A few retirement questions.

D

DaleD

New Member
Location
Cuyahoga Falls, Ohio
I will retire at the end of the year. I'll turn 64 in Nov. I have social security, 401k and a small pension. No debt, other than the usual monthly bills. My first question is, do I need a financial advisor? They are not cheap, around 1% of assets. I know enough to be dangerous, but I'm an IT guy by profession. Second question is a subset of the first, I have a pension, I can take $1200/month for life, or take $250k one time payout. The one time is attractive because I can roll it to an IRA and access it should need arise. If I take the monthly payout, that's it, I can't change it. Final question for this post is, about social security. Is there any reason not to take it at 64. The break even age if I start at 64 is 80. Going from the people I have known, once you get to 80, your financial needs become much less in terms of wants, and much more in terms of medical.
My current mindset is go with an advisor for 1 year, see how it works out, maybe take over on year 2. As I said, it's a substantial bite, but there is some value add in terms of getting things in order so my wife can follow what's been done.
As for the pension, I like the ease of a monthly payout. I'd be insulated from the market.
The social security decision is take it at 64 or wait. I'm leaning strongly to take it at 64.

Thanks in advance.
 

Do NOT go with a financial advisor. It has been proven that they do not do any better than the market. I strongly suggest you post the same question on https://www.early-retirement.org/ and go to Forums.
There are many knowledgeable people there that can suggest some books to read and give advice. One percent may not sound like much, but if you are withdrawing 4% each year to cover your expenses, the FA is taking 20% !!!
 
DaleD said:
I will retire at the end of the year. I'll turn 64 in Nov. I have social security, 401k and a small pension. No debt, other than the usual monthly bills. My first question is, do I need a financial advisor? They are not cheap, around 1% of assets. I know enough to be dangerous, but I'm an IT guy by profession. Second question is a subset of the first, I have a pension, I can take $1200/month for life, or take $250k one time payout. The one time is attractive because I can roll it to an IRA and access it should need arise. If I take the monthly payout, that's it, I can't change it. Final question for this post is, about social security. Is there any reason not to take it at 64. The break even age if I start at 64 is 80. Going from the people I have known, once you get to 80, your financial needs become much less in terms of wants, and much more in terms of medical.
My current mindset is go with an advisor for 1 year, see how it works out, maybe take over on year 2. As I said, it's a substantial bite, but there is some value add in terms of getting things in order so my wife can follow what's been done.
As for the pension, I like the ease of a monthly payout. I'd be insulated from the market.
The social security decision is take it at 64 or wait. I'm leaning strongly to take it at 64.

Thanks in advance.
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The very first question that I have is: Will your pension get periodic adjustments for inflation? One of my wife's small pension has never had a cost of living adjustment in over 30 years. If they do have adjustments and if you strongly believe that your company will be stable over the long haul, then I would stick with the pension. Otherwise rolling it into an IRA might be the better bet.

Your financial situation is not complex enough for you to hire a financial advisor and pay those high fees. They are likely to just steer your money into a mutual fund of their choice anyway. My advice is to get on the phone and talk to one of the better established mutual fund companies like Vanguard or Fidelity. Personally, I like balanced funds.

I have run the numbers on the question of when to take Social Security and it always comes down to how long do you expect to live and what do you want to do in the years immediately after you retire. For me it turned out to be 64, and for my wife it turned out to be 66. But this is still a crap shoot.

Enjoy your retirement and welcome to our forum.
 

We’re all different and so is our need for income.

I’ve always done my own homework and never felt the need for a financial planner.

I took my SS at 62 because it allowed me to hold off drawing on my tax deferred IRA.

I took my retirement fund in a lump sum and invested it rather than taking a monthly amount.

My biggest challenge was paying for my health insurance until I was old enough for Medicare.

Good luck!
 
Not advice just living in retirement since retiring at age 54. Age 80 now.

No financial advisor.

Rolled 401k into self directed & traditional IRA's.

Pension kept it rolling in every month.

Took Soc. Sec. at 62

Zero debt befor retiring & still zero debt. What takes place now is pension direct deposited last of the month. Soc. Sec. mid month, 2 MRD distributions for me mid month. Note money held in
self directed & traditional IRA's isn't taxed until it is distributed.

As realized some of life's expenses drop away but others can pop up.

If you are seeking advice do what you feel works best for you. But realize enjoying your retirement years depend on your health as well as your financial well being. Get a plan to assure your health is as good as you can so that the finances you expect to have, are enjoyed to the fullest.

Wife did the same so in effect we have 8 sources of steady income monthly.
 
I'll be different - well, just a little. We do use a financial adviser - an independent CFP firm. And yes, we pay fees. Shocking! However, we do so for a reason: I handle all the finances and investing, because I enjoy it. My spouse does not, could if he had to, but has no interest nor desire to ever do so.

If anything happens to me, spouse knows just enough to ask the right questions - which puts him miles ahead of many widows/widowers. That's a very big plus for using an advisor. Having worked in the office of a well-regarded independent financial advisor, I can tell you there is nothing sadder than people coming in AFTER they have already made one of several bone-headed decisions that can occur after settling an estate.....only to find out that neither we nor anyone else can reverse those financial consequences.

The trouble is, you don't know....what it is you don't know. It's hard to ask the right questions, when you're a newbie to the world of financial planning. And I say that as a contributing member of the FIRE forums (Financial Independence Retire Early).

The FIRE members are extremely helpful and very savvy about investing. They're dynamite on the ins and outs of qualifying for ACA subsidies. But genuine Financial Planning, which is regulated by industry organizations and not that easy to gain accreditation, escapes a lot of these folks. There's quite a bit of optimistic "I'm going to take care of my health and die in bed" posts, when you start digging for details of What Can Possibly Go Wrong.

That said, there is nothing wrong with managing your own investments with the help of low-cost Vanguard or Fidelity advisors. If your account is large enough they will assign a CFP to you, albeit the chances are good the CFP will possibly be younger than you and probably already planning to jump to a higher-paying job as soon as their two-year CFP internship is over.

My advice is that if you plan to go with a low-cost brokerage, hang around the financial forums and start learning the right questions to ask. Unless you are dealing with a CFP who has fiduciary responsibility to you, a broker only has to meet "suitability" requirements which are big enough to drive three M-1 tanks thru, side by side; e.g., useless. A broker pushes what makes him/her the most $$$$.

You don't use advisers to get the biggest return. If you want the hottest stock or the Next Big Thing, you will not find it using a fiduciary adviser, which is the only kind of adviser worth using.

If you don't wish to pay an adviser, learn one very important financial lesson. Read all you can find about how to take your portfolio distributions in a tax-efficient manner.

Our advisory firm does this automatically for us. A brokerage using a non-fiduciary adviser, does not - unless you direct it specifically to do so. Be sure you also stay aware of any changes Congress makes in future relevant tax laws.

You can sometimes find a CFP on a "pay as you go" or as a "one time" consultation (it's not easy, but they do exist) to help develop a plan for your retirement future needs, which includes considerations of your health, your spouse's health, your children, any elderly relatives.

Questions you need to ask yourself:
  • What do you want to do in the next 5 yrs? In the next 10 yrs?
  • Can you cover all your housing and standard overhead expenses even if inflation returns? $50 today can easily end up being worth only $25 in 20-30 yrs. Everything from property taxes to a bottle of aspirin is going to cost more in the year 2040 than it does today, and the chances are good quite a few of us here will still be around then.
  • What will you do if the market swoons and your portfolio takes three years to recover?
  • What happens if you or your spouse or a relative develops a serious - and expensive - medical condition?
  • What happens when you die, or your spouse dies?
Create your retirement budget, and test it rigorously against various scenarios. A lot of Boomers got financially slammed in the last Great Recession because not just one or two things went wrong - EVERYTHING went wrong at the same time.

Some folks didn't get hurt. But many did, and are still bearing the financial/emotional scars from it.
 
Lethe200 said:
Create your retirement budget, and test it rigorously against various scenarios. A lot of Boomers got financially slammed in the last Great Recession because not just one or two things went wrong - EVERYTHING went wrong at the same time.

Some folks didn't get hurt. But many did, and are still bearing the financial/emotional scars from it.
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Thanks for your reply. I am in a similar place to you in terms of a spouse who isn't much into financial management. That is one of the benefits. I have contacted a few advisors, and a casual friend directed me to a local bank that offers fiduciary financial planning. An added enticement is that they have legal staff as well as part of the package. I am considering signing up for a year, getting our will updated, putting our home in a trust and leaning on them for tax advice.
We have enough that barring hyperinflation, (which is possible), we are fine, financially. My goal is not to hit the next big thing, but to hang on to what I have. The only reason I still work is to improve my cash on hand position.
I have managed our finances throughout our married life, but to be honest, I get bored with the research. It's dry, and often times contradictory information is presented at various sources.
The social security question is relatively trivial, I was just trying to see if I'm missing something. It looks like it's pretty straightforward math. Take it when it will help. At 64, it will help, and I can live with the break even at 80.
I'm conservative, sometimes too conservative, so I am leaning towards the monthly payout on the pension.
I just want to avoid the boneheaded mistakes, I've never retired before.
 
Banks will run your portfolio management through their investment banking side, which is kept separate from the standard checking/savings/loans activity of regular customers. Their IBs tend to have high fees.

We used an estate attorney who specializes in eldercare issues to handle our legal work and have been very satisfied with her. I think you might want to also contact your state bar association and get some recommendations for estate attorneys in your area.

It's good that you recognize you have lower than average risk tolerance. With the spectre of inflation returning, it can be helpful to talk to a fiduciary adviser to avoid being too conservative with your portfolio.

Much depends on the assumptions of your longevity and your spouse's (genetics and personal health). Especially if you are facing 40 yrs, give or take, in retirement, that is a very long time to need your income to cover your needs and wants.

Best of luck to you - I know it's always a nerve-wracking decision, even when one is good at planning and research!
 
I haven't fully read all the replies but I noticed that @Lethe200 made some excellent points. One thing I didn't see mentioned is the. tax implication of taking a lump sum distribution. This article explains how to avoid paying 20% in taxes on a lump sum pay out. Two key things involved are having your receiving IRA already established at your preferred brokerage before taking the lump sum payout and making sure to transfer the money within 60 days.
https://benefitslink.com/articles/taxbite.html#:~:text=For%20any%20portion%20of%20your%20lump%20sum%20retirement,to%20pay%20taxes%20at%20your%20tax%20bracket%20rate
Good on your for choosing a fiduciary financial planner. To answer your first question: I've never used a financial planner; I "inhaled" financial articles and at one time watched the financial news daily. I learned enough to make very good investment decisions and build (although through trial and error) a portfolio that's doing well.
For your question about taking SS at 64. I was a proponent of taking SS early (took it at 62), but now I've changed my view because of the lingering probability that by 2034 SS will cut benefits, across the board for everyone by 23%, according to the Social Security Administration. I retired one month before my 51st birthday. I hadn't saved nearly what I intended and of course, I had to wait 11 years to start taking social security. But I had a few things going for me:
~I have a great retiree health plan.
~I receive a pension which adequately covers my personal expenses (not counting what my husband paid for)
~I retired debt free but keep a realistic budget.
~I always knew how to make a dollar out of 15 cents.
~As a stockholder in our co-op community (eg: I own my unit) our expenses are only about 36% of average housing expenses in the county.
Consequently I don't need to take distributions from my investments except for my RMDs. In fact I'm still adding to my savings and investments. I've minimized the tax bite because 68% of my investments are in Roth IRAs.
My questions to you are:
~Have you made a preliminary retirement budget? This needs to be done now and be "tangible", whether using an online spreadsheet or pencil and paper, not in your head.
~Will you be covered by a good health plan?
~Is there an option for your pension to pass to your wife after you're gone?
One more point: Make sure your wife is involved in the financial process and knows everything you know. If she doesn't understand something, coach her until she does.
 
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OneEyedDiva said:
My questions to you are:
~Have you made a preliminary retirement budget? This needs to be done now and be "tangible", whether using an online spreadsheet or pencil and paper, not in your head.
~Will you be covered by a good health plan?
~Is there an option for your pension to pass to your wife after you're gone?
One more point: Make sure your wife is involved in the financial process and knows everything you know. If she doesn't understand something, coach her until she does.
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I have done an essential budget. That is a budget that will provide a reasonable standard of living, with some allowance for unexpected expenses. The good news is, we are essentially debt free. Our two cars are paid off. The house is paid off. No credit card debt or loans. So, monthly essentials are property tax+insurance+groceries+utilities+recreation.
I work for a healthcare organization. They will sell me health insurance at a reasonable cost upon retirement. Once we hit medicare, I can use them for supplemental coverage.
Yes, there are various options on how much of the pension would go to her upon my passing.
Once I select a planner, or if I decide to go alone, (unlikely), my wife will know every bit of it. As I said, that's one of the selling points of getting a planner, having her involved and seeing how it's all laid out.
 
DaleD said:
My first question is, do I need a financial advisor?
or take $250k one time payout. The one time is attractive because I can roll it to an IRA
Final question for this post is, about social security. Is there any reason not to take it at 64.
Click to expand...

Personally, I don't need, don't want, and would not get a financial advisor.

I transferred all the retirement funds into a self directed traditional IRA, managed by myself.
I don't really check it that much, but so far it has outpaced the market by quite a bit so I'm fine with that.
What I do is invest in a bunch of individual stocks that I like, based on their history, fundamentals and so on.
I invest the same amount in each one, so it's kind of like my personal index fund, and I keep them for quite a long time.

Social security I took at the last possible time, which was around age 70. It was supposed to go up by 8 percent
the last 5 years from age 65 but it only went up 4% a year, and the people at the SS office didn't have a clue and just
said that's what it is. I'm glad to be done with that, to get the monthly payments and then be able to handle it on my own.
 
We have never sought out a designated fee-based Financial Planner HOWEVER, we both had life insurance policies (1970s) with different companies and ended up using them as sounding boards for the rest. They evolved with us, over the years, from life insurance to mutual funds, to full blown brokers. The last young man we used in TN, helped us plan as we moved into retirement. (I took him a check, handed it to him and said, "Make us some money!" and he DID!

Unfortunately, we left him behind but our new guy here (same large company) looked it over and said he wouldn't touch anything! They both listened to us and answered our questions - making suggestions when asked. We have way more money than we need because of that!! The other group we use, got their license for the State of Maine to keep us as clients. They did the most planning with us. Since we already had accounts - there has never been an extra fee for the planning part and we're good at maintaining it ourselves.

I have a friend who has NO head for finance - she NEEDS a financial person to handle things for her and should pay for that expertise. We're comfortable with our own set up.
 
DaleD said:
I will retire at the end of the year. I'll turn 64 in Nov. I have social security, 401k and a small pension. No debt, other than the usual monthly bills. My first question is, do I need a financial advisor? They are not cheap, around 1% of assets. I know enough to be dangerous, but I'm an IT guy by profession. Second question is a subset of the first, I have a pension, I can take $1200/month for life, or take $250k one time payout. The one time is attractive because I can roll it to an IRA and access it should need arise. If I take the monthly payout, that's it, I can't change it. Final question for this post is, about social security. Is there any reason not to take it at 64. The break even age if I start at 64 is 80. Going from the people I have known, once you get to 80, your financial needs become much less in terms of wants, and much more in terms of medical.
My current mindset is go with an advisor for 1 year, see how it works out, maybe take over on year 2. As I said, it's a substantial bite, but there is some value add in terms of getting things in order so my wife can follow what's been done.
As for the pension, I like the ease of a monthly payout. I'd be insulated from the market.
The social security decision is take it at 64 or wait. I'm leaning strongly to take it at 64.

Thanks in advance.
Click to expand...
At 83 ive never use a financial advisor...ive been doing all my own and learning how to handle my $$$$ all these years..and so far so good im STILL in good financial position.
 
I don't think there is a definitive answer regarding whether or not a financial planner can help. I managed my own finances for a long time. I did ok. When I retired in 2008 I found a good financial planner, my assets have continued to grow as a result of the financial planner's management of my investments. THe consistent performance the planner has provided has far exceeded my expectations.

I will say that my planner actively managements my investments, sometimes I am totally in cash, other times not. One thing you can't afford to do is buy and hold. The key thing for all of us old timers is not to lose money.

I think financial planners are like car mechanics, there are good ones, and not so good ones.
 
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NO! And the commercials about using a fiduciary because they put your interests first make me laugh... gut laugh. Trust your parents and no one else. God gave you a brain, study, and trust your judgment.
 
Sorry, I disagree with those who diss financial planners. I wouldn't trust my parents, they knew absolutely nothing about money except balancing a checkbook. Useless and pointless in today's complex financial world.

Trusting "no one else" is why so many middle-class people lost money in the last Great Recession of 2008/9. And personal judgment depends upon knowledge, something that is not only continuous/on-going, but time-consuming.

Not everyone wants to spend time reading financial articles and understanding how the global financial markets work. But you can spend some time learning the basics (just as you should know how to do an oil change on your car even if you NEVER do it yourself), and then spend some time selecting the right person to handle your financial affairs.

Like insurance or healthcare, it is worth the time spent to find someone qualified you can work with. Too many people either "trust their judgment" so the next media panic causes them to panic-sell; or they pick someone "because they're really nice people and 'I got a good feeling' from them".

Learn to tell the difference between real credentials and those fake "buy a piece of paper" credentials. Get referrals and talk to current clients before you sign up with anyone. And don't expect to be a "hands off" client - a good CFP prefers a client who will ask questions, discuss trends, and be honest about what their goals and current circumstances are.

Our personal account is relatively "small potatoes" at our CFP firm. But the founder always sits in during our meetings with our account CFP, because the founder knows I used to be in the business (I worked for the now semi-retired guy who mentored the founder when he first entered the industry).

As my spouse says, we spend 15 minutes on account business and then 45 minutes yakking about financial trends, tax strategies, and global investment possibilities - just for the fun of it. The founder has paid me the ultimate compliment of saying he wishes all his clients were like me.

Both from a tax and legal standpoint, switching over upon retirement from DIY investing - which I did very well at for decades - to a professional firm, was one of the smartest things we've done. This year we implemented a tax strategy they suggested, which I would never have realized we could take advantage of.

DIY can only take you so far. Ignorance is costly when it comes to strategic financial planning, these days. What you don't know.....you may never realize you don't know.
 
You have gotten a lot of good advice, I will just add one thing on social security. I was in a place similar to yours when I turned 65, however when I discovered that if my wife claimed hers, I could collect an amount equivalent to 50% of her payments without collecting mine. So that is what we did, and I will now wait until 70.

Strategy was recommended to us by a social security person, lots of confusing advice out there, but I found just talking to social security people the best thing to do, and then they can do it.

Best of luck with it, you are doing the right thing thinking it out, and I am sure will make a good decision.
 
bowmore said:
Do NOT go with a financial advisor. It has been proven that they do not do any better than the market. I strongly suggest you post the same question on https://www.early-retirement.org/ and go to Forums.
There are many knowledgeable people there that can suggest some books to read and give advice. One percent may not sound like much, but if you are withdrawing 4% each year to cover your expenses, the FA is taking 20% !!!
Click to expand...

DaleD,

What bowmore said !

Would also recommend Boggleheads for you to read and study up on.
https://www.bogleheads.org/index.php

Would also recommend that you consider a Fee Only Financial Planner/Advisor
We used Mr. Rick Ferri on 3 X occasions as we planned our retirement. We were very pleased with his services and advice and do recommend him. His fee's were very reasonable and well worth it for ms gamboolgal and I to have his review and advice.

We also used the Financial Planning Services (Voya) of megaoilcorp to review our Portfolio and our plans/desires prior to retirement.

We did use a Financial Management firm for several years while working and we also had monies at Vanguard invested in Mutual Funds and ETF's that we self managed.

Over about a 7 year period the Vanguard Performance was much better that the Financial Manage funds. It was not even close !
As we neared to retirement, we pulled / transferred all of our monies to Vanguard.
We self managed our Portfolio for the last ~3 years before I retired.

For us - we are conservative and do not speculate - after studying, posting and getting multiple reviews by firms as referenced above, we decided to self manage.

I retired effective 1-Feb-21 when I was 61 year old. I believe that ms gamboolgal and I will continue to self manage our Portfolio.

I will say that in looking back on our experience that we would have been much better off if we would have had the confidence to self manage our Portfolio much sooner.
But it's easy to looking back to know what we shoulda, woulda, coulda done !

All the best in your upcoming Retirement !

Please keep us posted on your status.

gamboolman....
 
You don't need a financial advisor. Put all your funds not necessary for living expenses into Amazon shares. Trust in Jeff Bezos. Of course, the risk there is an antitrust suit which I understand the DC Attorney has just started. I still place my faith in the wealthiest man on planet earth, Jeff Bezos.
 
Alligatorob said:
You have gotten a lot of good advice, I will just add one thing on social security. I was in a place similar to yours when I turned 65, however when I discovered that if my wife claimed hers, I could collect an amount equivalent to 50% of her payments without collecting mine. So that is what we did, and I will now wait until 70.
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My husband and I are doing the same.
 

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