http://www.aarp.org/money/investing/info-03-2012/two-sides-of-financial-planner.html
Good article on what to look for in financial advisors. Not sure if this has been posted in this thread. From 2012 but still very relevant.
To @CountingDownās point in post #8175 regarding annuity commissions, hereās an example of a 7% commission paid to salespeople that the investor wonāt see as a fee directly from their account:
http://www.cri4.com/crcl/fesco/AnnuityUpdates/Commission%20Updates/NW%20New%20Heights%20FIAA%20FIAB%20FIAC%20Non-Protected%20Firms.pdf
^^^ Yup, I recall seeing a $14k commission check for an annuity purchase of $750/mo (annuity purchase price was ~$200k). Former boss was always very happy when the pension plan participants chose an annuity instead of a lump sum payment.
I always planned on staying in the job market, and I didnāt have disability insurance - so I bought with Northwestern Mutual Life (NML). I should have instead put the same amount of money into an investment fund (self insure), because when I became a SAHM, I was overpaying for the insurance (it would only pay out if I was totally disabled for a period or permanent, due to it being āincome replacementā - if employed, would pay for partial disability). When I had stage III cancer after paying in on the policy for 14 years, it was a battle for them to accept that I was fully disabled for a period (and I had a totally narcissistic agent and had to change agents, knew well my new agent and she helped with corporate a bit). I may have ābroken evenā on what was paid out to me during my total disability time, but not for the time value of money. I ended having/paying on that policy this year.
My DDs have 30 year level premium term life insurance in place already. We havenāt cashed out our paid up insurance policies - will have policy loans be part of our retirement strategy when the time comes.
You donāt know what you donāt know.
Our DDs are gaining a whole lot more financial wisdom from us. The financial wisdom we had from parents was how to save $$; got in good careers after good college education. H did have what would now be considered a small amount of student loan for UG ($7,000) - we had that paid off in maybe 8 months (dual income no kids), when a 1 BR apt was $255/mo and oneās annual salary was under $20K for an engineer and for a nurse. We graduated from college when credit cards were becoming more common, and ābuilt up our creditā in a few small ways before purchasing our first home.
My dad was a great businessman, and had built up a nice estate at the time - diversified into having great cash flow with real estate (including a small corner bar in WI that had great ROI; then gave the operating partner a better interest rate than the bank for buying him out). My dad was fortunate to have a friend in the insurance business that did provide good information, and dad added two life insurance policies on himself before they increased the rate for smokers (I remember him talking about it in the early 1970ās) - dad quit smoking (had ruined his lungs by mid-40ās) but died of lung cancer at age 63, and he enjoyed that he had those policies. My mother had two smaller life insurance policies that had the grand-children as beneficiaries, and our DDs portions were invested by us for college costs - and was a great assist. Nice that the grand-kids can have that memory of her tied in that way, with helping them with those expenses.
I saw when NML agents were getting more and more into investing, providing financial āadviceā, etc. Noā¦by then we were learning more about term insurance purchase opportunities and having comparison information.
I just talked to a guy my age who lost his wife to cancer - she had a benign tumor/cyst from teen years in back of foot, and in her mid-50ās it started to bleed - H wonders if they had removed her foot at that point if she might have survived. Then cancer had spread to lymph nodes in knee - then to her hip (only 3 non-cancerous nodes in hip). Was treated at Vanderbilt; had bumped her head and they found cancer there - had a big surgery. Next body scan showed cancer all over, and died within the year. My take on it is something abnormal, get it out.
@hayden We used to have our assets at Wells Fargo managed by an outside FA. It was a while ago os it may be different now. We just paid the fee to the advisor not to the bank. The bank must make money somehow but we didnāt pay any fees directly to them. I think thatās the way with all brokerage firms. One doesnāt pay fees to park the money. They still seem to want your money.
Just to be a contrarian since everyone is so enamored with Vanguard, in addition to the difficulties I mentioned earlier, they also changed my money market checkbook without letting me know. I happily wrote checks without realizing my checkbbok was obsolete. Some fun when checks began to bounce. Again, I think they mean well but at the moment they donāt have a handle on the size they are getting to be.
Does anyone have a simple explanation for the differences between Vanguard mutual funds and etfās? I am think of convert mutual fund shares to corresponding efts to avoid capital gains distributions. I am abit uneasy doing so since I donāt understand the differences well.
Iglooo, when did Vanguard change the mm acct checks? I know they changed ours @ 20 years ago, but we had plenty of notice. We hardly ever use that account, so if itās been recently, I can call them!
FIL has a Wells Fargo account, but it is not managed for him, he has to approve trades. So shortly after his stroke last fall a 5 year CD matured, and he approved a transaction that used that money to buy into 2 mutual funds, with average 5.6% front load and 1.18% Expense Ratio. Wonderful. Iām pretty sure he did not research and recommend those funds himself, must have had some help from his friendly adviser. Not quite Bernie Madoff, but bad enough. Weāll probably sell them soon to free up cash for this yearās required distribution, so thatās 6% or more down the drain, on top of the investment losses due to the market downturn.
Good thing he saved so much.
Hayden, if the FA is an employee of WF, I would bet heās telling the truth. It sounds in line to me. A lot of FAs at banks are employees drawing salary and bonus, and the fee goes to the bank. It should not be hard to verify, in any case.
I will likely take the advice of some of you, and open ROTH IRAs for my kids this year. Any suggestions for where to open them, for very small amounts of money? (Max 3K). Thanks
I opened a Roth for S at Vanguard and one for D at Schwab. There is no minimum at either. At Vanguard, if you donāt have some minimum, you are assessed $10/yr or something from one index fund.
Thanks. I knew I could get help here. given the marketās not so great performance lately, any suggestions as to where to put it?
Iād recommend Fidelity or Vanguard. Personally, Iād go for an equity index fund. Given that its for your kidsā retirement, you have a very long time horizon. I wouldnāt focus to much on short term volatility and the market correction of the past few months makes it a better time to buy.
I put DSās money at Vanguard in the Total Stock Market (TSM) fund. Tbh, itās down from when I invested it, but I think it will come back during the next 40 years. Probably even sooner :))
TSM has a minimum investment of $3k.
If youāre willing to look beyond mutual funds or ETFs, I would recommend dividend paying stocks included in the āDividend Aristocratsā or āDividend Championsā lists (i.e. dividend paying stocks that have increased their dividend annually for at least 20 consecutive years). Dividend growth investing requires more research and active monitoring than mutual fund investing, but the reward for that extra work is a portfolio with an income stream.
The income stream starts small (your initial $3,500 investment would probably produce $105 - $175 / year), but if you or your son invested an additional $3,500 every year and reinvested the dividends, the income stream would be pretty impressive 30-40 years down the road when your son was ready to retire. As an added bonus, most brokers wonāt charge you a commission to reinvest the dividends, and because the dividends are generated within a Roth IRA, you would be creating a tax-free income stream. If you have any interest, the āDRiP Investing Resource Centerā (dripinvesting.org) has a lot of good reference materials (including the dividend champions list).
Are the kids you plan to open Roth IRAs for 18 or older? Fidelity, for example, wonāt take minor IRA money but Vanguard will.
Once one has taken care to have enough to retire, then can think of next generation or two.
I opened Roth IRAs for both kids at TDAmeritrade. Then I researched ETF (every year there are some listed in various money magazines) - and invested where we could (some have a minimum purchase amount). They have to have earned money for the calendar year (so you cannot exceed what they have earned on what you put into a Roth IRA for them, in addition to being below the Roth stated limit). TDAmeritrade also I believe requires the investor be at least 18.
To me this is a great way to pass on some $$ to the next generation if you have some available cash. The time value of money - and if you are gaining for the long term picture, it is a great vehicle.
I can only imagine how our children and grandchildren will be saddled with more taxes as they are having to pay for more social programs with aging population, other things our Federal government is spending on along with the growing federal deficit.
We are trying to pass along good financial wisdom. What you earn, how well you can save, how well you can invest. My dad was a terrific businessman, and left a decent estate. We hope to leave a decent estate too, but have also provided help with term life insurance and other things we had to figure out ourselves. With each generation, there are some things more complicated, and some things that remain simple truths.
No one has been saying anything? Busy doing taxes? Too busy with the election and the knot in oneās gut?
I retired today!
Congrats DocT!!