Retirement 101

aekekkMay 2, 2009

Hi All

I've been a lurker here for a few years and always find the posts well thought out and interesting.Joyful-I especially love reading your thoughts and advice! I have a dilemma. I am not very investemnt savy, but I am reading some investment mags such as Money and the business news etc. and am willing to learn. My husband and I (54 years) started using a financial services investment planner 2 years ago. Yes, of course our statements have gone down. We are paying .25% with a minimum 625.00/qrt for them to invest on a balance of $164,000. Should we be doing this ourselves? I feel like that's more money out of our pocket. I don't know where to go from here.Any advice? We're saving about 25,000 per year towards retirement.

Thank you for reporting this comment. Undo

Check with you bank. My bank has this service avaiable and the price depends on how much money you have in that bank. Also finanical planners with bigger companies may be cheaper--like Edward Jones. to me, the fee of 625.00 seems high for the amount you are inventing. Call different banks, credit unions, etc for rates.--but watch out for penalities if you switch.

    Bookmark   May 2, 2009 at 8:27PM
Thank you for reporting this comment. Undo

The 2 things you can control in investing are the cost of investing and your asset allocation.

One approach to keeping the cost to a minimum is to go to a fee only financial planner, who will charge by the hour. they usually will give you a free first hour so you can see if they are right for you. Then you can negotiate a fee for an overall "plan." You should ask them to explain what exactly that will look like, so you know what you're paying for. That plan should specify how your money is going to be invested -- how much in stocks, how much in bonds, and how much in money market instruments -- and how you plan to allocate additional contributions into your retirement accounts. If you google CERTIFIED FINANCIAL PLANNER, you will find one or more websites of professional organizations of fee only financial planners who are certified as having successfully completed instruction and passed rigorous tests to demonstrate their competence.

I would strongly urge you to read up on and give serious consideration to index mutual funds. They have the cheapest expense ratios, and you don't have to worry about picking a fund that has a "good" stock picking team, because the investments are targeted to match broad indexes of the stock and bond markets. So you just have to figure out what your asset allocation should be -- how much risk you want to take -- and you should plan to be more conservative as you get closer to retirement.

If an advisor is telling you they can "beat the market" stay away from them as fast as you can, because that claim is false. No one can consistently beat the market indexes.

After you have a reasonable understanding and level of confidence that your financial plan is right, you will just need your financial planner for an annual check up to see if you are on track toward reaching your goal. Needless to say, there have been many check up sessions in the past year or two because of the market turmoil. In any event, once your plan is in place, your annual expense should be just a couple of hundred dollars or less.

One more thing: Once your retirement nestegg reaches a certain threshold, say, $500K or more, some large mutual fund companies will provide financial planning services free of charge. Vanguard does that, and I think Fidelity and T Rowe Price do also. I think their planning services are available for a modest fee if your total amount invested is less than the threshold. Paying a certain percentage of your total amount invested is not necessary, unless you need time for the first year, say, to educate yourself on what investment approach is best for you.

But make sure you read the fine print of the papers you signed, so you avoid a costly mistake. If you signed a contract that forces you to forfeit a bundle if you withdraw, you should contact a lawyer or the Security & Exchange Commission to find out if such terms are legally enforceable. I think they are not.

    Bookmark   May 2, 2009 at 11:31PM
Thank you for reporting this comment. Undo

Just to be clear - although many brokerages encourage their staff to become Certified Financial Planners or Chartered Financial Analysts, brokers are not required to complete this type of study/certification.

Make sure you understand the difference between "suitability" broker advice and "fiduciary" planner/consultant advice. You want someone who is legally obligated to put your interests first, not the company's interests first.

Be aware that moving accounts from one broker to another DOES cost you some money. There is usually a transfer and/or closing charge for each account transferred. It's not much, usually less than $100/acct, but if you have a number of accounts to be moved, it will add up.

    Bookmark   May 3, 2009 at 12:17AM
Thank you for reporting this comment. Undo

Thanks so much for your advice everyone. I am looking for my contract and I can't find it. I'll call to get a copy of it. Our financial person holds a Series 7 and Series 65 securities licenses, and is a registered investment advisor representative.

This is a learning curve for me. I am trying to educate myself about investing but I find it foreign to me. I know some of the questions to ask and I did check a bunch of websites when we handed our money over to them for retiring. Everything checked out OK. They've re-balanced our potfolio several times with the current upheaval. They do call and email regularly. I'm just wondering if this is something we should be doing ourselves. If others have thoughts, I'm open to all suggestions! Thanks so much

    Bookmark   May 6, 2009 at 10:42AM
Thank you for reporting this comment. Undo

Just so you know - the IA is considered a pretty loose designation. One person on Wikipedia who has an IA and has worked in the FS industry calls the IA test "about as difficult as fogging a mirror".

Series 65 description: "The Series 65 has several advantages for many individuals. The license can be studied for and the test can be taken independently. It also allows for professionals such as CPA's, Lawyers, Mortgage Brokers and others to offer investment services or refer investment clients to registered brokers for commission sharing."

IOW, it's pretty much a license to sell, given to those who aren't going to bother becoming truly certified professionals.

Although an IA supposedly does have fiduciary responsibilities, it generally isn't viewed on the same level as CFP and ChFC designations, both of which take more study and annual re-certification.

Your IA can be very good nonetheless. There are many good and honest brokers around! But the more you educate yourself, the better you can interact with your advisor, and make decisions based on your own risk tolerance and financial goals. No matter who you use, the only person who truly cares about and is responsible for your money, is you yourself.

Good luck to you going forward.

    Bookmark   May 6, 2009 at 11:52AM
Thank you for reporting this comment. Undo


Many brokerage firms have tools that will automatically rebalance for you if you are in mutual funds, and you can do it as often as you prefer and it is free.

I found the book below very informative and empowering.

Here is a link that might be useful: Saving for Retirement without Living Like a Pauper or Winning the Lottery

    Bookmark   May 6, 2009 at 1:36PM
Thank you for reporting this comment. Undo

I like Liz Pulliam Weston's column on the MSN Money website, and one of her articles mentions not only the book Christine listed above, but a couple of others that you might find helpful:

Here is a link that might be useful: Recommended Books about Finance & Investing

    Bookmark   May 6, 2009 at 6:34PM
Sign Up to comment
More Discussions
I NEED to vent!
I am so UPSET Just received a notice from my credit...
Tiny pension - Taking lump sum or monthly annuity payment
I just received a notice from a previous employer asking...
Buying a car
I am planning to buy a car, but my credit rating is...
Ontario - Canadian law question
Hi: I am hoping I can find someone on the forum who...
Here's a question for those who pay with cash
It happens occasionally, I'll be in a checkout line...
People viewed this after searching for:
© 2015 Houzz Inc. Houzz® The new way to design your home™