Please Help me get rid of my $800/month Financial Planner!!!!!!!

[JMH221]

Just retired after working 40-years and need to get my (financial) ducks in a row.  I'm currently paying (please don't judge) a Financial Advisor a ridiculous amount of money per year for below average returns.  I'm just starting to learn how to live on a fixed income and would love to hear what all of you recommend as far as how to invest and how to generate a monthly income.  Please let me know what you think and if you can recommend any good books/online resources.  Thank you so much for the help!!!!!!

65 years young

Portfolio:
Traditional IRA Balance  $762,000
Roth IRA Balance  $172,000
Taxable    $378,000 

Pension:
$1,600/month (after taxes)

SS:
$1,000/month until 2020 then $1,600/month


Expenses:
$32,000/year   


Thanks again!         

[aj_yooper]

No need to be coy, Roy.  Just set yourself free!  ala Paul Simon "Fifty Ways to Leave Your Lover"

Seriously, if it is costing $800 a month, I would lose the planner as soon as I could.  There are many much lower cost advisers available.  You could do Vanguard (@ https://investor.vanguard.com/financial-advisor/financial-advice) for way less and have a CFP who will have your interests first, not his income.

Or, you could contact a reasonable adviser like Rick Ferri, CFP (@ http://www.rickferri.com/about/about-rick) and save a whole lot of fees.

You have done well in building your stache.  Now you need to streamline and focus.  Your current adviser will naturally scream like hell at the loss of your account, but your costs are, to me, atrocious.

Best wishes.

[MDM]

You could do worse than taking a few hours (either all at once or spread over a few days) to go through the items below:
http://www.bogleheads.org/wiki/Category:Getting_started
http://jlcollinsnh.com/stock-series/

Based on the numbers in the OP you will be fine, and have no need to pay $800/mo for an adviser.  See also http://dilbert.com/series/57.

[Rufus.T.Firefly]

That's a great decision! Congratulations on retirement as well.

As for reading lists, I am putting myself through a DYI Finances and Investing course with a reading list. I have to admit that this list is a bit overkill, but I enjoy reading finance books. Pretty much, you can just read A Random Walk Down Wall Street and you will have all that you need to know about investing. Here is my current progress:

Currently Reading:
Your Money or your Life (Robin & Dominguez)

Finished:
- Intelligent Investor (Graham)
- Common Sense on Mutual Funds (Bogle)
- A Random Walk Down Wall Street (Malkiel)
- The Big Short (Lewis)

Future Planned Reading:
- The Millionaire Next Door (Stanley)
- Irrational Exuberance (Shiller)
- Buffett: The Making of an American Capitalist (Lowenstein)
- Security Analysis (Graham and Dodd)

[gaja]

According to your math, your expences are basicly covered by your SS and pension. Why not quit the advisor cold turkey, and let everything sit in peace while you figure it out?

[rpr]

Firstly, congratulations! You have done well. Just your pension and SS seem sufficient to cover your expenses. The investments are pure gravy.

Can I ask how you arrived at the number of $800 per month? Assuming that this planner manages your entire assets, this works out to be about 0.8%. As a fee, it is high but not what I would consider outrageous. It depends on what your current investments are. Are those high expense fee mutual funds or are they low fee index funds? Does the 0.8% also include fund expense ratios? Is the $800/month a fixed fee or does it depend on assets under management?

However, going forward in retirement, you may be better served by going with a Fee-only adviser who works hourly and can create a financial plan. It depends on how much hand holding you need.

If however, you are interested in managing this and are willing to learn, it is not that difficult. Others have already posted useful material to read.

Good luck!

[boarder42]

Holy shit. You make 2600 a month in penision. And spend 32k per year currently 800 of which is going to a planner. So wait. You have no need for one. Dump him and put all your investments into vtsax at vanguard and move on with your life.

[forummm]

You're set for life without an advisor.

The easiest thing to do is put all your money in the Vanguard Target Retirement 2015 Fund (VTXVX) and forget about it. At your current spending, you will die a rich person--much wealthier than you are now.

If you're interested in doing something different with it:

https://personal.vanguard.com/us/FundsInvQuestionnaire
https://personal.vanguard.com/us/funds/tools/recommendation
https://personal.vanguard.com/us/insights/investingtruths/investing-truth-about-risk
https://personal.vanguard.com/us/insights/saving-investing/model-portfolio-allocations

[aj_yooper]

You did not ask about Social Security benefits timing, but you might consider drawing income from your tax deferred accounts or maybe your taxable account and delay SS until you are 70.  If you just started SS, you are able to change your mind in the first year of benefits.  There is a lot written on this, but Kiplinger covers it here:  http://www.kiplinger.com/article/retirement/T051-C000-S004-strategies-to-boost-your-social-security.html 

If you file a joint return, you could be (or mostly) in the 10% tax bracket (with an expense budget of $32 and the $20k marital deduction) so taking money from the TDA would be quite good.  It would also reduce your Required Minimum Distributions which start at age 70.  Just some thoughts.

[tallen]

You could do worse than taking a few hours (either all at once or spread over a few days) to go through the items below:
http://www.bogleheads.org/wiki/Category:Getting_started
http://jlcollinsnh.com/stock-series/

Based on the numbers in the OP you will be fine, and have no need to pay $800/mo for an adviser.  See also http://dilbert.com/series/57.

I second the advice to read what MDM linked, especially the stock series!

[JMH221]

Outstanding advice so far, thank you so much.  My current advisor charges 1% (I have some of my portfolio stashed at Fidelity) so this is where the $800/month comes from.

@MDM- The stock series link looks like EXACTLY what I need!

@Forumm- Thanks for the links, I really like the Vanguard recommendation tool.


I'm going to continue studying then promptly cut all ties with the Advisor, thanks again for all the invaluable help!

[Arktinkerer]

If the "Planner" has not been giving you advice about withdrawal strategies and SS then you certainly have not gotten your money's worth...

[smiller257]

When I first retired 3 years ago, I made the same mistake. My financial planner was costing me $500 per month and that money could buy a month of groceries. Once you are retired, managing your investments is not difficult. I invest in low cost index funds, keep about 3 months of expenses in cash and have 20% of my investments in bonds.

About the only thing you have to do is to keep an eye on your investments (monthly is OK) and re-balance yearly.  I read a book called How To Retire Early (http://www.amazon.com/How-To-Retire-Early-Retiring/dp/1482653729), it explains index funds and re-balancing.

Congrats on your retirement, dump that financial advisor!

[Trudie]

According to your math, your expences are basicly covered by your SS and pension. Why not quit the advisor cold turkey, and let everything sit in peace while you figure it out?

Although there is lots of good reading/advice above (which I think you should pursue) I think this hits the nail on the head.  You don't jeopardize your stache if you quit cold turkey and take a breather until you figure out the best course.

I say stop the bleeding, dump the advisor now... Best of  luck.

[Arktinkerer]

There must be 50 ways to leave your lover  Financial Planner...

http://sensiblefinancial.com/media-and-resources/sensible-thinking/Fifty-Ways-to-Leave-Your-Broker.php
http://money.usnews.com/money/personal-finance/financial-advisors/articles/2014/02/25/how-to-break-up-with-your-financial-advisor

And for reference...

https://www.youtube.com/watch?v=298nld4Yfds

[nereo]

Hi JMH221

You've gotten some great advice here and some good reading material.  I wanted to chime to say your situation is far from abnormal - I recently found out that my parents were paying 1.5% to a broker on well over $1MM in assets - I had to sit down with them and show them how his fees cost more than both their cars and their entire grocery + restaurant budget.

I'm glad you've seen the light and decided to get out of that parasitic relationship.

Also, kudos to you for having >95% of your expenses met by SS nad your pension.  That makes managing your own money a piece of cake.

Here's what I'd do -
1) keep it as simple as possible and convert everything into one Vanguard fund (while keeping your IRA as an IRA, your taxable as taxable, etc).  I would put everything into the total market index or SP500 (VFINX) but if you'd like a bit less volatility choose one of their balanced funds (e.g. VTXVX) - you've already "won the game" so feel free to be more conservative if that's your style. 
2) Set up automatic deposits of ~$500/month from your new Vanguard accounts to make up the very small gap between your  spending and pension + SS income.
3) Sit back watch your assets grow with very low fees.
4) enjoy your retirement.  Choose to do things that will maximize your happiness and fitness.
5) consider who you are going to donate lots of money to.  You will almost certainly have a couple million to leave to the individuals/charities of your choice in the coming decades.

[Trudie]

My final straw with our broker/planner (paying 1.25%) many moons ago -- about six -- was when I asked (post financial crisis) whether or not our funds had beaten their benchmarks and he said "no" to which I replied, "And how much were the managers rewarded for their crappy performance???"

The system is rigged for average folks.  Sticking to ETFs, index funds, low fees (Vanguard) will keep you on track with minimal effort.  We were helped by some tax loss harvesting our former guy did, but the unqualified portion of our portfolio was so small that it was hardly worthwhile.

[Bob W]

You can do this!   You can do it!  Take some of the advice above and fly like an eagle.   You Go!

[zephyr911]

HOLY FUCK. HOW IS IT POSSIBLE TO BE RIPPED OFF SO BADLY?

JUST LEAVE. JUST SAY NO.

[frompa]

Hey JMH221, how about an update?  Have you made the moves you need to?

[Money Badger]

Sure hope JMH221 checks back in...  There was however very little advice on "how" to leave so there are some things to look out for:

1. The planner who was so nice, answered all your calls or emails or charmed you with *whatever* they charmed with, is going to stick it to you to leave.  Usually, it's in mysteriously high trade costs or "tax complications" that are going to appear as they tell you that the investment choice "of a lifetime" they sold you is going to cost a fortune to liquidate...   Expect to pay for your freedom.   Also expect the "guilt trip" from them as they try to save the account.

2. Usually, there's an excuse some assets can't be transferred (usually just BS because it's actually going to show their boss they lost a client due to the paperwork involved).   Especially the case of small positions so liquidate them before you announce your leaving is my advice to get reduced commissions!!

3. You find out there is a complex mix of mutual funds they put you in that weren't obvious.   Certain closed end funds of funds fall into this category.

4. Or they just become nonresponsive.   Phone calls require emails require phone calls to get things done.

5. Mysterious "termination fees" appear.    If your advisor has switched firms, be wary of forms that are now "obsolete from the old firm" and new fees that appear.

6. A good CPA review of accounts before a major move is a darn good idea...    Worth repeating this every other year or so before any major rebalancing among taxable/non-taxable after you're on your own.

All the above points aside, the pay-off is in having the Fidelity or Vanguard representative you get for "transferring" into your new account.   That person knows the usual tricks and wants the money badly so they get it done without fuss.   But it will cost.   Truly, I appreciate "fee only" advisors who help people get their financial life together or offer good annual advice.    But the ones who are parasites, truly deserve to rot in Hades.   Don't ask me how I know...

[GreenSheep]

I have about 8 years until FIRE, but I think it makes just as little sense to pay this fee now as it will when I'm FIREd. I somehow have two financial advisors who are siphoning off about $400/month (total).

Despite having a graduate degree (in a completely unrelated field), all this investment stuff seems complicated to me. It's not like I can just walk into one office, pick up an envelope containing my cash, and take it over to the new office. I don't know enough to manage my own investments, but I think Vanguard can simplify this, right? I didn't realize until reading this thread that Vanguard can provide an advisor, at more than their usual (I think) 0.15% but still much less than the "standard" 1% -- am I reading that right? And does even an investment idiot like me really need an advisor, or can I just dump it into a diversified account and let it sit?

I have a SEP IRA and a taxable account to which I'm still contributing, and a Roth IRA to which I'm no longer contributing. I just need these little green employees to be put to work for me in a system that isn't collecting a huge fee. If anyone has a moment to do a little hand-holding and tell me how to get set up with Vanguard, I would be so grateful. I assume that I first need to get my financial advisors to move my funds into my savings account, then transfer the funds from there to Vanguard? And I assume that the account(s) I'd need with Vanguard would be different from someone who has already FIREd. Thank you so much for any help!

[frompa]

Hey GreenSheep - Call Vanguard and tell them you are trying to move funds to them, and they will assist you in the details.  A few years back when I was consolidating some retirement funds and bringing them all together at Vanguard, they were very helpful in actually contacting one of my entities that was being very resistant and slow-moving, with my consent and on my behalf, of course -- they got the job done, easily.  And I'd say, no you don't need an on-going financial advisor; talk with a Vanguard person about the big picture and what you're trying to do, choose the necessary funds, and you're good to go, except for rebalancing every year or so.  This stuff can be complicated, but it is completely comprehensible.  Most importantly, no one is going to care as much as you about your money and making it work for you consistent with your goals and values. 

[GreenSheep]

frompa, thanks so much!