Hi all...glad to find this site but now disgusted with myself!

[Lisa99]

Hi everyone, I'm so THANKFUL to have found this site. I'm 48, my husband is 44 and until a couple of days ago (before finding this site) I was pretty happy with our progress to date on retirement.

The disgust comes from learning just how stupid I really am about investments. We have an account with Ameriprise that includes a VUL and a range of mutual funds. The funds that we're in have a "max front load %" ranging between 3.00 and 5.75 and net expense ratios of .99 to 1.96! Until starting to read this site I had no idea that was BAD!

Our current situation at a high level:
1. $250k in Ameriprise
2. $310k in two 401k accts (we max out each 401k every year)
3. 3 rental houses (with mortgages) that have positive cashflow and about $200k in equity
4. $100k in a real estate private partnership (2016 distribution)
4. Mortgage on personal home @ 5.3% - payoff in 2040 (just moved to Las Vegas so this is a new mortgage)
5. Annual investments (automatic) - maxed out 401k ($31k) + $24k/year into Ameriprise account - Total $55k/annually
6. ESPP - husband puts 15% of his income into company ESPP. Current balance is $24k
7. $70k in vested options
8. $40k cash in credit union acct (6 months living expenses)
9. No kids other than the furry kind

Expenses:
1. Use Quicken to budget and track income/expenses. Budgeted expenses are $84k/year (includes hefty travel, entertainment and dining categories).

Debt:
Four mortgages (3 investment properties, one personal home). No other debt. We pay cash for our cars and drive them for years and don't use credit cards.

We both work for megacorps and don't dislike our jobs. We are both in IT and work full-time from home so we have a lot of freedom to plan our days as we wish (salaries are about $250k combined). However, we hope to retire no later than when I'm 59 and DH is 55 so we have 11 years or less of investing.

At this time I don't have questions, but wanted to introduce myself. I've been using Firecalc for several years to run scenarios but the huge eye-opener was that our 'hands-off' approach to trusting Ameriprise is costing us a ton of money. Now that I've found you wonderful people I am going to methodically educate myself starting with the books recommendation. I'm sure in the coming days I'll have a ton of questions but I promise to use the Search engine to see if you've answered the question first.

....so, my brain already hurts thinking about the elephant I've chosen to eat, but dang it, it's our money and I WILL eat that elephant!!

 

[FinanceDude]

Start with the book list on here. Take small easy to manage steps at a time. You'll be fine............and welcome to the ER forum!

 

[MichaelB]

Hi Lisa99, and welcome to the forum. Give yourself some credit for saving and building a healthy portfolio. Acknowledging you can do better with your investments is a good way to get back on track – hopefully it will help you reach your early retirement goal.

 

[Carnage]

Agree with MB, you made some small errors, but overall looking good!

 

[REWahoo]

One of the first steps I'd recommend is move your funds out of Ameriprise. Do a search on the forum and you'll find a number of discussions regarding how costly doing business with them can be.

 

[FIREd]

Hi Lisa,

I once drank the Ameriprise Kool-Aid too (VULs, annuities in IRA, loaded / expensive / under-performing mutual funds, etc...). You learn from your mistakes and move on. Don't feel too bad about it. It was the price to pay for you to discover that you are the best steward of your own money.

Welcome!

 

[Lisa99]

Thanks everyone for your welcome and your encouraging words!

REWahoo - we intend to do just that, but I am appallingly lacking in how to invest correctly. I'm headed to the library to start checking out the investing books recommended here. I need to have a solid plan before making any money moves. Although I am stopping the monthly $2k transfer into Ameriprise immediately!

 

[bruce1]

You are doing way better then many. Welcome

 

[Lisa99]

Hi Firedreamer - I'm sorry to hear that! One of the things I don't have a clue about is how to close down our acct and VUL. I don't want tax implications, so that's one more thing to add to my research list.

But I'm at least several months away from being prepared to shut down Ameriprise. I'm in the education and planning stage right now and don't think making quick moves is a good idea (plus my husband is skeptical about this new interest of mine, so need a solid plan!)

 

[RonBoyd]

I am going to methodically educate myself starting with the books recommendation.

You could do a lot worse than to start here:

http://www.early-retirement.org/for...reading-list-with-a-military-twist-45562.html

In the meantime, don't beat yourself to death over this... it's no big thing. Devote all (and I mean all) of your efforts to going forward.

 

[Lisa99]

Thanks Ron for the encouragement. Last year the fees were 'only' $1400. But as the account grows the fees will just keep getting bigger and bigger.

The money paid to Ameriprise so far is a sunk cost and I'm not going to fret about it. I am, however, setting a goal that by December 31, 2010 I will have a solid grasp of intelligent investing and will be ready to execute on our FIRE plan.

 

[RonBoyd]

I am, however, setting a goal that by December 31, 2010 I will have a solid grasp of intelligent investing and will be ready to execute on our FIRE plan.

You go, girl!

 

[ziggy29]

I deleted my previous post because I see this is VUL and not a variable annuity, but part of it still applies: Learn as much as you can about "1035 exchanges" where your Ameriprise account is concerned. It's possible, depending on circumstances, that you can perform a "1035 exchange" into another low-fee insurance product such as a Vanguard variable annuity with no tax consequences. (If the cash value is lower than what you paid in, there's no taxable event, just withdraw the funds.)

Also if there are surrender charges you'll want to see how many years of lower fees in other mutual funds it would take to "break even" compared to leaving the money in the Ameriprise account -- the shorter the break-even point, the more it probably makes sense to eat the surrender charge and move on.

 

[FIREd]

Hi Firedreamer - I'm sorry to hear that! One of the things I don't have a clue about is how to close down our acct and VUL. I don't want tax implications, so that's one more thing to add to my research list.

But I'm at least several months away from being prepared to shut down Ameriprise. I'm in the education and planning stage right now and don't think making quick moves is a good idea (plus my husband is skeptical about this new interest of mine, so need a solid plan!)

I agree. You should educate yourself before making a move.

Closing your accounts is not terribly difficult, though they will hammer you with "account closure fees". Yep, they'll get you one way or the other.

Regarding the VUL:

1) If the cash value is less than the sum of all the premiums you paid into it, then you can take the money out tax free and penalty free. You may still have to pay some surrender charges to take the money out.

2) If the cash value is more than the sum of all the premiums you paid into it (unlikely), you will have to pay income tax + 10% penalty on the "gain" plus some surrender charges if applicable. In this case, it might be best to wait until the stock market plunges before cashing in your policy (so that the cash value gets lower than the sum of all your premiums, see 1.)

Regarding the other accounts, you will have to do a "transfer in kind" to avoid paying taxes for taxable accounts, meaning you just transfer your mutual funds to another institution without selling them. However, since your money is currently invested in sub-par mutual funds, you might be better off selling everything, pay the taxes and start fresh somewhere else.

IRAs can be rolled over very easily. Open an IRA somewhere else and let them handle the transfer of assets.

 

[Lisa99]

Thank you Ziggy for describing how I would calculate break-even on the decision to move or stay.

 

[ziggy29]

2) If the cash value is more than the sum of all the premiums you paid into it (unlikely), you will have to pay income tax + 10% penalty on the "gain" plus some surrender charges if applicable. In this case, it might be best to wait until the stock market plunges before cashing in your policy (so that the cash value gets lower than the sum of all your premiums, see 1.)

I could be wrong, but if there is a gain I think a 1035 exchange might also be an option here if they want to avoid taxes and penalties.

Having said that, like you I suspect the cash value is less than the premiums paid in, in which case there is no taxable event to pull out the cash value and the 1035 exchange is unnecessary.

 

[FIREd]

I could be wrong, but if there is a gain I think a 1035 exchange might also be an option here if they want to avoid taxes and penalties.

Having said that, like you I suspect the cash value is less than the premiums paid in, in which case there is no taxable event to pull out the cash value and the 1035 exchange is unnecessary.

That's correct, a 1035 exchange would be an option if Lisa really wanted to keep the annuity. Surrender charges could still apply.

 

[Lisa99]

Ziggy you're spot on.

Premiums paid $50,606
Cash value $40,929

...getting more disgusted by the moment

But it is inspiring me to take my education seriously! We work hard for our money and to see it vaporize is not making me a happy camper.

 

[Coderguy]

Thanks everyone for your welcome and your encouraging words!

REWahoo - we intend to do just that, but I am appallingly lacking in how to invest correctly. I'm headed to the library to start checking out the investing books recommended here. I need to have a solid plan before making any money moves. Although I am stopping the monthly $2k transfer into Ameriprise immediately!

As someone who only recently started the reading list myself; the recommended books will change your life! They're great. My favorite has been the four pillars book.

 

[ziggy29]

Ziggy you're spot on.

Premiums paid $50,606
Cash value $40,929

...getting more disgusted by the moment

But it is inspiring me to take my education seriously! We work hard for our money and to see it vaporize is not making me a happy camper.

Around here we call it "tuition" -- the cost of an education in sound financial planning and money management.

Sorry to hear your tuition is so high -- the good news, though, is that the difference between your income and expenses is high enough to recoup that tuition in a rather short time so it's only a minor speed bump. And if it prompted you to make better money moves for the rest of your life, there will be return on that investment.

 

[Lisa99]

Thanks for the pep talk Ziggy.

I just finished sending an email to our advisor stopping the automatic monthly withdrawals. The education begins in earnest!

 

[brewer12345]

Thanks for the pep talk Ziggy.

I just finished sending an email to our advisor stopping the automatic monthly withdrawals. The education begins in earnest!

Don't be shocked if you become the target of heavy-handed retention efforts. After all, one of their prized milch cows is starting to high tail it out of the back 40...

 

[ziggy29]

I just finished sending an email to our advisor stopping the automatic monthly withdrawals. The education begins in earnest!

Good for you. I'd follow up on this regularly to make sure it happened -- whether you get something in writing to the effect, you see the usual transfers out of your bank account being stopped, something on their web site indicating there are no scheduled transfers -- and not merely assume the advisor is going to act on it.

 

[Lisa99]

exactly my next step. I just got an OOO message that my advisor is on vacation until August 16. I'm calling his assistant so make sure the message was received.

 

[Lisa99]

Next Question - Which books MUST I buy rather than check out

I am frugal in some areas...books is one of those. I really don't like to buy if I can check them out from the library. However, my education is at stake, so which books from the list below are a MUST BUY? Note: I have no interest in buying individual stock and really don't care at this point how Wall Street works (or doesn't work). I need a solid education in how to achieve FIRE.

"The Intelligent Investor"
"The Four Pillars of Investing
"The Intelligent Asset Allocator"
"Triumph of the Optimists"
"Why Smart People Make Big Money Mistakes"
"The Retirement Savings Time Bomb"
"Parlay Your IRA into a Family Fortune"
"Are You a Stock or a Bond"
"A Random Walk Down Wall Street"
"All About Asset Allocation"
"The Only Guide to a Winning Investment Strategy You'll Ever Need"
"Stocks for the Long Run"
"The Coffeehouse Investor"
"The Boglehead's Guide to Investing"
"Common Sense on Mutual Funds"
"The Little Book of Common Sense"
"J.K. Lasser's Your Winning Retirement Plan"