I don't know how it happened! [starting new business soon, how to avoid 1% AUM cost]

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JTim
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I don't know how it happened! [starting new business soon, how to avoid 1% AUM cost]

Post by JTim » Fri Dec 08, 2017 1:01 pm

but in a blink of an eye I went from a 17 year old fresh out of high school making 4 dollars an hour to a 55 year old construction superintendent making 120 plus a year, put 2 kids thru college and 2 weddings and still manage to save over a million dollars.800 thousand in company 401k (time is money),100 thousand in Roth Ira invested in the star fund, 100 thousand in vanguard money market. My question is now what? I will be leaving my company in 6 months till a year, I would like to avoid paying a adviser 1% . Been a fan of this site for years know there is a lot of people with great advise here.
Any Advise would be appreciated!!

sschoe2
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Re: I don't know how it happened! [retiring soon, how to avoid 1% AUM cost]

Post by sschoe2 » Fri Dec 08, 2017 1:13 pm

Roll everything into a Vanguard IRA. Fidelity or Schwab are also acceptable.

fabdog
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Re: I don't know how it happened! [retiring soon, how to avoid 1% AUM cost]

Post by fabdog » Fri Dec 08, 2017 1:21 pm

Certainly making sure you don't overpay for invest service is important... but there is a bunch more here to consider

What's your plan for living expenses? You have ~ $1 million saved (good) but how does that align to your expenses? If you want to spend $50/60K year, you are not ready to retire.

If you're leaving your company and just need advice on moving the 401K, take a look at the plan.. do they have good low cost options? If so, may make sense to keep the funds there... if they don't, roll it over to Vanguard/Schwab/Fidelity into an IRa so you can put it in low cost funds. If you are moving to another job and it has a great 401K plan, it may accept rollovers from your current plan.

Mike

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David Jay
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Re: I don't know how it happened! [retiring soon, how to avoid 1% AUM cost]

Post by David Jay » Fri Dec 08, 2017 1:27 pm

If you are 55 (or older) when you leave your current company, you can access the 401K assets without penalty.

You will have to wait until 59.5 to access the Roth or a rollover IRA without penalty (yea I know: 72t, but that's pretty restrictive). This needs to be thought through before you roll over your entire 401K balance into an IRA. You could do a partial rollover and leave age 55 to 60 funds in the 401K.
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nedsaid
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Re: I don't know how it happened! [retiring soon, how to avoid 1% AUM cost]

Post by nedsaid » Fri Dec 08, 2017 1:30 pm

You could use a Vanguard LifeStrategy fund, 4 broad index funds, rebalanced for you. No muss, no fuss. My guess is that you could get free help from Vanguard for an age appropriate asset allocation. You could also pick an age appropriate Target Date Retirement fund.

Are you retiring or are you switching companies?

Before you pull the trigger and retire, have you run the numbers? Can you afford to retire? A million bucks sounds like a lot, and it is a lot, but you would be surprised how fast money can be spent.

Do you have a pension? If you are just going to live off your nest egg, without lifestyle changes, you possibly could go through your million bucks even before drawing on Social Security. A good pension makes this more doable.
A fool and his money are good for business.

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Re: I don't know how it happened! [retiring soon, how to avoid 1% AUM cost]

Post by bloom2708 » Fri Dec 08, 2017 1:33 pm

sschoe2 wrote:
Fri Dec 08, 2017 1:13 pm
Roll everything into a Vanguard IRA. Fidelity or Schwab are also acceptable.
+1 for Vanguard.

$1 million isn't a slam dunk at 55. Pension? What are your yearly expenses? Spouse working? Healthcare covered until Medicare? Taxes covered?

Not to nitpick, but if you been a fan for years, why are you still with your 1%+ AUM advisor? Just no time to make the switch?

Now is a great time to look at your mix of stocks/bonds. 3 fund portfolio and LifeStrategy funds would be a good place to start.

Plan the work, work the plan.
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JTim
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Re: I don't know how it happened! [retiring soon, how to avoid 1% AUM cost]

Post by JTim » Fri Dec 08, 2017 1:41 pm

Not retiring plan on starting my own business, My wife has a great job she likes and provides us with health care. We don't plan on touching any of portfolio until we turn 65 when we both retire.
neither 1 of has a pension
do not have a adviser now,would like to get some advice here to avoid getting one

Team Work makes the Dream Work

livesoft
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Re: I don't know how it happened! [retiring soon, how to avoid 1% AUM cost]

Post by livesoft » Fri Dec 08, 2017 1:54 pm

David Jay wrote:
Fri Dec 08, 2017 1:27 pm
If you are 55 (or older) when you leave your current company, you can access the 401K assets without penalty.
This 401(k) age-55 thing is very plan dependent. The OP's 401(k) may or may not allow what you wrote.
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Re: I don't know how it happened! [retiring soon, how to avoid 1% AUM cost]

Post by livesoft » Fri Dec 08, 2017 1:56 pm

Advice: Read some books. See: https://www.bogleheads.org/wiki/Getting_started at the bottom. Your spouse can also help on this.
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nedsaid
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Re: I don't know how it happened! [retiring soon, how to avoid 1% AUM cost]

Post by nedsaid » Fri Dec 08, 2017 2:30 pm

JTim wrote:
Fri Dec 08, 2017 1:41 pm
Not retiring plan on starting my own business, My wife has a great job she likes and provides us with health care. We don't plan on touching any of portfolio until we turn 65 when we both retire.
neither 1 of has a pension
do not have a adviser now,would like to get some advice here to avoid getting one

Team Work makes the Dream Work
Why not look into the Vanguard Target Date 2025 fund? Roll your retirement money into that, it would be similar to what an advisor would do and you could skip the advisory fee. If you need advice, the best way is to pay for it by the hour, probably $150 to $400 an hour. 1% a year advisory fee on a large portfolio adds up pretty fast, with a million dollar portfolio, you are looking at $10,000 a year. You can buy a lot of advice for that.

By the way, congratulations for amassing a nice nest egg, raising two kids and starting your own business. None of this things are easy to do and you did all three.
A fool and his money are good for business.

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Watty
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Re: I don't know how it happened! [retiring soon, how to avoid 1% AUM cost]

Post by Watty » Fri Dec 08, 2017 3:18 pm

JTim wrote:
Fri Dec 08, 2017 1:01 pm
I would like to avoid paying a adviser 1%
A huge problem that the 1% fee is often only the tip of the iceberg since they will often put you into high cost investments with high fees because they get paid an additional commission to do that.

There have been academic studies that show that for someone retiring at 65 they can start out with what is called a "safe withdrawal rate" of around 4%. There are of course all sorts of assumptions and details that go into that and there lot of opinions and threads about that so take that 4% number with a grain of salt but that is likely in the right ballpark meaning that if you have one million dollars at 65 then you would need to plan on starting out living on $40,000 a year. If you can withdraw in the ballpark of 4% starting at 65 then paying someone 1% AUM is a quarter of your spendable money each year, if they also have another 1% in hidden fees then that is half of your money each year. You are right to want to avoid paying that.

https://www.bogleheads.org/wiki/Safe_withdrawal_rates

The getting started wiki and the Boglehead books

https://www.amazon.com/s/?search-alias= ... Bogleheads

are a good start but one option to consider while you learn more would be that Vanguard will provide investment advice for 0.3% a year and they will not try to put you into into high cost funds. You could use them for a year or two get your retirement funds moved and set up and then stop paying them once you feel comfortable managing it yourself.

https://investor.vanguard.com/financial ... ial-advice

Not that it would necessary be right for you but when I retired I moved almost all my retirement funds into a target date fund. People sometimes think of these as a dumbed down investing for dummies choice that needs to be improved on but in the right situation they are an excellent choice. The two main reasons not to use them are if you have a lot of retirement money in non-retirement accounts where taxes are an issue or if you don't have access to a good one in your 401k. Using something this simple will also make it easier to manage my portfolio as I age or if my less financially knowledgeable spouse needs to manage it some day.
Last edited by Watty on Sat Dec 09, 2017 1:31 pm, edited 1 time in total.

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prudent
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Re: I don't know how it happened! [will be starting business soon, how to avoid 1% AUM cost]

Post by prudent » Fri Dec 08, 2017 3:23 pm

corrected topic title to reflect OP plans to start a new business.

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BL
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Re: I don't know how it happened! [starting new business soon, how to avoid 1% AUM cost]

Post by BL » Fri Dec 08, 2017 5:08 pm

Jane Bryant Quinn has a good retirement book, How to Make Your Money Last, which would be a good reference book to keep on hand. Used is fine, but get the recent edition. The Bogleheads' Guide to Retirement is good as well.

Smart move to check in with Bogleheads. They won't charge the 1% AUM nor sell the high ER funds (that have 12b-1 kick-backs to advisers), nor will they sell you expensive annuities or insurance.

If you should decide you want to go with an adviser, the Vanguard PAS has 0.3% AUM and puts you into low-ER funds. You can even quit after a year or more and manage it on your own.

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David Jay
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Re: I don't know how it happened! [retiring soon, how to avoid 1% AUM cost]

Post by David Jay » Sat Dec 09, 2017 9:28 am

livesoft wrote:
Fri Dec 08, 2017 1:54 pm
David Jay wrote:
Fri Dec 08, 2017 1:27 pm
If you are 55 (or older) when you leave your current company, you can access the 401K assets without penalty.
This 401(k) age-55 thing is very plan dependent. The OP's 401(k) may or may not allow what you wrote.
I stand corrected. It is allowed by regulation but review your specific plan.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

mhalley
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Re: I don't know how it happened! [starting new business soon, how to avoid 1% AUM cost]

Post by mhalley » Sat Dec 09, 2017 1:02 pm

Depending on your current fund expenses, it might be better to just keep your 401k with them, 401k provides better creditor protection than IRAs, which might be an advantage for someone starting a new business.
https://www.irahelp.com/slottreport/5-r ... really-are

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