc) will compute and manage your RMDs any funds you have with them once they are required.
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Old 11-29-2015, 08:37 PM   #35
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s other mentioned, you will not have to deal with RMD until 70.5. I may be misreading your post, but amounts in your 401k, will also require RMD withdrawals.
Deciding to convert your 401k to IRA should be driven by your investment options in the 401k and what fees your 401k admin is taking from your portfolio. It may take some digging to find out your admin fees and remember these are in addition to any operating expenses of your investments. I would also verify that any admin fees previously paid by your employer will still be paid once you are retired. Others have mentioned how a bit of effort can give you a well diversified, low cost portfolios. All the major investment houses (Fidelity, Vanguard, Schwab,etc) will compute and manage your RMDs any funds you have with them once they are required.
Nwsteve
I understand that you don't have to take RMD until 70+, however with the "rule of 55", if you quit or leave your job at 55 or older you can take you 401K and convert it and set-up the IRA with RMD. Once you set up the RMD you have to draw until 59.5 or 5 years, which ever is later.

My retirement funds and investment portfolio are about equal in size I'm thinking it may be advantageous to setup an RMD off of 401K converted to IRA and draw something now when I'd be in lower tax bracket. I'd then blend my spend from the RMD and post tax investments. I am also figuring there is advantage in that I can also keep my taxable investments available if something came up that I needed a large amount quickly in an emergency. I'd then avoid penalty if I had to tap the 401K/IRA.

In rough numbers, I'm figuring to 'spend' $80K/year, and looking to take half from pre-tax and half from after tax investments. I'd have a very low taxable income now. If I took all $80K/year now from investments I'd then have to draw $80K/year (adjusted for inflation) later from pre-tax and end up, most likely, in a higher effective tax bracket.

Perhaps I'm wrong in my assessment and why I'm doing my due diligence now.
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Old 11-29-2015, 08:47 PM   #36
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I was about to hire a Charted Financial Consultant who had chatted me up impressively via phone.

Then I called to ask if she would do some vetting of a couple of companies I was considering for investments. She said no - the company only put together plans for stocks, bonds, and bank products to produce at least 6% over 20 years.

I can do that myself. And get a better return that's low risk.

I'd love to find someone who would do research / vetting for me at an hourly rate. Any ideas?


Another way I've checked out CFCs / CFPs is to ask how much of their clients' portfolios are socially responsible. Most ask me what socially responsible means.

"Click" goes my phone.

I've been considering using just a new tax law firm and skipping the CFCs / CFPs. It's interesting to read that others are already doing this.
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Old 11-29-2015, 08:51 PM   #37
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How much for the snake oil ?
+1

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Originally Posted by CaliforniaMan View Post
You are retiring early 50s, the financial planner is still working. So who is better at managing money? The only question you should ask is why are they still working.
+1


Also, you might ask if they knew or if they ever received any financial planning training from Bernie Madoff or Alan Stanford. If so, run away.
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Old 11-29-2015, 10:28 PM   #38
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We have some accounts at Fidelity, heard good things there. Talking to someone there is on my list as well. I'll have to research Vanguard to see if any advanatage of one over the other.
I have accounts at Fidelity among other places, but I would never ever ever use any of the people at Fidelity to give me advice. Sure, some of them may be OK, but then one reads a real horror story such as
https://www.bogleheads.org/forum/vie...p?f=1&t=178197
where the Fidelity advice certainly cost someone probably 6-figures in extra taxes.
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Old 11-30-2015, 12:03 AM   #39
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I understand that you don't have to take RMD until 70+, however with the "rule of 55", if you quit or leave your job at 55 or older you can take you 401K and convert it and set-up the IRA with RMD. Once you set up the RMD you have to draw until 59.5 or 5 years, which ever is later.
I think you are mixing some concepts that you should really get a handle on before you move forward....

The term RMD has nothing to do with the "rule of 55". The rule of 55 allows withdrawals from 401k under certain situations (as you describe), but it applies only to 401k, not to IRA. So, if you do a 401k to IRA rollover, you would no longer be able to use the "rule of 55". I do not think there are any restrictions on the amount or timing of distributions from a 401k using the rule of 55 exception.

You can get early distributions from an IRA without penalty under a 72t plan (also known as SEPP- Series of Equal Payments Plan). The SEPP is the one that requires you to draw for the longer of 5 yrs or age 59.5. There are limitations on the amount you can distribute from your IRA using SEPP.

I think I generally follow your desire to have access to both taxable and tax deferred savings, but as another poster suggested make sure you are not losing any benefits (such as the rule of 55 and/or access to a Stable Value Fund) if you do an IRA rollover. I am in a similar situation, myself.
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Old 11-30-2015, 12:20 AM   #40
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The opportunity in the tax code available to those retiring in the year they turn 55, or older, is the ability to withdraw funds from the 401k of that company without penalty. I would consider this the "55 rule" you refer to, a critical component of my ER plans. Most 401K plans have this option as allowed in the tax code, you should confirm. The penalty free withdrawal WILL NOT be available if the proceeds are rolled over into an IRA, and do not apply to 401k funds from any prior employer. It may desirable to roll other 401k or IRA proceeds into the 401k plan from your final employer to access these funds at will. Another option to avoid early withdrawal penalties is under the 72t plan, which involves an RMD type calculation, and requires min 5 years of withdrawals. The penalty free 401k withdrawal provides much more flexibility and is an excellent option for ER. There is rarely any incentive for financial advisers to recommend this approach, most prefer to roll proceeds into and IRA they can manage for a fee.

Being ER'd with minimal regular income and the ability to draw on both taxable and tax deferred income provides some excellent tax savings opportunities. Sadly, there are few incentives or knowledgeable financial advisers to help with this. Typically, the optimal strategy is to convert tIRA to Roth IRA up to the top of the 15% tax bracket each year, or withdraw from tIRA/401k to this limit, or harvest capital gains. Another income ceiling to obtain ACA tax credits is typically slightly less than the top of the 15% bracket, (referred to as the ACA Cliff at 400% of the poverty level) and can provide additional tax savings.

After working for decades and paying taxes on steady income, it's difficult to grasp the tax saving opportunities in ER. There are many knowledgeable folks and posts here on the ER forum for these strategies. Perhaps some have found financial advisers or CPAs who can provide guidance like this for maximizing wealth in ER, I have not. I've spent the last year educating myself in preparation for ER. I encourage you to understand these strategies, and be sure any CFP or adviser would acknowledge (hopefully recommend) keeping 401k for penalty free access from 55- 59.5 (assuming the plan is not terrible), and provide Roth conversion projections similar to i-orp to minimize taxes and optimize wealth. The Boglehead post below opened my eyes to the new financial frontier of ER. Second link from Kitces illustrates the zero percent tax on qualified dividends and long term capital gains in the 15% bracket.

After you understand these concepts, the same strategies apply for the MAGI ceiling to receive ACA tax credits. If you find a professional who understands and will help execute these strategies for a reasonable cost, consider it. Otherwise, save the $15k annual cost and many thousands more in tax savings.

https://www.bogleheads.org/forum/viewtopic.php?t=87471

https://www.kitces.com/blog/understa...p-up-in-basis/
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