Newly widowed need investment advice

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Topic Author
Herreschoff
Posts: 5
Joined: Thu Sep 19, 2019 9:00 am

Newly widowed need investment advice

Post by Herreschoff » Thu Sep 19, 2019 9:54 am

I am newly widowed as of August 2019. Please help me with investment advice. I have consulted with a Fidelity advisor, but am a bit wary of his advice and the wealth management fees. I am 67 and very healthy. Plan till age 100.



Currently:
$ 40,000 Cash/checking account
$ 500,000 IRA transferred into my name. All Fidelity Index funds: Total Market, International, S & P 500, Small Cap, Mid Cap
$ 1,368,000 currently in Fidelity MM waiting to be invested.
$ 30,000 Social Security/year
$ My only debt is my Home valued at $ 760,000. Owe $ 120,000 but rate is 2.75% taxes are $3,200 year.


I would like to have $75,000 plus $30,000 SS ($ 105,000 pre tax) income per year.

The advisor at first visit suggested an income inflation adjusted annuity to cover basic expenses. I didn't feel comfortable tieing up funds.

Next visit: He suggested $160,000 to cover two years in a MM and the rest Fidelity would manage for a .82 fee. They would handle the tax loss harvesting, setting up a bond sleeve, etc. which I know nothing about. I told him I like Index investing, but he said Indexs do well in an up cycle but not in a down cycle or a recession, where we are heading.

He made it sound so complicated my head was spinning. I am willing to learn. Please give me your input.

delamer
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Joined: Tue Feb 08, 2011 6:13 pm

Re: Newly widowed need investment advice

Post by delamer » Thu Sep 19, 2019 10:16 am

I am sorry for your loss.

Here is a 16 page article written by an advisor (Bill Bernstein) who is highly respected by Bogleheads: https://www.etf.com/docs/IfYouCan.pdf

While it is geared toward young people, the advice is relevant for everyone.

Here are some options for implementing a Boglehead/Bernstein portfolio: https://www.bogleheads.org/wiki/Lazy_portfolios

Your basic instincts are good. You can set up your investments to provide the income you need without paying a nearly 1% fee.

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RickBoglehead
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Re: Newly widowed need investment advice

Post by RickBoglehead » Thu Sep 19, 2019 10:25 am

Vanguard's Personal Advisory Service charges 0.3%, or 63% less than Fidelity...

Vanguard will put you in index funds. What "tax loss harvesting"? You have a big junk in MM, and a big junk in IRA. No tax loss harvesting that I see.

You can take PAS, let them set everything up, then whenever you feel comfortable (or never), drop them and do it yourself.
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.

dbr
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Re: Newly widowed need investment advice

Post by dbr » Thu Sep 19, 2019 10:47 am

Based on the often discussed 4% rule your assets are just sufficient to provide the $75,000 income per year you want. If people are correct that maybe that number should be less for today's retiree, then your assets would not be sufficient. Did the Fidelity advisor discuss any of this thought process with you?

The above would be a reason a person might look for more annuitized income as a more effective way to utilize assets to insure against outliving your means. Expecting in excess of 30 years longevity would also be an indicator for an annuity here. Buying the annuity at as young an age as 67 might be contraindicated. The key is what fraction of your assets was being suggested be put in the annuity for how much income. One would never annuitize most or all of one's assets, rather a minority fraction. Also, an annuity decision is permanent, so I would absolutely not rush into such a thing. It is just some reasoning why the annuity would have been suggested.

As to the 0.82% fee, this 4% rule I referred to includes all taxes and investment costs in the 4%. If you pay .8% for advice plus the cost of funds, around one fourth of your hoped for income would be gone before you even see it. I wonder if the advisor mentioned that? I don't think you can afford to pay for investing advice.

Do nothing for now and start with the excellent references already mentioned plus perhaps going to the Wiki https://www.bogleheads.org/wiki/Getting_started to get your feet on the ground.

dbr
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Re: Newly widowed need investment advice

Post by dbr » Thu Sep 19, 2019 10:52 am

RickBoglehead wrote:
Thu Sep 19, 2019 10:25 am
Vanguard's Personal Advisory Service charges 0.3%, or 63% less than Fidelity...

Vanguard will put you in index funds. What "tax loss harvesting"? You have a big junk in MM, and a big junk in IRA. No tax loss harvesting that I see.

You can take PAS, let them set everything up, then whenever you feel comfortable (or never), drop them and do it yourself.
VPAS could be a good alternative to Fidelity at a lower cost and no chance of being sold funds that are too expensive. They will discuss your situation with you and suggest best approaches.

Living Free
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Re: Newly widowed need investment advice

Post by Living Free » Thu Sep 19, 2019 10:53 am

Sorry for your loss.

I agree that the fee is too high. If you have $1,868,000 invested with fidelity at 0.82% advisory fee, you'll be paying $15,317.60 per year for the management advice. That would be 14.5% of your pre-tax income per year for this service. AND you lose the future gains of that much money going forward every year too.

Instead you could do vanguard PAS and consider dropping them after a while, or hire a one time fee only planner for (probably) several thousand dollars. Either option would be cheaper than the 0.82% annual fee. And you can post your proposed plan on her with all the details for feedback for free :)

GAAP
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Re: Newly widowed need investment advice

Post by GAAP » Thu Sep 19, 2019 10:54 am

I think the most critical input is that you don't have to rush. You will be far better off taking some time and developing a rational plan.

Also, don't be afraid to adjust over time as you learn more and better refine your needs.

The Fidelity "advice" sounds a lot like what my both my wife and my mother got when widowed. My view is that they want to charge you a lot every year to manage problems that they create and get a commission on -- bad advice at best. The rest of what he said is either fortune telling (a recession is coming), or self-evident (if the markets go down, so do the indexes). He is essentially arguing that he is smart enough to outsmart the market and choose (guess) the few things that will do better.

You may wish to provide more details on the composition of the IRA, it looks like some optimization may be possible there since they seem to overlap. See the sticky thread on asking portfolio questions viewtopic.php?f=1&t=6212.
“Adapt what is useful, reject what is useless, and add what is specifically your own.” ― Bruce Lee

nix4me
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Re: Newly widowed need investment advice

Post by nix4me » Thu Sep 19, 2019 10:59 am

You might consider putting the entire amount in a balanced fund such as Vanguard Balanced or one of the Lifestrategy funds. Then just pull the 4% each year. Simple and cheap

Or if you want to stay with Fidelity then a simple 2 fund approach would be:
40-60% in FZROX total stock index
40-60% in FXNAX total bond index
Last edited by nix4me on Thu Sep 19, 2019 11:03 am, edited 1 time in total.

HomeStretch
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Re: Newly widowed need investment advice

Post by HomeStretch » Thu Sep 19, 2019 10:59 am

Sorry for your loss.

What year will your mortgage be paid off? Without a mortgage, what will your annual expenses (currently $105k) be reduced to?

Based on the advisor’s advice about index funds, sounds like the advisor will likely put you into higher-ER active funds so expect to pay 1.5% at least in fees/ERs. If you go this route, you will have $25k - $30k/year (= fees/ERs) less to live on. Avoid this expense.
Last edited by HomeStretch on Thu Sep 19, 2019 11:03 am, edited 1 time in total.

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Raymond
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Re: Newly widowed need investment advice

Post by Raymond » Thu Sep 19, 2019 11:02 am

OP, welcome to Bogleheads.

My condolences on the passing of your loved one.

It's nice that the Fidelity adviser's crystal ball is working, not just about the possible "down cycle", but also that index funds don't do well in recessions - which index funds (there are all sorts of indexes), and how would they be any worse than the funds he is likely to propose to replace them - which almost certainly will have higher expense ratios, on top of the 0.82% management fee?

After all, the adviser has to make a living too :D

Is the inherited IRA a Roth or a Traditional? Was your late spouse over 70.5 years old when he passed, and had he started taking Required Minimum Distributions (RMDs) from the IRA beforehand? You could draw enough from the inherited IRA to make up at least a part of the $75,000 additional income.

How much tax benefit do you get from the mortgage interest deductions? One could make a case for just paying it off now, despite the low interest rate of 2.75%, but that would be up to you.

About the $1.368 million in the money market fund - you don't have to make a decision about it immediately. If the advisor is pushing you into making a quick decision, that would be suspicious (at least to me).

If you are up to it, may I suggest updating your original post by copying and pasting the format in this link?

"Asking Portfolio Questions"

Or you can just write a new post downstream with the updated information.

[Edit] In your situation, I would stop talking to the Fidelity advisor, but that's just me.
Herreschoff wrote:
Thu Sep 19, 2019 9:54 am
I am newly widowed as of August 2019. Please help me with investment advice. I have consulted with a Fidelity advisor, but am a bit wary of his advice and the wealth management fees. I am 67 and very healthy. Plan till age 100.

Currently:
$ 40,000 Cash/checking account
$ 500,000 IRA transferred into my name. All Fidelity Index funds: Total Market, International, S & P 500, Small Cap, Mid Cap
$ 1,368,000 currently in Fidelity MM waiting to be invested.
$ 30,000 Social Security/year
$ My only debt is my Home valued at $ 760,000. Owe $ 120,000 but rate is 2.75% taxes are $3,200 year.

I would like to have $75,000 plus $30,000 SS ($ 105,000 pre tax) income per year.

The advisor at first visit suggested an income inflation adjusted annuity to cover basic expenses. I didn't feel comfortable tieing up funds.

Next visit: He suggested $160,000 to cover two years in a MM and the rest Fidelity would manage for a .82 fee. They would handle the tax loss harvesting, setting up a bond sleeve, etc. which I know nothing about. I told him I like Index investing, but he said Indexs do well in an up cycle but not in a down cycle or a recession, where we are heading.

He made it sound so complicated my head was spinning. I am willing to learn. Please give me your input.
"Ritter, Tod und Teufel"

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Stinky
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Re: Newly widowed need investment advice

Post by Stinky » Thu Sep 19, 2019 11:31 am

I am sorry for your loss.

Have you considered downsizing your home? I understand that your loss is fresh, and you shouldn’t rush into making any significant decisions. So don’t think of downsizing right now.

But if you were to downsize, you would free up some capital, reduce your taxes, and probably cut your utilities and maintenance. Food for thought.

Your instincts are definitely correct in shying away from the fidelity advisor. Congratulations to you for recognizing that he was going in the wrong way for you.
It's a GREAT day to be alive - Travis Tritt

cherijoh
Posts: 6590
Joined: Tue Feb 20, 2007 4:49 pm
Location: Charlotte NC

Re: Newly widowed need investment advice

Post by cherijoh » Thu Sep 19, 2019 11:49 am

Herreschoff wrote:
Thu Sep 19, 2019 9:54 am
I am newly widowed as of August 2019. Please help me with investment advice. I have consulted with a Fidelity advisor, but am a bit wary of his advice and the wealth management fees. I am 67 and very healthy. Plan till age 100.



Currently:
$ 40,000 Cash/checking account
$ 500,000 IRA transferred into my name. All Fidelity Index funds: Total Market, International, S & P 500, Small Cap, Mid Cap
$ 1,368,000 currently in Fidelity MM waiting to be invested.
$ 30,000 Social Security/year
$ My only debt is my Home valued at $ 760,000. Owe $ 120,000 but rate is 2.75% taxes are $3,200 year.


I would like to have $75,000 plus $30,000 SS ($ 105,000 pre tax) income per year.

The advisor at first visit suggested an income inflation adjusted annuity to cover basic expenses. I didn't feel comfortable tieing up funds.

Next visit: He suggested $160,000 to cover two years in a MM and the rest Fidelity would manage for a .82 fee. They would handle the tax loss harvesting, setting up a bond sleeve, etc. which I know nothing about. I told him I like Index investing, but he said Indexs do well in an up cycle but not in a down cycle or a recession, where we are heading.

He made it sound so complicated my head was spinning. I am willing to learn. Please give me your input.
I'm sorry for your loss.

I wouldn't rush to do anything else immediately. Was your spouse over 70.5? If so, did he/she take the full 2019 RMD? There may be some exception for spouses taking over an IRA, but inherited IRAs require that any RMD be taken by Dec 31 just as the owner would have had he/she lived the entire year.

I wouldn't be in a rush to pay off a mortgage with that low of an interest rate.

WRT the advice you got from the Fidelity rep:

A single payment immediate annuity (SPIA) might be a good option in 10 -15 years as they do protect you from longevity risk. I wouldn't consider them now. But if you do eventually go that route beware of fees.

The dirty little sectret is that "financial advisors" like the one you spoke with make it sound complicated on purpose. If they told you about Lazy Portfolios, then you would realize that you didn't need them. :oops: Speaking from experience, you can by just fine without doing any tax loss harvesting. I'm not sure what a "bond sleeve" is but I assume it involves buying individaual bonds of various durations to throw off steady income. You don't need that either - a bond index fund will work fine.

His suggestion to leave 2 years expenses in MM funds is one I would consider. It could function as a "shock absorber" and prevent you from having to sell stocks at an inopportune time.

I think you are fully capable of setting up a simple portfolio of index funds - just like your IRA. You'll get different opinions about doing a lump sum or dollar cost averaging. Lump sum wins out 2/3 of the time historically. But due to current high valuations and your likely sense of discomfort with managing the portfolio, I would suggest using DCA. Many people consider 70/30 to 30/70 the sweet spot for investing with 60/40 to 40/60 being most appropriate for retirees. So maybe invest 30% between total stock market and international and then add more over the next 12 - 18 months to get to whatever AA you determine is right for you.

But two other options would be to consult a fee-only financial planner who works as a fiduciary and doesn't require you to be in an assets-under-management (AUM) arrangement. They can develop a simple plan that you implement on your own. In other words, a one-shot deal. You could also move the money to Vanguard and use their PAS service. THeir AUM fees are lower and they are likely to put you in a simple mix of funds that you can self-manage when you feel more comfortable with it.

Topic Author
Herreschoff
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Joined: Thu Sep 19, 2019 9:00 am

Re: Newly widowed need investment advice

Post by Herreschoff » Thu Sep 19, 2019 11:57 am

Yes, I plan to downsize in 2-3 years after my daughter in law is through her accelerated Nursing school program. My son and his wife currently live with me. They were helping me with my Husbands care. Win/Win situation.

Moving is expensive, at this point I don't where I would move to, so waiting is my best option.

Topic Author
Herreschoff
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Joined: Thu Sep 19, 2019 9:00 am

Re: Newly widowed need investment advice

Post by Herreschoff » Thu Sep 19, 2019 11:58 am

Yes, we did RMD for 2019.

cherijoh
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Re: Newly widowed need investment advice

Post by cherijoh » Thu Sep 19, 2019 12:03 pm

Herreschoff wrote:
Thu Sep 19, 2019 11:57 am
Yes, I plan to downsize in 2-3 years after my daughter in law is through her accelerated Nursing school program. My son and his wife currently live with me. They were helping me with my Husbands care. Win/Win situation.

Moving is expensive, at this point I don't where I would move to, so waiting is my best option.
I agree, you don't want to end up moving twice if you don't have to.

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Stinky
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Re: Newly widowed need investment advice

Post by Stinky » Thu Sep 19, 2019 12:07 pm

Herreschoff wrote:
Thu Sep 19, 2019 11:57 am
Yes, I plan to downsize in 2-3 years after my daughter in law is through her accelerated Nursing school program. My son and his wife currently live with me. They were helping me with my Husbands care. Win/Win situation.

Moving is expensive, at this point I don't where I would move to, so waiting is my best option.
This sounds like a good plan.

I agree, absolutely don’t move twice. Take your time.
It's a GREAT day to be alive - Travis Tritt

coffeeblack
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Re: Newly widowed need investment advice

Post by coffeeblack » Thu Sep 19, 2019 12:23 pm

Consider Planvision.

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Tyler Aspect
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Re: Newly widowed need investment advice

Post by Tyler Aspect » Thu Sep 19, 2019 12:35 pm

Herreschoff wrote:
Thu Sep 19, 2019 9:54 am
I am newly widowed as of August 2019. Please help me with investment advice. I have consulted with a Fidelity advisor, but am a bit wary of his advice and the wealth management fees. I am 67 and very healthy. Plan till age 100.



Currently:
$ 40,000 Cash/checking account
$ 500,000 IRA transferred into my name. All Fidelity Index funds: Total Market, International, S & P 500, Small Cap, Mid Cap
$ 1,368,000 currently in Fidelity MM waiting to be invested.
$ 30,000 Social Security/year
$ My only debt is my Home valued at $ 760,000. Owe $ 120,000 but rate is 2.75% taxes are $3,200 year.


I would like to have $75,000 plus $30,000 SS ($ 105,000 pre tax) income per year.

The advisor at first visit suggested an income inflation adjusted annuity to cover basic expenses. I didn't feel comfortable tieing up funds.

Next visit: He suggested $160,000 to cover two years in a MM and the rest Fidelity would manage for a .82 fee. They would handle the tax loss harvesting, setting up a bond sleeve, etc. which I know nothing about. I told him I like Index investing, but he said Indexs do well in an up cycle but not in a down cycle or a recession, where we are heading.

He made it sound so complicated my head was spinning. I am willing to learn. Please give me your input.
I am very sorry for your loss.

Do not enter into managed advisor arrangement at Fidelity. This could cost you big time.

Consider paying off the house mortgage as part of entering into retirement.

Example Portfolio:

(IRA at Fidelity)
Fidelity US Bond Index Fund (FXNAX) $500k

(Taxable at Vanguard)
Vanguard Total Stock Market Admiral (VTSAX) $450k
Vanguard Total World Stock ETF (VT) $450k
Vanguard Intermediate Term Bond ETF (BIV) $348k

Checking Account $40k

Cash 2.24%
Bond 47.43%
US Stock 38.51%
INTL Stock 11.83%
Last edited by Tyler Aspect on Thu Sep 19, 2019 4:21 pm, edited 1 time in total.
Past result does not predict future performance. Mentioned investments may lose money. Contents are presented "AS IS" and any implied suitability for a particular purpose are disclaimed.

psteinx
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Re: Newly widowed need investment advice

Post by psteinx » Thu Sep 19, 2019 12:42 pm

Herreschoff wrote:
Thu Sep 19, 2019 11:57 am
Yes, I plan to downsize in 2-3 years after my daughter in law is through her accelerated Nursing school program. My son and his wife currently live with me. They were helping me with my Husbands care. Win/Win situation.

Moving is expensive, at this point I don't where I would move to, so waiting is my best option.
Moving, at some point, may be worth considering because, in most parts of the country, a $760K house is quite big - more than needed for a single person and costly to maintain, insure, and pay taxes on. But the fact that you've got 3 people in the house, for now, at least means that the house is being more fully utilized. Timeframe and possible location for a move may be affected by how many kids you have, where they are, your relationships with them, their kids, if any, and the stability of their careers/locations.

lakpr
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Re: Newly widowed need investment advice

Post by lakpr » Thu Sep 19, 2019 12:43 pm

I will echo @nixforme’s suggestion.

Anywhere between 40% to 60% of your portfolio into FZROX fund (completely equities). Depends on how aggressive you want to be with the stock market participation.

Rest in the FXNAX bond fund.

Rebalance roughly once an year. May be on your birthday. Or may be on your dear departed husband’s birthday. Pick one day of the year, any day. You don’t need much more than that.

Draw all your living expenses from the bond fund (including RMD) during the course of the year. The annual rebalancing will take care of ensuring sufficient money to be available in the bond fund for you, as they are much less volatile.

Simple, and if you can automate the rebalancing somehow, you can be completely hands off.

————-

Or if you transfer everything over to Vanguard and invest in Vanguard Balanced Index fund VBIAX (60:40) or Vanguard LifeStrategy Conservative Growth fund VSCGX (40:60), you get daily rebalancing. One fund. Nothing can be simpler than that.

psteinx
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Re: Newly widowed need investment advice

Post by psteinx » Thu Sep 19, 2019 12:48 pm

I'm with the general sentiment here that 0.82% for management, year after year, PLUS likely fund fees is high.

A good starting step for you is to read widely on financial topics. But be aware that there's a pretty wide gamut of opinions out there, some credibly disagreeing, and some that are, frankly, a bit whacky.

One option to consider, in addition to an SPIA, is that I think there's a deferred annuity similar to that - where you pay now, at age 67, for an annuity that kicks in at age 80 or 85 or whatever. The advantage of that is that the cost, for a given level of old age income, should be much lower than an SPIA that starts now. i.e. The insurance company only has to cover a shorter timeframe (your last decade or two of life, maybe), in the semi-distant future (future obligations are discounted, because the insurance company can invest the premium in the meantime), and because lots of folks don't live to age 80 or 85, or if they do, don't live much beyond that. So, bottom line, you can get, say, $4K/monthly of income starting then, for not much premium now. The purpose of it is as an insurance policy, so that in the event you do have a long lifespan you're less like to experience financial stress at age 95 or whatever.

aristotelian
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Re: Newly widowed need investment advice

Post by aristotelian » Thu Sep 19, 2019 1:04 pm

First of all, sorry for your loss. You are right to be skeptical of the portfolio manager. His fee will amount to about $15K annually, so you will actually need to generate $115K of income if you are looking to spend $100K.

Unless you would have an extremely low interest rate, I would suggest paying off your mortgage. That will eat into your nest egg but reduce your expense. Since bonds are currently yielding below the mortgage, you will come out ahead.

You should do some questionnaires to assess your risk tolerance, keeping in mind that staying in case makes you vulnerable to inflation risk.

A simple portfolio might be:

IRA:
Fidelity Total Bond (FTBFX) - $500K

Brokerage:
Fidelity ZERO Total Stock Market (FZROX) - $800K
Fidelity Total Bond (FTBFX) - $500K

You could go +/- $200K in the stock fund depending on your risk tolerance.

Take a look at the Windfall wiki. Heed the advice about taking your time. With $1.8M, you will be absolutely fine if you just do nothing. Better to do that than to make a mistake. https://www.bogleheads.org/wiki/Managing_a_windfall

Ferdinand2014
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Re: Newly widowed need investment advice

Post by Ferdinand2014 » Thu Sep 19, 2019 1:07 pm

Herreschoff wrote:
Thu Sep 19, 2019 9:54 am
I am newly widowed as of August 2019. Please help me with investment advice. I have consulted with a Fidelity advisor, but am a bit wary of his advice and the wealth management fees. I am 67 and very healthy. Plan till age 100.



Currently:
$ 40,000 Cash/checking account
$ 500,000 IRA transferred into my name. All Fidelity Index funds: Total Market, International, S & P 500, Small Cap, Mid Cap
$ 1,368,000 currently in Fidelity MM waiting to be invested.
$ 30,000 Social Security/year
$ My only debt is my Home valued at $ 760,000. Owe $ 120,000 but rate is 2.75% taxes are $3,200 year.


I would like to have $75,000 plus $30,000 SS ($ 105,000 pre tax) income per year.

The advisor at first visit suggested an income inflation adjusted annuity to cover basic expenses. I didn't feel comfortable tieing up funds.

Next visit: He suggested $160,000 to cover two years in a MM and the rest Fidelity would manage for a .82 fee. They would handle the tax loss harvesting, setting up a bond sleeve, etc. which I know nothing about. I told him I like Index investing, but he said Indexs do well in an up cycle but not in a down cycle or a recession, where we are heading.

He made it sound so complicated my head was spinning. I am willing to learn. Please give me your input.

I would politely decline the management fee and management. Index funds you have are perfectly good. They do better in all markets. He is wrong on that advice. You don’t necessarily need to switch to another firm. I have used Fidelity for the past 22 years and they have certain advantages like a brick and mortar building and cash management accounts. You are in no rush. I would read some of the suggestions and other advise on this forum, leave the cash in the money market account and give yourself a few months to make any decisions. I think in general the $160,000 is not unreasonable advice. The part you don’t need is the 0.82 fee. I would come up with an allocation and investment plan, then invest the rest into index funds based on that. A SPIA (single payment immediate annuity) is not unreasonable and the only type of annuity I would consider. Another option is a simple all in one target date fund. Fidelity has an INDEX version that charges only 0.12 in expense ratio. You have time to sort this out. I am sorry for your loss.

One option is to put everything (IRA and brokerage) into a 2020 Fidelity target date index fund (FPIFX) expense ratio 0.12 and leave 2 years expenses in a money market account. The fund gradually becomes more conservative over time. Currently it has 36% in U.S. equities, 16% in international equities and 47% in cash and bonds.

https://fundresearch.fidelity.com/mutua ... /315793505

Another option:

IRA :
500,000 FXNAX (Fidelity Total Index Bond Fund) 0.025 expense ratio

Brokerage account:
175,000 in money market account
750,000 in FXAIX (Fidelity S&P 500 index) expense ratio 0.015, distributes dividends quarterly
322,000 in FSPSX (Fidelity International Index) expense ratio 0.035, distributes dividends bi-annually

Checking account:
40,000

Consider paying off mortgage of 120,000

With a conservative allocation of 60% equities (split 70% U.S. and 30% international) and 40% bonds and cash (noting enough cash for about 2 years of expenses and a bit extra).

The dividends from the equities would be about $25,000/ year, the bond fund about $11,000 year and the money market about $3,000/ year. The rest would come from selling some of the shares (capital gains).

Rebalance to these ratios once a year.

This is one basic example.
Last edited by Ferdinand2014 on Thu Sep 19, 2019 1:52 pm, edited 2 times in total.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

InMyDreams
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Re: Newly widowed need investment advice

Post by InMyDreams » Thu Sep 19, 2019 1:17 pm

coffeeblack wrote:
Thu Sep 19, 2019 12:23 pm
Consider Planvision.
which is an advice-only financial advisor at a very low fee. Search for it in the google search box in upper right hand corner to find more details in other threads. It also gives you access to planning software. I am considering doing it just for the low-cost access to the planning software.

Jane Bryant Quinn's How to Make Your Money Last is a pretty easy read with useful information. Skip the parts that don't apply to you. Even if you turn planning over to someone else it is useful. Knowledge is power.

There are advice-only advisors out there. Again, there are other threads about that and the threads that include planvision probably have info about locating them.

So sorry for your loss. Many decisions can be postponed while you recover from this very difficult time. A planner looking at the big picture may spot things that are better dealt sooner. Do you have a tax consultant? You might ask that person about changes in filing that you can plan for - e.g., you may file a joint return this year.

Tal-
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Re: Newly widowed need investment advice

Post by Tal- » Thu Sep 19, 2019 3:04 pm

So sorry for your loss.

My suggestion is simply to do nothing. Let yourself mourn. Don't worry about forming new relationships or long-term investment stratgies or anyting like that for now. Give yourself six months, simply drawing on your Fidelity MM during that time. Avoid big decisions. Hell - avoid all decisions.

Then, in half-a-year, come back and ask again.
Last edited by Tal- on Thu Sep 19, 2019 7:57 pm, edited 1 time in total.
Debt is to personal finance as a knife is to cooking.

coffeeblack
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Re: Newly widowed need investment advice

Post by coffeeblack » Thu Sep 19, 2019 3:59 pm

InMyDreams wrote:
Thu Sep 19, 2019 1:17 pm
coffeeblack wrote:
Thu Sep 19, 2019 12:23 pm
Consider Planvision.
which is an advice-only financial advisor at a very low fee. Search for it in the google search box in upper right hand corner to find more details in other threads. It also gives you access to planning software. I am considering doing it just for the low-cost access to the planning software.

Jane Bryant Quinn's How to Make Your Money Last is a pretty easy read with useful information. Skip the parts that don't apply to you. Even if you turn planning over to someone else it is useful. Knowledge is power.

There are advice-only advisors out there. Again, there are other threads about that and the threads that include planvision probably have info about locating them.

So sorry for your loss. Many decisions can be postponed while you recover from this very difficult time. A planner looking at the big picture may spot things that are better dealt sooner. Do you have a tax consultant? You might ask that person about changes in filing that you can plan for - e.g., you may file a joint return this year.
I liked their advice. It was honest. They don't owe anyone anything and don't work for any company.

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Re: Newly widowed need investment advice

Post by coffeeblack » Thu Sep 19, 2019 4:00 pm

Tal- wrote:
Thu Sep 19, 2019 3:04 pm
So sorry for your loss.

My suggestion is simply to do nothing. Let yourself morn. Don't worry about forming new relationships or long-term investment stratgies or anyting like that for now. Give yourself six months, simply drawing on your Fidelity MM during that time. Avoid big decisions. Hell - avoid all decisions.

Then, in half-a-year, come back and ask again.

This is good advice.

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Re: Newly widowed need investment advice

Post by cherijoh » Thu Sep 19, 2019 4:12 pm

aristotelian wrote:
Thu Sep 19, 2019 1:04 pm
First of all, sorry for your loss. You are right to be skeptical of the portfolio manager. His fee will amount to about $15K annually, so you will actually need to generate $115K of income if you are looking to spend $100K.

Unless you would have an extremely low interest rate, I would suggest paying off your mortgage. That will eat into your nest egg but reduce your expense. Since bonds are currently yielding below the mortgage, you will come out ahead.

You should do some questionnaires to assess your risk tolerance, keeping in mind that staying in case makes you vulnerable to inflation risk.

A simple portfolio might be:

IRA:
Fidelity Total Bond (FTBFX) - $500K

Brokerage:
Fidelity ZERO Total Stock Market (FZROX) - $800K
Fidelity Total Bond (FTBFX) - $500K

You could go +/- $200K in the stock fund depending on your risk tolerance.

Take a look at the Windfall wiki. Heed the advice about taking your time. With $1.8M, you will be absolutely fine if you just do nothing. Better to do that than to make a mistake. https://www.bogleheads.org/wiki/Managing_a_windfall
OP lists the mortgage rate at 2.75%. In light of that (plus the fact that she is looking to move in a couple of years) the impetus to pay off the mortgage immediately is reduced IMO. Although there is nothing wrong with doing so as OP would still have plenty of liquidity.

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Horton
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Re: Newly widowed need investment advice

Post by Horton » Thu Sep 19, 2019 4:22 pm

Tal- wrote:
Thu Sep 19, 2019 3:04 pm
So sorry for your loss.

My suggestion is simply to do nothing. Let yourself morn. Don't worry about forming new relationships or long-term investment stratgies or anyting like that for now. Give yourself six months, simply drawing on your Fidelity MM during that time. Avoid big decisions. Hell - avoid all decisions.

Then, in half-a-year, come back and ask again.
I agree. There are more important things for you to focus on right now. Your finances will be fine for 6-18 months. If anything, you could spend the time just observing the forum.

Very sorry for your loss.

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Re: Newly widowed need investment advice

Post by Christine_NM » Thu Sep 19, 2019 4:29 pm

Agree with no-decisions-now. Unfortunately, now is for mourning and maybe for learning. Not for acting.

Someone above figured Fidelity would get 15k a year from managing your account. And there is likely no penalty for mismanaging it. I have 2.2M at Vanguard in funds that cost $2230 in expense ratios. Zero fees. I do nothing. It took me 45 years to get to this point of nirvana. I hope you can learn faster than me.

That up cycle/down cycle talk is just nonsense. Everyone who owns stocks loses in a down cycle. Otherwise it would not be a down cycle.

Also, that Fido person knew darn well you had no idea what a bond sleeve or any of the rest of it meant. He wants you to pay Fidelity to avoid making your own mistakes. This is certainly a well worn and respectable path for widows. Take a while to think about what is right for you.

An immediate annuity might someday be a good idea, but no rush on that. Take your time, see a couple of other financial advisers. Resist signing anything.
18% cash 44% stock 38% bond. Retired, w/d rate 2.5%

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Re: Newly widowed need investment advice

Post by Meg77 » Thu Sep 19, 2019 5:02 pm

In your situation I would absolutely pay off the mortgage. Sure, your interest rate is really low at 2.75% - but your money market fund is paying you a lot less than that, and the yield on bonds is less than that too for anything relatively safe. There is no point in keeping the mortgage just to invest in bonds (and any reasonable asset allocation you select is going to include bonds in retirement). Mortgages will always have higher rates than good bonds will pay; otherwise banks would quit lending and just buy bonds.

Besides, paying that off has the added benefit of lowering your fixed costs. That will give you more flexibility when it comes to making distributions from the portfolio, reducing your sequence of returns risk. In simple terms, when (not if) stocks have a really bad year or two, you may be able to avoid selling any stocks, or you can at least sell fewer of them since you won't have as many fixed costs.

You're in good shape. You should be able to meet your objective of withdrawing $75K per year from the portfolio - however that's only true if it is invested. So when you are ready (and not a moment before), I would recommend dollar cost averaging into investments over a short period of time, maybe up to a year. This will reduce the psychological stress of having your money all invested at once and the regret if the market happens to drop significantly shortly thereafter (statistically you're better off investing the lump sum all at once, but it's OK if that is too much for you).

I would invest in 50% bonds and 50% stocks with up to 15% of your stocks in international. I manage my 60 year old retired mother's portfolio and that's what I've got her in. You can use a balanced fund or a few index funds at Fidelity. The zero cost funds recommended above would be fine choices.

Then just set up an automatic monthly distribution of $5,000 a month to go from the settlement account/money market to your checking. That leaves you $15K of cushion to withdraw each year for unbudgeted expenses like an annual tax bill or home repair, or for unusual giving or a big trip or medical expense. When/if the cash in the money market gets low, sell a little bit of bonds or stocks - whichever will keep you close to your 50/50 asset allocation target.

Every year or so you can pay a few hundred dollars for a financial planner to review your situation and offer any insight. Those folks don't manage your investments themselves so can be more objective and also look at the big picture - taxes, insurance coverages, estate planning. It's not a bad thing to pay for advice. The investment selection part is the easiest thing though and should be the cheapest. Save your money for a CPA, estate attorney, or financial planner consultation here and there as needed.

One question up front for the CPA or CFP would be how much to distribute from the IRA each year. Those distributions are taxable, but you may be better off making them little by little depending on your tax bracket (you'll perhaps want to "fill up" the lowest tax rate buckets). Or they may say to let the IRA grow and live off the taxable entirely for some length of time. That would be a key factor that I'm not savvy enough to give advice on. Otherwise your situation is fairly simple though, and you don't need ongoing advice or fees, just a bit of help setting it all up initially. Good luck!
"An investment in knowledge pays the best interest." - Benjamin Franklin

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Re: Newly widowed need investment advice

Post by psteinx » Thu Sep 19, 2019 5:15 pm

Counterargument to the "Mourn. Do nothing for 6 months" folks.

OP said spouse died in August. That means between about 3 and 7 weeks have passed. That's not nothing. I am fortunate not to have lost a spouse. I'm not sure how long I will grieve if/when that happens, or the shape and nature of my grief. But I don't think one is automatically incapacitated from thinking clearly for 6+ months past the death of one's spouse. Moreover, in at least some cases, the death followed a long decline and was anticipated. The survivor may have been "pre-mourning" for a while before the actual death.

Anyways, at a minimum, try to do some self-education. This might involve talking to assorted potential paid advisers, but also reading books, web sites and forums (including this one) and other sources. You'll be building your knowledge base, and at some point, hopefully positioning yourself to take wise actions.
Last edited by psteinx on Thu Sep 19, 2019 5:48 pm, edited 1 time in total.

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Herreschoff
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Re: Newly widowed need investment advice

Post by Herreschoff » Thu Sep 19, 2019 5:27 pm

This site is an amazing source information and support!! Thank-you, I feel so much better going forward and taking my time.

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Re: Newly widowed need investment advice

Post by abuss368 » Thu Sep 19, 2019 5:33 pm

So sorry to hear about your loss.

I would consider Vanguard Personal Advisory Services for 0.30%.
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

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Re: Newly widowed need investment advice

Post by saddle_tramp » Thu Sep 19, 2019 6:15 pm

My condolences on the loss of your husband. :(

My wife died last November 1 after an over decade long battle with Alzheimer's. You really can take time to mourn at your own pace. 3 to 6 weeks is less that the blink of an eye in mourning land. I am in the, 'do only what you must to get everything transferred in your name and then step back and do nothing more until you are ready' camp. If you want to read literature and monitor this site to better understand the world of investing then just do that. I think it is wise to keep the 2 years of money in liquid assets to pay the bills until you know you are ready to take the plunge and allocate your funds as you see fit. If that takes 6 months to a year, no biggie, as you are expecting a long life.

Looks like you and your late husband worked hard to have a secure retirement. Give yourself time to let that be a legacy to last the rest of your life and beyond if you wish.

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Re: Newly widowed need investment advice

Post by Stinky » Thu Sep 19, 2019 7:14 pm

Herreschoff wrote:
Thu Sep 19, 2019 5:27 pm
This site is an amazing source information and support!! Thank-you, I feel so much better going forward and taking my time.
You’ve gotten a lot of advice today. Some of the advice is conflicting, but all of it is offered out of a genuine sense of caring and concern.

Take your time. Figure out what makes the most sense to you. Proceed at your own speed.

And don’t hesitate to post on the Forum again as you have questions.
It's a GREAT day to be alive - Travis Tritt

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