How Much Do You think You Need to Retire? What Age Will You/Spouse Retire? Investment and General Retirement Issues (Part 3)

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Assuming you know fund managers aren’t the same as financial advisors and they perform entirely different jobs.

I ask just to be clear I would never advocate an investment strategy around a specific fund manager or asset type.

Financial performance has to be measured against a risk adjustment over time. Asset diverse portfolios are the only way to ensure long term risk calibrated success contrary to those advocating otherwise throughout this thread.

Financial advisors work with individual investors to customize a strategy that includes risk considerations, timelines, diversification, tax strategy, inheritance and other investor specific criteria. Those that use these services historically outperform those that don’t and suffer significant reversals far less.

Seems like some are confusing this profession with fund managers who manage a prescribed specific portfolio of assets. Totally different roles, careers and companies.

Just ask AI to describe the two jobs and it gives the following…

“A financial advisor provides comprehensive financial planning advice, including investment recommendations, to clients based on their individual goals and risk tolerance, while a fund manager actively manages a portfolio of investments within a specific fund, focusing primarily on selecting and trading assets to achieve optimal returns for the fund’s investors; essentially, a financial advisor advises on a broader range of financial matters, while a fund manager executes investment decisions within a specific fund.

Key Differences:

  • Scope of Services:

A financial advisor looks at a client’s entire financial picture, including budgeting, debt management, retirement planning, and investment strategies, while a fund manager focuses solely on managing the investments within a particular fund.

  • Client Interaction:

A financial advisor has direct interaction with clients to understand their financial goals and risk tolerance, while a fund manager typically does not have direct contact with individual investors in the fund.”

Numerous studies indicate those using FAs experience enhanced returns. Here is one example…

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I feel like those couples who still have healthy pension(s) have less need for FA, especially if the tax situation pretty straightforward. This group has a variety of situations. To me the main thing is that there is conscious planning whether by selves and/or paid helpers.

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How would you recommend people not too knowledgeable about finance and investments on how to select a financial advisor?

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I will DM as I want to avoid further debate.

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That’s me as well. My dad’s life was heavily influenced by the Depression and he continued to be very frugal into his old age. That no doubt informed my own attitude toward money. Just as I often encouraged him to indulge himself from time to time, our S does the same with us. I’ve loosened up a little but it hasn’t been easy, at least for H and me when it comes to ourselves. If it’s for our GDs, then H would buy anything they desire while I often insist we wait until I’ve at least done some price comparison and review checks.

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The general direction of this conversation (not any one post, but the overall chatter) reminds me of a combination of the Lincoln (or whoever said it before him) quote that “the man who represents himself has a fool for a client”, the Dunning-Kruger effect, in which a person with limited competence in some area overestimates their ability, and the difference between a wise person asking “why” in order to seek knowledge, understand and learn more, vs the other type of person who asks “why” out of a place of resistance, closed off to potentially new information.

Based on the nature of a normal distribution of essentially anything, all will land somewhere across the spectrum on the bell curve. There are professionals in all fields better than the average, and an equal number who are worse than average. While we may all want that professional who falls two standard deviations above the norm with their skill and expertise, the reality is that in any measurement, ANY measurement, 68% will fall within one standard deviation of the mean (ie in the average range).

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We have 2 W2 and 2 401(k)s, each with a a limited selection of funds to choose from. What would a financial advisor do for us? :laughing:

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Take 1% or so to advise you how to allocate it, in a way that you may or may not agree with?

I have had an issue with every financial advisor we’ve talked to, except one who actively managed our Roths, was extremely ethical and my husband’s best friend. Also the guy we worked with at PlanVision, though he didn’t offer much advice, mostly showed us how things should work out in the future and how to use eMoney. Great program, but it seems you need a financial advisor to get access to it, and $299 for PlanVision is just my price.

One advisor wanted us to do some fancy footwork, complicated stuff that we weren’t comfortable with. Another wanted us to buy a bunch of annuities, though we had a pension. His plan would have us getting high amounts of income……in our eighties. Another one would give advice if they managed a substantial amount of our 401Ks, in ways that we disagreed with. Everyone wants us to go to more bonds, international allocations, but we don’t want that.

Why would I possibly pay someone money, when I know what I want, and we have done fine? I can see paying a lawyer for estate planning, and a tax planner to advise us about tax strategies. It just seems like everyone wants money from you, they need their cut one way or another. I totally get that this is not the road that everyone wants to take, and many are happy with other people managing their money. But there’s certainly not one solution that’s right for everyone, and I agree with you, why would you pay someone to tell you what to do with your limited options, when you already know what you want?

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Commissions!!

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In addition to the expertise and services a good FA can provide (as @Catcherinthetoast outlined above), we use an FA so we don’t blame each other for any gross mis-steps. Call it marriage preservation.

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That’s basically why I steered my mother towards a Vanguard FA. He only charges 0.3%, makes her feel comfortable about her money, and is a very decent and knowledgeable guy. Problem is, even though I said why so many bonds and I don’t think she wants international funds at all, they have to use their formula. If I had taken control of her money and invested it, it would have done SO much better, both over the short and long term.

But…I don’t want to take responsibility. I don’t want anything to be my fault. Even if I totally disagree with what they’re doing, if she’s comfortable and happy, she can’t blame me for anything. Though when the money passes over to me and my sister, the advisor, great guy as he is, is gone.

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DH and I would probably be paying those premiums if we had not chosen to hold the premium amount and cut the benefit (from unlimited years to set number of years, and I believe some of the inflation factor).

I absolutely agree one can find good quality caregiver help on one’s own. MIL had a paid meals-on-wheels person Jeanne that she liked. She would sit and chat a bit - and MIL gave Jeanne a work proposal that suited them both. Flexible hours, more enjoyable work (one client that ‘clicked’ with her). Jeanne was retired, over 70, but needed the income due to tight budget. Then Jeanne had a stroke, was recovering at home, and had another stroke and died. A few months later, MIL (who never should have been without someone with her every day) declined to where DH went to care for her prior to transfer to skilled care. She adjusted nicely, but then her meds stopped working for her, a short decline, and died a day before turning 92. She had hypertensive heart disease, and meds kept her going for a long time.

Wonderful that you can help your family enjoy the efforts of your career and some of your nest egg.

I buy quite a few clothes for grandkids. We just returned from there, and I will be returning for #5 to be born and baptized (DH will fly in for the baptism). The grandkids were all sad we were leaving (the 18-month-old not old enough to be sad with our leaving – but she did grab items out of my suitcase before I closed it). The time, attention and the love are what the Gkids crave, and they get it in spades.

Son-in-law agreed for an additional 30-year term life insurance policy on him, with DD the owner and we parents paying the premiums. It is low cost, but a financial safety net with their increased family size. DD1 has life insurance through her job.

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It’s interesting to see all the responses. Certainly didn’t mean to start any arguments as to which way is the “right” way - nice for everyone to have options, but if I had limited 401k options, I wouldn’t have a FA either.

I do, however, have to disagree with this quote. There are a lot of things that would end up costing me more in the long run if I really wanted to try and do them myself!

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You say your D has life insurance through her job. If I recall correctly, she is a federal employee. The last I checked, the rates for federal employee life insurance (I believe program is called FEGLI) are not good, and you can get a term life policy for much less money. It also probably only covers some number of times her salary, which for a spouse left to support 5 kids without her, especially as you say she is the primary earner, may not be enough. If she has life insurance through some private company, that just happens to be available because of where she works, then this could be incorrect.
I would suggest keeping the minimal amount of FEGLI insurance, or none, through her job, and look elsewhere for more.

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When it comes to life insurance it is better to take it out early and not have your employer’s as the main coverage.

  • you would lose the coverage if/when you are unemployed
  • as you get older, there may be pre-existing health condition that would make your premium higher or prevent you from getting it

My son in law took out a large life insurance prior to getting a DNA test to see if he had BRCA1 and BRCA2 genes. His mom was tested positive after she was diagnosed with breast cancer. Unfortunately my SIL’s test also came back positive.

When my kids were younger, I didn’t have my main life insurance with my employer. I didn’t want to take a chance of not having a life insurance if I should become unemployed. My employer’s rates also weren’t that great.

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We went to a financial advisor early on. We knew very little, but we did know what our goals were. This guy came highly recommended. He continually tried to push us toward an insurance annuity that we wanted no part of. We let him know that we were not interested and set up another meeting. He went through many things and at the end of the meeting he pushed it again and tried to set up a third meeting. I told him we would return only if he didn’t bring up this product again as it did not align with our goals.
I called a friend of mine who also works in retirement planning to make sure I wasn’t missing anything or if I was wrong. My friend laughed and said she would happily sell me that product and with her commission she would give me an all expense paid trip to come visit and she would still make a ton off the commission.
The third meeting was going great and I was happy with everything we talked about. Then at the very end he once again started to push this product. I was so angry, looked at him and told him we were done and never returning as he refused to listen to our goals.
I swore I would never turn my money over to anyone again. I maybe should thank him because after that I took full control of our money LOTS AND LOTS of reading and occasional courses. We have done very well with me managing the money. Could we have done better? Maybe, maybe not, but I have done better than some other people I know. I know we would be fine but be a lot worse off after commissions and fees had I stuck with that guy.
My advice is to never turn over your money to an advisor without having an understanding of what they are doing and why they are doing it.

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Re life insurance. Both DH and I had it with our employers but it was a benefit of the job. We didn’t buy one cent of extra life insurance through our employers.

BUT both of us are members of professional organizations that offered favorable rates on life insurance. That’s where we got our additional life insurance. So…that’s worth checking if it applies to you.

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In 2008 when the market crashed, I worked with older people. Their 401ks literally fell from $850k to $450k - at least one did.

They had no clue what a stock or bond was or about reducing risk as they aged.

I remember saying to one - you just bought a $2000 tv and you knew every little difference between a plasma and LCD.

But you had $800k and couldn’t bother to learn the basics about a stock or bond ??

So I very much agree with your last sentence.

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“I swore I would never turn my money over to anyone again”.

Most people we know discuss investments with their advisors and while the advisor may make suggestions or recommendations, nothing is done without the OK by the client. Otherwise one risks the advisor churning their account.

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Clearly, some here have had bad experiences with advisors and have, rightly, walked away. I would, too.

We have been fortunate to have found an excellent advisor with whom we’ve forged a twenty-year relationship. Not once have we ever felt she’s put institutional priorities over ours, and she’s never pushed products. We have followed her as she’s moved from agency to agency based on her comfort level with each institution. When her loyalties, principles, and strategies don’t align with the institution, she moves. When she feels adjustments need to be made to our investments, she calls. We talk with her several times a year and meet annually. She’s lowered her fee twice as our portfolio has grown. Her advice and guidance got us exactly where we wanted to be earlier than we had planned (2008 was a mere blip). We started with her after she made a presentation at our son’s elementary school about 529 plans; we were the only attendees. She has provided excellent advice and financial education to our son, too, without charge. At this point, we count her a friend. She is a bit younger than we are, but when she starts thinking about her own retirement, she will give us an ample heads-up and discuss where we go from there. At that point, we will probably just move the portfolio to Fidelity and let it ride. We feel we’ve gotten stellar advice for the small percentage we’ve paid her, but probably will not continue to pay fees once she retires. It’s been a mutually fruitful and rewarding relationship. She’s most definitely one of the good ones. We don’t begrudge her a penny.

And, our marriage remains intact. :laughing:

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