I Lost My FInancial Brain - Please Help

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beehumble
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Joined: Thu Feb 04, 2016 11:43 am

I Lost My FInancial Brain - Please Help

Post by beehumble » Thu Feb 04, 2016 1:20 pm

Background:

Wife is 8 years older than I (65 vs. 57). Wifey and I made it through life, both working, raising two kids, paying their college, vacationing in the usual (Disney WOrld etc) and the not so usual places (overseas trips), buying a home, cars etc etc.

Along the way we managed to save, and to buy a couple of rental properties.

Only debt is the mortgage on our final, retirement home.

I)The Plan (numbered for reference only):
1) buy final retirement home ($200K mortgage, $150K down) - downsize to a single story.
a) needs to be close to my job as I will still work, wife will work a few months then retire at 66.
b) needs to be close to grandkids

2) I work, wifey retires
3) use her social security, my paycheck, and rental prop income to pay off mortgage in 4-5 years
4) live happily ever after

Current State of Affairs:

We executed Plan step 1 - bought a nice single story house just where we wanted it.

Then wife, always very healthy (yearly checkups), got cancer and died. So I lost my beloved, my best friend, my confidante, and the financial "brains behind the outfit". I paid the bills online daily; she did the hard stuff like tax returns and all the big money decisions - I had input, her ideas were pretty good although she was not an investor type person. She was conservative - "buy and hold, have some equities and real estate (the two growth areas of money) since stocks could always go way way down someday."

Alone now, I am trying to find the safe path forward without my better half, and my financial half.

II) The New Plan:
1) work until 62 (I just turned 58), then live on SocSec and investment income. Flexible on this but death can come quicky - wife did not get one retirement check, just missed it. I want some of those checks.
2) try to leave as much as possible to the two kids (wife really really wanted this so I want to honor it)

After coming out of a long and deep grief period, I have gathered info on our finances. Pedaling hard to get up to financial speed (reading, reading, reading), I found this forum. I already know to go with indexed funds with low fees, most likely the Vanguard products. I saw the CBS
special featuring Bogle about retirement and how fees are a killer, and how index funds are the best way to go versus active which almost always loses in the end. And I read the Buffet thing about how those with little market knowledge (his wife) should safely invest in Vanguard indexed
fund primarily.

So here I am, and I need a lot of advice. Sharks are circling - the probate is public, so it is known I lost my wife, and so I am getting calls, mailings, and door-knocks from financial people 'wanting to help me arrange my finances', wanting to buy my home as is to help me in my grief etc etc. An Edward Jones guy knocked on my door just the other day (no harm meant to any Edward Jones people on here!).

III) The Assests:
a) $1Million estimated worth in 4 properties, all paid off except the $200 mortgage on retirement home. (BUT i need one to live in, so subtract $280), so $720K in properties.
b) $400K in cash in bank (we (or she) were 'moving' it, but she died so it is still in cash til I know what to do)
c) $570K in 401K's
d) $130K in other stocks

Total Net Worth: approximately $2.1Million
BUT minus my house could invest $1.8 Million

SocSec at 62 will be $20K.

I have placed most of my 'stuff' in the Personal Capital aggregator to keep track (I am not using their financial services people - too high fees.)

Ideas I have had:

1) rental properties are a pain and will be a pain for the kids who have their own kids to taxi around etc if I pass them on, so sell them. Sell the mortgaged house, too, but downsize from my current house (two story) to single story home.)
Put all monies into Vanguard indexed ETFs (is there admiral etfs?)
So some $1.8Million in these funds - live off the distribution and the Soc Sec. Distribute 3% or $54K, plus 20K SocSec. Or even less. In down years, withdrawal less. In up years, do not withdraw more.

THE QUESTION:
So for this idea number 1, what to invest in? Market sucks right now.
My thoughts:
Immediately while cogitating on all this, I need to get cash out of bank and into an investment vehicle. Thinking all cash except emergency fund will go into some Vanguard bond fund such as:
Total Bond Market Index Admiral Shares or Vanguard Total Bond Market ETF
Should I go ETF or Admiral?? seems to have same fee of 0.07, etf has no comissions on trades, what about Admiral commission?

I can rollover inherited 401K's - thinking to roll out of corporate 401K plans which generally have high fees, into Vanguard indexed 401Ks.
Could use lot of help here as to where to roll them to, taking into account the market is not great at all - is it safer to roll those also into Vanguard Bond fund listed above for now, and later move some back into stocks, or just roll it allocated as I will want it if market was stable (avoid market timing)? (If so, how does one do that anyway - roll it over??)

I have read a good way to go is:
56% Total Stock Market Index Admiral Shares – VTSAX (3804 stocks across the USA)
24% Total International Stock Index Admiral Shares – VTIAX (5785 stocks across the world, excluding USA stocks)
20% Total Bond Market Index Admiral Shares – VBTLX (6948 bonds across the USA)
(AGAIN, should I use comparable Vanguard ETFs instead of the admiral??)


OK, that is what I have for now, except:

Idea 2 is to keep the two paid-off rental properties (3 rental units since one is a duplex) for the cash flow and as a safety in case the market completely tanks for the next 5 years straight - then I could live on (rental income + socsec) and not touch the tanked market until it returns. Then cash out the houses and place in the market before I pass away, so kids don't have to deal with it!!! Or just pass the houses to the kids and let them sell them or whatever!!! NO Capital gains on inherited houses or equities - so they will get it tax free - which is great!

If anyone of you Bogleheads can help me with opinions/ideas/etc, it would be greatly appreciated. Thanks.

Grieving in Limbo,
Beehumble

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Duckie
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Re: I Lost My FInancial Brain - Please Help

Post by Duckie » Thu Feb 04, 2016 7:06 pm

beehumble, welcome to the forum. I'm sorry for your loss.
beehumble wrote:Ideas I have had:

1) rental properties are a pain and will be a pain for the kids who have their own kids to taxi around etc if I pass them on, so sell them. Sell the mortgaged house, too, but downsize from my current house (two story) to single story home.)
This sounds like a good idea.
Put all monies into Vanguard indexed ETFs (is there admiral etfs?)
There are no admiral ETFs. The admiral share class of the mutual fund has the same expense ratio as the ETF.
So some $1.8Million in these funds - live off the distribution and the Soc Sec. Distribute 3% or $54K, plus 20K SocSec. Or even less. In down years, withdrawal less. In up years, do not withdraw more.
Seems sensible.
So for this idea number 1, what to invest in? Market sucks right now.
My thoughts:
Immediately while cogitating on all this, I need to get cash out of bank and into an investment vehicle. Thinking all cash except emergency fund will go into some Vanguard bond fund such as:
Total Bond Market Index Admiral Shares or Vanguard Total Bond Market ETF
You have $400K cash in the bank. How much are you earmarking as the emergency fund? Whatever is left will be considered just part of the portfolio.
Should I go ETF or Admiral?? seems to have same fee of 0.07, etf has no comissions on trades, what about Admiral commission?
Vanguard admiral shares have no commission. Whether you choose ETFs or the funds depends on your personal inclination. I prefer the funds for simplicity, others prefer ETFs.
I can rollover inherited 401K's - thinking to roll out of corporate 401K plans which generally have high fees, into Vanguard indexed 401Ks.
Get all your wife's tax-sheltered plans (TIRA, Roth IRA, 401k) titled in your name. Then you roll the 401k assets to TIRAs or Roth IRAs. (You don't roll a job 401k into a personal 401k.)
Could use lot of help here as to where to roll them to, taking into account the market is not great at all - is it safer to roll those also into Vanguard Bond fund listed above for now, and later move some back into stocks, or just roll it allocated as I will want it if market was stable (avoid market timing)?
Figure out where you want it to go first. Then roll it over.
(If so, how does one do that anyway - roll it over??)
You contact the receiving custodian (Vanguard?) and they will walk you through it and handle most of it.
I have read a good way to go is:
56% Total Stock Market Index Admiral Shares – VTSAX (3804 stocks across the USA)
24% Total International Stock Index Admiral Shares – VTIAX (5785 stocks across the world, excluding USA stocks)
20% Total Bond Market Index Admiral Shares – VBTLX (6948 bonds across the USA)
This is 80% stocks and 20% bonds. That's very aggressive for someone your age. I recommend an AA of either 50/50 or 60/40. If 50/50 it would be:
  • 35% Total Stock
    15% Total International Stock
    50% Total Bond (or tax-exempt equivalent)
If 60/40 it would be:
  • 42% Total Stock
    18% Total International Stock
    40% Total Bond (or equivalent)
For example let's say you sell the three properties (two rental, one former home) for $720K, pay $150K in taxes, pay off the $200K mortgage, and set aside $100K for your emergency fund. That leaves you $270K from the property. Plus the $400K cash, plus $570K tax-sheltered, plus $130K taxable stocks (can you sell these?). That adds up to $1,370,000 in liquid assets. Going with an AA of 60/40 (42/18/40) you could have:

Taxable at Vanguard -- $800K -- 58%
9% individual stocks -- I'd sell these
33% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.05%)
6% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.14%)
10% (VWIUX) Vanguard Intermediate-Term Tax-Exempt Fund Admiral Shares (0.12%)

Traditional/Roth IRAs at Vanguard -- $570K -- 42%
12% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.14%)
30% (VBTLX) Vanguard Total Bond Market Index Fund Admiral Shares (0.07%)
Idea 2 is to keep the two paid-off rental properties (3 rental units since one is a duplex) for the cash flow and as a safety in case the market completely tanks for the next 5 years straight - then I could live on (rental income + socsec) and not touch the tanked market until it returns.
The problem is that you already think they are a pain and if the stock market tanks you can bet that the real estate market will be hit also.
Last edited by Duckie on Fri Feb 05, 2016 7:30 pm, edited 1 time in total.

beehumble
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Re: I Lost My FInancial Brain - Please Help

Post by beehumble » Thu Feb 04, 2016 8:28 pm

That sounds great! Still studying the allocation stuff at the end of your post - looks good. Thanks for that!

The cash is AFTER the emergency fund so I know and want to invest that asap - wasn't sure how to go - learning/pedaling as fast as I can! Glad I found this site! (I got $250K from her life insurance benefit at her company - this is also tax-free.) And we had set aside $150K to payoff the new house with some from the emergency fund, but when she passed I stopped doing anything except minimum payments on it until I could figure out what to do - In my grief I froze up, so to speak - I was (well) advised to hold off on major things in my life (like paying off the house) until I started to come out of the grief and could focus once again. It cost some interest-paid on the new house mortgage but it could not be helped - I needed time to recover from the loss of my wife.

One thing, there is no taxes on sales of any of the property we own - I own - there is no capital gain tax or extremely small tax, as I got these through the death of my wife, so the cost basis has been reset to their value on the day of her death, or up to six months after that day. I live in Texas and since it is a community property state, the entire basis is reset, not just the deceased's half as in most states. Same for stocks - the cost basis is reset to the value at her death. From what I read, this is the best tax break in the entire tax code. I did not know about it until after my wife passed, and I (we) got lucky - I read where some people as they are dying transfer properties to their children before death, thus missing out on this tax break - the better way is to let the children inherit it in the Will after death, tax-free.

So if I sell the properties for $720K there will be no or very small tax owed. Yes, I can sell the stocks, everything is mine - they are being re-issued or whatever it is called, in my name, I think is what my probate lawyer said about those (Is there a reason I could not sell them?)


Added via an EDIT:
I had said I thought I would take 3% from the investments and the rest (20K) from social security. If I do the 60/40 split - which I will probably do - how does a 3% withdrawal affect the total invested amount (bonds have a lower return than the stocks is my understanding - I was thinking 3% would be about $54K (3% of 1.8Million). But now maybe it is less than 54K? such as 1.8M * 0.6 * 0.03 = $32.4K + 20K social = 52.4K which is do-able since I would have no debt.

And one more thing - I see stocks in the IRA and tax exempts in the non-IRA portion - I had read to put bond-type investments in the IRA as much as possible since dividends/interest are taxable. I will have more than the 1,370,000 since I have that 150K in taxes that I don't pay, plus the 100K allotted for the emergency fund (I already have a good emergency fund).

So maybe make it all bonds in the IRA account, and the rest in stocks?

Thanks for the advice! I really appreciate it!
Last edited by beehumble on Thu Feb 04, 2016 8:59 pm, edited 1 time in total.

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Raymond
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Re: I Lost My FInancial Brain - Please Help

Post by Raymond » Thu Feb 04, 2016 8:43 pm

beehumble, my condolences.

Tell all those sharks, whether they are from Edward Jones (EJ), Merrill Lynch, Ameriprise, your insurance company, whatever, to go take a long walk off a short pier.

If you don't want to be blunt, just tell them you already have a financial advisor, a close friend from childhood who saved your life over Macho Grande :D (movie reference)

Don't be worried about offending anyone here about EJ, most of the posts about that company are people requesting help on how to escape them.

Not much to add to Duckie's outstanding post, but I agree with him about simplifying your real estate holdings.
"Ritter, Tod und Teufel"

beehumble
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Re: I Lost My FInancial Brain - Please Help

Post by beehumble » Thu Feb 04, 2016 9:15 pm

Thanks Raymond!

Yeah I am ignoring them - I want to be safe with the money we worked hard for all our lives for - as I said, my wife wanted to pass as much as possible to the son and daughter (in something easy for them to manage - they are busy raising kids etc!), as do I, while also living ok in retirement. (My daughter has said she does not know how, nor does she want to know how, to manage the rental properties, and I don't blame her - she has four kids! If I don't sell them, she will when she gets them!)

Another question: I really want to get the cash invested right away - it will take a bit of time to sell the property. So should I also for now put the $400K in the allocations of 60/40 (this is outside of the tax-deferred - I will roll the 401K's into it as specified by duckie) and readjust/rebalance it as I cash out each property one by one and add it to the invested funds?

I guess I am saying, for right now I have the 570K in 401K's that I want to roll to Vanguard tax-deferreds as listed by Duckie. And I want to get that 400K cash working, too.
So total I need to get in to market right now is 400K, and roll the 570K. Any advice on how to allocate that if different from above?

Thanks again to all of you!

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BL
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Re: I Lost My FInancial Brain - Please Help

Post by BL » Thu Feb 04, 2016 9:21 pm

Sorry for your loss. How long has it been?

It is often suggested to do only required actions for at least a year after such a loss. You don't need the stress of deciding or the regret of making sudden decisions. Take your time, do what has to be done, gather up information about investing and your finances so you will be ready to act in the future. There is no rush if you still have cash in the bank or rentals to sell. Hold off selling your home for now, even if you decide it is the best thing to do. That is one of the regrets I have heard. You have enough stress for now.

Thank you for sharing a bit about the sharks that gather. Good for you to hold them off. If you agree not to make any unnecessary commitments, then they won't have much hold on you. They are not done yet. Good for you to come here where you get generally good information and no one is out to benefit from your loss. There could be sharks here as well but if you stick to the thread and not messaging, you should do fine.

Some people use higher interest CDs instead of bonds. Bonds could be as simple as total bond market in IRAs/401ks and perhaps municipal bonds in taxable. Keeping as much as needed in retirement accounts may keep your IRA RMDs down after age 70. Converting some to Roth IRAs (and paying tax on that) would also help and give you access to tax-free funds after 5 years, I believe. Some do this to the top of their tax bracket.

Find out what the 401ks are invested in. It could be they are in low-ER index funds or could be moved to that, so there is no rush to roll them over to an IRA. If you haven't converted them to your ownership there could be some time limits to get it done.

Age in bonds is one recommendation. So 60/40, 50/50, or 40/60 stocks/bonds could be reasonable but everyone has a different need, ability, and willingness to be more or less aggressive.

You don't have to make a decision on when to take SS until the time comes, and then you can decide month to month if it is worth delaying. I also think it is retroactive about 6 months so you have a bit of extra time to decide there.

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Watty
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Re: I Lost My FInancial Brain - Please Help

Post by Watty » Thu Feb 04, 2016 11:03 pm

Sorry to hear about your loss, but I am glad that you were able to avoid the "sharks". It is amazing just how bad they can be and the things they can do. If you find that you do need help then, in addition to asking here, Vanguard does provide financial advisors for a lower fee than most places and they are pretty reputable. With any "advisor" you need to be sure that they have a "fiduciary responsibility" (get that in writing) to you like a lawyer or a doctor does and have to legally do what is in your best interests. A "fee based" advisor is not the same as "fee only" so you need to watch out for that, they can take a fee and a commission.

Be especially careful if someone tries to sell you life insurance as an investment or some sort of complex annuity. They can be pretty slick on trying to make these look good but they are selling them so that they can make a lot of money off of you. The one exception to the annuity is what is called a single premium immediate annuity (SPIA) which has it own pitfalls but is sometimes a good choice. These are basically like buying a pension.

Selling some of the rental properties might be a good idea just for diversification so that you don't have too much of your net worth in one local real estate market. Be sure to know the taxes before sell and that might help figure out which ones to sell. If the capital gains taxes will be too high then you might be able to just have a property management company take care of them.
beehumble wrote:SocSec at 62 will be $20K.
I'm don't know much about it but could you take a Social Security Survivors benefit and delay starting your own Social Security until you are older? That might allow you to have a larger benefit and not need to draw down your savings as much if you live to be an older age. It might be worth talking to the social security office to find out what all your options are.
beehumble wrote:And I want to get that 400K cash working, too.
I would take a hard look at paying off your mortgage. That would be like getting a risk free CD at the same interest rate. At your age you should likely have 50% or more of your portfolio in bonds that are earning a lower interest rate.

That would help lower your monthly expenses so that you would have less "sequence of returns risk" that might hurt you if the market takes a big drop early in your retirment.

psychoslowmatic
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Re: I Lost My FInancial Brain - Please Help

Post by psychoslowmatic » Fri Feb 05, 2016 7:36 am

I'm sorry for your loss. Reading between the lines of your posts it sounds like you're thinking you won't be around long-you talk about getting things set up for your kids. Financially you have to plan for the worst, which in this case is a very long retirement. If you're 57 you could be around for 50 years. If you have health problems that's one thing but this could be a symptom of your grief, I hope you're getting help to deal with it.

Financially I don't have much to add except don't stress about getting it perfect. There's not a huge difference between 60/40 and 50/50. Also I would make simplicity a major goal since you don't seem to love financial planning as a hobby. Best of luck to you, again sorry for your loss.

Carl53
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Re: I Lost My FInancial Brain - Please Help

Post by Carl53 » Fri Feb 05, 2016 8:42 am

Watty wrote:
beehumble wrote:SocSec at 62 will be $20K.
I'm don't know much about it but could you take a Social Security Survivors benefit and delay starting your own Social Security until you are older? That might allow you to have a larger benefit and not need to draw down your savings as much if you live to be an older age. It might be worth talking to the social security office to find out what all your options are.
You could take the survivor benefit at age 60 which would be 71.5% of what she would have received at FRA (66 for her). Then your benefit could increase in value up to age 70, if you wish, prior to switching.
https://www.ssa.gov/planners/survivors/ ... rtred.html
This may be the farthest thing from your mind, but beware that should you remarry prior to age 60, you would lose out on the SS survivor benefit.
https://www.ssa.gov/pubs/EN-05-10084.pdf

You mentioned that your wife had not received any payments after retirement. If those payments were to have included pension payments, it is likely that you are entitled to 50% of her pension unless you had signed off on not having survivor's benefits.

I could see you paring down the rentals and housing situation. Keep what is only the easiest to manage or what you find enjoyable.

Down the road you might find someone new to share your life. Read up on prenuptial agreements, wills etc. You and your wife intended for your kids and grandkids to get most of your assets should you pass. Be careful to not jeopardize this.

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unclescrooge
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Re: I Lost My FInancial Brain - Please Help

Post by unclescrooge » Fri Feb 05, 2016 9:09 am

Sorry for your loss.

I wouldn't rush out too sell the rentals just yet. See if you can find a property management company to take care of them for you.

I bought and own two rentals about 2,000 miles away in a state I have never visited. The internet has made such things easier than ever.

IPer
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Re: I Lost My FInancial Brain - Please Help

Post by IPer » Fri Feb 05, 2016 9:26 am

Sorry for your loss.
You seem to have a good head on your shoulders.
My perception is you seem more like a 60/40 (stocks/bonds) guy than a 80/20, I could be wrong.
My other perception is you have basically made it, you just need to rearrange things, the others
on this board will be much more eloquent at answering that part. Best regards!
Read the Wiki Wiki !

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Tamarind
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Re: I Lost My FInancial Brain - Please Help

Post by Tamarind » Fri Feb 05, 2016 9:41 am

I'm so sorry for your loss.

You have clearly done a LOT of research into investments. Duckie is a fantastic resource and others may also lend their individual expertise.

Looks like you haven't delved as deeply into your options for income streams as a survivor: social security survivor's benefits, her pension, etc. These may be important to developing your plan because they will reduce your need to draw on your investments and enable you to leave more to your children if that's what you want.

If it is still too painful to think about this income coming to you as a result of your wife's death, then you may not be quite ready to take financial action yet. You and she prepared well for retirement and there is no rush. It's ok to park the cash in high-yield savings accounts and wait - just make sure you keep each savings account below the FDIC limit...$240k will give you some space for interest accumulation without needing to change anything.

You may also want an unusually large cash cushion while you sort out the real estate holdings, which to save, which to sell, how much to put on the mortgage. This may go more smoothly if you sort out one piece of the puzzle at a time.

I would recommend that you sort through the income, real estate pieces before settling on an asset allocation, as your need, ability, and willingness to take risk will depend on them. If you find that you have significant income from her SS & pension, you'll have less need to tap your investments and have the option to use a more aggressive allocation for amounts that you'll use later in retirement or intend to pass on. If on the other hand you need 3-4% annually of the investments, you should go with the more conservative options recommended above.

Lafder
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Re: I Lost My FInancial Brain - Please Help

Post by Lafder » Fri Feb 05, 2016 11:43 am

I am so sorry for your loss!

I feel I am the (still living) wife in your scenario since I handle our finances and investments and rentals as your wife did.

I have told my husband that if anything happens to me and I can not handle things, he should make an account here and follow the consensus on what to do.

So I am reassured you have found Bogleheads which will be the best and least biased advice you can get.

I would play with the numbers on selling the rentals vs having a management company manage them so you can really be hands free. Only you know what level of stress and security having rentals vs investments is for you!

I would also be sure you have all your documents and estate planning in place so when you pass the asset transfer is as easy as possible for your kids.

Welcome here!

lafder

beehumble
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Re: I Lost My FInancial Brain - Please Help

Post by beehumble » Fri Feb 05, 2016 3:04 pm

Thank you all for the advice!

Latest:
Today I met with a Certified Financial Planner from Fidelity. He gets nothing from my investment choices - and he is free of charge.
He came with my wife's benefits packages - she worked for a company whose retirement packages (401K) were with Fidelity.

How is he paid? A flat salary plus a bonus based on his retention rate of clients, and their satisfaction with him based on a two question annual survey I complete. If he loses too many of us, he loses his job. He has 300 households under management. He explained Fidelity has 4 Trillion in assets under management, ranked 5th in the US, and it is the largest manager of 401K plans in the country. Fidelity gets paid from this, and he gets his salary from their profits....wife's company basically pays Fidelity by putting the retirement 401K with Fidelity.
So he has no interest in pushing high fee products or any of that on me....I like that.

He works only on near-retirement or starting/in retirement accounts, with a minimum of $500K.

The focus was on keeping what I have and living off of it, and passing it on.

I am out of the 'grow' phase for much of it, but not all of it - he will preserve most, invest a smaller portion in growth stocks.

He aligns with much of what is said here.

1) look into survivor benefit of spouse with my Social Security office - I should be able to get (as said above - thanks!) 71.5% or her benefit at 60, and her benefit will be based on her current age if she were alive so there is some increase to it. (Her benefit is higher than mine. Yes, I cannot marry again until 60, but that is the farthest thing from my mind anyway. If I were to meet someone over the next two years, after more emotional healing, I would be 60 anyway - I would need time to first meet somebody, and then time to get to know them. That is not on my mind; time with my grand kids is on my mind! My wife was looking forward to spending more time with them once she retired - I will make up that time with them for both of us.)

2) pay off the mortgage ($200K) out of my cash, right now. CFP said if I called him later this afternoon and said I paid off the house, he would have no problem with that, would be happy about that. (also as some above said - thanks again!)

3) keep the rentals and use as conservative, safe, cash flow, especially since these are paid-off . As some also said here, he said use a property manager if I don't want to get involved and he said it sounds like I don't, so go that route and spend more time with the kids/grandkids.(diddo for this one, too - thanks!)

4) keep $75K in cash emergency fund - will talk where to keep it next time, early next week

5) he has laid out several parts of a detailed portfolio for rest of it, the result of it is I will have same income I have now, for life, AND still preserve everything or nearly everything, to pass on to the kids, because these are EXTREMELY safe holdings.

I meet with him early next week for the polished proposed retirement portfolio approval.

Will keep you updated! So far I am liking it, especially how he gets paid - not from my choices at all, only from my being happy with the portfolio he sets up for me. His flat rate salary is supplemented with a bonus based on my happiness - he said his job is to make me happy - the focus is on what is best for me.

(note 1: he did also discuss that sequence of returns risk, and said in this volatile market that is a major concern, but always a concern - his plan avoids it entirely. He had a neat chart that showed the same money, same rate of return, same everything, EXCEPT the sequence of returns. In fact, the two columns on the spreadsheet had the SAME stock market annual gains or losses, just reversed from top to bottom. The first column ran out of money after 16 years I think it was, while the second kept right on chugging at a very very healthy rate. It was all about WHEN the market went down - the sequence.
I want to avoid that and there is no way to know how it will go, all I know is the market is scary for me since I am nearing retirement. It is best to avoid that risk at all costs - there is not enough years to recover - while working, one also contributes (hopefully) so that helps mitigate that risk - the time horizon plus contributions help, both of which are lost once one retires.)

(note 2: fees for products he mentioned are higher - like 0.67 %, but the income stream is guaranteed AND the capital is preserved and I retain control over it and can pass it on. I get the same net income I have now, with no debt burdens (mortgage is paid off - the properties were not a factor in the discussion - it was all about getting the same net income I get from my paycheck, then the property income is added to that. He would not advise selling PAID-OFF rental property to put the cash into the market, he said - real estate has virtually no risk compared to the market, and returns can be net 6% year after year.)

All for now, thanks again everybody!
Last edited by beehumble on Fri Feb 05, 2016 3:17 pm, edited 1 time in total.

Avo
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Re: I Lost My FInancial Brain - Please Help

Post by Avo » Fri Feb 05, 2016 3:09 pm

beehumble wrote: 5) he has laid out several parts of a detailed portfolio for rest of it, the result of it is I will have same income I have now, for life, AND still preserve everything or nearly everything, to pass on to the kids, because these are EXTREMELY safe holdings.
Please let us review these! There are excellent low-cost index funds at Fidelity, but also a lot of high-cost, actively managed funds. The latter is what Fidelity makes most of its money off of.

clip651
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Re: I Lost My FInancial Brain - Please Help

Post by clip651 » Fri Feb 05, 2016 3:39 pm

beehumble wrote: (note 2: fees for products he mentioned are higher - like 0.67 %, but the income stream is guaranteed AND the capital is preserved and I retain control over it and can pass it on.
Please post details on what this is for input here -- it sounds fishy to me, but we don't have any details about what sort of product this is.

(Keep in mind a plain vanilla savings account gives you an income stream (very small currently due to low interest rates), the invested money is guaranteed, your retain full access to it, and of course can pass it on. And it has no other fees, gotchas, or tax issues beyond taxes on the interest. If you want true safety, that's your baseline for comparison.)

And as the poster above posted, please post all other proposed investment details before committing to anything. The second opinions here are free and may save you a lot of money and headaches.

So very sorry for your loss. Best wishes,

cj

beehumble
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Re: I Lost My FInancial Brain - Please Help

Post by beehumble » Fri Feb 05, 2016 3:43 pm

Avo wrote:
beehumble wrote: 5) he has laid out several parts of a detailed portfolio for rest of it, the result of it is I will have same income I have now, for life, AND still preserve everything or nearly everything, to pass on to the kids, because these are EXTREMELY safe holdings.
Please let us review these! There are excellent low-cost index funds at Fidelity, but also a lot of high-cost, actively managed funds. The latter is what Fidelity makes most of its money off of.
Yes, I will. I added a 'note 2' about it. I will have more details on the fees next week - the proposal of the portfolio. One small (compared to the overall portfolio) component is in actively managed stocks - about 100 stocks - that fee too is I think 0.67 but I need to check on that. A couple of components had fees between 0.6 and 1.8 or so - high I know. The stocks are NOT in an index - there is tax-loss harvesting as well, to counter the fees. This is a very small component of the portfolio, to allow for growth.

I am on guard for snake oil...i right away questioned the fees. Fidelity and all these companies have products not available except through their CFP's etc. is my understanding. You cannot just buy it. The guy pointed out something - if I get a guaranteed 4% return, what dos it matter if the fee is 1.2%?
I can't really argue with that.

I did argue with that already and lost. Some 3 or 4 months ago, when I first took over my wife's 401K, the market began cratering. In 2008 she lost half of her 401K and it took some 5-6 years to get back - such a loss of time and potential gains. She always regretted that. So as the market showed signs of cratering, I reallocated the 401K to a cash position that yields about 0.1 %. HOWEVER, a Fidelity guy (diff guy than this one but same team I guess) at that time said I could move it to a cash position that yields for me 1.7%. I asked the fees and they were higher like 1.2 but he pointed out it would still mean I get more back - 1.7%- from that one than the one I chose. I balked at the fees and have regretted it since. The fee alone is not the deciding factor in all cases. And I said to him I could allocate it myself but he said it is not a product I have access to - he would have to do it.
They have products that we cannot get unless through them - and these might have higher fees but also have higher returns, too. My choice of a few months ago cost me about $1800 so far (3 months) - in a year, if I make no changes,it will be about $7300 lost on that one component of my portfolio. (I needed to get through my grief so I am ok with it - I did not want to think too hard and kind of froze up - but I am ready now. I don't want to leave that full $7300 on the table.)

So this guy points out the same thing -higher fees, but also higher return for me - a guaranteed 4.75 % on one product, and 4% on another. (I would have both in my portfolio.) I will double check that I understand this completely when we meet again, but that is how I recall it - and I get to keep the capital to pass on.

Thanks!

beehumble
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Re: I Lost My FInancial Brain - Please Help

Post by beehumble » Fri Feb 05, 2016 4:21 pm

clip651 wrote:
beehumble wrote: (note 2: fees for products he mentioned are higher - like 0.67 %, but the income stream is guaranteed AND the capital is preserved and I retain control over it and can pass it on.
Please post details on what this is for input here -- it sounds fishy to me, but we don't have any details about what sort of product this is.

(Keep in mind a plain vanilla savings account gives you an income stream (very small currently due to low interest rates), the invested money is guaranteed, your retain full access to it, and of course can pass it on. And it has no other fees, gotchas, or tax issues beyond taxes on the interest. If you want true safety, that's your baseline for comparison.)

And as the poster above posted, please post all other proposed investment details before committing to anything. The second opinions here are free and may save you a lot of money and headaches.

So very sorry for your loss. Best wishes,

cj
Yes I know and will post info as I get it. I pointed out to him that one part sounded like a CD (2.35% return) - very small component of portfolio that I could make withdrawals from quickly, and I noted another sounded like an annuity. He said they are not exactly that, and gave me the name - guaranteed interest contract. He pointed out differences but I cannot remember all of it - I do get to keep my principal even after death.

My take on it at this point is: they have 4Trillion with a T power in the industry, so they can access things that are not available to the general public through credit unions, banks, or the internet. Otherwise eventually nobody would use them.

I think it might be like how the best cuts of beef go to the restaurants, while the general public does not have access to that meat. The beef industry serves up the best to their high volume, repeat customers first (restaurants), we get what's left, which can be good too, but not the best. (We can get some better stuff - even stuff restaurants get, at places like Costco, since Costco serves businesses as well as individuals.) I might be wrong about this, but for the moment this is how I think it is - they have better products through them.

My further take is, as long as I get what I need - steady lifetime income, and much of it then left to my kids - what do I care? For that, I avoid the real risk of losing a lot of it in a volatile market - can I be sure the market won't tank again in the next 20 years, as it did in 2000 and 2008? I will die but it will (most likely) stay invested until my kids retire - a volatile market later will hurt their inheritance.

'Pigs get fat, hogs get slaughtered' comes into play here for me. This means, of course, "to be satisfied with enough, that being greedy or too ambitious will be your ruin." If I get a satisfactory income to live comfortably on for the rest of my days and be with my grand kids, and get to pass much of what we have built up to our kids, but Fidelity gets a piece for managing the portfolio, then that is good enough for me. My wife's major concerns were those two things - that I am ok financially, and that we give as much as we can to the kids.
True, there are probably other ways to go that might double or even triple my portfolio if done by myself and IF (a major iF) things play out right, but those also incur two major risks for what I want - I could run of money, or use up the legacy, or both. I want to spend the time with the grand kids, not try to become some type of mini-Warren Buffet by trying to master the financial industry at this late stage. I have been to the college of hard knocks; I don't want to go back if I can help it. I also remember how when young, I moved my apartment by myself with some friends. When older, I hired somebody to move it for me - saved me from pulling out my back, and it was more pleasant watching those youngsters move the stuff, than doing it myself! I had to pay of course, and I expect to have to pay for a CFP to manage my stuff now. Such is life - you want to dance you have to pay the band. (I am not 100 percent committed to going with this guy and his plan - I am just sharing my thoughts on it. I'd rather pay the expert a little bit and be safe, then to try to save that fee and totally screw it up, not just for me, but for the kids.

I have a duty to my wife to get this right. There is too much at stake to screw this up. I know when to admit I need help, hence I am here! I will for sure post the plan details here and hope for feedback!

I am a simple guy with simple needs - I won't use the money to buy a Lexus, I would prefer a Camry or Accord, second hand and a year old, and pay cash. I am that guy. I can live aok on what this guy proposes for me - AND safely pass much of it on. As the sun sets on my days, I want to spend them with my grand kids, in peace, knowing my kids will get something from us, too. That is all I want at this point in my life. This guy's plan seems to give me exactly that.

All that said, I will indeed post more details here as I get them! I really do want it reviewed to be sure it is not snake oil. AS I said, the person who would have done that review is gone, and here I see so much knowledge and I take comfort in that!


Ok, all I got for now! Meetup with him is on Tuesday - I will know more at that time, and post details! I hope it is not snake oil. As I said, I do suspect there are ways to get higher returns via lower fees etc than what this guy proposes, BUT at what risk? I am not sure I can handle too much risk anymore. I would hate to lose the legacy - it would have broke my wife's heart should I do that. I owe it to her to do the best I can in managing what we built up all those years, and especially not to lose it. (Of course, one of them might take the inheritance and bet it all on red, and lose it in one spin of the wheel! but I'll be dead and gone by then!!!)
Last edited by beehumble on Fri Feb 05, 2016 4:39 pm, edited 1 time in total.

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dodecahedron
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Re: I Lost My FInancial Brain - Please Help

Post by dodecahedron » Fri Feb 05, 2016 4:38 pm

I am so sorry for your loss. And I can relate to your situation. After my spouse died two years ago, I felt pretty overwhelmed at the prospect of figuring out how to manage all the investments. This forum has been a huge help. Welcome!

What you said about the advisors, brokers, agents circling like sharks was sobering to hear. I am grateful I was spared that. (Almost all of my husband's estate passed to me outside of the probate process, because virtually all the assets were either titled as joint accounts or beneficiary designations. The publicly viewable "probate estate" was pretty minimal (a couple of relatively old cars titled in his name alone, some minor accounts receivable for his business, and a few other odds and ends.) The lion's share of the estate was in bank and brokerage accounts that were joint or in retirement accounts that listed me as beneficiary. Those funds were not on public display at the courthouse.

To simplify my estate and to keep the sharks away from my heirs when I leave this earth, I have put most of my assets into accounts titled with beneficiaries as "POD, TOD, or ITF" ("payable on death", "transfer on death", or "in trust for".) You might want to consider doing something similar. Those designations won't change the estate taxes due but the assets will not be part of the probate estate.
Last edited by dodecahedron on Fri Feb 05, 2016 4:45 pm, edited 1 time in total.

corysold
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Re: I Lost My FInancial Brain - Please Help

Post by corysold » Fri Feb 05, 2016 4:45 pm

beehumble wrote:
Avo wrote:
beehumble wrote: 5) he has laid out several parts of a detailed portfolio for rest of it, the result of it is I will have same income I have now, for life, AND still preserve everything or nearly everything, to pass on to the kids, because these are EXTREMELY safe holdings.
Please let us review these! There are excellent low-cost index funds at Fidelity, but also a lot of high-cost, actively managed funds. The latter is what Fidelity makes most of its money off of.
Yes, I will. I added a 'note 2' about it. I will have more details on the fees next week - the proposal of the portfolio. One small (compared to the overall portfolio) component is in actively managed stocks - about 100 stocks - that fee too is I think 0.67 but I need to check on that. A couple of components had fees between 0.6 and 1.8 or so - high I know. The stocks are NOT in an index - there is tax-loss harvesting as well, to counter the fees. This is a very small component of the portfolio, to allow for growth.

I am on guard for snake oil...i right away questioned the fees. Fidelity and all these companies have products not available except through their CFP's etc. is my understanding. You cannot just buy it. The guy pointed out something - if I get a guaranteed 4% return, what dos it matter if the fee is 1.2%?
I can't really argue with that.

I did argue with that already and lost. Some 3 or 4 months ago, when I first took over my wife's 401K, the market began cratering. In 2008 she lost half of her 401K and it took some 5-6 years to get back - such a loss of time and potential gains. She always regretted that. So as the market showed signs of cratering, I reallocated the 401K to a cash position that yields about 0.1 %. HOWEVER, a Fidelity guy (diff guy than this one but same team I guess) at that time said I could move it to a cash position that yields for me 1.7%. I asked the fees and they were higher like 1.2 but he pointed out it would still mean I get more back - 1.7%- from that one than the one I chose. I balked at the fees and have regretted it since. The fee alone is not the deciding factor in all cases. And I said to him I could allocate it myself but he said it is not a product I have access to - he would have to do it.
They have products that we cannot get unless through them - and these might have higher fees but also have higher returns, too. My choice of a few months ago cost me about $1800 so far (3 months) - in a year, if I make no changes,it will be about $7300 lost on that one component of my portfolio. (I needed to get through my grief so I am ok with it - I did not want to think too hard and kind of froze up - but I am ready now. I don't want to leave that full $7300 on the table.)

So this guy points out the same thing -higher fees, but also higher return for me - a guaranteed 4.75 % on one product, and 4% on another. (I would have both in my portfolio.) I will double check that I understand this completely when we meet again, but that is how I recall it - and I get to keep the capital to pass on.

Thanks!
I wouldn't necessarily not argue with paying 1.2% to get 4%. That means you only get 2.8% in the end. What if there was a product that only guaranteed 3%, but cost .1%? Now you are coming out ahead.

He may very well have your best interests in mind, but he also might get an extra bonus if he retains you and has you in some "special" products.

clip651
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Re: I Lost My FInancial Brain - Please Help

Post by clip651 » Fri Feb 05, 2016 4:50 pm

Please, please be careful. He is selling you hard, on what I'm not sure yet. Just whatever you do, please don't sign or commit to anything at the next meeting. Go in planning to make NO decisions and make NO commitments. Take as much information as you can in writing about whatever he is suggesting. Go home and read about it. Look for information about it from other sites, like here, and the SEC. Take time to think about it, and really understand what you are getting into. Look at alternatives from other companies. Look at alternatives suggested by experienced posters here. There is no rush here.

That's advice from someone who spent over a year working to unwind what I could of what had been done to my elderly parents. (I could not undo the damage done over the years, but I could at least stop the bleeding from crazy fees and other bad arrangements.) The fears they had, and the broker's "solutions" sound very, very similar to the things you are saying. There are a lot of different "products" out there, with a lot of different names and confusing terms. (The annuities I've seen have 100+ pages of fine print attached.) Very, very few of these products are in your best interest. Even fewer have people in suits eager to sit down with you and explain them to you.

When was the last time someone offered to meet with you in person, tell you how wonderful you are, how wonderful they are, and show you a bunch of fancy charts to get you to agree to invest in a boring 5 year CD??? A good CD is one of the best safe investments out there these days. You may want or need to take more risk than CDs for a portion of your portfolio. A bond fund might be more appropriate instead or in addition to savings accounts and CDs. (Plus stocks for the portion you want to take more risks with.) But you probably do not need anything complicated for the safe portion.

Maybe I'm wrong about this guy... but my instincts say this is still one of the sharks. Perhaps a small shark (lower fees than average), but still a shark. He would like you to think he isn't, of course.

Again, sincere best wishes.

cj
Last edited by clip651 on Fri Feb 05, 2016 4:54 pm, edited 1 time in total.

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Re: I Lost My FInancial Brain - Please Help

Post by beehumble » Fri Feb 05, 2016 4:51 pm

By the way, not sure I said this: this guy's plan has me retiring at 60 - two years from now, unless I choose to keep working. That sounds good, too.

"I wouldn't necessarily not argue with paying 1.2% to get 4%. That means you only get 2.8% in the end. What if there was a product that only guaranteed 3%, but cost .1%? Now you are coming out ahead."


No, I do not get 2.8 in the end, I get 4%, they get 1.2 - the product must generate 5.2 total - at least that is how I understood it (if I have $100K invested, I thought it meant I get $4000 return, they get $1200, and I still have the initial $100K, not $100K minus $1200 - but I am clueless about all this so I will be sure to ask - thanks!! ). So I will ask at next meeting, to be sure. Where to get such a product? - only they can offer it - again this is my take on it. You won't find it listed in their funds for us non-Fidelity folk to purchase. Their 4Trillion let's them do this, allows them to have such products. Again, my take - might be wrong, but how I think it goes.
Last edited by beehumble on Fri Feb 05, 2016 5:26 pm, edited 1 time in total.

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Re: I Lost My FInancial Brain - Please Help

Post by beehumble » Fri Feb 05, 2016 5:00 pm

dodecahedron wrote:I am so sorry for your loss. And I can relate to your situation. After my spouse died two years ago, I felt pretty overwhelmed at the prospect of figuring out how to manage all the investments. This forum has been a huge help. Welcome!

What you said about the advisors, brokers, agents circling like sharks was sobering to hear. I am grateful I was spared that. (Almost all of my husband's estate passed to me outside of the probate process, because virtually all the assets were either titled as joint accounts or beneficiary designations. The publicly viewable "probate estate" was pretty minimal (a couple of relatively old cars titled in his name alone, some minor accounts receivable for his business, and a few other odds and ends.) The lion's share of the estate was in bank and brokerage accounts that were joint or in retirement accounts that listed me as beneficiary. Those funds were not on public display at the courthouse.

To simplify my estate and to keep the sharks away from my heirs when I leave this earth, I have put most of my assets into accounts titled with beneficiaries as "POD, TOD, or ITF" ("payable on death", "transfer on death", or "in trust for".) You might want to consider doing something similar. Those designations won't change the estate taxes due but the assets will not be part of the probate estate.
I am not sure about this but I thought I read somewhere that Transfer on Death could cause a loss of the reset of the cost basis? Again not sure so you might want to check somebody with knowledge on this, or maybe somebody here knows? Is it an inheritance if it is transferred on death, or a transfer? (When I die, the kids will have no tax on any gains I made on stocks in the portfolio - they inherit it tax-free. Is this the case if it is transferred on death? I am not sure.)

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Re: I Lost My FInancial Brain - Please Help

Post by beehumble » Fri Feb 05, 2016 5:18 pm

I do not plan to sign anything at the next meeting and maybe never. My shark detectors are up full with this process. As I called to move the stuff from wife's name to mine, they asked if I would like to meet one of their reps, no charge to me - it is included in her benefits - he is free and will always be free for me, he said. Her company has lots of retirement money with them, and they get a could profit from that, so the company pays for much of this indirectly, as did she indirectly since the company had less profits to share with employees since they had to pay this guy's company.

I know they get something for doing this - we all need to get paid , that 'fruit of our labor' thing. The products he talked about have fees although they are lower than lots of fees for the same types of things, he showed me by pulling a list of fees for Fidelity as well as non-Fidelity similar products.

Does this guy know of products that are just as safe and give me higher return at lower fees - maybe. But his guaranteed rates of return were pretty good for this market. But I do plan to shop around to others such as Vanguard.

Why would Fidelity do this - give me access to the suit - unless there was a lot in it for them? Maybe because they too go by pigs get fat, hogs get slaughtered. If they are too greedy with fees, people could just go somewhere else like to their competitor Vanguard, in which case they would get 0 fees.

Thanks for the words of advice - my antennae is up - I will not sign anything next meeting, will see what competitors can do for me!

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dodecahedron
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Re: I Lost My FInancial Brain - Please Help

Post by dodecahedron » Fri Feb 05, 2016 5:29 pm

beehumble wrote: I am not sure about this but I thought I read somewhere that Transfer on Death could cause a loss of the reset of the cost basis? Again not sure so you might want to check somebody with knowledge on this, or maybe somebody here knows? Is it an inheritance if it is transferred on death, or a transfer? (When I die, the kids will have no tax on any gains I made on stocks in the portfolio - they inherit it tax-free. Is this the case if it is transferred on death? I am not sure.)
TOD accounts are still considered "inherited assets." For example, they would be listed on the estate's tax return.

The beneficiary of the TOD account did not have any access to the account during his/her lifetime, so it is definitely an inherited asset subject to basis stepup.

Now a *joint account* would be an entirely different matter! Because the beneficiary had access to the joint account before death, it is not an inherited account.

Terminology issue: both inheritances and lifetime gifts are "transfers." One takes place after the owner's death and one takes place during the owner's life. Stepped up basis applies to the former but not the latter.

Here is an authoritative source:
When an individual makes
a gift to another person during the
grantor’s lifetime, the capital gains
tax basis of that property in the
hands of the new owner remains
unchanged. Should the individual
choose to sell the property, the capital
gains tax will be determined
based on the grantor’s tax basis in
the property. Contrast this result
with what occurs under a transferon-death
deed, when the transfer is
deemed to occur at the grantor’s
death and the grantee receives a
step-up in basis. 26 U.S.C. § 1016.
Source: http://www.americanbar.org/content/dam/ ... eckdam.pdf

beehumble
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Re: I Lost My FInancial Brain - Please Help

Post by beehumble » Fri Feb 05, 2016 5:52 pm

clip651 wrote:Please, please be careful. He is selling you hard, on what I'm not sure yet. Just whatever you do, please don't sign or commit to anything at the next meeting. Go in planning to make NO decisions and make NO commitments. Take as much information as you can in writing about whatever he is suggesting. Go home and read about it. Look for information about it from other sites, like here, and the SEC. Take time to think about it, and really understand what you are getting into. Look at alternatives from other companies. Look at alternatives suggested by experienced posters here. There is no rush here.

That's advice from someone who spent over a year working to unwind what I could of what had been done to my elderly parents. (I could not undo the damage done over the years, but I could at least stop the bleeding from crazy fees and other bad arrangements.) The fears they had, and the broker's "solutions" sound very, very similar to the things you are saying. There are a lot of different "products" out there, with a lot of different names and confusing terms. (The annuities I've seen have 100+ pages of fine print attached.) Very, very few of these products are in your best interest. Even fewer have people in suits eager to sit down with you and explain them to you.

When was the last time someone offered to meet with you in person, tell you how wonderful you are, how wonderful they are, and show you a bunch of fancy charts to get you to agree to invest in a boring 5 year CD??? A good CD is one of the best safe investments out there these days. You may want or need to take more risk than CDs for a portion of your portfolio. A bond fund might be more appropriate instead or in addition to savings accounts and CDs. (Plus stocks for the portion you want to take more risks with.) But you probably do not need anything complicated for the safe portion.

Maybe I'm wrong about this guy... but my instincts say this is still one of the sharks. Perhaps a small shark (lower fees than average), but still a shark. He would like you to think he isn't, of course.

Again, sincere best wishes.

cj

It was not so simple a plan. He had several components. He had one component that had a 50/50 split, with 4.75% return, and a fee of 1.1 or so; another component had a 50/50 split with a 4% return and fee of 0.67, if I recall. These were in the 401K section. The first had $375K, the second $175K, if I recall. He had another section for a piece of the cash - had a 2.35% return (liek a Cd, but not totally. He had another section for managed stocks - 100 shares either I pick or they pick - don't remember the fee or the return - will be sure to check it - it is managed so as to prevent disaster if market tanks - I know, one could set a stop-loss. I need to study it all when I get the details. Then I can ask him questions about it.

The net effect is I get the same net income I get now, and the 'stuff' is preserved so it gets passed to the kids. Does he (Fidelity) get something? Sure. I can try to do it myself as much as I can but there are a lot of risks out there.



I will run some analysis of my own via excel. I played around with that last night and it seems if I put 15% in stocks, and the rest (85%) in bonds, the risk of a meltdown (sequence of returns for example) is very small. But when I ran that analysis (put numbers in the spreadsheet) my return was maybe what this guy proposed - I will have to see again. I have that spread sheet.

I will not sign anything. I am on guard!

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Re: I Lost My FInancial Brain - Please Help

Post by beehumble » Fri Feb 05, 2016 5:59 pm

dodecahedron wrote:
beehumble wrote: I am not sure about this but I thought I read somewhere that Transfer on Death could cause a loss of the reset of the cost basis? Again not sure so you might want to check somebody with knowledge on this, or maybe somebody here knows? Is it an inheritance if it is transferred on death, or a transfer? (When I die, the kids will have no tax on any gains I made on stocks in the portfolio - they inherit it tax-free. Is this the case if it is transferred on death? I am not sure.)
TOD accounts are still considered "inherited assets." For example, they would be listed on the estate's tax return.

The beneficiary of the TOD account did not have any access to the account during his/her lifetime, so it is definitely an inherited asset subject to basis stepup.

Now a *joint account* would be an entirely different matter! Because the beneficiary had access to the joint account before death, it is not an inherited account.

Terminology issue: both inheritances and lifetime gifts are "transfers." One takes place after the owner's death and one takes place during the owner's life. Stepped up basis applies to the former but not the latter.

Here is an authoritative source:
When an individual makes
a gift to another person during the
grantor’s lifetime, the capital gains
tax basis of that property in the
hands of the new owner remains
unchanged. Should the individual
choose to sell the property, the capital
gains tax will be determined
based on the grantor’s tax basis in
the property. Contrast this result
with what occurs under a transferon-death
deed, when the transfer is
deemed to occur at the grantor’s
death and the grantee receives a
step-up in basis. 26 U.S.C. § 1016.
Source: http://www.americanbar.org/content/dam/ ... eckdam.pdf

Wow! I'm impressed! I see there is a lot of knowledge on this forum! Thanks for clarifying that! "Property" includes stocks I believe, else it would say "real property"? You see how little I know - and that is why I am here!

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Re: I Lost My FInancial Brain - Please Help

Post by JD » Fri Feb 05, 2016 6:10 pm

clip651 wrote:Please, please be careful. He is selling you hard, on what I'm not sure yet. Just whatever you do, please don't sign or commit to anything at the next meeting. Go in planning to make NO decisions and make NO commitments.......................

When was the last time someone offered to meet with you in person, tell you how wonderful you are, how wonderful they are, and show you a bunch of fancy charts to get you to agree to invest in a boring 5 year CD???...........


cj
+1

beehumble
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Re: I Lost My FInancial Brain - Please Help

Post by beehumble » Fri Feb 05, 2016 6:37 pm

Ok did a little research.

The returns in the 401K, at least part of it, are from what he called guaranteed investment contracts or GICs, also called stable value funds. These are very very safe, and provide a fixed rate of return better than money markets or savings accounts.

from wiki on stable value funds:
The investment objective of stable value funds is to provide capital preservation and predictable, steady returns.[4] During the 2008 financial crisis, stable value funds were one of the few 401(k) investments that produced a positive return; stable value fund returns generally ranged between 3 and 5 percent for 2008.[7].....Many stable value funds have survived bankruptcies without any losses, for example in the case of Enron in 2001.



He split my 401K into two sections:
He said I would get 4.75% return in the one, and 4% return in the other, with virtually no harm to principal.

So I see even in 2008 these types of funds provided decent returns.

I will see more details on it next Tuesday.

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Re: I Lost My FInancial Brain - Please Help

Post by beehumble » Fri Feb 05, 2016 7:01 pm

I don't think I was clear on what I think this guy is doing for me (how can I be when I am not sure myself!!).

I think he is replacing my job's NET income via returns on my investments, outside of my property. (The one area of confusion is the Social Security - I think he included that already but not sure - my gut says it must be included in his calculations.)

He said to hold the property since it is paid for and virtually carries no risk. I get income from that too. So basically he is using my investments to keep my income just as it is today, but without a job, while preserving the principal so I can leave a legacy to my kids.

And I can start this at 60! :sharebeer

I need to ask about healthcare if I retire at 60 - maybe I will learn to love Obamacare, maybe not! :wink:

This works for me!

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Re: I Lost My FInancial Brain - Please Help

Post by itstoomuch » Fri Feb 05, 2016 7:01 pm

We (65/68) bought utility stocks and Indexes (VPU/XLU/IDU). I need to redetermine the Indexes because they may have too much international components(?), or utilities holding high cost contracts/assets, or low quality utilities. Holding for Income and appreciation from deflation and inflation.

We also bought GLWB Variable and GLWB Fixed Index annuities (2008-2012) for Income purposes (buying a pension with other benefits) These annuities do not need to be annuitized to realized income. They are laddered in time and amounts.

We bought a condo in late 2015 from an inheritance, and will realize its income. We did not buy securities because we wanted to diversify and have more inflation protection. Rental is close to 7% yield and hope to realize 5% yield on original investments. Rental is located in our Only's city.

YMMV 8-) Just 18% of the retirement portfolio is directly tied to security/bond markets. SS and small pension are included and deemed to be 3.5% yield. We took SS at first opportunity. We are not dependent on this 18% which are in IRA/Roth/Taxable.
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

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Re: I Lost My FInancial Brain - Please Help

Post by pkcrafter » Fri Feb 05, 2016 9:03 pm

beehumble, I am also very sorry for your loss.

You are being offered a pretty good rate on the GICs (insurance company contract), but you must look at the length of the contract and whether it's redeemable or not. Once you're in, you may have a very difficult time getting out. So if you have a long contract, interest rates might rise and you won't get the higher rate.

It sounds like your needed withdrawal rate is around 3%, is that correct? If so, you are in the safe withdrawal limit and you can do a lot on your own at very low cost to generate enough to maintain your asset level. At any rate, I would not put all assets in a GIC.

Do a Google search on GIC risk.

added: If this advisor is going to manage your investments, he is going to get compensated in some way. Find out exactly how he is compensated.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

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Re: I Lost My FInancial Brain - Please Help

Post by itstoomuch » Fri Feb 05, 2016 10:24 pm

See thread: Asset location strategies for taxes are OK; but not great
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

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Re: I Lost My FInancial Brain - Please Help

Post by LadyGeek » Fri Feb 05, 2016 10:49 pm

^^^ Here's the link: Asset location strategies for taxes are OK; but not great

Caution: Don't let the tax tail wag the investment dog. Translation: Taxes come second to getting your asset allocation right.

See the wiki: Tax-efficient fund placement and pay attention to the info boxes at the top of the article.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

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Re: I Lost My FInancial Brain - Please Help

Post by Watty » Fri Feb 05, 2016 11:06 pm

beehumble wrote:No, I do not get 2.8 in the end, I get 4%, they get 1.2 - the product must generate 5.2 total - at least that is how I understood it (if I have $100K invested, I thought it meant I get $4000 return, they get $1200, and I still have the initial $100K, not $100K minus $1200 - but I am clueless about all this so I will be sure to ask - thanks!! ).
A potential problem with this is that it is not adjusted for inflation so if inflation so each year that $4,000 will have less purchasing power.

There are lots of alternatives for example in a retirment account where taxes are not a problem you could buy a ten year ladder for TIPS where $4,000 in TIPS bonds matures each year. That would cost $40,000 and your would have $60,000 to invest elsewhere for the next ten year.

You need to remember that you income needs will change a lot by the time you are 70 and getting Social Security and on Medicare. Even if it looks like a good choice I would not buy anymore of this type of product than you would need for income when you are 70.

If you don't buy this now then you can likely buy it sometime in the future and interest rates may be higher and this type of investment would pay more.
beehumble wrote:Today I met with a Certified Financial Planner from Fidelity. He gets nothing from my investment choices - and he is free of charge.
He came with my wife's benefits packages - she worked for a company whose retirement packages (401K) were with Fidelity.

How is he paid? A flat salary plus a bonus based on his retention rate of clients, and their satisfaction with him based on a two question annual survey I complete. If he loses too many of us, he loses his job. He has 300 households under management. He explained Fidelity has 4 Trillion in assets under management, ranked 5th in the US, and it is the largest manager of 401K plans in the country. Fidelity gets paid from this, and he gets his salary from their profits....wife's company basically pays Fidelity by putting the retirement 401K with Fidelity.
So he has no interest in pushing high fee products or any of that on me....I like that.
It would be very good to ask him if he has a "fiduciary responsibility" to you and where that is stated in the paperwork. Ask him that specific term and make sure that you have that in writing somewhere. If you do not get that from him then you should be very cautious.
beehumble wrote:Why would Fidelity do this - give me access to the suit - unless there was a lot in it for them? Maybe because they too go by pigs get fat, hogs get slaughtered. If they are too greedy with fees, people could just go somewhere else like to their competitor Vanguard, in which case they would get 0 fees.
One problem with proprietary products is that it locks you into using Fidelity. These may have restrictions on selling them or after you have owned them for a while then selling them might cause you to pay a lot of capital gains taxes to sell them and move your funds.

You have a good size portfolio but there are lots of people with accounts that are tens or hundreds the size of yours so there is very little chance that you are getting access to anything that is all that special.
beehumble wrote:He had another section for managed stocks - 100 shares either I pick or they pick - don't remember the fee or the return - will be sure to check it - it is managed so as to prevent disaster if market tanks - I know, one could set a stop-loss. I need to study it all when I get the details.
That sounds like smoke and mirrors to me, unless they use some sort of hedging strategy with options then there is no way to "prevent disaster if market tanks" except by making bets with your money. If they use some sort of options strategy then that gets very expensive over decades.

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BL
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Re: I Lost My FInancial Brain - Please Help

Post by BL » Fri Feb 05, 2016 11:14 pm

Please be careful. I'm afraid it sounds like another shark to me.
Be sure to have the facts in writing and wait at least a month before agreeing/signing anything.
Have him write and sign a statement that he is acting as your fiduciary. That is a little better than advisor.

Can you leave you money in the 401k and take advantage of the guaranteed fund from there? Then you wouldn't be paying an extra ~1% charge to use it.

Have you talked to Vanguard? I don't believe they would lead you into things that cost a lot or talk you into a too-good-to-be-true product.

There is no rush here to commit to anything.

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Re: I Lost My FInancial Brain - Please Help

Post by jalbert » Fri Feb 05, 2016 11:33 pm

So sorry to hear the reason for the posting. A couple of points about the real estate:

1. It can be a very tax efficient way to realize income.

2. If you held the properties jointly, and live in a state that is not a community property state, then I believe you get a step-up in basis for the half of each property that was owned by your late wife. I would recommend confirming this independently with a CPA before acting on it, but that is my understanding.

3. Another poster offered:
...if the stock market tanks you can bet that the real estate market will be hit also.
Actually, the general low correlation of residential real estate with US equities is an advantage of rental income property.

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Re: I Lost My FInancial Brain - Please Help

Post by srj » Sat Feb 06, 2016 2:29 am

Investing doesn't have to be complicated and I'm concerned this advisor is taking you for a ride. Vanguard has their own advisors that I personally would trust more. The instructions for my wife should I die is to have Vanguard Personal Advisor Services manage the investments.

What I would do:
-Sell the rental properties (or keep one of you want to manage it as a hobby)
-Pay off the mortgage
-Sell your "other stocks"
-Invest your cash and proceeds 60% VTSAX, 40% in either VWIUX or VBTLX (depends on your tax rate for the year).
-In your 401k (who is that with?) invest 60% in a broad low cost stock fund and 40% in a broad low cost bond fund.

Some of this is going to take time. You will want to keep the taxes in mind too and it's probably worth seeking advice there (but not from anyone trying to sell you something!) I don't think there's too much rush, just make sure you have a plan you're happy with and will stick to.

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Re: I Lost My FInancial Brain - Please Help

Post by jjface » Sat Feb 06, 2016 4:02 am

Time to put on the brakes. I think this fidelity adviser is razzling and dazzling you into submission. He is playing a lot of sweet music and whispering sweet nothings in your ear. Soon you will be married! The alarm bells should be ringing! This is the time when your best friends (aka Bogleheads) sit you down and say this gal is no good for you - you can do better.

I can pick at a lot of what he said to you but it will end up being a long post and one of your investment goals should be simplicity. Investing can be easy if you keep it simple. Otherwise he is going to make a lot of money off you no matter how nice he makes it look. If you have more investments than fingers then it is too complicated. Better if you can get it down to one hand.

1. You don't want to manage property. Sell them. They are not safe and conservative!! They are risky and time consuming if you do not like doing it. You said it yourself - so trust your gut.

2. Go speak with someone at vanguard - they are one of the few places that are unlikely to take you for a ride. You'll like them and they will help you with the move. I like fidelity and have most of my accounts there but once an adviser starts sniffing around I am out of there. They can smell blood you know. Fear too.

3. Pay off your mortgage - who wants to be saddled with one in retirement?

4. You have a good amount of assets so no need to be too aggressive with the stocks. Somewhere between 40-60% should be good.

5. Take your time there is no hurry. You can make changes over several years.

And one more sorry for your loss!

PS you should be able to retire comfortably now if you want - you do not have to wait until you are 60.

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AtlasShrugged?
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Re: I Lost My FInancial Brain - Please Help

Post by AtlasShrugged? » Sat Feb 06, 2016 7:22 am

beehumble....First, I am so sorry to read of your loss. That is a real tough one. I too have an older wife (+14 years) and premature death is a reality that I myself may have to face. You make plans and then 'poof' - they're gone. Your post made me all the more aware of that possibility.

Second, my advice is to do 'almost nothing' for the time being. You need to grieve. The money isn't going anywhere. The properties are not going anywhere. It is highly unlikely that your 2MM total portfolio is just going to disappear in a year, even with a 'black swan' event. Seek out help with getting through the grief process. I am not saying that you have a problem, but I am saying that it (professional help with grief process) will help you in the long run.

Third, I would not sign anything with Fidelity at this time. I use Fidelity, and I have no complaints. It is a well-run company, highly responsive. I am leery of anything 'guaranteed' because as you are very painfully aware - nothing is truly guaranteed in this life. A guarantee is only as good as the company (or person) that makes it. You have done a great job researching things, so take your time. You're in no rush.

After you are past the 'active grief' stage, then start thinking about what to do with your assets. Take some time for yourself.
“If you don't know, the thing to do is not to get scared, but to learn.”

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Re: I Lost My FInancial Brain - Please Help

Post by BL » Sat Feb 06, 2016 8:24 am

The above scenario is why I am reluctant to recommend Fidelity for anyone, including myself when I may need extra help in investing. F does have low-ER Spartan funds and they have Target index funds (which they hide really well!) but if a salesman/adviser gets their paws on you, they will sell you expensive and sometimes complicated products because that is where they make the most profit.

I would feel safest getting advice at Vanguard, where the funds are almost always low-ER and the people who advise are not receiving commissions for their sales. Since the company is owned by the funds, there are no family owners or shareholders to satisfy, either. I hope that when I am at risk of doing something foolish financially, I will choose to hire the low cost advisers to manage my money. (Actually, I don't do much of anything with it now, so it would be to avoid being talked into something by a "friend", advisor, or scammer.)

It does sound like you want a conservative investment which is fine. Vanguard's Target Retirement Income fund has only 30% stocks, and their Life Strategy Income fund has only 20% stocks, which is as low as I would recommend so that stocks might cover some inflation. Use CDs, I-Bonds (10k/year online), and "high"-interest bank/CU savings accounts to give off some interest for 2-5 years of spending needs. Buying a too-good-to-be-true "guaranteed", complicated product that you don't understand is not what your spouse would have wanted you to do. You can bet the salesperson will rake off their own bonus and "guarantees" and it will cost you dearly to get out when you realize it was a bad idea.

This low-interest era has many searching for more interest/dividends, which makes them susceptible to sales pitches on risky instead of FDIC-guaranteed products. Nothing beats being in an FDIC insured product at a bank (or equivalent insured product at a credit union) if you want guarantees, but the pay-offs are very low these days. Of course if the investment side of banking gets ahold of you, you will pay dearly.

About the only other guaranteed product I might consider is the only "good" annuity, the SPIA (Single premium immediate annuity) which could give me a floor of required income for a short time period, perhaps until age 70 Social Security, or to buy at age 70+ a guaranteed pension-like lifetime annuity at a fixed cost from a highly rated insurance company sold by an independent agent.

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Re: I Lost My FInancial Brain - Please Help

Post by BL » Sat Feb 06, 2016 8:28 am

JCE66 wrote:beehumble....First, I am so sorry to read of your loss. That is a real tough one. I too have an older wife (+14 years) and premature death is a reality that I myself may have to face. You make plans and then 'poof' - they're gone. Your post made me all the more aware of that possibility.

Second, my advice is to do 'almost nothing' for the time being. You need to grieve. The money isn't going anywhere. The properties are not going anywhere. It is highly unlikely that your 2MM total portfolio is just going to disappear in a year, even with a 'black swan' event. Seek out help with getting through the grief process. I am not saying that you have a problem, but I am saying that it (professional help with grief process) will help you in the long run.

Third, I would not sign anything with Fidelity at this time. I use Fidelity, and I have no complaints. It is a well-run company, highly responsive. I am leery of anything 'guaranteed' because as you are very painfully aware - nothing is truly guaranteed in this life. A guarantee is only as good as the company (or person) that makes it. You have done a great job researching things, so take your time. You're in no rush.

After you are past the 'active grief' stage, then start thinking about what to do with your assets. Take some time for yourself.
+1 Well said! "Don't just do something. Stand there!" This is not the time to make big decisions.

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Re: I Lost My FInancial Brain - Please Help

Post by Watty » Sat Feb 06, 2016 10:47 am

jjface wrote:Time to put on the brakes. I think this fidelity adviser is razzling and dazzling you into submission. He is playing a lot of sweet music and whispering sweet nothings in your ear.
+1

A fundamental rule of investing is to not invest in something that you don't fully understand.

There is nothing wrong with deciding that you need to take another six months or a year to be ready to decide on a long term plan. In the meantime you could just put the Fidelity 401K money into their "Fidelity Freedom Index Income Fund" which is their most conservative target date fund. Be sure to get the index version since it has a lower cost than the non-index version.

That 4% guaranteed return has to have a catch in it since many government bonds are selling for less than 1%. It could be that once you understand the details then it could still be a reasonable choice but you don't know that yet.

Fidelity is not as bad as some of the other investment companies but they are a for profit company that makes a huge amount of money off of their customers each year. They try to keep a low profile but they are mostly owned by the Johnson family which is always listed as one of the richest families in America.

http://www.forbes.com/profile/edward-johnson/

When needed I have no problem with paying for services but unless your financial advisor is going to follow the "fiduciary standard" then there is a huge conflict of interest that could work to your disadvantage. Even if you decide you like and trust him you need to be careful because he could retire or change jobs in a few years and then you account will be assigned to someone else that might not be as good. I don't know about Fidelity but often when accounts are reassigned like this they will be reassigned to someone that is very good at generating income for the company.

I have an account with Fidelity, as well as Vanguard, in part because they have a local office and that is nice when you don't want to send a large check through mail. They seem to provide better customer service than Vanguard but I only use their low cost mutual funds. There brokerage services for buying and selling stocks and ETF are also arguably better than Vanguards.

With using their financial advisor there is nothing wrong with telling him that you don't feel comfortable using anything other than their low cost Spartan index funds so that your plan should be built around them as much as possible.

Just for comparison the ownership of Vanguard is set up so that the mutual fund owners are the owners of Vanguard. This is basically the same as how a local credit union is owned by its members.

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Re: I Lost My FInancial Brain - Please Help

Post by TIAX » Sat Feb 06, 2016 11:10 am

beehumble wrote:So for this idea number 1, what to invest in? Market sucks right now.
This statement is a bit concerning. Have you had personal experience in the stock market? I assume your wife was managing your investment accounts in 2000 and 2008.

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Re: I Lost My FInancial Brain - Please Help

Post by radiowave » Sat Feb 06, 2016 3:53 pm

beehumble, my condolences as well.

I had a similar situation with Fidelity last year. Had multiple retirement accounts that we wanted to consolidate, met with the FA at Fidelity, nice guy, he brought out probably the same charts and formulas, wanted me to talk to the other team, etc. All about the same costs as you. Fortunately I started reading the Bogleheads forum and read Mel Lindauer and Taylor Larimore's book. I decided to do the simple 3 fund portfolio with Fidelity Spartan choices: Total Stock FSTVX, International index FSIVX and total bond FSITX . When I told the Fidelity FA that was my decision, he was nice about it and supported my efforts even gave me a few tips to keep costs low, never had any more contact with the "other team". I've had overall good experiences with Fidelity so far, excellent phone/chat room support and if I need to send forms or a check, I just go down to the Fidelity office abt 20 min from my house and they put it in the courier pouch.

One other to consider along with investments is cash management. Fidelity has very good tools and if you get their debit card, pay ATM fees. Their new 2% rewards card is worth considering as well.
Bogleheads Wiki: https://www.bogleheads.org/wiki/Main_Page

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Re: I Lost My FInancial Brain - Please Help

Post by Dandy » Sun Feb 07, 2016 5:17 am

I am so sorry for your loss - a nightmare I often think of.

I would first get a good idea of your basic annual expense level and your annual net income. That should tell you the gap or surplus you are dealing with. I would try to keep the investment property income and expenses separate. So you end up knowing how profitable your real estate investments are vs the surplus/gap from other income and expenses.

What is the long term goal for the properties? Do you plan to keep them forever or sell. Have a plan. If you aren't the real estate "expert" you may wish to sell rather than try to learn real estate/landlord skills and investment management.

For someone not experienced with investments and probably conservative from a risk standpoint you may want to consider Dr. Bernstein's idea of having 20-25 years worth of residual expenses (essentially what you need to draw on from investments to meet your normal expenses) in "safe" products. e.g. individual TIPS, short term bonds, CDs, Stable Value Fund, etc. Any excess you can invest anyway you want -- even very aggressive.
So, you essentially have a "safe" portfolio and a risk portfolio. When you need to fund your annual expenses you can take money from your "safe" portfolio or if the risk portfolio has done well from that portfolio. The advantage of this approach is that there is less concern about the volatility of the equity market and you have gone a long way to make sure your retirement is properly funded. If this sounds good I would look into Dr. William Bernstein's idea more closely.

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Re: I Lost My FInancial Brain - Please Help

Post by supersharpie » Sun Feb 07, 2016 5:46 am

Beehumble, my condolences. Be aware that you are eligible for Social Security survivor benefits on your wife's record the month you turn 60. Survivors are often, though not always, best served by taking this benefit first and delaying taking their own Social Security retirement until they turn 70. By delaying taking your retirement from 62 to 70 your benefit amount nearly doubles.

Make sure to have a conversation about your options with a Social Security claims representative when you file for the Lump Sum Death Payment of $255 that you are due immediately. They will be able to run all of the numbers for you.

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Re: I Lost My FInancial Brain - Please Help

Post by celia » Sun Feb 07, 2016 1:14 pm

Beehumble, Not only am I also sorry to hear of your loss, but also that it occurred at one of life's "inflection" points--starting retirement. That certainly would throw anyone's plans to the winds.

First and most importantly, I want to caution you about making too many more changes in your life at this time. Each of these is a LIFE STRESSOR that you have recently experienced: death of spouse, change in financial state (her loss of wages/planned down-shifting to SS), starting a large mortgage, change in residence. There may also be other things that we don't know about, but this is a lot for one person to handle, especially if they don't have a close friend/confidant to share it with. Page 186 of Organizational Behavior discusses this. To minimize the stress, I encourage you to keep as many things the same as you can for now.

Try to keep the same routine, eat well, and get enough sleep. Things will work themselves out.

There is no hurry to change anything, that I can see, and I encourage you to wait at least a month after you make any decision to implement it, to see if it feels "right" for you. I think you should hold off on selling any property for now, and when you do, I'd start with any that are vacant. RIGHT NOW, YOU ARE JUST IN AN INFORMATION-GATHERING PHASE.

There are two things that should make your financial life a little easier right now. Instead of answering the phone, let an answering machine pick up all your messages. If someone is trying to sell you something, they will either leave you a short message or nothing at all. There is no need to talk to them. (I also like the idea of telling door-knockers that you already have a financial advisor. It is not their business who it is.) You can also distance yourself from so many financial transactions by setting up as many of your bills as you can on automatic payment. Once we did this, I only have to look at the checkbook once a month--to record the balance listed on any bill that came in the mail and to write the few checks that can't be automated.


Don't forget to check on options for your wife's pension. I have the impression she was eligible for one, and you might be able to have it transferred to you.

Regarding Social Security, you said that your wife's benefit would be higher than yours. Are you comparing her age 66 to your age 66 benefit OR her age 66 benefit to your age 62 or something else? This should not be a hurried decision as there are many ways to maximize your benefit. (Most of them involve waiting as the monthly benefit grows when one collects for fewer years.) The Social Security people will answer any questions you have BUT you need to know what to ask. We can help with that when you get ready and there are people in this forum who can calculate it for you if we know the FRA amount for each of you. (You might want to start a new thread on this.) You also need to know that the SS law was changed last year and it may/may not impact you.

In regards to her 401K, it could be transferred to a traditional/Roll-over IRA. I'm not sure if the RMD rules for 401Ks are the same as for IRA, but for IRAs there are Required Minimum Distributions (RMDs) required at age 70 1/2, but withdrawals can be taken as early as 59 1/2, without penalty. RMDs are taxable in the year received (unless you are withdrawing from a Roth IRA/401K). So you will need to start planning for RMDs and taxes. Some people take tham early to minimize the taxes later or to convert them to Roth. It is different for each case.

Since income taxes have not been discussed yet, this should be planned for as not only do people get a shock when they start RMDs at 70 1/2, but as a single person your tax rate will be higher than if you were still married. Since your wife was the tax pro of the family, I suggest you have your taxes done at H&R Block or another company, especially since you are likely depreciating the rentals. A CPA is not needed, as far as I can see. Then you will need to find out what marginal tax bracket you are in (as a single person) and where you fall within that bracket. This will help you determine if you should start taking RMDs at age 59 1/2 or not and how much. Also, interest and dividends are not taxable if you are in the 15% bracket or lower.



Here are my comments regarding the Fidelity product being sold to you:
note 2: fees for products he mentioned are higher - like 0.67 %, but the income stream is guaranteed AND the capital is preserved and I retain control over it and can pass it on.
As for the Fidelity advisor, I know you mentioned he gets paid based on your "happiness" with him, but the 0.67% fees for setting up/maintaining this could be a problem. Even if he says HE is not getting this, the company is. We need to know more to help advise on this. What kind of product is this?
Fidelity and all these companies have products not available except through their CFP's etc. is my understanding. You cannot just buy it. The guy pointed out something - if I get a guaranteed 4% return, what dos it matter if the fee is 1.2%
I can't really argue with that.
Some "insurance" products are loaded with heavier fees in the earlier years and a steep exit fee. Instead of locking yourself into an investment that is costly to get out of, you may want to maintain flexibility so that your kids can access the money easier after you go or if you decide to invest in something else. And inflation will shrink the value of that guaranteed benefit over time. What will happen should you live to 100?
Where to get such a product? - only they can offer it - again this is my take on it.

Obvious RED FLAG to me!
I know they get something for doing this - we all need to get paid , that 'fruit of our labor' thing. The products he talked about have fees although they are lower than lots of fees for the same types of things, he showed me by pulling a list of fees for Fidelity as well as non-Fidelity similar products.
No matter where you invest, the people who work for the company, indeed, get paid. The larger the investment house, the lower the fees as there are more investors to share in the costs. The salaries come out of the fees attached to every fund. Managed mutual funds need managers as opposed to Index mutual funds, so the fees on managed funds are therefore higher. But Vanguard is the only company that is owned by its investors. They could keep the fees low OR have typical fees and pass the profits onto their shareholders (the investors). They choose to do the former. This is to give you another perspective.
I think he is replacing my job's NET income via returns on my investments, outside of my property.
Why isn't he comparing it to your GROSS income? You will still have to pay taxes on it and pay for medical insurance (if that was withheld from your wages).

Is the advisor trying to put this in the 401K?



Although you should focus on your kids and grandkids today, what do you think it will be like when the younger ones grow up and leave home? Even while teens, they often don't want to do anything with their parents, let along grandparents. So you should also planning for your time down the road.

Please keep us posted with other questions that come up. Feel free to start a new thread for starting SS or selling the rentals as those can easily be stand-alone topics. (And there is already a lot to read in this thread.)
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.

beehumble
Posts: 38
Joined: Thu Feb 04, 2016 11:43 am

Re: I Lost My FInancial Brain - Please Help

Post by beehumble » Sun Feb 07, 2016 4:24 pm

Ok I think I need to update/clarify things based on the feedback received so far, and thanks everyone!

It is one year and 2 months since the wife passed.
I consider myself mostly through the grief - it was a long, hard slog as we were ver very close and had a great marriage.
And long the way, I came down with acute endocarditis so that took several months to recover. And then last last year, my mom
died. I did not include these but now mentioning to explain why it took some 14 months to recover from the grief - we all grieve at
our own pace.

So for grief:
  • G1) It has been 14 months - I am over the deep grief
    G2) Over last few months, I have gathered most of the info on our assets
    G3) I am well enough to begin making financial decisions
So I am ready to make needed changes to the 'money'. As Celia mentioned about information gathering stage, I am out of the first part of that pretty much - I have gathered a lot of info on our total assets. Now, I am trying to figure out what to do with them so as to do what most of us at my age bracket want:
My Goals for life, regards my assets:
  • 1) live off them ok
    2) pass much of it to the two kids - legacy.
I did not do anything during the grief period, as advised. As I emerged from it, as if coming up from being underwater, I started looking / gathering info on the assets. Now I want to shift them around to meet goals 1 and 2 above.

To be more clear on those:
My assets, generally:
  • a) $575K in four 401Ks or retirement plans. The largest of those is already with Fidelity, and it includes the free advisor.
    b) $480K cash not invested
    c) $1M estimated worth of real estate.
    • ci) one of these - the was-to-be retirement home - has $150 paid down,, $199K mortgaged, payment is $1547 includes tax/escrow
      cii) others are paid off - I live in one, two others are rentals (one is a duplex)
    d) $20K/year at 60 years of age - I can get at least 20K yearly in Soc Sec. (I am 58 - will be 60 in one year and 10 months)
Four pieces of advice given by the Fidelity guy so far that I can agree with:
  • A1) "use $199K cash to immediately pay off that mortgage, and rent it, or move there and rent my current house"

    A2) "do not sell the houses to put the money in markets etc." (as a poster here said and I read elsewhere, rental real estate and markets do NOT usually correlate - as one goes down, usually other holds a steady return.) It is a form of diversifying to hold both real estate AND equities. And I also read the only two real 'growth' areas are real estate and markets, and also read that some growth is needed even in retirement to avert inflation. Real estate growth comes in both capital gains and rent increases - rents have been increasing in recent years as there are more renters and less rentals.
    • i) corollary - do not sell the retirement home - it is closer to grand kids, and likely where I will be in some 3 years from now - he said I need to think of 3-4 years from now, not just today. i agree.
    A3) "Meet wih Social Security office asap to know exactly my benefits as regards my wife" - he said same as somebody here - could take hers at 60, Then I could perhaps, as a poster here said, let mine build up and take mine later (I thought this was lost as of this year?) I can still take hers over mine - her monthly payout approaches the maximum allowed by Soc Sec of some $2600/month - several hundreds of dollars more than mine would be at my full term which is years away for me.

    A4) "You can always get liquid again - get cash out of the real estate - if needed, later. Could for example get a $30K loan against your residence, even without a job - not from a bank per se, but there are lenders who will do it for sure give you $30K against a paid-for $365K house."
So that is where I stand at this point - I meet him next Tuesday.

I am going to run this all by Vanguard, to see what they say to do. Again, thanks everybody!

User avatar
BL
Posts: 7945
Joined: Sun Mar 01, 2009 2:28 pm

Re: I Lost My FInancial Brain - Please Help

Post by BL » Sun Feb 07, 2016 4:55 pm

+1 on Celia's points.
If you find out the exact name of the products you are considering, there is a fair chance that someone here knows something about it. I also advise caution, because some of these decisions can't be undone without sacrificing a lot of money. Better to wait and do nothing for a while. Things may seem entirely different next year, and you want to be sure that you can easily and cheaply change your mind rather than be committed to something not the best.

Ok, I read your further info. You have had 3 major stressors in a bit over a year. I can't imagine how difficult that must have been. Please be very easy on yourself and go slowly. Good idea talking to Vanguard, too.

As for SS, I suggest a new post here with FRA numbers for you and your wife, and also what you would get waiting until age 70, as well as starting numbers as widower at 60 and also yourself at 62 so you can grow the widower's numbers until FRA. So you might either start yours at 62 and survivor's at 66, or survivor's at 60 and yours at 70, depending on which ends up the greatest value. I am not sure, but don't think many recent changes affected your status (it affected spouses, not survivors, AFAIK.) Anyway, author Mike Piper has been responding to various questions and I consider him to be one of our resident experts. He has been updating his SS book as well, but I don't know if it is available yet.

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