How the hell are we supposed to retire?

[Patrick]

I'll throw in 1 more thing for anyone with an inherited IRA - convert it into your own if you can.
ie - you (or spouse) have a 401k at work that isn't maxed out, or your own/spouse IRA, max it (plan and govt limits apply),
draw the income from the inherited IRA for a revenue neutral transaction.

1. your own IRA is protected from creditors, an inherited IRA is not.
2. it creates an "extension" to the time required to liquidate it until you want to - and might be in a lower tax bracket.
3. easier to bequest to child or spouse.

 

[rick81721]

First world problems I know but all this gets confusing for us non-financial folks. I just got done taking a pre-retirement training course and basically my take away is that I'll need to see a financial planner to set my son (only child) up. I'm one of the lucky few who still gets a decent pension in addition to SS and I'm maxing our my 401K + catchup. My plan is to retire in 5 years when I reach 62 and move south (FL). My wife will continue to work when we move and my son will still be in school but my plan is for us to live off of my pension, SS, and what I feel I need from my 401K. Yes, I'm taking my SS at 62 to minimize what I need to take out of my 401K to maximize growth. I plan to use the 3 bucket method to divide up my money to max growth while still protecting me in case of a down market. Our plan is to not touch my wife's 401K and leave all of that to our son along with our house which will have no mortgage. He's too young to gauge how he's going to be with money and we're teaching him but you never know how he's going to turn out. This is the main reason for us needed a financial planner to understand our options. We also plan to portion some money to our church also and charity organizations but my biggest concern is our son. I want to set him up but don't want to enable him if he has habits that are harmful if you get my drift. Another takeaway from that training course is 401K is designed for the owner to use, not as an inheritance. I don't know enough about the specifics and tax ramifications to know why but learned that we can use the disbursements to pay for life insurance because payouts from that is tax free. I know there are funds, POD accounts, etc. but it all gets overwhelming. My challenge is to find the right financial planner and when. Find one while I'm still in NJ and working or wait until we've moved. Yup, first world problems.

Looks like you are in good shape. We had a similar plan - we found our CFP a few years before we retired, still use him now (retired 5 years now).

Like you, we also have just one son. We setup a trust that specified at what age our son could get everything - before that age my brother controls distribution. We also set that up before retirement and now that we are FL residents, will re-do everything down there. But will continue with the same principle. Good luck - Florida is a great place to retire - but is really hot in the summer. Consider a 2nd place to ride out out the heat!

 

[JerseyPete]

Looks like you are in good shape. We had a similar plan - we found our CFP a few years before we retired, still use him now (retired 5 years now).

Like you, we also have just one son. We setup a trust that specified at what age our son could get everything - before that age my brother controls distribution. We also set that up before retirement and now that we are FL residents, will re-do everything down there. But will continue with the same principle. Good luck - Florida is a great place to retire - but is really hot in the summer. Consider a 2nd place to ride out out the heat!

How do you interview and find a good CFP though?

 

[Bike N Gear]

How do you interview and find a good CFP though?

My wife spent a good two years doing that. 4 months after she finally hired one, he left the company and everything was turned over to someone new. So far so good, but obviously not thrilled with the wasted time and effort.

 

[Patrick]

Start with referral from Rick ?

 

[graveyardman67]

I'll throw in 1 more thing for anyone with an inherited IRA - convert it into your own if you can.
ie - you (or spouse) have a 401k at work that isn't maxed out, or your own/spouse IRA, max it (plan and govt limits apply),
draw the income from the inherited IRA for a revenue neutral transaction.

1. your own IRA is protected from creditors, an inherited IRA is not.
2. it creates an "extension" to the time required to liquidate it until you want to - and might be in a lower tax bracket.
3. easier to bequest to child or spouse.

It's different for spouse vs other relative (or non-relative).

 

[ekuhn]

How do you interview and find a good CFP though?

Even though I'm far from retirement, I was recommended a guy through a friend. He only manages accounts of $300k or more, and since mine was still locked in my 401k I couldn't turn it over to him. He is with Merrill and in Bridgewater if you're still looking I can send you a contact. He made a nice plan and did a shit ton of simulations to see where'd I'd be based on retiring at 60. Gave me a bunch of advice on some changes to make. He works for a fee on the portfolio...they all do. The more they do for you the more it costs. So dont be afraid to shop it around.

 

[tonyride]

OK, totally newb question here relating to CFP. How does it work and what do they do exactly? Do you tell them what you want and turn all your assets to him/her and let them do whatever needs to be done? After setting up all the accounts and funds, what do they do year after year? Is it more just maintenance and make necessary adjustments based on market conditions and life events?

 

[rick81721]

How do you interview and find a good CFP though?

I think we interviewed 4 from different financial institutions before deciding. Choose someone you are comfortable with and is on the same page as you and your wife. I'm happy to PM our guy if you are interested (he's in philly)

 

[ekuhn]

OK, totally newb question here relating to CFP. How does it work and what do they do exactly? Do you tell them what you want and turn all your assets to him/her and let them do whatever needs to be done? After setting up all the accounts and funds, what do they do year after year? Is it more just maintenance and make necessary adjustments based on market conditions and life events?

They take all those variable inputs - monthly expenses, (mortgage, utilities, food, etc), current income and projected savings accounts, large purchases (car, house, boat, wedding) etc. Throw into some modeling software and the computer does the rest. You want to retire at 60 and to do so at your current style of living, you are XX% of the way there. Retire at 62 or 65, then you are YY% of the way there (hopefully 100%).

You dump the money to them and let them know how much risk you want to take. There are self managed plans, minimally managed plans, 95% managed plans. Its all based on your comfortability level with the planner and if you want to pay 1% of a portfolio value or 5% of it. They may tell you to move more money to bonds or small cap, then technology or large cap accounts, or these mutual funds vs others.

Most of the guys I've talked with are real easy going and can explain it all from the ground up - just ask.

 

[JonF]

Another CFP alternative is that the financial institutions that you may already be investing in have managed plan options handled by a real live in-house CFP as opposed to the self-managed or robo-managed options that are popular. I have a CFP at Vanguard managing the funds we have there plus he also advises how to distribute the work 401k funds at another institution so everything is in sync with the overall plan. They do the same "big picture" calculations and have semi annual meetings to make sure everything is on track and make changes if necessary. Something to consider if you already have money parked somewhere.

 

[Bike N Gear]

Another CFP alternative is that the financial institutions that you may already be investing in have managed plan options handled by a real live in-house CFP as opposed to the self-managed or robo-managed options that are popular. I have a CFP at Vanguard managing the funds we have there plus he also advises how to distribute the work 401k funds at another institution so everything is in sync with the overall plan. They do the same "big picture" calculations and have semi annual meetings to make sure everything is on track and make changes if necessary. Something to consider if you already have money parked somewhere.

Do they only do that for other institutions' for 401k? We have multiple accounts, but not all are 401ks. Some regular brokerage accounts and some Roth. I wouldn't think Fidelity would want to give advice about our vanguard accounts. I know the CFP does, but he's paid.

 

[Cassinonorth]

Even though I'm far from retirement, I was recommended a guy through a friend. He only manages accounts of $300k or more, and since mine was still locked in my 401k I couldn't turn it over to him. He is with Merrill and in Bridgewater if you're still looking I can send you a contact. He made a nice plan and did a shit ton of simulations to see where'd I'd be based on retiring at 60. Gave me a bunch of advice on some changes to make. He works for a fee on the portfolio...they all do. The more they do for you the more it costs. So dont be afraid to shop it around.

Fee only or commission based?

 

[JonF]

Do they only do that for other institutions' for 401k? We have multiple accounts, but not all are 401ks. Some regular brokerage accounts and some Roth. I wouldn't think Fidelity would want to give advice about our vanguard accounts. I know the CFP does, but he's paid.

Not sure, you'd have to ask about your specific accounts. With permission, they were able to access the 401k to see the amount but its just passive. Since its in funds, they provide some passive advice that i would then act on since they don't manage that. Any other accounts they cannot see you can inform them about the balances and nature for inclusion in the overall computation. Some things that are either immutable or would generate too significant of a tax burden to alter towards the plan gets accomodated for in some fashion. Also, some accounts can be transferred in. I had an IRA that they absorbed from another institution so it could be actively managed centrally.

 

[Cassinonorth]

Here's a very good article on active vs passively traded funds:

Active vs Passive Investing: The Differences | The Motley Fool

Understand the debate between active investing vs passive investing, so you can decide which investment strategy is right for your portfolio.

www.fool.com

Tldr; make sure your expense ratio isn't eating all the "extra money" your CFP makes.

 

[Patrick]

Do they only do that for other institutions' for 401k? We have multiple accounts, but not all are 401ks. Some regular brokerage accounts and some Roth. I wouldn't think Fidelity would want to give advice about our vanguard accounts. I know the CFP does, but he's paid.

We have a combo Chase(ira + post tax), Vanguard (IRA + Brokerage), Fidelity (401k).

Chase is 100% managed - he wants to know how much we have in the other accounts, but never asked where it is invested.
Wants to meet twice a year, we usually cancel. They take a monthly management fee based on % of total managed.
(the "we do better when you do better" bullsh*t)
- he does check in with "how are we doing compared" cause if chase was doing better, we might move the $$$ there.
- the money is invested in all different types of funds from many different providers (including vanguard and jp morgan (ethical issue?))

Vanguard is 100% self-managed - yes we are doing as well as the managed money. But it is an up market - so not difficult.

Fidelity - Wife's 401k provider - so no choice. Chase guy may have asked once to see the funds selection.

================

this combo makes me kinda comfortable that we are getting the market return since they are all doing about the same.
I also get to watch the managed transactions - sometimes I think they are rearranging the lawn chairs, but that's ok.

TBD what we do in retirement. Someone ask the market to double 1 more time in the next 5 years, we should be good.
big ask?

 

[Santapez]

Market will double. Dollar may fall in value by 50%

 

[Bike N Gear]

We have a combo Chase(ira + post tax), Vanguard (IRA + Brokerage), Fidelity (401k).

Chase is 100% managed - he wants to know how much we have in the other accounts, but never asked where it is invested.
Wants to meet twice a year, we usually cancel. They take a monthly management fee based on % of total managed.
(the "we do better when you do better" bullsh*t)
- he does check in with "how are we doing compared" cause if chase was doing better, we might move the $$$ there.
- the money is invested in all different types of funds from many different providers (including vanguard and jp morgan (ethical issue?))

Vanguard is 100% self-managed - yes we are doing as well as the managed money. But it is an up market - so not difficult.

Fidelity - Wife's 401k provider - so no choice. Chase guy may have asked once to see the funds selection.

================

this combo makes me kinda comfortable that we are getting the market return since they are all doing about the same.
I also get to watch the managed transactions - sometimes I think they are rearranging the lawn chairs, but that's ok.

TBD what we do in retirement. Someone ask the market to double 1 more time in the next 5 years, we should be good.
big ask?

We recently hired Edelman, but only with a small percent of the portfolio. Their fee is based on the amount they manage, but they do go through every other holding and give recommendations so we're not overlapping holdings and we're overall heading in the right direction.

 

[JonF]

TBD what we do in retirement. Someone ask the market to double 1 more time in the next 5 years, we should be good.
big ask?

Sorry, the next regularly scheduled doubling is in 6 years. You just missed the cut!

 

[Bike N Gear]

Wife plans to be done in 5 years. If the market doubled that would be amazing.