61 y/o in Atlanta, mostly retired

[Lorenzo]

Hello forum! Yes, this is my first post.

I'm 61 and at least for the past 10-15 years have been in a position to modulate my workload/income. In other words, there have been times when I worked less in order to do other stuff, mostly involving travel. Even before the covid years I had been tapering off my workload, but for the past 3 years or so my work has decreased (not entirely within my control) to now just a trickle. So I guess I'm now retired and earn what might be called retirement gig income. My savings are in a 401k and a rollover IRA. No pension. I have some cash, and I have been paying expenses with that, though with interest rates so high it has not been the obvious choice of what source to tap for expenses. In other words, I have not dipped into my investments yet, but it is time. I don't want to entirely deplete my cash.

I have been using the same financial planner/advisor to manage that IRA on an AUM basis for decades, and I trust him and his "wealth management" firm completely. In designing and maintaining my portfolio, they have always seemed to follow the conservative, conventional wisdom. They do an annual rebalancing, and every once in a while they have dropped some fund and replaced it with another. I have often thought I could do that myself if I made the time, but I chose to spend my free time on other things. For many years the logic appealed to me that it is reasonably efficient to spend my time doing the paying work I am proficient in--per hour, my work pays well--and leaving the portfolio management to someone proficient in that. However, now that I am ramping down the hours--okay, okay, retired--that logic is less persuasive, and I have more time.

I recently had a long phone call with my advisor to discuss retirement more seriously than in previous conversations we've had, and among the things we discussed was the 4 percent rule-of-thumb withdrawal rate. Sure, they can help with a detailed plan and so forth, but it seems to me that no matter what the details of the plan may be it will still work out to a ballpark withdrawal rate of 4 percent per year. Like most AUM fees, my advisor's is about one percent. After the phone call with my advisor, I started thinking about that 4 percent from another perspective. If my advisor receives one percent, and I therefore receive the remaining 3 percent, my advisor is effectively on my payroll earning 25 percent of my gross retirement income. Just supposing I have a $1M portfolio, it feels as though I'm going to be paying someone $10,000 a year to "run the business" when my "salary" is only $30,000. Is it silly to look at it that way? After all, my advisor is still earning one percent of my assets under management as has always been the case.

I am considering the possibility of taking a more hands-on approach. Could I hire an advisor/planner on an hourly fee basis to plan how to turn my savings into a cash income stream and otherwise make sure my ducks are in a row for, say, the next year, and then repeat the process annually (or at whatever interval I want)? I have contacted a few advisors whose names I got from acquaintances, but so far, none of them work on an hourly fee basis--everyone seems to prefer the AUM fee model.

Thoughts?

 

[bloom2708]

Welcome to your "eye opening" nirvana. You have found your fees.

Now, be sure not to look and see how big your portfolio would have been if you hadn't paid that "just 1%" for 40 years. That is a tearful eye opener.

Instead of $1 million you might have 2.5 or 3 million.

Fees, the silent killer. Silent but deadly. But "just 1% or 1.5%".

A 25% haircut is tough to swallow. Most here and at Bogleheads.org manage their money themselves with just a few index funds with super low expense ratios.

Personally, I spent ~2 years at Edward Jones and saw the proverbial light quite quickly with the hidden and not hidden fees. The loads and 12b-1 fees and high expense ratios.

Painful. So much wealth is consumed and transferred to "wealth management" companies. It should be against the law. Just 1% don't cha know. Or just 2% or more.

At this point, all you can do is move to a Vanguard or Fidelity, cut your expenses to .05% to .09% ish and try to maximize your strategy.

Welcome and good luck on your journey of discovery.

 

[Lorenzo]

...
Now, be sure not to look and see how big your portfolio would have been if you hadn't paid that "just 1%" for 40 years. That is a tearful eye opener.

Well, I don't really look at it that way, though I suspect many here do. First, 40 years ago there were not the same tools available: no internet to buy and sell assets with the click of a mouse, no internet forums like this to pick others' brains, and the books on investing I found were tedious to read--just not what I wanted to do. I was once a busy professional and made the decision to spend the relatively little free time I had earlier in my career doing other things, knowing I was paying someone one percent to manage my money and what that would cost me down the road in forgone returns. But as I said, the less busy I have become, the less this logic seems to make sense. I hadn't considered what the picture would look like once I retired, and how that one percent could effectively be viewed as 25 percent of what is available for me to live on each year for 30 years.

 

[DuluthGA]

I believe you’re correct to look at the future impact v/s the past. What’s done is done. I also live in Atlanta area, retired at 60 and manage my own money. I had to bypass potential upside for the ability to sleep at night. I’m probably 50/50 cash (cash, CD’s, T-bills & individual bonds) and stock mutual funds. I don’t plan to ever need to the mutual funds so I don’t sweat their up and downs. At this point in life it’s about less stress, anxiety and sleeping well. What makes you achieve those? Only you can decide.

 

[Surewhitey]

We are always making marginal improvements now that most of the big ones are (mostly) done. You can always improve your return by tweaking. I'd look at simplicity as a start, say VTI or VOO and some say mixing in a little bond fund and a small cap value fund. It could be this simple.

I'm looking at moving an old HSA this week, personally. Optum only pays .01% on balances and adds in fees as you get to lower balances (not to mention investment fees for the funds offered) whereas FIDO pays 4.96% on balances & no future fees... Again small improvements that cuts out an additional account for simplifying.

Lots of good advice here if you want to share more details.

 

[LateToFIRE]

Lorenzo, I have similar thinking to what you're thinking, about same age, etc. For the past 30 years I've used an advisor at the rate of ~1% AUM fees. I didn't keep all my funds with them (thankfully) but the fees have added up over time as the portfolio has grown. In the beginning, I was not very knowledgeable about investing, and DW was even less so. What we needed way back then was someone we could hand our savings over to whom we could trust, so that we could focus on making money. The advisor also served as a kind of gatekeeper - we never touched those savings in part because we'd have to go thru the advisor who'd probably talk us out of whatever crazy speculative investment we might have been lured into. Our advisor has been very useful over the years in various special situations, but going forward, I don't see the utility.

While I was working (up until a few weeks ago) in the kind of career where intensity can fluctuate between 50-80 hours a week, I had no energy and little interest in managing my own funds. Now, I've got plenty of time, and exactly as you put it, the thought of paying away ~1% for convenience is simply excruciating. Not gonna do that any longer. And with the size of portfolio we'll be aggregating (after some assets sales and combining accounts across different brokers), fees could be $50-60K per year. That is pure craziness.

If you've got a portfolio of $1M or more, there is a good chance that one of the majors (Fidelity/Vanguard/Schwab) would be willing to put you in their private client business where you can get personalized advice for "free" or rather for no-fee. They won't manage your funds without a fee, but they can guide you with suggestions, recommendations, etc. Now, of course, they'll try to sell you stuff like annuities, LTC insurance, etc. But, you know what - my advisor was always tryin to do that anyhow, so no difference, other than NO MORE FEES.

I've learned a lot from observing how my funds have been managed over the years. And in managing some of my other funds that were not under management, and educating myself on retirement planning, I feel I've developed enough of an understanding of investment theory, along with a solid long-term investor temperament that I'll be ok on my own. The temperament part is probably the most important - having the patience and fortitude to ride out cycles without panicking, and remaining calm and consistent in strategy despite all the media hysteria (good and bad).

 

[Out-to-Lunch]

After the phone call with my advisor, I started thinking about that 4 percent from another perspective. If my advisor receives one percent, and I therefore receive the remaining 3 percent, my advisor is effectively on my payroll earning 25 percent of my gross retirement income. Just supposing I have a $1M portfolio, it feels as though I'm going to be paying someone $10,000 a year to "run the business" when my "salary" is only $30,000. Is it silly to look at it that way?

Not silly at all. Rather, you have hit the nail on the head.

 

[Lorenzo]

Thanks to all who replied, and please know that I read every reply. I have also started reading existing threads, of course. In particular, I noted a recent thread on withdrawal strategy, and I suppose that's the major issue I am pondering: If I'm already retired or at least semi-retired, how do I turn my investments into an income stream?

...
Lots of good advice here if you want to share more details.

Okay, see below!

...
If you've got a portfolio of $1M or more, there is a good chance that one of the majors (Fidelity/Vanguard/Schwab) would be willing to put you in their private client business where you can get personalized advice for "free" or rather for no-fee. They won't manage your funds without a fee, but they can guide you with suggestions, recommendations, etc. Now, of course, they'll try to sell you stuff like annuities, LTC insurance, etc. But, you know what - my advisor was always tryin to do that anyhow, so no difference, other than NO MORE FEES....

So, my rollover tIRA that forms the bulk of my investment portfolio and a much smaller Roth are managed by the independent advisor using Schwab to hold the accounts. The 401k is with Voya through my employer. I suppose that once I separate from that employer--at present, I continue to do some amount of work and they continue to treat me as a full-time employee--I should roll over the 401k either into the same tIRA at Schwab or something else, but Voya is not the place for it to remain, am I right? I should also mention I have an individual (not advisor-managed) account at Schwab, in which I have some individual stocks that I bought when I was in my 20s just for fun, and a couple of those companies grew into household names. Sadly, I only invested in individual stocks for fun and never more than I was willing to lose--treating it like gambling in Vegas--so although those stocks make up an impressive little chunk of my total they did not make me wealthy.

In my initial post I mentioned trying to hire an advisor on an hourly fee basis to look at my portfolio and, if necessary, put it into a state from which I can make withdrawals. For all I know, my present portfolio is fine. Maybe all I need to do for now is fire (no pun intended) my advisor, leave everything at Schwab, and start withdrawing as needed? (Almost everything is at Schwab--I have a savings account with Ally that pays something like 4.35% last I looked.)

The Schwab tIRA and Roth accounts managed by my advisor are invested in roughly 75% equity ETFs (typical large cap, small cap, mid-cap split) and 15% in a bond ETF, about 5% in a TIP ETF, and 5% in a money market fund (as of recently). I really hadn't looked at my account for a long time until now, and I'm a little surprised at how equity-heavy I am, considering I have been discussing my retirement plans with my advisor for the past couple of years. Speaking as a noob here, considering that I am semi-retired and my low risk tolerance, I would have thought the advisor would have ratcheted me down to something like a 60/40 stock/bond ratio by now.

@LateToFIRE, you mention that a Schwab advisor will probably try to sell me an annuity, etc. I get the impression that folks on this board are not fond of annuities. Is that so, and why? I would think a dependable income stream would finally help me get some sleep at night. My present advisor is not fond of annuities, either, as it reduces my flexibility, he says. To his credit, I believe he has me invested mainly in low-cost ETFs, and as a fiduciary, he doesn't earn a commission on anything he invests me in.

Other details: My wife is younger than me, still employed, and will remain so for maybe 4-5 more years until she can no longer stand having me travel the world without her. Having gotten a late start in making a career, she will have only a minimal teacher's pension. At least I will have her health insurance benefit for a few years.

 

[RetiredHappy]

I do have about 15% of my investments in 2 term deferred fixed income annuities. They work for us. One started paying when I turned 60 for 10 years, the second will start when I am 70 for 15 years. Not counting the principal, the actual rate of return is over 5%. It allows us to be more aggressive with our investments.

 

[pb4uski]

Thanks to all who replied, and please know that I read every reply. I have also started reading existing threads, of course. In particular, I noted a recent thread on withdrawal strategy, and I suppose that's the major issue I am pondering: If I'm already retired or at least semi-retired, how do I turn my investments into an income stream? ...

IMO too many retirees get too hung up on creating an income stream or avoid spending principal as if they saved all this money to hoard it rather than for their retirement.

Money is fungible. Even investments in stocks that don't pay a dividend can create cash flow for spending by just selling a little each year. An aggressive investor could have everything in Berkshire Hathaway and then just sell shares as needed for cash flow (I'm not recommending that, just pointing out that it could be done).

If you want income you can use some funds to create a bond ladder that would produce income. I have a portfolio of 40 individual bonds and brokered CDs that yields about 5.2%.

Or a portfolio of high-quality preferred stocks from companies like Allstate, Bank of America, J.P. Morgan Chase, MetLife, Morgan Stanley, State Street Corp, Charles Schwab, Goldman Sachs, Hartford, Wells Fargo and the like. I have portfolio of 30 preferred stocks that yield 6.8% on average.

 

[DrRoy]

I started thinking about that 4 percent from another perspective. If my advisor receives one percent, and I therefore receive the remaining 3 percent, my advisor is effectively on my payroll earning 25 percent of my gross retirement income.

Thoughts?

That is exactly how you should look at it, and it is ridiculous. Pay yourself to do it. It's great $/hr.

 

[all4j]

1st, there may be a few approaches to finding a fee only advisor. The Napfa (National Assoc of Personal Financial Advisors) can provide you with some based on your zip, etc. Resources for references might be who does your taxes, wills, insurance, banking, even Nextdoor app. Sounds like a good idea to engage one.

Personally, I’ve changed my view on using an advisor. LateToFIRE had a really good post. As with many things, what works for one may not for another. What worked in the past may not be good going forward. I’ll pose some thoughts on what you might want to consider; much of which has come to me from listening to the experience & perspective of friends. There are still missing pieces from your situation…risk tolerance, goals, etc.

Regarding paying someone $10k to run the business…does the $30k a year meet your wants? Can you do better? Someone posted you could have $3M by now; same logic says perhaps $300k as well. If you can do as well or better, do you want to? On the one end of the spectrum, a basic 2 or 3 fund portfolio may meet all your wants. Then, it will take minimal time from you. But layer on strategy for taking RMDs, when to start social security, minimize taxes, et al. I have several friends who are quite capable, but much prefer someone else, with more objectivity, doing it. They see it as similar to paying someone to cut their grass, change their oil, etc – they have other things they prefer doing.

We don’t like to think of some cases, but also consider continuity for when you will not be in a position to handle things. Many have documents for what to do when they die, but don’t forget incapacitation from cognitive decline, stroke, etc. Would your wife need or want someone else to manage things?

From my limited perspective, I’d say perhaps your best path forward is to get a list of a couple of fee only advisors, interview them, use one & if pleased, migrate away from the AUM advisor. Whether you continue to rely on a fee based advisor could be decided once you get a feel for how you are doing.

Probably easier for you at this point in life than before or later.

Lastly, regarding annuities…they are not all the same. A SPIA or MYGA have their place in several situations. There are many, many other varieties that are mostly hard to understand, have high fees, limited choices etc. Some have limited niches, but most not so much. I’ve known them to appeal to many of the risk averse types &/or some of the ‘game over’ folks.

Good luck – sounds like you’re getting a good handle on things

 

[Lorenzo]

1st, there may be a few approaches to finding a fee only advisor. The Napfa (National Assoc of Personal Financial Advisors) can provide you with some based on your zip, etc. Resources for references might be who does your taxes, wills, insurance, banking, even Nextdoor app. Sounds like a good idea to engage one.

Thanks. NAPFA sounds like a good suggestion--I'll contact them. And I just dropped off my tax info at my tax preparer's office this morning, yet it didn't occur to me to ask if they knew of an advisor who might work on an hourly fee basis. I will ask. I asked some of my lawyer friends if they knew of an advisor who might charge hourly, and some said they feel in the same boat I am: they have a 1% AUM arrangement that they feel is too steep and would like to find an hourly advisor.

Regarding paying someone $10k to run the business…does the $30k a year meet your wants? Can you do better? Someone posted you could have $3M by now; same logic says perhaps $300k as well. If you can do as well or better, do you want to? On the one end of the spectrum, a basic 2 or 3 fund portfolio may meet all your wants. Then, it will take minimal time from you. But layer on strategy for taking RMDs, when to start social security, minimize taxes, et al. I have several friends who are quite capable, but much prefer someone else, with more objectivity, doing it. They see it as similar to paying someone to cut their grass, change their oil, etc – they have other things they prefer doing.

Well said. Looking back, I really don't have regrets. My advisor charged the same percentage as most such advisors charge, and I believe their work quality was at least average, as was (is) their customer service/responsiveness. I could call my advisor at any time and run something by him without any additional fee. I have no idea if I could have come out ahead by having done it all myself. It would certainly have depended on how many years ago I started doing it myself. It would have been near-impossible 40 years ago, before the Internet, and even just 20 years ago there wasn't that much online yet. I did not wish to spend my Friday nights watching Wall Street Week or my evenings reading investing magazines and books. And then there is the matter of self-control you referred to. Would I have stuck to the plan and not sold in a panic during the dips and bought during the frenzies? I don't know. My advisor kept me focused on the long term, advised me on the few occasions I had a specific financial issue arise, and kept my portfolio balanced at a reasonable allocation for how I characterized my risk tolerance. I don't cut my grass OR change my oil, and although I have been poring over this forum for the past few days I don't wish to turn investing into one of my hobbies. I do believe having someone to turn to once a year or so for strategies on tax, social security, RMDs, etc., would make sense for me. And although my wife is younger and could pick up the slack when get too feeble, she doesn't enjoy financial matters any more than I do.

Lastly, regarding annuities…they are not all the same. A SPIA or MYGA have their place in several situations. There are many, many other varieties that are mostly hard to understand, have high fees, limited choices etc. Some have limited niches, but most not so much. I’ve known them to appeal to many of the risk averse types &/or some of the ‘game over’ folks.

I certainly haven't ruled out an annuity yet. (I just googled "SPIA vs MYGA.") As someone mentioned in a reply above, an annuity could be useful to us more risk-averse folks by providing a backstop, so we can be more aggressive with our remaining investments. I really envy people with traditional pensions; they must sleep well at night. I get the impression many of the FIRE folks lean toward what, from my perspective, I would call an aggressive investing style. FIRECalc uses a 75/25 stock to bond ratio as a default. Maybe as a young retiree--my own portfolio is currently 75% equities--but I can't imagine a retiree keeping that ratio for 30 years.

Good luck – sounds like you’re getting a good handle on things

Thanks, man!


Incidentally, I came across the Intelligent Income service from Schwab. I see it has been discussed in a few threads, but not many. It claims to be able to not just act as a robo-advisor but, for retirees, automate the process of creating an income stream from a portfolio, right down to choices for how you would like your money sent to your spending account. Maybe this in combination with consulting a human advisor for a few hours every few years?

 

[flyoverstate]

As I approach retirement (63yo, retiring within a year), I have more conversations with peers about retirement finances. My jaw drops when they tell me how much they pay their advisors. We will spend less yearly on all of our vacations than some of my friends spend on advisors each year, chasing some nebulous killer return that never quite pans out. We are all basically at the mercy of the stock/bond market overall returns, unless we have inside information.

It isn't that hard, especially now that higher interest rates on bonds and CDs have returned. You can get 5% all year long in brokered CDs through Fidelity, Schwab, etc. If you take out 4%, voila, you will have a happy retirement, and that 1% cushion will build into a rainy day fund instead of lining the pocket of some guy who got 'C's in his college finance courses. And you can sleep well knowing that if your FDIC-insured CDs don't pay off because the FDIC is insolvent, the world will be so screwed it won't really matter anyway.

 

[Route246]

I agree with Bloom but I feel it is a difficult pill to swallow for those who went that route and I'm a little sensitive to that.

I listened to Bob Brinker when he was on local AM radio on weekends here and I followed the low expense ratio, diversified index fund mantra and it has served me well. His $160/year newsletter was a bargain in retrospect. I subscribed until the end last year out of respect and appreciation for Bob's advice.

Welcome to your "eye opening" nirvana. You have found your fees.

Now, be sure not to look and see how big your portfolio would have been if you hadn't paid that "just 1%" for 40 years. That is a tearful eye opener.

Instead of $1 million you might have 2.5 or 3 million.

Fees, the silent killer. Silent but deadly. But "just 1% or 1.5%".

A 25% haircut is tough to swallow. Most here and at Bogleheads.org manage their money themselves with just a few index funds with super low expense ratios.

Personally, I spent ~2 years at Edward Jones and saw the proverbial light quite quickly with the hidden and not hidden fees. The loads and 12b-1 fees and high expense ratios.

Painful. So much wealth is consumed and transferred to "wealth management" companies. It should be against the law. Just 1% don't cha know. Or just 2% or more.

At this point, all you can do is move to a Vanguard or Fidelity, cut your expenses to .05% to .09% ish and try to maximize your strategy.

Welcome and good luck on your journey of discovery.

 

[Lorenzo]

As I approach retirement (63yo, retiring within a year), I have more conversations with peers about retirement finances. My jaw drops when they tell me how much they pay their advisors. We will spend less yearly on all of our vacations than some of my friends spend on advisors each year, chasing some nebulous killer return that never quite pans out. We are all basically at the mercy of the stock/bond market overall returns, unless we have inside information.

It isn't that hard, especially now that higher interest rates on bonds and CDs have returned. You can get 5% all year long in brokered CDs through Fidelity, Schwab, etc. If you take out 4%, voila, you will have a happy retirement, and that 1% cushion will build into a rainy day fund instead of lining the pocket of some guy who got 'C's in his college finance courses.

Did your peers say they were chasing some killer return? I never expected my advisor to enable me to "outperform the market," as they say. I just wanted to let someone else take the reins, keep me from exercising my worst impulses during the ups and downs of the market, and ensure my investment earns a return on par with what other individual investors are able to achieve. As for the last part, about earning market-rate returns, this has been made easier only in the last couple of decades by the advent of index funds and ETFs. It just wasn't that simple when you and I started out, which was much longer ago than that, and it has gradually gotten easier for individuals to take control of, and learn how to manage, their own investments. It's just that the availability of the tools and the information has improved so gradually that some of us weren't really paying attention--maybe we were concentrating on the career and not thinking about our 401k contributions or rollover IRAs--until we are on the cusp of retirement. And now that I see how much easier things are, I don't see a reason not to get more involved. But it has never been about returns.

As for CDs and such, this is why I still believe it could be beneficial to get some professional input from time to time. CD rates are great now, but there are also other options, including money market funds. I ask myself how lower interest rates in the future might affect a CD ladder strategy? When I was a kid in the 1970s, I believe my grandparents were enjoying their retirement income entirely from CDs, earning what must have been something like 8-10%. Maybe it was a no-brainer then. Now? I don't know.

 

[pb4uski]

...I ask myself how lower interest rates in the future might affect a CD ladder strategy?...

Well, lower rates will result in lower overall yields but with a ladder the impact of lower rates will eek in over time as bonds mature and new bonds are bought for the end of the ladder. So if you have a 10 year ladder then the changes in the 10 year will impact you the most as bonds mature and are replaced by a new 10-year bond.

 

[Lorenzo]

Well, lower rates will result in lower overall yields but with a ladder the impact of lower rates will eek in over time as bonds mature and new bonds are bought for the end of the ladder. So if you have a 10 year ladder then the changes in the 10 year will impact you the most as bonds mature and are replaced by a new 10-year bond.

Right, so (to ask some rhetorical questions) what does one do as it gets closer to the end of the 10 years, and how close to the end does one need to start thinking about adjusting their strategy? I was just using this as an example of things I think it might make sense to discuss with an advisor every, say, couple of years, to keep on top of it.

 

[Route246]

I think I understand your rhetorical question. The thought of uncertainty, changing interest rates, black swan world events, market corrections and personal financial surprises is very intimidating and the thought of having a financial advisor you "trust" is comforting and brings down the stress and uncertainty.

The problem is that if you're paying 1%-2% or more for "advice" you're giving away a very substantial amount of your compounding growth.

Just for fun I entered in $1M with 4% return minus 1% AUM and 2%AUM with 20 years of growth. The "Cost" columns are how much that 1% and 2% is costing over 20 years.

Even at 1% your 1M is 2.191M self-managed and 1.792M with 1% AUM deducted each year. Please correct my numbers if they are wrong. I spun this up in a few minutes and may have erred.

The compounding over time is what makes all of this so significant.

Year @ 4%	Year -1% @ 4%	Cost	Year -2% @ 4%	Cost
$1,040,000.00	$1,029,600.00	$10,400.00	$1,019,200.00	$20,800.00
$1,081,600.00	$1,060,076.16	$21,523.84	$1,038,768.64	$42,831.36
$1,124,864.00	$1,091,454.41	$33,409.59	$1,058,713.00	$66,151.00
$1,169,858.56	$1,123,761.47	$46,097.09	$1,079,040.29	$90,818.27
$1,216,652.90	$1,157,024.80	$59,628.10	$1,099,757.86	$116,895.04
$1,265,319.02	$1,191,272.74	$74,046.28	$1,120,873.21	$144,445.81
$1,315,931.78	$1,226,534.41	$89,397.37	$1,142,393.98	$173,537.80
$1,368,569.05	$1,262,839.83	$105,729.22	$1,164,327.94	$204,241.11
$1,423,311.81	$1,300,219.89	$123,091.92	$1,186,683.04	$236,628.77
$1,480,244.28	$1,338,706.40	$141,537.89	$1,209,467.35	$270,776.93
$1,539,454.06	$1,378,332.11	$161,121.95	$1,232,689.13	$306,764.93
$1,601,032.22	$1,419,130.74	$181,901.48	$1,256,356.76	$344,675.46
$1,665,073.51	$1,461,137.01	$203,936.50	$1,280,478.81	$384,594.70
$1,731,676.45	$1,504,386.66	$227,289.78	$1,305,064.00	$426,612.45
$1,800,943.51	$1,548,916.51	$252,027.00	$1,330,121.23	$470,822.28
$1,872,981.25	$1,594,764.44	$278,216.81	$1,355,659.56	$517,321.69
$1,947,900.50	$1,641,969.46	$305,931.03	$1,381,688.22	$566,212.28
$2,025,816.52	$1,690,571.76	$335,244.76	$1,408,216.63	$617,599.88
$2,106,849.18	$1,740,612.68	$366,236.49	$1,435,254.39	$671,594.78
$2,191,123.14	$1,792,134.82	$398,988.32	$1,462,811.28	$728,311.87

Right, so (to ask some rhetorical questions) what does one do as it gets closer to the end of the 10 years, and how close to the end does one need to start thinking about adjusting their strategy? I was just using this as an example of things I think it might make sense to discuss with an advisor every, say, couple of years, to keep on top of it.

 

[pb4uski]

Right, so (to ask some rhetorical questions) what does one do as it gets closer to the end of the 10 years...

You never really get to the end of the 10 years, because each year one of your 10 bonds matures and to the extent that you don't need the maturity proceeds for spending, you reinvest the maturity proceeds in a new 10-year bond. Immediately after that investment, you have 10 bonds that each mature annually for 10 years. Rinse and repeat once a year when a bond matures.

So unless you need some money from maturity proceeds for spending then the ladder just rolls with each maturity with a new 10-year bond replacing the maturing bond.

If you need part of the maturity proceeds for spending then the amount of the new 10-year bond is lower by the amount of the withdrawal.

 

[Lorenzo]

I think I understand your rhetorical question. The thought of uncertainty, changing interest rates, black swan world events, market corrections and personal financial surprises is very intimidating and the thought of having a financial advisor you "trust" is comforting and brings down the stress and uncertainty.

The problem is that if you're paying 1%-2% or more for "advice" you're giving away a very substantial amount of your compounding growth.

Just for fun I entered in $1M with 4% return minus 1% AUM and 2%AUM with 20 years of growth. The "Cost" columns are how much that 1% and 2% is costing over 20 years.

Even at 1% your 1M is 2.191M self-managed and 1.792M with 1% AUM deducted each year. Please correct my numbers if they are wrong. I spun this up in a few minutes and may have erred.

The compounding over time is what makes all of this so significant....

Thanks, but the math is not news to me. I have understood what the tradeoff was in cold hard dollar figures for many years. I took accounting and economics and all that in college, and I get it. As I said in my original post, I'm now considering switching from an advisor who charges a percentage of AUM to one who charges an hourly fee, as I believe that may fit this next phase of my life better.

 

[Lorenzo]

You never really get to the end of the 10 years, because each year one of your 10 bonds matures and to the extent that you don't need the maturity proceeds for spending, you reinvest the maturity proceeds in a new 10-year bond. Immediately after that investment, you have 10 bonds that each mature annually for 10 years. Rinse and repeat once a year when a bond matures.

So unless you need some money from maturity proceeds for spending then the ladder just rolls with each maturity with a new 10-year bond replacing the maturing bond.

If you need part of the maturity proceeds for spending then the amount of the new 10-year bond is lower by the amount of the withdrawal.

Unless I misunderstand something, that works so long as interest rates continue to make CDs attractive. Only in the past year or two does it seem everyone is talking seriously about CDs. If interest rates start a downward trend, the question becomes at what point do I do something other than reinvest in a new CD? Would I not like to have someone tap me on the shoulder and say now is the time to start considering a different retirement investment strategy, and here are some options?

 

[pb4uski]

Yes, if rates decline and stabilize the ladder yield will eventually converge to those lower rates but the same would be true for other fixed income instruments.

Most FAs won't put you in the next big thing... they are fairly cookie cutter since they make money no matter what. You'll learn more here but there are finds to be had. There was a short period of time in 2019 where credit union CDs were particularly attractive. Same thing for i-bonds. I just closed out a position today from April 2022 that yielded 6.45% from then until now and the 9.65% offered in the first 6 months was incredible. Opportunities come and go and it pays to be nimble.

 

[Route246]

Thanks, but the math is not news to me. I have understood what the tradeoff was in cold hard dollar figures for many years. I took accounting and economics and all that in college, and I get it. As I said in my original post, I'm now considering switching from an advisor who charges a percentage of AUM to one who charges an hourly fee, as I believe that may fit this next phase of my life better.

Sorry, I wasn't trying to change your mind or anyone else's mind. What you or anyone else does with money is your own business. When someone writes here or any other forum publicly I assume that they are seeking opinions. That is how I operate. I would never say my method is better than any other method, in the end your score is all that matters and how you got there is your own business. My method is not for the risk-averse as it involves diversifying very heavily in equities. Over the last 45+ years that approach has served me quite well. Two times during that 45 year run I have suffered very painful asset depreciation for being overweighted in equities. It is not for the faint of heart.

The saving grace is I am committed to taking the long view. I never buy high and sell low. If I'm not dollar cost averaging I'm trying to buy on corrections and dips and I sell high when I need to raise cash and I usually take capital losses when all hope is lost or a stock, ETF or fund goes to zero or crashes mercilessly. Circuit City was one of my most famous losses, my wife never lets me forget that one. Easy come, easy go as they say. I used that catastrophic loss to offset some nice gains on other holdings but it was still a catastrophic loss.

 

[Lorenzo]

Folks, I should probably never have mentioned I used an AUM percentage fee-based advisor. It appears to have become a distraction from the question I was attempting to ask.

Forget about any previous advisors I might have mentioned and their fees I might have paid and the returns I might have forgone because of it. What I wanted to do in my first post on this forum was, in addition to introducing myself, ask if anyone had experience with an hourly fee-based advisor. It sounds like the vast majority on this forum absolutely hate the idea of someone assisting them with their finances. It seems coming here to ask about financial advisors is about as popular as coming to an automobile enthusiast forum to ask about mechanics. I don't repair my own car, or mow my own lawn, and so forth. Rather, I'm willing to pay someone (or maybe a robo-someone) what I deem a fair price for the job. The issue with my present advisor whom I should never have mentioned is that I don't believe I'm getting good value. They're doing an absolutely bog-standard job, and that's fine, because I'm risk-averse and content to invest in exactly whatever way conventional wisdom suggests I should, but I don't need to pay them a percentage quarterly for them to do nothing most quarters. I'd rather hire someone on an as-needed basis.

If I have specific questions in the future, I'll post them in the appropriate sub-forum, but I will be sure not to mention anything about financial advisors.