I found a Financial Advisors thread from several years ago but thought I’d start a new one.
What are your thoughts on using a Financial Advisor heading into retirement? I don’t mean just for investment decisions, but also one that can assist with all of the decisions in retirement. While investment allocations alone don’t worry me too much, the combination of investment allocations along with tax planning, Roth conversions, ACA health insurance subsidies (for ages<65), estate planning, spending/withdrawal levels, etc. freaks me out a bit.
On the one hand it sounds expensive, but if you have assets in the millions I can see how a good financial advisor could save money if they keep you from making costly tax mistakes.
How many of you are considering using a financial advisor when you’re close to or in retirement?
I plan to check in with a financial advisor 2-3x as retirement is approaching.
I’ve had several meetings with 401k advisors through various workplaces, and each one basically says “yep you’re investing, keep doing that”, and sometimes they’ll offer additional bad advice.
The last one just picked an assortment of stocks based on their 10-year RoR and their expense fee, just subtracted one from the other. I asked, “Don’t all your materials say that past performance doesn’t guarantee future returns? What makes these better other than the historical return and the expense ratio?” She had no sufficient response and that’s my last interaction with an advisor.
However, when it comes to things like Medicare choices, or esoteric plays like placing your assets into an irrecovable trust, somebody who knows that area of life could be beneficial.
I wouldn’t continue using an advisor once I have a good handle on my future, unless laws significantly change.
I would suggest to also work with an estate planning attorney regardless of the value of your current assets.
As for the financial advisor, I wonder if a combination of an estate-planning attorney and a tax advisor (in some cases, these could be the same person) would serve the same underlying purpose as the financial planner w/o the potential conflict of interest that the planner is going to have.
I’ve always been self directed with respect to investments and financial planning. However, when I started thinking about retirement I decided to get a second opinion from a financial planner. I did value a second opinion, but also thought it was important for my wife to hear an opinion directly from a professional rather than just my own thoughts. I had enough assets with Schwab that they provided this as a value added service, but had I not had that option I would have gone with a “fee only” financial advisor.
Like you said investment allocations don’t scare me. ACA health subsidies are not applicable in my situation. I do plan to do a Roth conversion ladder starting this year. I’m not worried about withdrawal levels. I did start a Donor Advised Fund a few years ago as a vehicle to time my charitable contributions for more favorable tax treatment. I should perhaps do more in terms of estate planning to minimize taxes when we pass, but that’s pretty far down my priority list as we don’t have kids.
If you’re simply paying an AUM fee for asset management, then a lot of what’s mentioned above applies. You should be getting more than that for the fee that’s charged. We’re using someone who also provides tax planning, so they’re providing short-term advice (drawing down an inherited IRA, child going to college) and long-term advice (where everything should be for taxable and non-taxable accounts to minimize social security taxation and taxable RMDs).
Might it be cheaper to manage my own assets and find a CPA to do tax stuff? Maybe, in absolute dollars, but my time has value. I’d rather spend it off doing hobbies I enjoy instead of spending however much time trying to run down all the tools to plot out finances for retirement while also trying to find alpha in the stock market.
If you are just looking for a financial planner, they typically don’t charge a % of assets as they are simply helping create a financial plan rather than managing your assets. Financial planners generally have by the hour type flat charges or a flat fee range. For an Asset manager type financial advisor, most do charge as a % of AUM. Of course there are also those that sell commission based products, but that’s a no thanks for me.
I am aware. But those type of financial advisors are not generally licensed, and therefore will not provide a lot of specific advice,. particularly around investing.
I found a woman in my area who is a CFP and ChFC, she claims to be fee-based and specializes in retirement and near-retirement planning. I mostly want to have someone help me understand if I should be doing Roths now or later, helping me get a plan on paper for managing income and taxes in retirement, that sort of thing. I could DIY it but I hate taxes for one, and maybe she’s thought of something I’d miss.
I don’t need help investing. I buy VOO and BND today, got some FZROX and VTI on the shelf from a few years ago. It’s fine, need to ramp up my BND exposure and check out SCHD, might put $100k there as part of my SoR mitigation.
It’s all about smoothing out your earnings so you don’t get boned once you hit RMD age
So if you have a lot invested and don’t really spend a great deal of money then you’re more likely to run into that pesky issue later in life where you have to withdraw more than you were earning during your working years
If you give us an idea of how much you earn, spend in a year, age, amount of invested assets - it will be pretty easy to give you an idea of next steps. Or you can plunk it into excel
Thanks Ted, it sounds like I’m thinking like you at this point. It sounds like you’re happy with your setup, correct?
My other reason for considering paying an AUM fee for those services is that I know my personality and how handling everything myself is likely to play out. I’m pretty sure that I will worry and obsess and all of those little (and not so little) decisions will be on my mind day and night. I think if I pay an expert to make the decisions I will be more likely to enjoy myself.
I don’t think RMDs will be that big of an issue for me but I could be wrong.
My situation:
My wife and I are both 57 and hoping to retire at 59 or 60. I’m hesitant to give too much detail on the invested asset side, but it’s several million. Retirement timing isn’t 100% financial for us. Spending is a bit trickier in that our current level of spending would be fine, but if possible I’d love to spend much more (who wouldn’t?), at least for the first several years of retirement. That desire to spend as much as reasonably possible is why I wonder if RMDs need to be a concern.
I mentioned estate planning in the initial post but that isn’t a major concern. In theory if we die right as our money runs out that would be fine. That is more of the reason I’m considering a financial advisor, to safely maximize our spending. Otherwise I wouldn’t be too concerned, our savings should be more than enough to maintain our current level of spending even if we pay too much in taxes or don’t optimize the investing side.
I look at it this way: for the combined services, an AUM fee is fine. For just here, give me your money and I’ll invest it for you, it’s not. After forking out $3K for taxes last year and knowing we could be bumping up against the next tax bracket, the tax management piece is huge for me; I think of it as paying for that, they get time to prove themselves on the investing side. If I ever decide I don’t like what they’re doing there, I can always “fire” them by finding someone else or taking it back over.