Had no obligation meeting with a financial advisor, looking for feedback

[petestan]

I manage my own investments, but decided to have a meeting with an advisor since there was no obligation. I will be 61 in a month, retired, no pension, no kids, heirs etc and have about $1.1 mm in assets with about 35% in tax deferred investments. No debts, live pretty frugally, in good health for now and withdraw about 3.2% of portfolio. I am thinking of taking SS at 67 and will get approximately $1400/month.

I told the advisor I was concerned about long term care since I have no LTC insurance and was thinking of a deferred annuity. He suggested putting $200,000 into a variable structure contract with an income guarantee, fee around 1.3%, could get around 6%. At present, I am not paying federal tax but pay state tax of 5.1%, so I was a little concerned about tax consequences of withdrawing $200,000. I believe I can have about a $37,000 gain without incurring federal tax so would that mean I would pay about $1900 in total to state on the gain?

Another thing he told me is that I do not have to be concerned about getting a reduction in SS in 2034 if the government does nothing about SS finances by then. He said ONLY people 41 years and younger would take a hit. Is that true? I thought we would ALL be looking at about a 22-25% reduction if NOTHING is done.

I was looking for feedback. Also, what are some of the best alternatives to LTC?

Thanks

 

[Dtail]

I manage my own investments, but decided to have a meeting with an advisor since there was no obligation. I will be 61 in a month, retired, no pension, no kids, heirs etc and have about $1.1 mm in assets with about 35% in tax deferred investments. No debts, live pretty frugally, in good health for now and withdraw about 3.2% of portfolio. I am thinking of taking SS at 67 and will get approximately $1400/month.

I told the advisor I was concerned about long term care since I have no LTC insurance and was thinking of a deferred annuity. He suggested putting $200,000 into a variable structure contract with an income guarantee, fee around 1.3%, could get around 6%. At present, I am not paying federal tax but pay state tax of 5.1%, so I was a little concerned about tax consequences of withdrawing $200,000. I believe I can have about a $37,000 gain without incurring federal tax so would that mean I would pay about $1900 in total to state on the gain?

Another thing he told me is that I do not have to be concerned about getting a reduction in SS in 2034 if the government does nothing about SS finances by then. He said ONLY people 41 years and younger would take a hit. Is that true? I thought we would ALL be looking at about a 22-25% reduction if NOTHING is done.

I was looking for feedback. Also, what are some of the best alternatives to LTC?

Thanks

Bolded - this statement is absolutely not true. As of now, the reduction would affect everyone. It is roughly 23%.

 

[braumeister]

If he flat out lied to you about the SS cut (and he did), how can you trust anything else he said?

 

[target2019]

Where does FA interest lie? Is he advising as if he were your fiduciary?
Since he is not your advisor with an agreement, he can say many things, and will not be held accountable later.
I've done similar (sit with an FA), and always found large holes in what the FA initially said to me. It is a sales pitch, and part of what FA tries to sell you is that he/she has some higher understanding of finance and investing.

 

[Another Reader]

This is not a financial adviser looking out for your best interest, this is a salesman that stands to benefit greatly from what he wants to sell you. Run away from this deal and the salesman and don't look back.

No one knows for sure what will happen with Social Security. AFAIK, reductions when the trust fund runs out would be across the board, but who knows what Congress will decide? There is nothing in the law or regulations about people 41 and under.

Dump this guy and find a fee-only true CFP fiduciary if you feel you need advice.

 

[Jerry1]

No one knows for sure what will happen with Social Security. AFAIK, reductions when the trust fund runs out would be across the board, but who knows what Congress will decide? There is nothing in the law or regulations about people 41 and under.

This is my understanding as well. No one knows at this point. We do know that the fund will be underfunded in 2034 if nothing is done. Between now and then anything could happen. It would have been better if he stated that his opinion is that they won’t change benefits for people already in the system. Logical, but nothing to bank on at this point.

 

[golfnut]

As of now, everybody should be concerned about a ss haircut. Look at this way, this fa will be less concerned about it if he gets you and others to sign up for annuity product.

 

[RunningBum]

His solution was an annuity, with a fairly high fee. Wonder how many questions that is his answer to?

His SS answer is indicative of how clueless he is.

 

[VanWinkle]

I manage my own investments, but decided to have a meeting with an advisor since there was no obligation. I will be 61 in a month, retired, no pension, no kids, heirs etc and have about $1.1 mm in assets with about 35% in tax deferred investments. No debts, live pretty frugally, in good health for now and withdraw about 3.2% of portfolio. I am thinking of taking SS at 67 and will get approximately $1400/month.

I told the advisor I was concerned about long term care since I have no LTC insurance and was thinking of a deferred annuity. He suggested putting $200,000 into a variable structure contract with an income guarantee, fee around 1.3%, could get around 6%. At present, I am not paying federal tax but pay state tax of 5.1%, so I was a little concerned about tax consequences of withdrawing $200,000. I believe I can have about a $37,000 gain without incurring federal tax so would that mean I would pay about $1900 in total to state on the gain?

Another thing he told me is that I do not have to be concerned about getting a reduction in SS in 2034 if the government does nothing about SS finances by then. He said ONLY people 41 years and younger would take a hit. Is that true? I thought we would ALL be looking at about a 22-25% reduction if NOTHING is done.

I was looking for feedback. Also, what are some of the best alternatives to LTC?

Thanks

1.3 expense is not the whole enchilada for this type of contract, and 6% also includes a return of your principal- so more like 2-2.5% return. Run away as you likely already have the assets to cover LTC on your own. Having no heirs makes a big difference in how much LTC you can handle out of your assets.

 

[Ready]

If I found myself in a meeting like that, I would let the individual know that I'm happy to hear their advice, but if they plan to recommend any products that they personally earn a commission on, they will be viewed as a sales pitch and not credible investment advice. Then see where the conversation leads you.

 

[flintnational]

The "no obligation" meeting invites I receive in the mail include a free dinner. I would hold out for the free dinner.

 

[youbet]

His solution was an annuity.

Not to defend the "advisor," but actually OP brought up the idea of an annuity.

I told the advisor I was concerned about long term care since I have no LTC insurance and was thinking of a deferred annuity.

Now, the advisor apparently suggested a variable annuity while OP asked about a deferred annuity, so that's suspect. But the advisor did not bring up annuities out of the blue.

Regardless, there is little an "advisor" can bring to the table for FIRE aspirants either in the accumulation or withdrawal phase, so the details are really moot. Just DIY and benefit from better decisions and planning from the person who knows you the best: YOU. And enjoy zero fees while participating in a fun hobby.

 

[petestan]

Thank you to all who replied. I thought the SS statement was in error and I appreciate everyone's input regarding the annuity. I will stay with doing it myself.

 

[Another Reader]

OP: If you have this much in your portfolio AND Social Security coming with no debts and no heirs, you are probably covered for long term care. Most people don't do more than a year or two in LTC and you could probably do at least 8 at today's prices. If you have a home. probably more. Have a trust and a medical POA set up with some instructions on how to handle your care. Look around at these facilities near you and keep an eye on them so if things start to deteriorate, you can discuss your care with the POA.

 

[RobbieB]

LTC is something I don't worry about. 2 out of 3 are dead before a year.

 

[youbet]

LTC is something I don't worry about. 2 out of 3 are dead before a year.

Thanks RobbieB. None of the numbers in the article were a surprise, but they were presented in an interesting, understandable way.

My LTC self-insure plans would cover long stays for either/both DW and I, but our overall estate planning (taking care of the kids and grand kids) does work out better if we don't use LTC or our numbers fall into the likely, expected ranges.

This reminds me of how little LTCi is really "insurance." The real risk is that a couple combined spend many years in LTC and LTCi (that's being sold today) typically caps at 3 - 5 years.

 

[RobbieB]

Yup, even money you won't last 6 months.

 

[Bamaman]

I think a good advisor might be suggesting that you need a good will with healthcare directives, etc. This can be a problem with single people without children.

 

[samclem]

LTC is something I don't worry about. 2 out of 3 are dead before a year.

LTC is a lot more than just nursing homes.
LTCI is insurance (maybe crummy insurance, but still insurance). I think most people who buy it do it to prevent a financial catastrophe, not because they think they are >likely< to wind up ahead financially. Properly underwritten insurance is never a good bet for the insured, it is a money loser in the aggregate. It's the >unlikely< but devastating outcome people are trying to avoid by purchasing LTCI.

 

[flintnational]

Thanks RobbieB. Good information. Based on the study data in the article, 25% of the population will die in a nursing home. Of those, only 35% will last more than 1 year.

So, based on this data, the individual risk of dying in a nursing home with a stay longer than 1 year is 8.75% (25% x 35%). The risk for either member of a couple (not both) would be 17.5%* (8.75% + 8.75%). Both members of a couple would be only .07% (8.75% x 8.75%).

*Per the study, men actually died after an average shorter stay than women.

 

[Lakewood90712]

this is not a financial adviser looking out for your best interest, this is a salesman that stands to benefit greatly from what he wants to sell you. Run away from this deal and the salesman and don't look back.

No one knows for sure what will happen with social security. Afaik, reductions when the trust fund runs out would be across the board, but who knows what congress will decide? There is nothing in the law or regulations about people 41 and under.

Dump this guy and find a fee-only true cfp fiduciary if you feel you need advice.

this !

 

[foxfirev5]

Thanks RobbieB. None of the numbers in the article were a surprise, but they were presented in an interesting, understandable way.

My LTC self-insure plans would cover long stays for either/both DW and I, but our overall estate planning (taking care of the kids and grand kids) does work out better if we don't use LTC or our numbers fall into the likely, expected ranges.

This reminds me of how little LTCi is really "insurance." The real risk is that a couple combined spend many years in LTC and LTCi (that's being sold today) typically caps at 3 - 5 years.

This why I've had a hard time with LTCi. I can self insure a couple of years while the policy only pays for 3-5. Therefore I have to further plan for expiration in a very specific "sweet spot". No thanks.

 

[RunningBum]

Not to defend the "advisor," but actually OP brought up the idea of an annuity.



Now, the advisor apparently suggested a variable annuity while OP asked about a deferred annuity, so that's suspect. But the advisor did not bring up annuities out of the blue.

Regardless, there is little an "advisor" can bring to the table for FIRE aspirants either in the accumulation or withdrawal phase, so the details are really moot. Just DIY and benefit from better decisions and planning from the person who knows you the best: YOU. And enjoy zero fees while participating in a fun hobby.

You're right, I read about the LTC concern and didn't read carefully enough that OP did ask about an annuity.

 

[Scrapr]

True that many folks don't last long in AL/Memory care. Mom & Dad recently died in Memory care. One woman had been in Memory are for 13 years. Another for 7 years i think. Her husband would visit her every day and stay most of the day. Very sad.

Mom was in Skilled Nursing for a couple weeks and the bills there were $$$. My brother was the Health Care person for them & I think he said it was $10k/mo. The memory care was like $5k/mo. So a long stay in Skilled Nursing could be catastrophic in a hurry. But I think Mom & Dad were one of the few Private pay. Everybody else was Medicare. (maybe that was why the staff liked them!)

 

[GravitySucks]

But I think Mom & Dad were one of the few Private pay. Everybody else was Medicare. (maybe that was why the staff liked them!)

I doubt the staff care who pays. The poor LPNs are still doing dangerous work for carp pay. A million years ago when I worked in a SNF it seemed the people that had regular visitors received the best care.

Does anyone know of a LTC policy that kicks in after year 3 or 5 and pays till death? I guess after 3 years straight in that sort of living hell I wouldn't care if Medicaid pays though.