My situation is much less complex than others here (two W-2 salaries [recently turned into one salary], 401k, small pension upcoming, no businesses).
I also struggled with the advisor question. Why pay 1 % when my situation is pretty straightforward? How do I find someone?
How I balanced it:
Spent a bunch of time educating myself via podcasts (‘The Retirement Answer Man’ has been particularly accessible and helpful);
Consulted with free wealth advisor offered via our bank (gave her all our account amounts/type/spending patterns, future costs projected, etc.);
She ran scenarios with retirement planning software to analyze and calculate the likelihood our money would last till ‘end of plan’ (AKA ‘death);
She gave us unlimited access to the software and I spent hours playing with variables (e.g., assume low returns for 10 years);
Have upcoming appt with hourly, flat-rate advisor to check all that info. Giving him same net worth info and account types. He’s a former JP Morgan investment advisor/VP - hoping to double check of the free advice. Found him via a flat rate, fee-only investment broker website that’s been highly rated by Fortune, Nerdwallet, Wired, etc. https://hellonectarine.com/. We’ll see!
I checked the online reviews and of the hundreds of people he’s consulted with on an hourly basis — they all gave 5/5 stars and had positive comments (no negatives). And some of them were people who said they manage their own investments regularly (so they know some stuff) but wanted a check. They seemed satisfied. I’m hoping it’s useful.
If it’s productive, I’ll post back in case helpful for others.
You can check his background on FINRA to see if he had any disclosures. Even if he’s no longer affiliated with JP Morgan, his name still should show up. Just look him up FINRA Broker Check.
You would never withdraw. That’s the point. There is no RMD. This is not an IRA or 401k. I will grow my income yearly, not dissolve my principal.
I will hopefully be in the 12% tax bracket, thanks to munis. Most important is my security.
IF I was in a 12% bracket with little chance to generate income - ie I made $45k and wanted fixed income and was just starting, you are right - I’d buy taxable federal agency bonds. They have short calls. But you can today get 5.3-5.5%. A year ago 5.8%.
When my older company offered a pension buyout last year, I took it. Rolled into my IRA and bought a one year Federal Home Loan Bank bond at $99.50 5.81%. It had a one year call. The longest I could find. I just bought another 1 year after it was called but at 5.5%. Because the account is tax free (deferred), it made more sense. Btw my son who doesn’t want to be tied up long as he’s just starting out bought the same bond because the chance of not getting called was slim and being young, he wanted to outpace even CDs.
But anyone here with $$ looking for a safe retirement (notice I said safe) will benefit from bonds of some source, likely munis.
Btw - Tax equivalent yields vary. Tennessee has no state income tax so mine is less. If you live in CA and buy only CA bonds, you have a much higher one. If you buy a New Mexico bond, you will pay CA income tax but not q federal. Most states have enough issuers that you can easily diversify in state. But if someone wanted issues across all states, then if you live in a taxing state, you will pay. Sometimes though, you will buy a cheaper bond from another state so you save in principal up front.
@Jolynne_Smyth, I think taking a couple of cracks at the financial/retirement plan (one free, one fee only) is very sensible.
By analogy, when I was a W2 employee (and my wife had very simple self-employment income), I did my own taxes. When I had moved to NY to work on Wall Street but was planning to return to my professorship in a couple of years, I hired an accountant to do the taxes to see if I was missing anything. I think I pretty much had it right, but it was useful. If you are completely on target, you will feel more comfortable that you have thought through the problem. But, you’ll probably learn something to augment your plan. Unlikely, you will hear that you were thinking about it all wrong and need to do something completely different.
Great that you like to keep up with tax free bonds and take advantage of that.
Another commented “Most advisors don’t manage assets themselves.” That statement may very well be true - an advisor group needs to have a certain level of assets withing their group to manage some assets themselves.
Nice answer by @shawbridge, whose interest and expertise are much greater than mine - I just concentrate my efforts on what I believe is in DH and my best interest with balancing out limited time on our financials. That amount weighs in on our QOL - the time/attention. If/when I see problems on performance, then I do put in more time/attention. SWAN - we generally do!
Our FA doesn’t manage specific tax free bonds for specifically for us but they likely are part of the larger fund mixes - which we choose based on our risk desires. They actually are able to invest in some things that are not available to individual investors because of the size of the assets managed. I am not home to be able to detail for you. Again, they also do other things for us like the research and provide recommendation on annuities that are part of our portfolio. When one annuity is ready to expire, a decision on those funds. When our 401k stock fund grows too much (having imbalance on our risk profile), we look to FA on recommendation - which could be ‘wait and hold’.
DD2’s company had a FA come in to talk to them about investing in 401k/Roth 401k. After DD2 took his advice (which was ‘safe’ but not maximizing for her benefit) she agreed to have future funds go a different direction. Over time, we can see how things go for her.
I listed by income & age because that’s how it was presented and the tax-exemption benefits of munis compared to other types of bonds are more correlated income (and corresponding tax bracket). However, there is a notable correlation with financial assets like you mention, beyond just the correlation between assets and age. Some specific numbers from the Survey of Consumer Finances are below. Unfortunately they don’t break down categories in more detail than below. Mean is expressed in terms of all persons, not just holders.
Stock Holdings By Income:
Top 10 NW% – 96% own stocks, Mean value ~= ~$2.3M (63% of fin assets)
75-90th NW – 90% own stocks, Mean value ~= ~$250k (48% of fin assets)
50-75th NW – 68% own stocks, Mean value ~= ~$40k (32% of fin assets)
25-50th NW – 48% own stocks, Mean value ~= ~$5k (15% of fin assets)
Directly Owned Bonds (includes Munis)
Top 10 NW% – 8% own, Mean value ~= ~$100k (2-3% of fin assets)
80-90th NW – 2% own, Mean value ~= ~$2k (<1% of fin assets)
60-80th NW – <1% own, Mean value ~= ~$0k
40-60th NW – 0% own, Mean value ~= ~$0k
There is an older paper (only has results through 2013 SCF) that goes in to far more detail, including going to top 1% and including both direct and indirect ownership. As shown in the table below, it found that municipal bond ownership was primarily used among top few % by financial assets, particularly top 1%. Nearly half of top 1% by financial assets owned munis. However, munis only composed 6-7% of financial assets among this top 1% in 2013. Like in the more recent survey, it found top x% by wealth persons tend to keep the bulk of their financial assets in non fixed-income holdings.
I have a disproportionately high NW for my income and spending, yet I keep the vast majority of liquid financial assets in stocks rather than bonds and don’t plan to change this in retirement. One can live off a primarily stock portfolio, just as one can live off a primarily fixed income portfolio. Selling stocks is unlikely to decrease portfolio value over a sufficiently long time horizon, so long as % sold per year is below a safe withdrawal rate. If time horizon is long enough (decades), chance of financial assets lasting until death generally increases with a higher % stocks, up to vast majority (but less than 100%) of portfolio being stocks. Among persons whose financial assets are high enough that they have near zero chance of running out during lifetime regardless of investments, they are likely to have a much larger total to use or pass on after death, with a majority stock portfolio.
Everything I have read indicates that munis are great for those in the 22%+ bracket and higher. At 12%, aren’t folks better off just buying a taxable bond, and paying the tax?
If I didn’t have - by then hopefully 130k in muni income - I would be in a higher bracket because I’d have more than that in taxable income.
But if I can buy an A rated corporate (like O Reilly Automotive or whoever is A rated - I’ll have to look) bond at 5% taxable or a city, state, airport, public college bond and sometimes insured at 4% tax free, I’m better off with the 4%. For those living in a state that has state income tax, they are really advantaged.
If ss, my pension, some dividends and a 401k/IRA paid me, say $75k, and now I have $170k in taxable bond income, I’m at $250k and whatever that bracket is and investing in JP Morgan or Citi bonds which has risk. Or I can be $80k, in that bracket and have $130k in taxable bond income free income additionally.
So to answer you, if my tax free were taxable, my taxable income would be much higher. That’s why they typically say a muni has a TEY or tax equivalent yield of……x% and that depends on each individual’s situation.
The bulk (almost all) of our retirement savings are tax deferred.
We would like to do some home improvements.
How do you allocate them?
Do you do things piecemeal, one project per year? Bite the bullet and do everything at once? Take out a home equity loan? Take the money out of savings?
We are waiting to draw our social security so we do have to pull some money out to you know eat and stuff!
Our FA says that we do have the funds for renovations and still have money for the rest of our lives,I’m trying to figure out what is the best way to do them.
The in-laws did gift some money but my husband decided to let their FA keep investing to see how he does. It’s not enough to really do much of what we’d like to do.
My wish list. One bathroom, kitchen, new flooring for the main floor, paint the trim and walls in the LR,DR and kitchen area.
We just do stuff as it comes up. My wife has wanted to move - probably for five years - but we haven’t.
I wouldn’t take a loan - that’s me unless it was a must have.
We are all different but I wouldn’t take look at in the vein of - will I get to enjoy it for a long time ? If yes and I could cash flow it, I would do as much as I can at once or at least as much as one vendor could do. One vendor at a time.
If I don’t plan to be here long, I wouldn’t make any cosmetic improvements that are costly.
I would only borrow if I had necessary repairs and that’s the only way I can afford it.
It takes my husband a LONG time to agree to do household improvements. The funny thing is, if it’s for outdoors, he seems much more willing to spend money to make it look good.
I’ve been known to do household improvements with just my own money, because I wanted something and he didn’t want to pay for it.
We both kind of agree that we’d rather spend money on fun trips than on our house, so for better or worse we probably don’t do as many household projects as we should.
I feel that we’ve only done outside improvements or infrastructure because those are easier for my husband to accomplish or spend the money on.
We will have been here 18 years, very little has been done cosmetically and that needs to be done.
I think my husband and I are not the traveling people, a big trip every other year is plenty. It’s hard to admit but we like day trips and being homebodies.
@tsbna44, paint was one of the things but not on the top of my list at all. It will be part of a renovation, not something we will tackle first, mostly likely last. Trim and paint are in good shape, but if we do an extensive renovation, we would like to change.
The only reason I mentioned a home equity loan is the possibility that our investments would outperform interest. We still have a small mortgage which will be paid for in a few years. Which we will not pay off early or refinance. Our investments have definitely outperformed the interest rate we are paying.
When replacing my hardwood flooring with LVP, I had the installer replace my 1” baseboards with the taller 5” baseboards to give a more updated look which made a HUGE difference in appearance. I have been updating (not remodeling yet) my 2001 home over the last 5 years little by little. I have now completely updated 3 of my 4 full baths. Just replacing the toilets, vanity tops, sink and shower hardware (rainshower), mirrors, and lighting was relatively inexpensive and they look like a 2025 home (except no wallpaper, ughhh, not sure I can do that). Also, just updating my staircase removing the white wooden spindles with more sleek metal spindles and a darker walnut wood rail. None of this was ridiculously expensive. I have held off on the kitchen and the master bath as they will likely be remodeled, either by me or the next owner.
