I'm taking over my IRA management

[COcheesehead]

Here's a question;
I expanded Index Blend options and added S&P500 and Dow indexes to the chart. How come the 100% Stocks blend is so much less than either S&P or Dow?

And now you know why so many invest in index ETF’s.

 

[target2019]

The screen capture above exposes account information, I think.

 

[ERD50]

I know this has been mentioned in other thread(s)...many of these fees are waived when Fidelity manages your account. Don't know which ones as I can't find my notes. Someone with more knowledge, please chime in.

I was thinking that too. Not sure.

But who pays the 2% ER if they collect 1%? I can't quite see Fidelity getting it 'free', and the trading/admin costs pushed on to the other owners? Accounting-wise, I don;t see how they could just waive the costs? Those costs can't just be made up, they must reflect actual expenses, not just a 'profit' for the company?

-ERD50

 

[skipro33]

The screen capture above exposes account information, I think.

Nothing can be done on my account without my voice recognition. It's a security feature that works pretty good. Plus, that account is no longer funded; converted to cash and transferred as of Friday to the new rollover IRA account.

 

[skipro33]

Well, it's all done and my funds are now available to me in the new, unmanaged IRA. I've taken some time over the past few days to get my mind into the game of asset management of this new account. Based on my other income resources; a pension that covers 100% of my expenses and social security paying a gross $2032 starting next month, along with a comfortable cash reserve in my checking account. I think I'm ready to put this pot of money onto 100% equity funds.
I've been looking into what Fidelity has to offer along market indexed funds, large growth and large blend funds. When comparing their version of S&P500 Index fund (FXAIX) to Fidelity Growth Discovery Fund (FDSVX) and Fidelity Contra Fund (FCNTX), each of which are a large blend and a large growth fund respectively, over 10 years, the growth funds outperform the S&P Index. BUT...
The chart Fidelity graphs performance of these three funds do not take into account expense ratios. The S&P fund is minimal, .015%, as it is unmanaged. The other two however have a .75% expense ratio tacked onto them. I can't find a calculator that will allow plugging in expense ratios. I even tried to find a drawdown calculator that would allow me to enter a percentage of the account balance as a draw, in this case .74%, but can't locate one. So I have to 'guess' as best I can. And by guessing, it seems to me that, while the S&P fund has grown from their hypothetical $10,000 initial investment to $34,646 over the past 10 years and the the other two have grown to $37,410 and $39,132, (both with .74% expense ratios) that those expense ratios pretty much wipe out the difference between their performance and the S&P fund. Am I understanding this right?
If so, I might just as well put the cash into the S&P500 Index fund and let 'er ride for the next 8.5 years while I wait for age 70.5 and have take RMD's.

Assuming that's the case, how to put this pot of money back into circulation? Dump it all at once now? Wait and see? Average into it over time? If over time, what time frame?

Thanks for all the advice and opinions. You guys are great!

 

[kgtest]

Dump it all in at once. Sorta like jumping into a cold lake. It'll feel similar once you get past the waistline



I just put the money in as soon as it's available to put into the market. You could try and time it to one of the worst 20 days of the year, but you could be waiting and miss it.


All or nothin. Or All in.

 

[HI Bill]

how to put this pot of money back into circulation? Dump it all at once now? Wait and see? Average into it over time? If over time, what time frame?

I sure wish someone had a working crystal ball. Would make things SO much easier! I would be very hesitant to go all in now, given the market (unless you have insider info that say's we've bottomed out).

I might take the approach: Every time the ETF fund you want to invest in falls 2% on a single day, invest a chunk (say $10-50K). Kind of like dollar cost averaging. Given the previous market run, and the current political instability, it might be better to wait...or not. I'm guessing that after the balance of power shifts in January, the market will continue to decline, but I'm usually wrong in predicting the market's moves!

 

[RunningBum]

Assuming that's the case, how to put this pot of money back into circulation? Dump it all at once now? Wait and see? Average into it over time? If over time, what time frame?

If you hadn't moved your account over, would you have sold all your holdings and wait or average it back in? If not, why wouldn't you just reinvest it all now?

 

[Another Reader]

The graphs are almost always after expenses.

I'm fond of the minimum expense S&P Index and Total Market Index Funds at Fidelity. The zero expense total market fund is new. My bond exposure is over at Vanguard with the "W" funds - Wellington and Wellesley. I think the management expense is justified there. If you want to add complexity, add some sector funds. I have some managed funds at T Rowe Price that have done well, if you are willing to pay for management.

If you want to stick with the basics, the very inexpensive index funds at Fidelity should satisfy your needs. You may want to consider their no-commission ETF's as well.

If it were me, I would average in. Market volatility and possible overvaluation in the face of deteriorating economic conditions would scare me a bit.

 

[flintnational]

If you hadn't moved your account over, would you have sold all your holdings and wait or average it back in? If not, why wouldn't you just reinvest it all now?

+1 Generally when you move funds, they should be invested per your prior AA. Moving funds should not trigger an "all at once or dollar cost decision".

 

[stephenson]

Skipro,

I am appalled at what Fidelity did.

I would call them on this .... don't let it slide ... I believe what they did was at least unfair, maybe unethical ... perhaps even counter to norms.

 

[skipro33]

If you hadn't moved your account over, would you have sold all your holdings and wait or average it back in? If not, why wouldn't you just reinvest it all now?

Well, no. Most likely I would have been satisfied with my investments outside the managed block of funds I would have selected on my own. It was only managed for 18 months before I pulled the plug on them and I had it in a self managed 60/40 split. I only went to the managed fund in order to be able to forget about investing and have more play time. Less worry so to speak, pay someone to worry for me. But they dropped that ball big time. I think they did a bad job assessing my risk; both me personally and my entire net worth in relation to this one IRA. I think the manager treated me as some dumb yokel who he could spend 5 minutes with, sign up to a vanilla 60/40 account that a computer model automatically did the buy/sell to keep it balanced. I don't think a single real live human looked at what my IRA was invested in and the manager I spoke with was as surprised as I was. Here's something he let slip; he told me he's backed up with at least a week's worth of phone calls of nervous investors right now who also have managed funds. I told him it's no surprise to me, if others are able to watch the evening news, compare, right from their own Fidelity logon page to unmanaged 60/40 funds, that they too would be confused as to what the hell is going on.

His explaination was smoke and mirrors, telling me 60/40 depends a lot on domestic vs international, et al, blah blah blah. Sure it does, but to the tune of a 5% difference between the blend they managed my IRA at and every other blended fund they offer themselves? I had him sweating. After an hour on Friday and another hour yesterday, Tuesday, on the phone with me, he said he had to move on to other calls. I have since called their 800 number several times to figure out how to utilize their website with my account. They are helpful on the phone. I did make one mistake; I told the fella I wanted to authorize my account with my wife's so we each could manage the others. He immediately blocked my wife's password as it was not documented that I should have it and he now knew I did. Now I gotta get DW to call in and get her password reset and authorize me to log in under her password to manage her IRA for her. (We are old school; I take care of the money, she cooks and cleans. Ha!)

 

[skipro33]

The graphs are almost always after expenses.

I assumed that at first, but after being burned, I decided to call their 800 # and ask. The guy who answered my call stepped through to the exact same page I was on and he confirmed; the performance graph does not include the expenses being deducted each year. I asked him the same question in 3 or 4 different ways to be sure we were understanding each other. I finally asked him how I could compare funds performance if I couldn't isolate fees and expenses from the mix. He told me about a website, FINRA.org, that would outline for me. It didn't. Or at least I couldn't make it show me a fund's performance over time with the expenses factored into it.

So I looked for a drawdown calculator. Most folks here take their draws as a percentage, such as a 4% draw, from their accounts, not a fixed dollar amount. But the only drawdown calculators I could find are for fixed dollar amounts of draw, not percentages of the account balance. Anyone have a link to one? Even FireCalc is based on a fixed dollar amount of draw and not a percentage. I don't understand how anyone can know their account is 100% funded if they draw on a percentage and not a fixed amount if they are trusting FireCalc to inform them of their risk to retire at any given point.

 

[gwraigty]

I did make one mistake; I told the fella I wanted to authorize my account with my wife's so we each could manage the others. He immediately blocked my wife's password as it was not documented that I should have it and he now knew I did. Now I gotta get DW to call in and get her password reset and authorize me to log in under her password to manage her IRA for her. (We are old school; I take care of the money, she cooks and cleans. Ha!)

We are somewhat old school, except I take care of the money and cook and clean. Fidelity has POA forms that you can fill out which will authorize you to view and transact on her IRA with your log in and vice versa.

 

[skipro33]

+1 Generally when you move funds, they should be invested per your prior AA. Moving funds should not trigger an "all at once or dollar cost decision".

I agree. But pulling the plug on a managed account doesn't allow for incremental movement. It's a burn one and phoenix into a new account deal.

My AA is being reanalyzed as I now have a better understanding why I can. When I was working, I had no clue how much of this account I might need. Now retired 6 years, I see it's a very comfortable buffer for unseen disaster or medical emergencies. If not used for that, then a heck of a time when I have the balls to splurge on ourselves.

 

[skipro33]

We are somewhat old school, except I take care of the money and cook and clean. Fidelity has POA forms that you can fill out which will authorize you to view and transact on her IRA with your log in and vice versa.

I know that now. Ha! But now we have to drive down to their office to sign forms.

 

[skipro33]

Skipro,

I am appalled at what Fidelity did.

I would call them on this .... don't let it slide ... I believe what they did was at least unfair, maybe unethical ... perhaps even counter to norms.

I am and I did.
An hour on the phone to the manager at my local branch on Friday and another hour yesterday. He knows my mind and I was respectful enough to give him the chance to show me the error of my understanding. He failed. Either because I'm just not intelligent enough to comprehend his explanation, or he was blowing smoke.

I 'm considering moving out of Fidelity. We have an independent investment firm; Hansen McClain Advisors. They even host a talk show on investing every Saturday on the local news radio channel here in Sacramento; KFBK. You can listen to them here;
https://www.hansonmcclain.com/radio/

I met with them prior to my retirement as I was with Great West at the time and they didn't have a local office. But before I retired, GW went away and my employer moved my accounts to Fidelity.

I consider moving because I don't think Fidelity deserves to hold my funds after this and especially without an explanation that I can even somewhat understand.

 

[Dtail]

I assumed that at first, but after being burned, I decided to call their 800 # and ask. The guy who answered my call stepped through to the exact same page I was on and he confirmed; the performance graph does not include the expenses being deducted each year. I asked him the same question in 3 or 4 different ways to be sure we were understanding each other. I finally asked him how I could compare funds performance if I couldn't isolate fees and expenses from the mix. He told me about a website, FINRA.org, that would outline for me. It didn't. Or at least I couldn't make it show me a fund's performance over time with the expenses factored into it.

So I looked for a drawdown calculator. Most folks here take their draws as a percentage, such as a 4% draw, from their accounts, not a fixed dollar amount. But the only drawdown calculators I could find are for fixed dollar amounts of draw, not percentages of the account balance. Anyone have a link to one? Even FireCalc is based on a fixed dollar amount of draw and not a percentage. I don't understand how anyone can know their account is 100% funded if they draw on a percentage and not a fixed amount if they are trusting FireCalc to inform them of their risk to retire at any given point.

Bolded - Effectively if you choose "% of remaining portfolio" in Firecalc, you are using a percentage drawdown concept.
Even though you choose the expense input on the first page of let's say 40,000 for a 1mm portfolio. Thus you are effectively choosing a starting % of 4%. Then using the above choice I stated, Firecalc is calculating your results based on using 4% of the portfolio each year using the historical market results.
One last thing you need to choose is how much of each year's withdrawal (stated in % terms) you wish to cover in every subsequent year, thus effectively putting in a spending floor.

 

[Rianne]

VG charges .3%. That's $4500/yr on 1.5M. We will not touch that until 2023. We haven't pulled the plug yet, but are seriously considering. Looking back at 2008, if we had a VG MM, he would have put us in stock index funds long before we did ourselves, simply due to fear. We'd have double what we have now.

I'd appreciate feedback on hiring VG, is the fee worth it?

 

[JeKa]

And if Fidelity doesn't have the low cost funds you like, check out Vanguard. My expense ratio is 0.10 percent.

 

[Oakster]

Since you're 62, and have roughly 8 years until your RMDs (~9 until your wife's), AND you don't need to touch your investments for your annual spend, I think it's entirely reasonable to do what you're suggesting! Why pay the extra percent for likely no gain? With your investment horizon, emergency fund, and lack of need to tap the funds anytime within the next 8 years, I'd go a bit less conservative (70/30, 80/20, or even 90/10), as long as you don't mind the bumpy ride! Good luck!

Exactly, I would go less conservative myself and let it grow, if you don't need it. Make sure to keep enough in cd's bonds or money markets to cover about 3 years of living expenses. I like the idea of a cd ladder for that. Then, you can afford to let it ride if the market is down a bit.

 

[Tracer]

Fidelity has managed my portfolio for 11 years. I have 2 accounts. One IRA and one non-IRA. The IRA is in a slightly more aggressive portfolio than the non-IRA. I've averaged about 7% and 5.5% respectively after fees. These portfolios are designed for the long term, 5 years and beyond.

 

[jasg]

Most folks here take their draws as a percentage, such as a 4% draw, from their accounts, not a fixed dollar amount.

A 4% withdrawal is a common approach (for reference, first year RMD is 3.65%).

I dropped my FA after I realized that his 1% fee was a big piece of an annual withdrawal (even more considering fund fees). If I am living on $40k from a $1M portfolio, why pay $10k for management?

I went with a 3-fund Vanguard portfolio, sleep well and pay fees of 0.07%.

 

[jazz4cash]

I’ve had great experiences self managing at Fido, but given OPs experience I would be heading to VG or Schwab. I still think the performance charts are net of expenses and the Fido rep’s answer was wrong. This reinforces my opinion that using a managed account is a crap shoot. Plus you have to monitor the account like a hawk. If a manager is choosing individual securities I can see some value and work product but not using a bunch of funds. Good luck with your transition, OP.

 

[Luck_Club]

Fidelity has managed my portfolio for 11 years. I have 2 accounts. One IRA and one non-IRA. The IRA is in a slightly more aggressive portfolio than the non-IRA. I've averaged about 7% and 5.5% respectively after fees. These portfolios are designed for the long term, 5 years and beyond.

when did they enter the market with their management?

Did they dump it all in at one time?
Did they unwind old positions to get you to a proper asset allocation?

If you were in all cash at this point in the cycle, how long would you take to reach full allocated asset balance?