Considering throwing in the towel and going with a CFP

[FANOFJESUS]

Seems steep? I was crying when I read that, heck give me your million dollars, I'll take 15,000 from you and mail you a check for 30,000. I'll also send your nice birthday and Christmas cards

I can beat that I'll take the million mail him a check for 30,000 every year. I charge nothing but I get to keep the interest on the million. My plan also comes with a 33 year guarantee but with no COLA on the 30,000

 

[pb4uski]

Very generous of you.

 

[samclem]

I'm often amazed at the level of knowledge some people here have regarding finances. It's intimidating sometimes - I post a question about something I think I have a pretty good handle on, and I get a load of responses that remind me just how much I don't know.

But, I've come to realize that even if I don't pick that absolute optimal solution for my particular financial problem, that I've learned enough that I can pick a pretty darn good solution.

And for me, it's important that whatever financial plan I choose, that I understand it. That is, I'm not just doing it because someone told me it's the right thing to do. I'm doing it because I understand how it works, and what the risks are. There are some good sound investment principals that are pretty easy to understand and to implement, and that don't require a lot of your time. So maybe it won't be the absolutely most tax efficient plan if I live to the age of 97, but it's still a good plan and I understand it will work good for me.

100% correct, IMO. Trying to optimize things to the 99.5% point is a fool's errand given the quality of the data we are dealing with and the assumptions we must make to build a plan. Getting the big things right is enough, and folks here are super at catching those and volunteering their time/opinions. Understanding the basic whats and whys of what you are doing and having a good foundation are key to staying on track and not being swayed by the next bit of cable TV financial pornography or the slick presentation by a high-fee [-]broker[/-] "advisor".

 

[LOL!]

I don't mind writing that there are too many Wellesley lovers on this forum.

The OP expressed a preference for using Fidelity. Fidelity does not have Wellesley.

 

[REWahoo]

I don't mind writing that there are too many Wellesley lovers on this forum.

Or not enough - depends on your point of view.

 

[ziggy29]

The OP expressed a preference for using Fidelity. Fidelity does not have Wellesley.

Yes, but that rarely stops a Vanguard fan from trying...

 

[tmm99]

The OP expressed a preference for using Fidelity. Fidelity does not have Wellesley.

You can hold Wellesley at Fidelity, right?

 

[NW-Bound]

I don't mind writing that there are too many Wellesley lovers on this forum.

The OP expressed a preference for using Fidelity. Fidelity does not have Wellesley.

I have very little in Wellesley being an active investor myself, nor am I a Vanguard fan. I have much more at other brokerages. But given the OP's reluctance to do anything by himself, such as rebalancing between index stock and bond funds, a balanced fund such as Wellesley would work well for him.

I did mention in my post that other conservative balanced funds exist, and I know that Fidelity has them, but I did not recall right off hand to mention them. The idea is that a balanced fund with a low ER and a long track record would work well for investors who do not want to get involved in the nitty-gritty of managing their investments. Wellesley is certainly not the only suitable fund.

 

[pb4uski]

....The OP expressed a preference for using Fidelity. Fidelity does not have Wellesley.

Not true. According to Fidelity's website, Fidelity customers can buy Wellesley. However, they can only buy Investor shares (7 bps higher ER than Admiral shares) and there is a $75 per transaction fee.

 

[target2019]

You can hold Wellesley at Fidelity, right?

Correct.

Would you recommend Wellesley for a taxable account? Curious how people feel about that.

 

[pb4uski]

....Would you recommend Wellesley for a taxable account? Curious how people feel about that.

I guess it depends on how much you value tax efficiency over simplicity.

If all you had was taxable then why not? Or if your bond allocation used your tax-deferred and tax-free and there was room left over in taxable and the AA of Wellesley fit in with your overall AA, then why not?

Some people prefer simplicity and tax efficiency is less of an issue.

 

[target2019]

It sounds like almost everyone is concerned about taxes. I would think taxes a priority before efficiency of one fund.

I hold wells in a Roth. Just wondering how others place it.

 

[shotgunner]

I think this analogy is brilliant. Easy to understand for almost anyone and it perfectly describes the process of taking and income stream from an investment portfolio over time.

This post should be a sticky, reference material for all who are about to live on income stream from investments. It's good reinforcement for those contemplating are just letting go of a steady pay check from work.

Thank you NW-Bound

You can set up a steady income stream like earlier posters suggested. That's easy.

Think of your account as a reservoir that a city draws its water from, while the reservoir is refilled by run-off from streams and rains. The water use is usually constant. However, the reservoir level is going to rise and fall with seasons. But historical data tells the city how much it can draw and not to exceed the average inflow and risk running the reservoir dry. That's the SWR (Safe Withdrawal Rate) people talk about.

You can draw whatever you want and keep it steady by yourself. You do not need the FA to do that for you. And the FA is not going to be able to help keep the reservoir level constant. What does he do to help when the market tanks? What does he do to get a return that's 1.5% better than a mutual fund like Wellington or Wellesley to justify his take? And there are other MFs out there too, not just these two.




Well, that's why you buy a balanced fund instead of picking your own stocks. And a good fund charges you only 0.18%, the ER (expense ratio), not the 1.5%.

And you should get DW to understand that your account will shrink at times, just like the reservoir that your city draws water from. The only guy that promised and could "deliver" a steady portfolio growth was Bernie Madoff.

 

[LOL!]

I have very little in Wellesley being an active investor myself, nor am I a Vanguard fan. I have much more at other brokerages. But given the OP's reluctance to do anything by himself, such as rebalancing between index stock and bond funds, a balanced fund such as Wellesley would work well for him.

I did mention in my post that other conservative balanced funds exist, and I know that Fidelity has them, but I did not recall right off hand to mention them. The idea is that a balanced fund with a low ER and a long track record would work well for investors who do not want to get involved in the nitty-gritty of managing their investments. Wellesley is certainly not the only suitable fund.

All the funds I mentioned (Fidelity Freedom Index and Vanguard Target Retirement) are balanced, automatically rebalanced, and would reduce tracking error regret. They are set-and-forget funds.

I should have also mentioned the Vanguard LifeStrategy funds and perhaps the Fidelity 4-in-1 index fund.

More importantly, none of the funds I mentioned are actively managed. They should be more tax efficient than an actively managed fund.

 

[hnzw_rui]

Fidelity has done a disservice to you by not guiding you to their low-expense-ratio passively-managed index funds that are just as good as Vanguard funds. More on that in a moment.

Fidelity has the Fidelity Freedom Index funds which are almost impossible to find on their web site. Ticker symbols are FPIFX, FLIFX, and so on. The expense ratios are around 0.2%.

Unfortunately true. Fidelity makes it harder to find balanced index funds on their website.

When I searched for Fidelity mutual funds, I got this page: https://www.fidelity.com/mutual-funds/fidelity-funds/overview

On the Asset Allocation tab, all they had were high ER, high turnover actively managed funds. Until you posted those ticker symbols, I didn't even realize Fidelity had all-in-one funds that use index funds.

 

[AnIntentionalRoad]

Go to vanguard. They'll do this for you much, much cheaper.

1.5% is highway robbery. Yes, you hit it off with this guy, but everyone does. He's a financial salesman--that's what they are good at, getting people comfortable handing their money over for exorbitant fees.

If not vanguard at least hire an hourly fee based advisor. They'll do this for you for a few grand a year.

Sent from my SM-T237P using Early Retirement Forum mobile app

 

[ESRwannabe]

So you need to take out $30k a year and your willing to pay $15k in fees for someone to manage it for you...

To each his own but I'd reconsider a do it yourself option.

You could put all the money into vanguard managed payout fund. Maybe split it 50 50 with Wellesley income and just take the distributions


Sent from my iPhone using Early Retirement Forum

 

[chatham]

I am very, very happy for you that you did not end up using an adviser who would charge you 1.5% of your money year after year. There's a great spreadsheet at Retire Early Homepage where you can calculate the effect of fees. Over twenty years, 1.5% on a one million dollar portfolio works out to be $431,947 if you make 5% annualized.

For years, we used an adviser who charged .9% of assets under management. At that time, that was about the best we could do with the account balance we had. I don't have any regrets about working with them. Using Portfolio Visualizer, I can see that we did better than I would have done doing it myself, net of fees.

That said, things change, and if you do want to work with an adviser, there are some flat fee ones nowadays that are much more reasonably priced. We now work with a firm called FPL Capital Management. You can pay as little as $1000 a year and get help setting up the portfolio, a couple of phone conferences a year, rebalancing support, and quarterly reports. Our assets are actually custodied at TD Ameritrade. Paying a flat fee feels so much better to me. I would never in a million years expect a doctor or a lawyer to charge me based on a percentage of my net worth, and it doesn't make a lot of sense to pay an asset manager that way if you can possibly avoid it.

If I need financial planning beyond the included asset management, I can pay an hourly rate. I'm paying a fraction of what I was before for a level of service that's higher than what I was getting before. This is the easiest money I ever made. Paying a percentage like what I had been doing and what you nearly did is like a huge ongoing tax for most folks.

Congratulations on your decision! Having a million dollar nest egg is quite an achievement, and you should keep as much of it as possible for yourself.

 

[hotwired]

It's early a.m. so my math might be off, but its sounds like you've got about one million. And you're not paying 15k to get 30, you're paying 1.5% of the money he's managing to manage that million. If that's true, you really shouldn't need to pay any more than .5-.8 AUM (assets under management) for a CFP to manage. For 1.5% in my opinion, the planner should have some serious skill up his sleeve. In other words, he's a good investor and will get you 1-2% points extra return every year.

I do understand that if you don't want to manage yourself, then no amount of us telling you how easy it is will make a difference, but I'll echo what someone said about Wellington. It's a wonderful, old, pretty stable, old fashioned fund that won't steer you wrong.

 

[Mr._Graybeard]

It seems like the OP is interested in getting some face time with an advisor. He's in the Madison area, where both Fidelity and Charles Schwab have offices. Both houses offer good-low-cost investment options and free consultations. I have money with both of them myself, but personally prefer Schwab.

 

[samclem]

And you're not paying 15k to get 30, you're paying 1.5% of the money he's managing to manage that million.

The OP is paying 1/3rd of his total "take" from his account to someone else, and trying to live on the other 2/3rds. Calling it something else doesn't make it any less damaging.

For 1.5% in my opinion, the planner should have some serious skill up his sleeve. In other words, he's a good investor and will get you 1-2% points extra return every year.

Such people are unidentifiable in advance. In retrospect, it takes decades to identify those who did it by chance from those who did it by skill. If a person had that skill, they could make millions very quickly in the options market, they wouldn't be out trying to make a buck talking to retail investors and sending out Christmas cards.

 

[NW-Bound]

All the funds I mentioned (Fidelity Freedom Index and Vanguard Target Retirement) are balanced, automatically rebalanced, and would reduce tracking error regret. They are set-and-forget funds.

I should have also mentioned the Vanguard LifeStrategy funds and perhaps the Fidelity 4-in-1 index fund.

More importantly, none of the funds I mentioned are actively managed. They should be more tax efficient than an actively managed fund.

Ah, I just recall looking into the funds you mentioned, but then forgot to do a follow-up post.

Yes, these may be more tax-efficient than Wellington that is actively managed. But a conservative fund like Wellington and Wellesley has another attribute that is important to a scaredy-cat investor; it has a lower beta and withstands the downdrafts like the two recent 2002-2003 and 2008-2009 recessions much better than purely indexed funds.

Perhaps one can build his own passive balanced portfolio using index ETFs of large-cap value stocks and bonds, but the OP is not about to do that.

 

[athena53]

Hey, I'll manage it for you and get a 3% annual return. Half a % of assets per year- a bargain! ;-)


Seriously- if you really want a second opinion get a fee-only planner who charges by the hour. Confer with him/her every 6 months or so to see if the mix of investments needs to be tweaked and to talk about the amounts you're likely to take out in the next 6-12 months. They should be able to put you in a few low-cost ETFs and maybe a bond or income fund. If they try to turn it into brain surgery and want to charge accordingly, find someone else.

 

[NW-Bound]

To readers who came late to this thread and have not read the entire discussion: the OP has decided to do it himself with low-expense-ratio MFs.