Financial Advisors

The Sandbox General
#1

The “SO-You Finances Split” thread got me thinking about my retirement. I’m <40 and I think I’m saving enough for retirement, but I wouldn’t mind some confirmation, and maybe some decent projections around what it would take to retire early (mid 50’s maybe?).

I’ve tried to go through this on my own a little bit, and I always feel like I have no idea what I’m doing (probably because I have no idea what I’m doing). All of the online calculators I find seem too simplistic (for example, not taking into account raises from promotions or switching jobs).

So then I was listening to a podcast (Business Wars) and one of the ads was about financial planning. So I enter my info into this website, and I’ve gotten way too many emails/phone calls from financial planners. I speak to one local person, and they want $1,200 to develop my financial plan. :scream:

So I figured I’d come on here and see what you guys think. Are financial advisors worth it? How do you know when you’re on track to retire on time (or early)? Is $1,200 not that much and I should just suck it up and pay the money?

#2

I want a financial advisor because I know nothing and I don’t watch the market closely enough to react if March 2020 happens again (well, I could buy, but selling would be a bit late). Of course, I’m in my mid-20s so I can recover (I think, for now). I know my parents/grandparents had trouble finding someone they liked and trusted though… which makes me nervous. No idea on how to find one / what is a reasonable cost. That said, $1200 sounds like a lot to my untrained eye. :woozy_face:

My company has an in-house financial advisor and some “financial planning” thing tangential to our medical benefits - not sure if it’s in-depth enough to be helpful or not. Maybe your company offers something similar? It’s a benefit that I find is easy to forget about.

#3

Now that you mention it, there was some retirement thing I got in the mail from work a while ago. Now I just have to see if I can find that info that I probably threw away…

#4

I’d be careful with financial advisors that they’re required to have a fiduciary obligation. I forget the nuance but not all the people offering advice are obligated to put your interests ahead of theirs in terms of what you should invest in, etc.

Edit: I believe financial advisors do not have a fiduciary obligation, investment advisors do

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#5

Yeah, the website I went through (www.smartassets.com) says that they only use advisors with a fiduciary obligation, and the one I talked to reiterated that.

It looks like my employer offers something through Fidelity, so I’m trying to see exactly what that is.

#6

Yeah that makes sense, I’d look through Fidelity.

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#7

You probably want a flat-fee based advisor, someone you pay to develop a plan. A lot of advisors will be doing the ‘work’ for free then selling products for commission. That can frequently make their advice suspect.

I read a 3-foot tall pile of books when I started investing so I don’t use an advisor. Where we did pay for an advisor was back when we started budgeting. Trying to budget with two head-strong people was a mess. Paying someone for a year was so worth the money; they took the emotion out of the process and unified our strategy.

Paying a fee-based advisor can start to make sense when you’re north of $1MM in investable assets, but not likely before.

#8

Yeah… I have a while until I’m there. Fidelity’s online calculator says I’m ok, so that’s good enough for me for now probably.

#9

I wouldn’t consider a financial advisor in your 20s.

Do you have an 6+ month emergency fund? Are you saving at minimum your 401k matching? Good start. Can you save more without delaying major purchases like a home? Do it.

In your 20s, just aggressively invest in broad mutual funds/ETFs with expense fees of <0.2%. Vanguard has a lot of options. Don’t do bonds or target retirement date funds yet. Diversify into that as you get older. Once you get to a point where you’re maxing your 401k and Roth IRA (research the backdoor Roth if necessary due to income) or invest in non-retirement stock indices.

I save aggressively so I can give myself a raise anytime I please. It’s a good feeling that I could just earn like $2000 more per month if needed.

That’ll be $1200 please.

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#10

Awesome I appreciate the advice. I got most of that down :smiley: . I did an investment class in college and it was just enough to overwhelm me a bit, especially about researching stocks etc. That was the appeal of an advisor - someone who knew what they were doing (supposedly).

#11

No real need to research stocks. A dozen advisors will give you ten very similar opinions and two crap ones. Broad market indices/ETFs only, with some amount of that being international markets. Advice on the split varies, I’ve seen anywhere from 50/50 domestic/international to 90/10. I use 60/40. Focus on “Total Market” types of funds with low expense ratios and you’re golden. Then just watch the cash roll in over the years.

When you’re ready for non-retirement investments, just set up an auto transfer. I transfer an amount direct from my bank every other Monday (used to do every Monday but it makes taxes a real pain when you sell). Never panic sell. When you do sell non-retirement equities, research how it affects your taxes. You might end up selling portions of it over a few years.

(Caveat: You can try individual stocks if you have play money that might burn, or you might invest in GME and retire next year)

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#12

reading r/financialindependence would help a lot if you aren’t already. Though full disclosure they are very anti-Financial Advisor. But given that there’s enough information there to learn a ton and figure it out on your own if you have the time. I generally follow the basic principles there and feel pretty comfortable with my finances (It’s very in-line with what @Rastiln is describing above)

#13

:laughing: Do you take AO$? I think I have some laying around somewhere…

But thanks for your post. I’m not in my 20’s anymore, but I’ve checked all your boxes. The last few years I’ve been trying to increase my 401(k) contribution by 1% each year. I’m up to 10% now and I’d like to get to 15% eventually.

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#14

I’m not, and I haven’t done a lot with reddit. I’ll have to check it out, thanks!

#15

Being on the younger side, I also save like I’m going to retire by age 60 and don’t count on Social Security. Old you will thank young you. Or you’ll be dead, in which case you won’t regret missing out on that trip to Vegas.

(Slight sarcasm above, but not entirely.)

#16

Yep, basically it’s said to invest in vanguard mutual funds or ETFs. Some distribution between US/Intl/Bonds. Save as much as you can, starting with 401k matching, then maxing out HSA, then maxing out 401k, then IRA (get $$ into a roth IRA if usually popular advice there), then after all that put money into taxable account. And always have an emergency fund too.

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#17

Good point! I completely forgot about HSAs because they’re irrelvent to me. 401k matching first, then max HSA, then max 401k+IRA. HSAs are amazing, I’m jealous of people who have them.

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#18

They really are amazing but it’s easy to not take advantage of the benefits since they are generally seen as medical spending accounts. A lot of people I talk to about them didn’t seem to realize the tax benefits of investing within the HSA

#19

Hmm, I have an HSA. Maybe instead of bumping up my 401(k) contribution this year I’ll increase my HSA contribution. I think you have to have $10k to start investing? I’ll have to look into that more.

#20

Hmm, from what I’ve seen from different providers it’s usually either a $1k or $2k minimum cash balance before they let you invest. $10k seems high but I suppose it’s possible.

HSA’s are amazing because the money goes in pre-tax, and then if you spend it on medical expenses it comes out untaxed. Any earnings on investments you make within the HSA are also completely untaxed.

ALSO, a cool thing about HSA’s is that you can withdraw money from them for any medical expense you’ve had since the account has been open. What I do is pay for my medical expenses with a credit card (earnings points as a bonus) and then save the receipts. Those receipts can be cashed in at any time in the future. Say in 15 years I need some cash, I can whip out my medical receipts and use my HSA as an ATM, and since it’s medical expenses it’s tax free.

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