Options for a new widow or widower who is not expert on managing retirement investments

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tadamsmar
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Re: Options for a new widow or widower who is not expert on managing retirement investments

Post by tadamsmar »

nedsaid wrote: Mon Nov 28, 2022 12:35 pm
I would look into Vanguard Personal Advisory Service. Many threads here regarding VPAS, it isn't perfect and it has its flaws, but it might be the best solution for someone like you.

What you don't want is to have your widow rush to Edward Jones or Ameriprise after your passing on. They are a pretty expensive way to go for financial planning and asset management. Fidelity and Schwab have good, lower cost options but she might get subtle sales pressure to move on to more expensive advisory services. So if you want a lower cost service, VPAS, Fidelity Go, and Schwab's Intelligent Portfolios plus access to Certified Financial Planners are three of the better options that I am aware of.

T Rowe Price offers financial planning and portfolio management for about 1% a year of net assets. American Century offers this for 0.90% but their planning services might not be as comprehensive as one would like. A local Financial Advisor would be probably 1.1% or assets or more unless you have a sizeable portfolio, I would expect a range of probably 1.2% to 1.8% of assets per year, all inclusive. The more expensive services could have all-in costs of 2% or more of assets each year.

For a widow, she would probably want somebody local that she could talk to face to face. But VPAS, Schwab, and Fidelity are viable if she can do phone and/or zoom conferences. There might be a Schwab or Fidelity office close enough for her. The local and independent Financial Advisors will be more expensive, and that is the problem.

So nothing is perfect, there are drawbacks to everything. Despite what people say here, just telling your widow to read your Investment Policy Statement after your passing just isn't going to do it. If your spouse is not interested in learning how to do these things, it is probably best to get things set up while you are still living. The least I would do here is to seriously look into VPAS.

Edit: I restated some things here that I made earlier in the thread. I didn't realize this was an older thread that I had already weighed in on.
One issue is that we have funds at Vanguard, TSP, 401K with Fidelity, Ibonds at Treasury Direct, and a cash balance pension fund with my employer. I still do a little bit of part-time work.

Would a Vanguard PAS manage all that or would I have to move it all to Vanguard?

Maybe I should move it anyway. But there are costs in doing that.
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nedsaid
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Re: Options for a new widow or widower who is not expert on managing retirement investments

Post by nedsaid »

tadamsmar wrote: Mon Nov 28, 2022 1:45 pm
One issue is that we have funds at Vanguard, TSP, 401K with Fidelity, Ibonds at Treasury Direct, and a cash balance pension fund with my employer. I still do a little bit of part-time work.

Would a Vanguard PAS manage all that or would I have to move it all to Vanguard?

Maybe I should move it anyway.
If you wanted VPAS to manage everything: the Thrift Savings Plan and the 401k with Fidelity would need to be rolled over.
Vanguard won't manage the I-Bonds or the Cash Balance Pension but would consider them as they develop your financial plan.
When you finally leave work, you could choose whether to roll the money into Vanguard or to take the monthly pension payments.

If you choose to hold retirement assets like the TSP or the 401k outside of Vanguard, they will likely give you very general asset allocation advice for those accounts but not much more. Pretty likely they won't tell you what specific funds to hold or when to rebalance those accounts. They will manage whatever you give them to manage, they will take into account assets held elsewhere, but you can't expect them to run accounts for which they get no compensation.

Advisors do have to work with precisely this issue as many clients will choose to have assets held elsewhere. The Advisory firm will want to know what you hold elsewhere as this will affect their recommendations. It will also affect how they manage your account with them, for example if your other accounts are invested relatively conservatively, they might elect to invest a bit more aggressively as they are taking the big picture into account. But in a way, it defeats the purpose of an Advisory relationship as the client has to self manage the other accounts.
A fool and his money are good for business.
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nedsaid
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Re: Options for a new widow or widower who is not expert on managing retirement investments

Post by nedsaid »

Most all of my retirement is split 3 ways between three providers. One of the providers is providing an Advisory service for me, my all-in costs for doing so is 0.90% of assets a year. I talk to the Financial Consultant every quarter, get retirement projections, limited financial planning, and access to MoneyGuide Pro which is financial planning software. They can see what I hold elsewhere. The service I am using manages about 30% of my retirement. I don't expect them to give me any more than limited advice regarding what I hold elsewhere. So I am doing right now something similar to your current situation.

One reason that I used the Advisory Service is to do sort of a test drive. I want to see if their planning services are robust enough for what I want. I am expecting help with Social Security claiming strategies and portfolio withdrawal strategies in retirement. It could be that if I had all my retirement assets with them that they would be willing to provide more comprehensive and detailed advice. Can't blame them, eh? As long as I get good general advice and a good general plan, I will be satisfied. I could run scenarios in MoneyGuide Pro. This software is an expensive subscription for Financial Planners, so having access isn't an insignificant benefit. Most people probably don't want to bother trying to learn a software program, though it is mostly user friendly.

Another similarity to your situation is that I have a Cash Balance Pension, I am thinking about whether to roll it over or just to take the monthly payments whenever I decide to retire.

If I get wowed by the Advisory service I am using, I suppose I could just roll everything over to them but the cost is the 0.90% that I mentioned above. I am cheap and don't want the added costs. But if I decide I just want to hand over the keys entirely, it might be worth it to me. Vanguard does all of this for about 0.35%, that is if you stick to the index funds or index ETFs, and they could be an option for me. The issue is that I have never dealt with Vanguard as a customer myself though I do own Vanguard ETTs.

What you could do is what I am doing and test drive the Vanguard service with part of your portfolio. If they do a good service for you and if they are a good fit, you could then roll everything over (except for the iBonds and the pension if you chose the monthly payments) and let them run the whole show for you. If you don't like the service, you could cancel it after a year or so. The reason I say that is that would pay them for the time spent to set things up for you. A year ought to be a long enough time period to determine whether they are a good fit or not.
A fool and his money are good for business.
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