Financial Advisor

[cxr133]

Hi All,


Thinking more about retiring and have run the calculators in Firecalc and Fidelity a dozen times i get somewhere between 95-100% but i feel like i am just inputting numbers without an understanding on where the rubber meets the road . What are the real spending habits of retired people. i dont understand taxes or healthcare spending.

So i have an Appt with a FA\ Wealth management and i want to be able to ask pertinent questions.

Wondering if you guys could help me out with educated questions i should be asking at this point?
not worried about fee structure to FA at this time

just some basic info me 54\wife 55 , I have a Pension with healthcare fully covered. Not sure i qualify for a lump sum payout there is some language the Tier i am may not qualify. My wife and i both contribute to our 401K and close to 2M combined at this point. not much cash on hand, house paid off. would like to retire 2028 would love to retire 2025

kids: youngest daughter leaving for college in the fall. not a huge commitment she received a tuition scholarship so we only have to pay room and Board.

other than that i think we are ready to downsize and could move from a HCOL to a LCOL area.

Thanks

 

[RetiredAt49]

You are debt free and Firecalc and other tools are giving you a green light yet you want to speak with a Financial Advisor / Wealth Management Company…. Why? Not sure why you are asking us for questions that you should be asking your FA… are you confused about asset allocation? Basic investing? Other?

There are a TON of threads on this topic. My .02 = Save your hard hard money (don’t give it to an AUM FA), buy a few low cost index funds, stick to your asset allocation, and retire yesterday [emoji16]

 

[rodi]

If you haven't read this thread yet, read it:

https://www.early-retirement.org/forums/f47/some-important-questions-to-answer-before-asking-can-i-retire-69999.html

It's normal to be nervous before retiring. Like you I ran calculators, then took advantage of my assigned FP from Schwab to have them review my plan.

The biggest thing you need to be aware of is how much you are spending... if you have a solid grasp on what you are currently spending, and how that will change in retirement (especially with taxes, health care, and no longer deferring money to payroll taxes and retirement savings.)

I personally, would try to be aware that many financial planners have a goal of getting you to invest your money with them - especially in an AUM arrangement or some other fee structure that benefits *them* more than you. So have your eyes open when the FP makes suggestions. (BIL just went through this and his FP tried to sell him a boatload of annuities that are not so great for BIL/SIL but awesome for the FP's bottom line.) Keep your eyes open.

 

[Slim11]

I met with one recently. They talk a good game and can help some people. But, they get a percentage of your total money regardless of how much they make every year. So, if they make you 80k they take a percentage of everything, not just the 80k. Over the years thats adds up. How much is the pension, can you live on it alone or beed to take 401k money to subsidize it? Is the pension forever, does it have colas?

 

[OldShooter]

I'd suggest that your best tactic beyond establishing that he has a fiductiary responsibility to you is to listen. The FA should spend quite a bit of time asking you questions about your life and your goals, somewhat less time going beyond the general information (like you have provided here) on your finances, and zero time trying to sell you something. Ideally take DW or another person to listen to the FA and later compare notes with you.

Pre-appointment be sure to check him out at https://brokercheck.finra.org/ If anything there smells the least bit suspicious or if it shows him to have very limited experience, cancel the meeting. His employer's form ADV is another good read (https://www.investor.gov/introduction-investing/investing-basics/glossary/form-adv). Look here especially at customer disputes. Anyone who has been in business will have some, but what kind and what financial magnitude and how resolved?

 

[LateToFIRE]

I have used a financial advisor for many years, but have also spent a lot of time educating myself on all the relevant topics, because in my view, one should never place blind trust in any professional, be it doctor, lawyer, contractor, advisor, etc.

You do seem to recognize that this works best if you've got a head start on understanding the relevant issues and questions. You did not give us enough of a picture of your situation for us to be able to come up with any tailored questions. But, top of my list, I'd want to know the advisor's level of experience - especially with people with a similar profile to you. And I'd want to know level of experience with people who are already retired and been retired for a few years - because observing what really happens to people (good and bad) in retirement should be part of the perspectives they bring to the table. I'd also want to know that they are part of a larger organization and how that works (just in case they get hit by a bus). And the fee part is critically important - too many opportunities for them to advise you based on their best interest as opposed to yours. And, last but not least, there has to be chemistry for a long-term relationship, which also means your significant other needs to participate and feel comfortable.

Now, a lot of folks here are gonna tell you that you don't need an advisor - because after all, you're asking a self-help community. And sure, you might not "need" one, but clearly you might feel more comfortable if you had one, and that's ok.

I don't "need" an advisor either - at this point my level of knowledge on retirement finance is not too shabby. But, how much time do I want to spend chasing down answers? And who would my DW turn to if something happened to me? So, even though I am very into the self-help thing, I can see that I'm gonna need some professional advice, probably more than my current advisor can really offer.

Best of luck, not that you need it, sounds like you're in good shape.

 

[easysurfer]

I met with one recently. They talk a good game and can help some people. But, they get a percentage of your total money regardless of how much they make every year. So, if they make you 80k they take a percentage of everything, not just the 80k. Over the years thats adds up. How much is the pension, can you live on it alone or beed to take 401k money to subsidize it? Is the pension forever, does it have colas?

When I last checked, they also get a percentage of your total money no matter how much they lose too .

 

[MarieIG]

Be careful. The FA may wish you to lump sum your pension out so he can get his paws on it. Don't rush into anything.

You may be absolutely fine as you are.

Some Important Questions to Answer Before Asking - Can I Retire?

 

[Koolau]

RE: FAs. I'd only use a pay-by-the-hour FA who sells NOTHING.

RE: Lump sum. I have no citation on this (you can look it up) I contend that most pension pay outs are better than taking a lump sum (on the strictly value basis.) The other advantage to pension pay outs is that they are not affected by market down turns where as your lump sum that you invest can be dramatically affected by down turns (or just lousy investing skills or just plain bad luck.) Having a pension coming in gives you the ability to be more aggressive in you portfolio.

RE: Investment plan: Keep it simple. Lots of folks here buy and sell Bonds and Stocks. They love doing it and some are good at it and make a lot of money. If you just want to do your hobbies or travel or just enjoy being retired, don't let the money be your full time j*b. Put together a simple plan of equity and bond mutual funds at a reliable investment house such as Vanguard or Fidelity or Schwab. You could get by with as few as 2 MFs. One equities and one bonds. Be sure to rebalance every year. Relax.

My other advice is while you are spending your 2 (or 5) years at w*rk: Put some cash away in CDs or other easily available places so that when you pull the plug, you are not "forced" to get into your portfolio to come up with money for a remodel or a big trip. Also, the extra cash will help you if you decide you need to do Roth conversions. IOW cash can pay the extra taxes you will incur during Roth conversions. Read up on Roth conversions here or elsewhere on the net. Very likely a good idea, but not for everyone.

Keep in mind you're not paying me and I'm just an old guy on the internet, so YMMV.

 

[Exchme]

RE: FAs. I'd only use a pay-by-the-hour FA who sells NOTHING.

RE: Lump sum. I have no citation on this (you can look it up) I contend that most pension pay outs are better than taking a lump sum (on the strictly value basis.) The other advantage to pension pay outs is that they are not affected by market down turns where as your lump sum that you invest can be dramatically affected by down turns (or just lousy investing skills or just plain bad luck.) Having a pension coming in gives you the ability to be more aggressive in you portfolio.

RE: Investment plan: Keep it simple. Lots of folks here buy and sell Bonds and Stocks. They love doing it and some are good at it and make a lot of money. If you just want to do your hobbies or travel or just enjoy being retired, don't let the money be your full time j*b. Put together a simple plan of equity and bond mutual funds at a reliable investment house such as Vanguard or Fidelity or Schwab. You could get by with as few as 2 MFs. One equities and one bonds. Be sure to rebalance every year. Relax.

My other advice is while you are spending your 2 (or 5) years at w*rk: Put some cash away in CDs or other easily available places so that when you pull the plug, you are not "forced" to get into your portfolio to come up with money for a remodel or a big trip. Also, the extra cash will help you if you decide you need to do Roth conversions. IOW cash can pay the extra taxes you will incur during Roth conversions. Read up on Roth conversions here or elsewhere on the net. Very likely a good idea, but not for everyone.

Keep in mind you're not paying me and I'm just an old guy on the internet, so YMMV.

Agreed, the investing part does not have to be hard and keeping it simple, low cost and diversified is not only good enough, it's probably the best you can do. Plus if it's simple, you can handle it yourself for longer before needing help.

I think a lot of folks would benefit from a one-time-fee planner that could educate them on relevant topics like ACA, Roth Conversions, SS claiming strategies and at least point them to professionals that can help with Medicare option selection, tax planning, setting up DPOA, estate planning, etc. if those kinds of things are needed. It's kind of a blizzard of new topics hitting at a stage of life when it would be nice if it was simple and familiar.

Of course the best answer is for folks to stop by here frequently and learn for free, even if we are just old guys and gals on the internet!

 

[Ncc1701]

I was a Financial Advisor for 25 years at firms like Merrill, Schwab & Fidelity.

Based on the situation you described, I mean this with the utmost sincerity and candidness when I say.....

CANCEL YOUR APPOINTMENT NOW.

 

[Another Reader]

Is this person with a well known company? If so, would you be comfortable sharing the company name? Many of these companies should be avoided and there is no point in subjecting yourself and your wife to a meeting with their sales person.

 

[DrRoy]

RE: FAs. I'd only use a pay-by-the-hour FA who sells NOTHING.

RE: Lump sum. I have no citation on this (you can look it up) I contend that most pension pay outs are better than taking a lump sum (on the strictly value basis.) The other advantage to pension pay outs is that they are not affected by market down turns where as your lump sum that you invest can be dramatically affected by down turns (or just lousy investing skills or just plain bad luck.) Having a pension coming in gives you the ability to be more aggressive in you portfolio.

RE: Investment plan: Keep it simple. Lots of folks here buy and sell Bonds and Stocks. They love doing it and some are good at it and make a lot of money. If you just want to do your hobbies or travel or just enjoy being retired, don't let the money be your full time j*b. Put together a simple plan of equity and bond mutual funds at a reliable investment house such as Vanguard or Fidelity or Schwab. You could get by with as few as 2 MFs. One equities and one bonds. Be sure to rebalance every year. Relax.

+1 above.

If you feel the need for guidance, find a single fee only advisor, and get a pre-RE review. DO NOT take on someone that charges a % of assets each year.

 

[frayne]

Prior to retiring in 2005 I interviewed a number of financial advisors and came away with, why pay a middle man for something that I have the emotional maturity and intelligence to do myself. With that said, if someone wants to pay 1% for AUM fee to have someone hold their hands, that's fine too.

 

[Koolau]

Prior to retiring in 2005 I interviewed a number of financial advisors and came away with, why pay a middle man for something that I have the emotional maturity and intelligence to do myself. With that said, if someone wants to pay 1% for AUM fee to have someone hold their hands, that's fine too.

Additionally, I had encountered several FA (some with credentials) who PROVED they were not acting in MY best interest but in their own. They helped me screw up my financial plans and cost me a LOT of money. I can screw up my finances for free - without their help. And, amazingly, when I do it my self, I'm a true fiduciary! GO FIGURE!

 

[target2019]

Hi All,


Thinking more about retiring and have run the calculators in Firecalc and Fidelity a dozen times i get somewhere between 95-100% but i feel like i am just inputting numbers without an understanding on where the rubber meets the road . What are the real spending habits of retired people. i dont understand taxes or healthcare spending.

So i have an Appt with a FA\ Wealth management and i want to be able to ask pertinent questions.

Wondering if you guys could help me out with educated questions i should be asking at this point?
not worried about fee structure to FA at this time

just some basic info me 54\wife 55 , I have a Pension with healthcare fully covered. Not sure i qualify for a lump sum payout there is some language the Tier i am may not qualify. My wife and i both contribute to our 401K and close to 2M combined at this point. not much cash on hand, house paid off. would like to retire 2028 would love to retire 2025

kids: youngest daughter leaving for college in the fall. not a huge commitment she received a tuition scholarship so we only have to pay room and Board.

other than that i think we are ready to downsize and could move from a HCOL to a LCOL area.

Thanks

I hope you will review with the minds of E-R what's said in the meeting. Be sure to take notes.

If you meet with a half dozen FA's, you may notice certain themes that they focus on. IMO, it's all a sales pitch. Your best future will come from developing knowledge about your financial concerns.

 

[rmorris50]

Couple of thoughts as I skimmed this thread…

Pension lump sum, the IRS discount rates are tied to current interest rates and are updated once a year. So the time to take the lump sum was 2022 cause the discount rates spiked in 2023. I took my pension lump sum this past Dec because come Jan it was dropping from $340k to $260k!!!

Our financial advisor has been great since my husband hates dealing with finances so I found it helped our relationship to let the FA be the “bad guy”. Also my husband knows everything is with him if I cross the rainbow bridge before him. The downside is the FA is not conducive to firing early. Mine is doing everything possible to keep me working another 5-7 years so his AUM stays intact. So if you are trying to retire early, esp lean FIRE a FA is gonna prob going to puke all over that and try to scare you into not doing that.

My two cents.

 

[Jerry1]

You’re in a questioning/learning phase of preparing for retirement. Go to the FA meeting and see if you learn anything and then bring questions back here and get answers. Just make sure not to commit to anything or pay anything for the initial meeting. My FA did prepare a financial analysis for me for $1500. It was a bit pricey, but the process did help me get comfortable with retiring.

For about two years before I retired, I spent a lot of time working my plan and gaining knowledge. This is truly a situation where you don’t know what you don’t know. That’s a good reason to sit with the FA. They will ask you questions that will help you understand the particulars of your situation. For example, many here have to buy their own health insurance. The process involves subsidies that are based on income. Income can be manipulated to ensure that you maximize the subsidy. This may not matter in your situation, but it’s an example of something that people have to understand and where doing it incorrectly can cost someone thousands of dollars. Another example. My assistant got a buy out from the company. Being retired, she applied for SS. She should have waited until the following year because the buyout increased her income and her buyout and SS took her into the next higher tax bracket. She didn’t tell me until after it was done. That cost her a lot in taxes.

There’s a lot of gotch ya’s out there but they are specific to each person. So keep running your numbers and asking questions until you’re comfortable you know what’s in play.

 

[LateToFIRE]

...The downside is the FA is not conducive to firing early. Mine is doing everything possible to keep me working another 5-7 years so his AUM stays intact. So if you are trying to retire early, esp lean FIRE a FA is gonna prob going to puke all over that and try to scare you into not doing that.

This also echos my experience. You're reminding me that every time I would mention ER, my FA would would look at me like I had two heads and scare the crap out of us. No wonder I've had OMY syndrome. Broadly speaking most of them don't think much outside the box and FIRE is not in their vocabulary. 95% of them are salespeople, plain & simple. I had one of the 5% decent ones that was very helpful at various life stages, but the AUM fees, ugh, the AUM fees have just gotten to be hard to justify vs the value-add. I guess there is a paradox of sorts - when you're just starting from scratch both in terms of AUM and knowledge, having the FA is really useful and the cost does not seem high. But after you've built your pile, even with the sliding AUM fee schedule, you just start questioning the value and at some point probably either need to self-manage or move up to a higher tier of service.

 

[arcyallen]

Wondering if you guys could help me out with educated questions i should be asking at this point?
not worried about fee structure to FA at this time

I commend you for getting this far, and for knowing what you know and more importantly what you don't (yet).

I recommend not listening to anyone that tells you to absolutely do or not do something, or gives you one-size-fits-all advice. That's any FA you talk with, or anyone on this board for that matter.

Let me actually answer your question:
-This is my situation. These are my assets. This is what I want to do. How could this work?
-Why or why not?
-What are the possible pitfalls to this plan?
-What would you recommend I do?
-What's the benefit you'd provide for me if I decided to work with you?
-If I should decide to work with you, what should I expect from you going forward?

And I know you weren't worried about the fee structure at this time, but ultimately you'll want to understand your options. When you're ready, simply ask them "What will this cost me, and what are my alternatives?"

 

[SumDay]

We found our fee only planner at www.napfa.org at the recommendation of several folks on this board. We've had her for 12 years and have been retired for 5. She has none of our assets under management, only works by the project. Those get less and less frequent now that I'm figuring out things on my own.

Good luck!

 

[jollystomper]

Hi All,


Thinking more about retiring and have run the calculators in Firecalc and Fidelity a dozen times i get somewhere between 95-100% but i feel like i am just inputting numbers without an understanding on where the rubber meets the road . What are the real spending habits of retired people. i dont understand taxes or healthcare spending.

So i have an Appt with a FA\ Wealth management and i want to be able to ask pertinent questions.

Wondering if you guys could help me out with educated questions i should be asking at this point?
not worried about fee structure to FA at this time

just some basic info me 54\wife 55 , I have a Pension with healthcare fully covered. Not sure i qualify for a lump sum payout there is some language the Tier i am may not qualify. My wife and i both contribute to our 401K and close to 2M combined at this point. not much cash on hand, house paid off. would like to retire 2028 would love to retire 2025

kids: youngest daughter leaving for college in the fall. not a huge commitment she received a tuition scholarship so we only have to pay room and Board.

other than that i think we are ready to downsize and could move from a HCOL to a LCOL area.

Thanks

I see nothing wrong with going to a FA as another source of input beyond the (various and good) online calculations. The more input for when planning for retirement, the better. I did this is the years before I retired, though the FA were provided for free by Megacorp. The key is to not see them beyond another source of input, so do not make decisions based only on their initial recommendations.

The main thing you need to do, in my view, is to provide your data with the main question of "will my current actions allow me to retire in 2025?", and provide the detail on your current actions (current financial account amounts, AA, savings rate, and ongoing contributions to them), major expenditures before retirement, your expected retirement expenses, and your future retirement income (pension, SS at FRA). Then let them make their assessment ("yes, you are fine", "you will be fine if you consider these changes", "no way, you are crazy,", etc. ) and see what they recommend.

As was mentioned above, come back here with their recommendation to get additional (in my view) "real world" input.

 

[gayl]

Hi All,


Thinking more about retiring and have run the calculators in Firecalc and Fidelity a dozen times i get somewhere between 95-100% but i feel like i am just inputting numbers without an understanding on where the rubber meets the road . What are the real spending habits of retired people. i dont understand taxes or healthcare spending.

So i have an Appt with a FA\ Wealth management and i want to be able to ask pertinent questions.

Wondering if you guys could help me out with educated questions i should be asking at this point?
not worried about fee structure to FA at this time

just some basic info me 54\wife 55 , I have a Pension with healthcare fully covered. Not sure i qualify for a lump sum payout there is some language the Tier i am may not qualify. My wife and i both contribute to our 401K and close to 2M combined at this point. not much cash on hand, house paid off. would like to retire 2028 would love to retire 2025

kids: youngest daughter leaving for college in the fall. not a huge commitment she received a tuition scholarship so we only have to pay room and Board.

other than that i think we are ready to downsize and could move from a HCOL to a LCOL area.

Thanks

I have some questions you might want an answer to but from your HR.
"Pension with healthcare fully covered"
1. What's the COLA
2. What age can I access it at?
3. How solvent is the fund?
For you, just 2 questions: [1] how much of your current take home will that net pension cover? (I bailed when my net pension matched my take home) & [2] how much do you love your job

None of these questions can be answered by a CFA. Sometimes we just gotta run our own numbers

from someone living on the db pension

 

[cxr133]

I see nothing wrong with going to a FA as another source of input beyond the (various and good) online calculations. The more input for when planning for retirement, the better. I did this is the years before I retired, though the FA were provided for free by Megacorp. The key is to not see them beyond another source of input, so do not make decisions based only on their initial recommendations.

The main thing you need to do, in my view, is to provide your data with the main question of "will my current actions allow me to retire in 2025?", and provide the detail on your current actions (current financial account amounts, AA, savings rate, and ongoing contributions to them), major expenditures before retirement, your expected retirement expenses, and your future retirement income (pension, SS at FRA). Then let them make their assessment ("yes, you are fine", "you will be fine if you consider these changes", "no way, you are crazy,", etc. ) and see what they recommend.

As was mentioned above, come back here with their recommendation to get additional (in my view) "real world" input.

THANKS, yes this is exactly i am trying to learn

a Seperate question what do you guys think of Wealthfront Cash accounts for small savings.
its appears to be 4.5% APY with zero fees and readily access to your money. Better than CDS?


Thanks

 

[cxr133]

Another quick question.. are there FA that specialize in FIRE?
this first introductory meeting really just turned into a conversation , because i did not have all my info on current portfolio or pension info but he did make a comment that i shouldnt think about retiring yet because i am too young.

I didnt say this but i was thinking SIR, that why i am talking to you to see if its a viable option :smackhead