Who do my parents need to see to get their retirement in order?

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irasymn10
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Who do my parents need to see to get their retirement in order?

Post by irasymn10 »

Hello!

My parents are retiring in the foreseeable future, and they've already met with 4 different "advisors", each giving my parents different retirement paths, and giving them high return percentages and/or big projected numbers after years of investing in retirement. Ive seen all the papers from each visit, and sparing you from the interesting things they were told by these "advisors", I just need to guide them in the right direction.

The main concerns I have for their retirement are:

Taxes...they have pensions, 401k, annuities, IRAs, and of course SS. I obviously want their taxes to be minimal, so strategic planning is important, and with so many different accounts, its a nightmare to figure out what their taxes will be and how to minimize. One of the advisors said their tax rate was going to be very low, but I have no idea how that's possible with what i've seen with their income. I don't want their income to be eaten alive by taxes.

Pensions and 401k's...what to do with them (ie keep them with the employer, rollover, get a lump sum, etc). I also have to find out about survivorship of the pensions to take that possibility into account.

THEIR main concerns are:

Running out of money



How do you figure all of this stuff out? Do financial advisors routinely cover tax implications as mentioned above? Or should they also see a CPA before they make any moves?
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FiveK
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Re: Who do my parents need to see to get their retirement in order?

Post by FiveK »

They would benefit from collecting and reviewing the information suggested in these three posts
Some Important Questions to Answer Before Asking - Can I Retire?
How To: Write a "Case Study" Topic
Asking Portfolio Questions

Is that something they are willing to tackle?
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irasymn10
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Re: Who do my parents need to see to get their retirement in order?

Post by irasymn10 »

Thanks, I will read these and show them!
mhalley
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Re: Who do my parents need to see to get their retirement in order?

Post by mhalley »

You don’t mention the most important part of these fa plans, what does it cost? I bet most of these plans are going to have a 1+% aum fee plus high ER funds. The go to here is vanguard pas, but a one time fee from somebody like garretplanning network might be a place to start.
PAS might not give the tax advice they need, ie, Roth conversions etc.
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Re: Who do my parents need to see to get their retirement in order?

Post by backpacker61 »

irasymn10 wrote: Fri Jul 30, 2021 11:54 pm
The main concerns I have for their retirement are:

Taxes...they have pensions, 401k, annuities, IRAs, and of course SS. I obviously want their taxes to be minimal, so strategic planning is important, and with so many different accounts, its a nightmare to figure out what their taxes will be and how to minimize. One of the advisors said their tax rate was going to be very low, but I have no idea how that's possible with what i've seen with their income. I don't want their income to be eaten alive by taxes.
What you want is to maximize their after-tax income, which is a slightly different problem than minimizing taxes. It's a subtle difference, but one that's easy to lose sight of.
irasymn10 wrote: Fri Jul 30, 2021 11:54 pm Pensions and 401k's...what to do with them (ie keep them with the employer, rollover, get a lump sum, etc). I also have to find out about survivorship of the pensions to take that possibility into account.
You can compare the pension lump sums they would be offered with what they could purchase with the same lump sum amount at

immediateannuities.com

In most cases, they will receive a larger guaranteed income stream by keeping the pension in the form of an annuity, because the employer was able to provide it at wholesale. Some people seem to be in a rush to cash in their pensions for lump sums, but I would be more circumspect about it.
irasymn10 wrote: Fri Jul 30, 2021 11:54 pm THEIR main concerns are:

Running out of money
They can use the Planning Center at Fidelity to evaluate a sustainable plan for retirement withdrawals. It is easier to set up if you already have accounts there, but they let anyone use it by setting up a guest account. I am using it to evaluate my own retirement prospects, and I feel it's plenty good enough for my purposes. I don't feel a need to hire a Financial Advisor for more help with running the numbers.

http://www.fidelity.com/calculators-too ... d-guidance
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Re: Who do my parents need to see to get their retirement in order?

Post by Watty »

Who do my parents need to see to get their retirement in order?
A good starting point would be for them to read one of the Boglehead books. These are very readable even if they do not have a background in investing.

https://www.amazon.com/s?k=Bogleheads&t ... ads.org-20

You might want to read one of those books along with them so you can discuss it, sort of a mini book club.

They could also post here themself. Someone already posted the link on how to ask a portfolio question but that would be a good starting point. It can take a while to get all your information together in one place in that format and I found that just doing that was a very good exercise that helped me get a better handle on where I was at now. Even if they decide not to post their information like that it would be good if went through the process of writing all the information down like that,

https://www.bogleheads.org/wiki/Asking_ ... _questions
backpacker61 wrote: Sat Jul 31, 2021 5:58 am What you want is to maximize their after-tax income, which is a slightly different problem than minimizing taxes. It's a subtle difference, but one that's easy to lose sight of.
You beat me to saying that. It is also important to look at the numbers over their entire lifetime and possibly their heirs. Sometimes it may make sense to pay a bunch of taxes early on because it will make you more over the long term.
irasymn10 wrote: Fri Jul 30, 2021 11:54 pm Pensions and 401k's...what to do with them (ie keep them with the employer, rollover, get a lump sum, etc). I also have to find out about survivorship of the pensions to take that possibility into account.
A related decision is when to start Social Security and they should make that choice along with if they should take a lump sum or some other pension option. For example for some people it might make sense to delay starting Social Security in order to get a larger social security check later but to take a lump sum pension payment in part because they will have that larger Social Security check.

This is an excellent web site to help them decide when to start Social Security.

https://opensocialsecurity.com/

In deciding to take the pension or lump sum one key thing to look at is if they will actually need and use the pension income. If they will just get a pension check, pay taxes on it, and then put it into some investment account then the lump sum would likely be better even if the pension is mathematically a good choice compared to a single premium immediate annuity(SPIA) that they could buy on their own. This is especially true if the pension is not adjusted for inflation. A pension or SPIA is basically insurance to make sure that you do not outlive your money. Buying insurance that you do not need is hard to justify.
irasymn10 wrote: Fri Jul 30, 2021 11:54 pm they have pensions, 401k, annuities, IRAs, and of course SS.
There are lots of things called "annuities" but most of them are overly complex very expensive things that salespeople sell to make a large commission. If anyone tries to sell them anything other than a SPIA then they are dealing with a salesperson and not a true financial advisor so they should run away because they are trying to rip them off. Some of the salespeople are pretty good and will have an argument ready for all the objections they raise but that does not make it a good choice.

The same is true with life insurance as an investment, there is no good reason to buy anything other than term insurance. If they already have something like universal or whole life insurance what to do with it is more complex. (One rare exception is once in a blue moon a complex life insurance could make sense for a multimillionaire who is dealing with an estate planning lawyer with estate tax planning, or with a lawyers plan for a kid with special needs.)
Last edited by Watty on Sat Jul 31, 2021 8:54 am, edited 3 times in total.
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Re: Who do my parents need to see to get their retirement in order?

Post by Watty »

mhalley wrote: Sat Jul 31, 2021 1:44 am You don’t mention the most important part of these fa plans, what does it cost? I bet most of these plans are going to have a 1+% aum fee plus high ER funds.
You cannot overemphasize the importance of costs enough.

There are all sorts of assumptions and qualifications, and opinions, but academic studies have show that in the past a 65 year old could have a 30 year retirement and be pretty safe if they start out with about a 4% withdrawal rate and adjust it each year for inflation. This is called a safe withdrawal rate(SWR) The details are not important right now but there is a wiki on this.

https://www.bogleheads.org/wiki/Safe_withdrawal_rates

The reason that this is so important is paying an advisor a 1% fee does not sound that bad but that 1% needs come out of their 4% SWR so they would be paying the advisor 25% of their spendable income for the year. :shock:

If you don't get anything else out of this thread make sure that your parents understand this.

In reality the 1% annual fee is usually just the tip of the iceberg and there are also lots of other fees like high expense ratios, loads, and hidden fees.

Some advisors may say that they will be able to invest the money better to more than make up for their fees but that is a lie. If they could do that they would be working on wall street make a seven or eight figure salary and not talking to your parents.

One thing some financial advisors will sometimes do is to make large bets with your parents money. Just by random change half the time they might win that bet and look like a genius, the other half of the time they will lose the bet but they will still get paid their fees for at least a few years until the client gets fed up and moves their remaining funds away.
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Re: Who do my parents need to see to get their retirement in order?

Post by ruralavalon »

What advisors have they used for this retirement planning? What are the fees? They need to be careful of "advisors" who want to manage investments for a fee. They may be better served by a financial planner, who gives advice only but does not seek to manage their investments.

FiveK wrote: Sat Jul 31, 2021 12:16 am They would benefit from collecting and reviewing the information suggested in these three posts
Some Important Questions to Answer Before Asking - Can I Retire?
How To: Write a "Case Study" Topic
Asking Portfolio Questions

Is that something they are willing to tackle?
+ 1, they will need to collect this information.

Taxes...they have pensions, 401k, annuities, IRAs, and of course SS.
What types of annuities do they have?

If good funds with low expense ratios are offered in the 401k plan it may be best to leave it where it is. If a rollover is to be done then rollover to an IRA at a low cost provider like Vanguard, Fidelity or Schwab.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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Re: Who do my parents need to see to get their retirement in order?

Post by delamer »

As others have said, you don’t want the tax tail to wag the income dog.

Optimizing taxes is a good idea, but the most important thing is for your parents to live comfortably and not stress about finances. Pay attention to what they need.

And remember that the plan should be one that they can manage on their own or with low cost advisors. It’s nice for you to get pats-on-the-back when things go well, but it won’t be as much fun when things take a downturn
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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Re: Who do my parents need to see to get their retirement in order?

Post by irasymn10 »

mhalley wrote: Sat Jul 31, 2021 1:44 am You don’t mention the most important part of these fa plans, what does it cost? I bet most of these plans are going to have a 1+% aum fee plus high ER funds. The go to here is vanguard pas, but a one time fee from somebody like garretplanning network might be a place to start.
PAS might not give the tax advice they need, ie, Roth conversions etc.
Yes youre 100% right, thanks for mentioning this! It totally slipped my mind. Thanks for the info, I will check that out.
backpacker61 wrote: Sat Jul 31, 2021 5:58 am
What you want is to maximize their after-tax income, which is a slightly different problem than minimizing taxes. It's a subtle difference, but one that's easy to lose sight of.

You can compare the pension lump sums they would be offered with what they could purchase with the same lump sum amount at

immediateannuities.com

In most cases, they will receive a larger guaranteed income stream by keeping the pension in the form of an annuity, because the employer was able to provide it at wholesale. Some people seem to be in a rush to cash in their pensions for lump sums, but I would be more circumspect about it.

They can use the Planning Center at Fidelity to evaluate a sustainable plan for retirement withdrawals. It is easier to set up if you already have accounts there, but they let anyone use it by setting up a guest account. I am using it to evaluate my own retirement prospects, and I feel it's plenty good enough for my purposes. I don't feel a need to hire a Financial Advisor for more help with running the numbers.

http://www.fidelity.com/calculators-too ... d-guidance
Thank you so much for this information and the tools! This will definitely help in the beginning planning stages, and I've never to these sites yet. My dad "heard from a friend" that he should cash out his pension, so he's listening without having the knowledge behind it, and I just don't want him to make wrong move.
Watty wrote: Sat Jul 31, 2021 8:30 am A good starting point would be for them to read one of the Boglehead books. These are very readable even if they do not have a background in investing.

They could also post here themself. Someone already posted the link on how to ask a portfolio question but that would be a good starting point. It can take a while to get all your information together in one place in that format and I found that just doing that was a very good exercise that helped me get a better handle on where I was at now. Even if they decide not to post their information like that it would be good if went through the process of writing all the information down like that,

A related decision is when to start Social Security and they should make that choice along with if they should take a lump sum or some other pension option. For example for some people it might make sense to delay starting Social Security in order to get a larger social security check later but to take a lump sum pension payment in part because they will have that larger Social Security check.
I just ordered the "Bogleheads Guide To Investing" and will share it with my parents, Thanks for the recommendations.

Im not quite sure yet if they will have enough income without their pensions to just start storing the pensions checks in a investment account, but I will find out. What you said makes total sense about the pension. I know neither have yet taken social security, they both wanted to wait, so thats a "bonus" for them.

Im gonna get all their info together, and make a post for them. Thanks for all the info!
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Re: Who do my parents need to see to get their retirement in order?

Post by irasymn10 »

ruralavalon wrote: Sat Jul 31, 2021 9:32 am What advisors have they used for this retirement planning? What are the fees? They need to be careful of "advisors" who want to manage investments for a fee. They may be better served by a financial planner, who gives advice only but does not seek to manage their investments.

What types of annuities do they have?

If good funds with low expense ratios are offered in the 401k plan it may be best to leave it where it is. If a rollover is to be done then rollover to an IRA at a low cost provider like Vanguard, Fidelity or Schwab.
They met with local financial advisors, that's all I know so far. The only fee I know is the one FA, which is 1.26%. The others im unaware of what their fee is, but I told my parents not to sign or do anything, which they didn't. One of the guys was on a local tv show.

I'm not sure about the details of the annuities, I will have to get their information and post back here for a "portfolio review". Im leaning towards they're variable annuities, but I don't know much more yet. Thanks for the info.


delamer wrote: Sat Jul 31, 2021 10:24 am As others have said, you don’t want the tax tail to wag the income dog.

Optimizing taxes is a good idea, but the most important thing is for your parents to live comfortably and not stress about finances. Pay attention to what they need.

And remember that the plan should be one that they can manage on their own or with low cost advisors. It’s nice for you to get pats-on-the-back when things go well, but it won’t be as much fun when things take a downturn
Yes, I definitely want them to live comfortably and not stress, for sure.

This is where is gonna problem, because I cannot see them managing their own investments, which is the reason I made this post, because they would just go with a random FA to manage their finances. I'm going to HAVE to be a part of their management, but hopefully they'll catch on and I can start giving them little things to do/check on later on. Fingers crossed! :D
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Re: Who do my parents need to see to get their retirement in order?

Post by ruralavalon »

irasymn10 wrote: Sat Jul 31, 2021 11:50 amI just ordered the "Bogleheads Guide To Investing" and will share it with my parents, Thanks for the recommendations.
The Bogleheads' Guide to Retirement Planning is probably a better choice for them.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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Re: Who do my parents need to see to get their retirement in order?

Post by delamer »

irasymn10 wrote: Sat Jul 31, 2021 12:00 pm
ruralavalon wrote: Sat Jul 31, 2021 9:32 am What advisors have they used for this retirement planning? What are the fees? They need to be careful of "advisors" who want to manage investments for a fee. They may be better served by a financial planner, who gives advice only but does not seek to manage their investments.

What types of annuities do they have?

If good funds with low expense ratios are offered in the 401k plan it may be best to leave it where it is. If a rollover is to be done then rollover to an IRA at a low cost provider like Vanguard, Fidelity or Schwab.
They met with local financial advisors, that's all I know so far. The only fee I know is the one FA, which is 1.26%. The others im unaware of what their fee is, but I told my parents not to sign or do anything, which they didn't. One of the guys was on a local tv show.

I'm not sure about the details of the annuities, I will have to get their information and post back here for a "portfolio review". Im leaning towards they're variable annuities, but I don't know much more yet. Thanks for the info.


delamer wrote: Sat Jul 31, 2021 10:24 am As others have said, you don’t want the tax tail to wag the income dog.

Optimizing taxes is a good idea, but the most important thing is for your parents to live comfortably and not stress about finances. Pay attention to what they need.

And remember that the plan should be one that they can manage on their own or with low cost advisors. It’s nice for you to get pats-on-the-back when things go well, but it won’t be as much fun when things take a downturn
Yes, I definitely want them to live comfortably and not stress, for sure.

This is where is gonna problem, because I cannot see them managing their own investments, which is the reason I made this post, because they would just go with a random FA to manage their finances. I'm going to HAVE to be a part of their management, but hopefully they'll catch on and I can start giving them little things to do/check on later on. Fingers crossed! :D
It sounds like they have substantial fixed income and investments now.

Receiving a good pension and Social Security admittedly doesn’t require much financial savvy. A solid income plus long tenure at certain employers is all you need.

But if they have a largeish portfolio, then they either saved a lot, picked a good asset allocation, or got lucky — or some combination, maybe.

So maybe they know more than they think already and a little education would make them a lot more confident.

And as far as investments are concerned, a LifeStrategy fund can go a long way: https://investor.vanguard.com/mutual-fu ... trategy/#/
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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Re: Who do my parents need to see to get their retirement in order?

Post by RyeBourbon »

.
I interviewed advisors last year.
Watty wrote: Sat Jul 31, 2021 8:47 am
The reason that this is so important is paying an advisor a 1% fee does not sound that bad but that 1% needs come out of their 4% SWR so they would be paying the advisor 25% of their spendable income for the year. :shock:
Once I came to this conclusion on my own, I stopped talking to them.

By the time you understand enough to choose an advisor (and it doesn't take that long; just read a lot), you can DIY.
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Re: Who do my parents need to see to get their retirement in order?

Post by Silly Wabbit »

irasymn10 wrote: Fri Jul 30, 2021 11:54 pm THEIR main concerns are:

Running out of money
With pensions, social security and annuities, how do they run out of money? Do these cover their expenses?

You mention they're considering cashing in the pension - given their primary concern is running out of money, that seems like a bad idea. They'd be trading a certain income stream for a less certain one. Why take more risk if they don't need to?
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Re: Who do my parents need to see to get their retirement in order?

Post by SuzBanyan »

To know if they have enough and aren’t likely to outlive their savings, your parents need to know their expected expenses in retirement. The link to the Fidelity planner from Backpacker61 can help with that.
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Re: Who do my parents need to see to get their retirement in order?

Post by dbr »

SuzBanyan wrote: Sat Jul 31, 2021 5:16 pm To know if they have enough and aren’t likely to outlive their savings, your parents need to know their expected expenses in retirement. The link to the Fidelity planner from Backpacker61 can help with that.
Exactly

The whole point of all the planners, and Fidelity is pretty good, is to straighten out where the money is going to come from to support wanted spending. Of course the retiree has to estimate his expenses, get SS estimates, understand the pension plans and the annuities, and so. Tax costs are an item to themselves and might need consultation with a CPA.

The problem in general is not about investment advice but about financial planning. Finding a financial planner who does not turn out to be a sleazy salesman can be challenging, but there are certainly reputable people* out there who can do financial planning at a fixed or hourly cost.

*I've never personally met any such person, but my exposure is not that much, among friends and acquaintances.
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Re: Who do my parents need to see to get their retirement in order?

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ruralavalon wrote: Sat Jul 31, 2021 12:03 pm
irasymn10 wrote: Sat Jul 31, 2021 11:50 amI just ordered the "Bogleheads Guide To Investing" and will share it with my parents, Thanks for the recommendations.
The Bogleheads' Guide to Retirement Planning is probably a better choice for them.
+1 Don't rush to investments, there are more important things to consider first.

Another good book is How to Make Your Money Last: The Indispensable Retirement Guide by Jane Bryant Quinn. It helped me clear up the retirement big picture in my head.
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Re: Who do my parents need to see to get their retirement in order?

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Eagle33 wrote: Sat Jul 31, 2021 10:49 pm
ruralavalon wrote: Sat Jul 31, 2021 12:03 pm
irasymn10 wrote: Sat Jul 31, 2021 11:50 amI just ordered the "Bogleheads Guide To Investing" and will share it with my parents, Thanks for the recommendations.
The Bogleheads' Guide to Retirement Planning is probably a better choice for them.
+1 Don't rush to investments, there are more important things to consider first.

Another good book is How to Make Your Money Last: The Indispensable Retirement Guide by Jane Bryant Quinn. It helped me clear up the retirement big picture in my head.
The Bogleheads' Guide to Retirement Planning includes discussion of investing, plus planning, Social Security, health insurance, withdrawal strategies, Single Premium Immediate Annuities (SPIAs), estate planning, etc.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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Re: Who do my parents need to see to get their retirement in order?

Post by radiowave »

OP, a good place to start the discussion with your parents is to determine residual living expenses to be funded by investments:

base annualized living expenses - sum of annual income

e.g.

50,000 base expenses expected in retirement - (social security + pensions + annuities)
50,000 - 40,000 = 10,000 to fund from expenses (again a hypothetical)

If you are using safe withdrawal rate (SWR) then a portfolio of 1,000,000 would produced 40,000/yr which meets RLE plus 30,000 to spare for unexpected expenses, discretionary spending, etc. Putting it another way, with the same example, the RLE above would require a SWR of only 1%.

You can construct a simple spread sheet to create multiple "what if" scenarios to help work through different options.
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Re: Who do my parents need to see to get their retirement in order?

Post by nedsaid »

If your parents need an Advisor, I would look for the Certified Financial Planner status. It takes rigorous coursework, about 3 years of work experience, and passing a difficult exam. Problem is, individualized attention is expensive, really no way around it.

The default advice here is the Vanguard Personal Advisory Service, which charges 0.30% plus the embedded expenses in the funds, so all-in expenses are about 0.40% or so. That is going to be as inexpensive as you will get as Vanguard has economies of scale that few can match.

What I would recommend for your parents would be to pay for a plan from a Certified Financial Planner. Plans run $2,500 on up. If they choose to implement the plan themselves, they would have an upfront cost but would save over the long haul. The Assets Under Management fees really add up over time. There are planners that charge on a subscription basis. 1% Assets Under Management for $1,000,000 is $10,000 a year and that goes on year after year.

For older folks, the default option is Edward Jones and Ameriprise because they have a lot of offices but they are really expensive. Your all-in costs can be over 2% a year and that is an awful lot. It is an easy option for senior citizens but about the most expensive.

There are advisory services with a combination of a robot and a human, the Vanguard service described above is one such service, Fidelity offers one for 0.50%, and Schwab gets you access to a CFP for $300 up front fee and $30 a month. The Schwab portfolios are complex by Boglehead standards but are run by a robot, Schwab portfolios tend to be cash heavy and that is how they make their money. These options would be superior to the Advisors your parents have been seeing. The drawback is that your Advisors will change over time.
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Re: Who do my parents need to see to get their retirement in order?

Post by irasymn10 »

ruralavalon wrote: Sat Jul 31, 2021 12:03 pm The Bogleheads' Guide to Retirement Planning is probably a better choice for them.
I purchased this one as well! Thanks!

delamer wrote: Sat Jul 31, 2021 12:33 pm It sounds like they have substantial fixed income and investments now.

And as far as investments are concerned, a LifeStrategy fund can go a long way: https://investor.vanguard.com/mutual-fu ... trategy/#/
I got on them about saving over the last 10 years or so, because they were spending a lot. So my annoyance to them seemed to help financially, at least a tiny bit. Im going to read about the LifeStrategy funds, and thank you!

Eagle33 wrote: Sat Jul 31, 2021 10:49 pm +1 Don't rush to investments, there are more important things to consider first.

Another good book is How to Make Your Money Last: The Indispensable Retirement Guide by Jane Bryant Quinn. It helped me clear up the retirement big picture in my head.
I also purchased the Bogleheads Guide to Retirement Planning, but I put this in my cart for next time. I only can read so many books at once :D Thanks for the recommendation.

radiowave wrote: Sun Aug 01, 2021 9:27 am OP, a good place to start the discussion with your parents is to determine residual living expenses to be funded by investments:

base annualized living expenses - sum of annual income

50,000 base expenses expected in retirement - (social security + pensions + annuities)
50,000 - 40,000 = 10,000 to fund from expenses (again a hypothetical)

If you are using safe withdrawal rate (SWR) then a portfolio of 1,000,000 would produced 40,000/yr which meets RLE plus 30,000 to spare for unexpected expenses, discretionary spending, etc. Putting it another way, with the same example, the RLE above would require a SWR of only 1%.

You can construct a simple spread sheet to create multiple "what if" scenarios to help work through different options.
I'm currently gathering all my parents information now, and its looking like they'll have a good amount of income from SS and pensions, I just have to get all of their expenses.

Im sorry, what is RLE? I knew the SWR but not the other one.

nedsaid wrote: Sun Aug 01, 2021 10:00 am If your parents need an Advisor, I would look for the Certified Financial Planner status. It takes rigorous coursework, about 3 years of work experience, and passing a difficult exam. Problem is, individualized attention is expensive, really no way around it.

The default advice here is the Vanguard Personal Advisory Service, which charges 0.30% plus the embedded expenses in the funds, so all-in expenses are about 0.40% or so. That is going to be as inexpensive as you will get as Vanguard has economies of scale that few can match.

What I would recommend for your parents would be to pay for a plan from a Certified Financial Planner. Plans run $2,500 on up. If they choose to implement the plan themselves, they would have an upfront cost but would save over the long haul. The Assets Under Management fees really add up over time. There are planners that charge on a subscription basis. 1% Assets Under Management for $1,000,000 is $10,000 a year and that goes on year after year.
Thanks for the info, Ill check out the Vanguards Personal Advisory Service.

I was looking at CFP's under the CFP website, but it just didn't give me a positive feeling. Many Morgan Stanley people, "Investment Advisors", Wealth Managers, and Thrivent people. Maybe Im wrong, but from the titles, it sounds like they would be giving the same thing my parents already got.

I really don't like the idea of a monthly fee on a continuing basis, Id rather them pay upfront and that's it (im sure my parents would think the same thing).

Is there specific things I should be asking a CFP to weed out the unwanteds? Maybe I can call them myself before wasting my parents time.
delamer
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Re: Who do my parents need to see to get their retirement in order?

Post by delamer »

irasymn10 wrote: Sun Aug 01, 2021 12:04 pm
ruralavalon wrote: Sat Jul 31, 2021 12:03 pm The Bogleheads' Guide to Retirement Planning is probably a better choice for them.
I purchased this one as well! Thanks!

delamer wrote: Sat Jul 31, 2021 12:33 pm It sounds like they have substantial fixed income and investments now.

And as far as investments are concerned, a LifeStrategy fund can go a long way: https://investor.vanguard.com/mutual-fu ... trategy/#/
I got on them about saving over the last 10 years or so, because they were spending a lot. So my annoyance to them seemed to help financially, at least a tiny bit. Im going to read about the LifeStrategy funds, and thank you!

Eagle33 wrote: Sat Jul 31, 2021 10:49 pm +1 Don't rush to investments, there are more important things to consider first.

Another good book is How to Make Your Money Last: The Indispensable Retirement Guide by Jane Bryant Quinn. It helped me clear up the retirement big picture in my head.
I also purchased the Bogleheads Guide to Retirement Planning, but I put this in my cart for next time. I only can read so many books at once :D Thanks for the recommendation.

radiowave wrote: Sun Aug 01, 2021 9:27 am OP, a good place to start the discussion with your parents is to determine residual living expenses to be funded by investments:

base annualized living expenses - sum of annual income

50,000 base expenses expected in retirement - (social security + pensions + annuities)
50,000 - 40,000 = 10,000 to fund from expenses (again a hypothetical)

If you are using safe withdrawal rate (SWR) then a portfolio of 1,000,000 would produced 40,000/yr which meets RLE plus 30,000 to spare for unexpected expenses, discretionary spending, etc. Putting it another way, with the same example, the RLE above would require a SWR of only 1%.

You can construct a simple spread sheet to create multiple "what if" scenarios to help work through different options.
I'm currently gathering all my parents information now, and its looking like they'll have a good amount of income from SS and pensions, I just have to get all of their expenses.

Im sorry, what is RLE? I knew the SWR but not the other one.

nedsaid wrote: Sun Aug 01, 2021 10:00 am If your parents need an Advisor, I would look for the Certified Financial Planner status. It takes rigorous coursework, about 3 years of work experience, and passing a difficult exam. Problem is, individualized attention is expensive, really no way around it.

The default advice here is the Vanguard Personal Advisory Service, which charges 0.30% plus the embedded expenses in the funds, so all-in expenses are about 0.40% or so. That is going to be as inexpensive as you will get as Vanguard has economies of scale that few can match.

What I would recommend for your parents would be to pay for a plan from a Certified Financial Planner. Plans run $2,500 on up. If they choose to implement the plan themselves, they would have an upfront cost but would save over the long haul. The Assets Under Management fees really add up over time. There are planners that charge on a subscription basis. 1% Assets Under Management for $1,000,000 is $10,000 a year and that goes on year after year.
Thanks for the info, Ill check out the Vanguards Personal Advisory Service.

I was looking at CFP's under the CFP website, but it just didn't give me a positive feeling. Many Morgan Stanley people, "Investment Advisors", Wealth Managers, and Thrivent people. Maybe Im wrong, but from the titles, it sounds like they would be giving the same thing my parents already got.

I really don't like the idea of a monthly fee on a continuing basis, Id rather them pay upfront and that's it (im sure my parents would think the same thing).

Is there specific things I should be asking a CFP to weed out the unwanteds? Maybe I can call them myself before wasting my parents time.
If they can find a LifeStrategy fund that has a comfortable allocation between stocks and bonds, then it’s a cheap option (relative to a paid advisor) and it’s one-time decision that they don’t need to any more thought to barring a significant change of circumstances). Also, for most people, there is less temptation to make adjustments to a portfolio with an all-in-one fund than with several individual funds.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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Re: Who do my parents need to see to get their retirement in order?

Post by radiowave »

irasymn10 wrote: Sun Aug 01, 2021 12:04 pm
ruralavalon wrote: Sat Jul 31, 2021 12:03 pm The Bogleheads' Guide to Retirement Planning is probably a better choice for them.
I purchased this one as well! Thanks!

delamer wrote: Sat Jul 31, 2021 12:33 pm It sounds like they have substantial fixed income and investments now.

And as far as investments are concerned, a LifeStrategy fund can go a long way: https://investor.vanguard.com/mutual-fu ... trategy/#/
I got on them about saving over the last 10 years or so, because they were spending a lot. So my annoyance to them seemed to help financially, at least a tiny bit. Im going to read about the LifeStrategy funds, and thank you!

Eagle33 wrote: Sat Jul 31, 2021 10:49 pm +1 Don't rush to investments, there are more important things to consider first.

Another good book is How to Make Your Money Last: The Indispensable Retirement Guide by Jane Bryant Quinn. It helped me clear up the retirement big picture in my head.
I also purchased the Bogleheads Guide to Retirement Planning, but I put this in my cart for next time. I only can read so many books at once :D Thanks for the recommendation.

radiowave wrote: Sun Aug 01, 2021 9:27 am OP, a good place to start the discussion with your parents is to determine residual living expenses to be funded by investments:

base annualized living expenses - sum of annual income

50,000 base expenses expected in retirement - (social security + pensions + annuities)
50,000 - 40,000 = 10,000 to fund from expenses (again a hypothetical)

If you are using safe withdrawal rate (SWR) then a portfolio of 1,000,000 would produced 40,000/yr which meets RLE plus 30,000 to spare for unexpected expenses, discretionary spending, etc. Putting it another way, with the same example, the RLE above would require a SWR of only 1%.

You can construct a simple spread sheet to create multiple "what if" scenarios to help work through different options.
I'm currently gathering all my parents information now, and its looking like they'll have a good amount of income from SS and pensions, I just have to get all of their expenses.

Im sorry, what is RLE? I knew the SWR but not the other one.

nedsaid wrote: Sun Aug 01, 2021 10:00 am If your parents need an Advisor, I would look for the Certified Financial Planner status. It takes rigorous coursework, about 3 years of work experience, and passing a difficult exam. Problem is, individualized attention is expensive, really no way around it.

The default advice here is the Vanguard Personal Advisory Service, which charges 0.30% plus the embedded expenses in the funds, so all-in expenses are about 0.40% or so. That is going to be as inexpensive as you will get as Vanguard has economies of scale that few can match.

What I would recommend for your parents would be to pay for a plan from a Certified Financial Planner. Plans run $2,500 on up. If they choose to implement the plan themselves, they would have an upfront cost but would save over the long haul. The Assets Under Management fees really add up over time. There are planners that charge on a subscription basis. 1% Assets Under Management for $1,000,000 is $10,000 a year and that goes on year after year.
Thanks for the info, Ill check out the Vanguards Personal Advisory Service.

I was looking at CFP's under the CFP website, but it just didn't give me a positive feeling. Many Morgan Stanley people, "Investment Advisors", Wealth Managers, and Thrivent people. Maybe Im wrong, but from the titles, it sounds like they would be giving the same thing my parents already got.

I really don't like the idea of a monthly fee on a continuing basis, Id rather them pay upfront and that's it (im sure my parents would think the same thing).

Is there specific things I should be asking a CFP to weed out the unwanteds? Maybe I can call them myself before wasting my parents time.
RLE = residual living expenses after accounting for income and baseline expenses.

Also, you mentioned gathering your parents information. Consider constructing a spreadsheet with the accounts and funds to track including bank accounts, insurance policies, etc. Could probably start a second thread on spreadsheet strategies to track portfolio, several threads on that here in the past few years.
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Re: Who do my parents need to see to get their retirement in order?

Post by RickBoglehead »

Some things strike me here. OP doesn't want their income to be eaten by taxes. OP has to find out about survivorship with pensions. OP needs to guide them in the right direction.

They met with four advisors without involving the OP. Is that because they have no clue what they are doing, or because they don't really want or need help?

What do THEY want? Do they totally lack understanding of what they have and whether they can retire or not? Did they not file for Social Security because they understood the benefit of waiting, or because they didn't understand anything?

OP, if they aren't involved in figuring this out, it's going to be messy.
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Re: Who do my parents need to see to get their retirement in order?

Post by nedsaid »

irasymn10 wrote: Sun Aug 01, 2021 12:04 pm
nedsaid wrote: Sun Aug 01, 2021 10:00 am If your parents need an Advisor, I would look for the Certified Financial Planner status. It takes rigorous coursework, about 3 years of work experience, and passing a difficult exam. Problem is, individualized attention is expensive, really no way around it.

The default advice here is the Vanguard Personal Advisory Service, which charges 0.30% plus the embedded expenses in the funds, so all-in expenses are about 0.40% or so. That is going to be as inexpensive as you will get as Vanguard has economies of scale that few can match.

What I would recommend for your parents would be to pay for a plan from a Certified Financial Planner. Plans run $2,500 on up. If they choose to implement the plan themselves, they would have an upfront cost but would save over the long haul. The Assets Under Management fees really add up over time. There are planners that charge on a subscription basis. 1% Assets Under Management for $1,000,000 is $10,000 a year and that goes on year after year.
Thanks for the info, Ill check out the Vanguards Personal Advisory Service.

I was looking at CFP's under the CFP website, but it just didn't give me a positive feeling. Many Morgan Stanley people, "Investment Advisors", Wealth Managers, and Thrivent people. Maybe Im wrong, but from the titles, it sounds like they would be giving the same thing my parents already got.

I really don't like the idea of a monthly fee on a continuing basis, Id rather them pay upfront and that's it (im sure my parents would think the same thing).

Is there specific things I should be asking a CFP to weed out the unwanteds? Maybe I can call them myself before wasting my parents time.
A good place to start is to look over the advisor biography that they have posted online, that will tell you a lot.

The CFP is not an ironclad guarantee that the advisor will always act in your best interest but it is a very good credential to have. You know that someone with that designation has been trained with a broad view of personal finance rather than just selling you investments.

Number one question: Are you a Fiduciary? There is a higher standard with a Fiduciary standard than a suitability standard. Still that is no guarantee but it is a start.

Not sure how to ask the advisor this question but you want to know if he or she is truly independent. The problem with someone from a big full-service brokerage house like UBS or Merrill Lynch is that they are captive to company research and are captive to company products. If they work for a big firm, it is more than likely that they will have a sales manager, the pressure to make goals in this big organizations can be just insane. In that situation you are not going to get unbiased advice.

Ultimately, everyone has to make a living. Even a CFP with his or her own practice will have to have a large enough client and revenue base in order to pay the bills. So there is an element of sales here no matter who you are. What you hope to get is someone who is already established.

You want to know the fee structure. In other words, how is the advisor compensated?

I think the biggest thing is to interview the advisor to get a sense of the person. Sometimes you have a rapport with the person and other times you don't. You also want someone with the knowledge and expertise to handle whatever particular issues are facing your parents. No one, no matter how knowledgeable, is expert on everything regarding financial planning. So lots of planners have a niche practice, they focus on certain types of clients. Sort of like interviewing for a job, it seems to more more about "fit" than just credentials and qualifications. You probably don't have time to interview in person but that would be ideal.
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Re: Who do my parents need to see to get their retirement in order?

Post by irasymn10 »

delamer wrote: Sun Aug 01, 2021 12:38 pm
If they can find a LifeStrategy fund that has a comfortable allocation between stocks and bonds, then it’s a cheap option (relative to a paid advisor) and it’s one-time decision that they don’t need to any more thought to barring a significant change of circumstances). Also, for most people, there is less temptation to make adjustments to a portfolio with an all-in-one fund than with several individual funds.
That might be a great fit for them, as I don't see them ever wanting to personally "mess around" with their investments. I think keeping it simple would be perfect for their needs.

RickBoglehead wrote: Sun Aug 01, 2021 2:55 pm Some things strike me here. OP doesn't want their income to be eaten by taxes. OP has to find out about survivorship with pensions. OP needs to guide them in the right direction.

They met with four advisors without involving the OP. Is that because they have no clue what they are doing, or because they don't really want or need help?

What do THEY want? Do they totally lack understanding of what they have and whether they can retire or not? Did they not file for Social Security because they understood the benefit of waiting, or because they didn't understand anything?

OP, if they aren't involved in figuring this out, it's going to be messy.
They're going to be involved much more now that I'm involved if that makes sense, but they just don't know much about finance other than saving well and living below their means. Different investing paths/concepts were mentioned with each meeting, and that made them more confused. This is where I stepped in because they wanted my input on which advisor to go with. My parents dont work off of budgets... They have income and expenses, and as long as the bills are being paid on time, they dont put in much extra thought.

Simply, they don't want to run out of money nor want to worry about running out of money. The other stuff you mentioned wasn't even brought up by the advisors they met, so that gave a red alert in my head because this stuff should be looked at.


nedsaid wrote: Sun Aug 01, 2021 3:05 pm A good place to start is to look over the advisor biography that they have posted online, that will tell you a lot.

The CFP is not an ironclad guarantee that the advisor will always act in your best interest but it is a very good credential to have. You know that someone with that designation has been trained with a broad view of personal finance rather than just selling you investments.

Number one question: Are you a Fiduciary? There is a higher standard with a Fiduciary standard than a suitability standard. Still that is no guarantee but it is a start.

Not sure how to ask the advisor this question but you want to know if he or she is truly independent. The problem with someone from a big full-service brokerage house like UBS or Merrill Lynch is that they are captive to company research and are captive to company products. If they work for a big firm, it is more than likely that they will have a sales manager, the pressure to make goals in this big organizations can be just insane. In that situation you are not going to get unbiased advice.

Ultimately, everyone has to make a living. Even a CFP with his or her own practice will have to have a large enough client and revenue base in order to pay the bills. So there is an element of sales here no matter who you are. What you hope to get is someone who is already established.

You want to know the fee structure. In other words, how is the advisor compensated?

I think the biggest thing is to interview the advisor to get a sense of the person. Sometimes you have a rapport with the person and other times you don't. You also want someone with the knowledge and expertise to handle whatever particular issues are facing your parents. No one, no matter how knowledgeable, is expert on everything regarding financial planning. So lots of planners have a niche practice, they focus on certain types of clients. Sort of like interviewing for a job, it seems to more more about "fit" than just credentials and qualifications. You probably don't have time to interview in person but that would be ideal.

So basically...fiduciary, if they're only able to offer their companies products, or do they have access to a multitude of companies products, and the fee structure, got it!

I think what you mentioned about "no one is an expert regarding financial planning" is why I'm here because my parents thought the opposite would be true, and its just not. And knowing how my parents are, if the person can make them laugh at all, they'd be sure to tell me "we liked him!" :oops:

Thanks for your advice!
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Re: Who do my parents need to see to get their retirement in order?

Post by ruralavalon »

irasymn10 wrote: Sun Aug 01, 2021 12:04 pmIs there specific things I should be asking a CFP to weed out the unwanteds? Maybe I can call them myself before wasting my parents time.
This online book chapter covers questions to ask when hiring an advisor, "Chapter 10 – On Your Own or Hire an Advisor", link.

Two links for finding an advisor:
http://www.napfa.org/consumer/index.asp
http://www.garrettplanningnetwork.com/
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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Re: Who do my parents need to see to get their retirement in order?

Post by nedsaid »

irasymn10 wrote: Sun Aug 01, 2021 11:19 pm

I think what you mentioned about "no one is an expert regarding financial planning" is why I'm here because my parents thought the opposite would be true, and its just not. And knowing how my parents are, if the person can make them laugh at all, they'd be sure to tell me "we liked him!" :oops:

Thanks for your advice!
Not sure that I or anyone else said that. What I will say is that no matter how much you know, there is always more to learn; in that sense no one is an expert. A good CFP with experience can really be a help because of their knowledge and what they have seen real life people do with their own finances. An advisor can help steer you around mistakes others have made. What I like about financial planning is that you look at the big picture of a person's financial live. Too often we make decisions in isolation, not considering the effects a decision could have on other parts of our life. Plus we all have blind spots, always good to get an objective opinion from somebody else. What I would say is that everything in life has limits and there is a point of diminishing returns. Financial Planning isn't the answer to everything in life but it can help you immensely. For one thing, the CFP might make you aware of options you didn't even know you had. What I will also say is that every person and every family is unique.
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Re: Who do my parents need to see to get their retirement in order?

Post by ThriftyisFun »

A book your parents might find helpful about retirement is "The Ultimate Retirement Guide for 50+: Winning Strategies to Make Your Money Last a Lifetime" by Suze Orman.

It came out early 2020 (pre-covid). I listened to the audiobook (read by the author). Suze adds extra tips and examples not included in the book. Easy and engaging to listen to.while traveling or commuting. I got the audiobook free from library but bought my own copy plus the book. Now listening to it for a second time. I hope to get a bookclub going on it.

It really got me to thinking of where to live (is my house suitable for an "older" me?), best timing for my retirement, urgency to update my estate documents and a series of other things.

Chapters include such titles as
- How to help the ones you love without hurting your retirement
- making the most of your working years
- where to live
- power moves in you 60's
- how to pay yourself in retirement (and not run out of money)
- how and where to invest
- finding the right financial advisor
- protecting yourself and those you love

Each chapter ends with a useful summary checklist.

She talks about how to find a good fee-only, Fiduciary, certified financial planner.
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