Cash balance plan (defined benefit) integrated with Vanguard's Personal Advisor

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steveusma
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Cash balance plan (defined benefit) integrated with Vanguard's Personal Advisor

Post by steveusma » Sat Jun 09, 2018 12:15 pm

All my investments are with Vanguard and I have a telephone interview in a few days to possibly sign-up for Vanguard Personal Advisor services, instead of continuing with the financial advisor I have used for a few years (and who charges about 10 times the fee that the Personal Advisor services does - for what I'm not really sure).

I would like to know if I sign up whether or not to expect my Vanguard advisor to be knowledgeable about guiding me in using a cash balance (or defined-benefit) plan.

If not, what would actually probably happen?

If he or she does not have expertise to directly develop and integrate the CB/DB plan into my Vanguard financial plans, I would think the most ideal alternative scenario would be for the advisor to to suggest a CB "expert" outside of Vanguard with whom Vanguard regularly works (also if someone on this forum has had a positive experience with a certain company, I would appreciate knowing about that, as mentioned below).

I would hope and assume, however, that my Vanguard personal advisor would in any event have some cursory knowledge of CB plans and would at least be able to discuss with me the implications of using a CB/DB plan for my retirement purposes (such as how CB plans affect my retirement horizon, post-retirement withdrawal strategy, etc.) even if the advisor (or a different advisor or someone else at Vanguard) cannot directly assist with the "mechanics" involved in performing the step-by-step actions in developing and using a CB plan.

I definitely want a CB/DB plan to be an element of my overall retirement strategy. I am a relatively high medical-field earner in solo practice and the CB plan enables me to contribute to my retirement account about three times every year the "normal" amount allowed by the IRS through conventional methods such as 401k's, etc. As well as to reduce my tax burden by about three times.

Also, even though in any event I expect to continue to be a client of Vanguard in general from now on, if it turns out that Vanguard might not in fact be particularly equipped to work with me in being able to take advantage of the rather staggering tax and retirement benefits of a CB plan, I would appreciate any recommendations that anyone might have as to a firm who would be able to competently provide that service, especially if you or someone you know may have had positive experience with that company or individual provider. Thanks!

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Tyler Aspect
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Re: Cash balance plan (defined benefit) integrated with Vanguard's Personal Advisor

Post by Tyler Aspect » Sat Jun 09, 2018 4:50 pm

I was not sure if you already have a cash balance plan, or just exploring setting up one. My understanding is that a cash balance plan would have a higher cost compared to a regular 401k plan. A 401k plan can have a total yearly contribution of $54000 if employer contributions are included.

The disadvantage of a cash balance plan is that the employer can have significant liabilities if a market crash occurs.
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afan
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Re: Cash balance plan (defined benefit) integrated with Vanguard's Personal Advisor

Post by afan » Sun Jun 10, 2018 7:38 am

But the OP is in solo practice, hence the employer as well as the employee.

I would not expect any help from Vanguard on this question. They have CFPs, but I have been unimpressed by their knowledge. I would expect a much better answer by posting a question on this forum than asking the Vanguard CFPs. THey are perfectly pleasant, but don't know anything.

If you really insist on having someone manage the investments you hold at Vanguard, then PAS will assemble a reasonable asset allocation in low cost Vanguard funds at a lower price than most other advisors.

That is all PAS will do. They will not give you any useful advice.

From the sound of your description you probably have enough money at Vanguard to get a free consultation from a Vanguard CFP on a specific subject. Try them out on the issue of integrating your CB plan with the rest of your retirement planning. If I am wrong and they are helpful then you may have all you need. You might decide to use PAS to maintain your portfolio. You are probably also eligible for a free financial plan from Vanguard. This will not really be a financial plan. It will be a generic estimate of future income from a balanced portfolio. It will not consider any other issues since they are apparently not accounted for in the boilerplate software Vanguard uses.

But I predict you will conclude the Vanguard CFPs do not have the wherewithal to tell you anything.

It sounds like you definitely need a tax expert, Look for a CPA who specializes in personal and retirement plan taxation (most CPAs do business tax and only crank out a few personal returns during tax season as a side gig. They may not know any more about the taxes in your case than you do). You might also go over your situation with an enrolled agent.

For planning you might want to hire an "advice only" planner who does NOT manage your money, sell you anything, or have any way of generating revenue besides a fee for advice. There are such people and you could shop for them, telling them upfront that this is what you need. The fees for a good advice only planner will seem high until you compare them to what you would be paying for even PAS for a year. Then they will seem like a bargain.

If your current planner charges ten times PAS, that is an outrageous fee. Dump immediately. As in "Today, Sunday June 10, before noon" if you can. If you cannot dump this planner today, then do it Monday.
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Tyler Aspect
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Re: Cash balance plan (defined benefit) integrated with Vanguard's Personal Advisor

Post by Tyler Aspect » Sun Jun 10, 2018 12:25 pm

I have seen cash balance plan providers offering a traditional 401k plan along side with the cash balance plan. One way to invest with the cash balance plan is to only put in short term bond and a very low return guarantee, in order to limit liabilities. Then the concurrent 401k program would allow you to invest more equities without the employer liability issue.
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dbr
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Re: Cash balance plan (defined benefit) integrated with Vanguard's Personal Advisor

Post by dbr » Mon Jun 11, 2018 9:35 am

I can't answer the OPs question, but I think it would be immensely helpful if someone who does know might write up a list of what VGPAS does and does not do. The example in this thread would be typical of questions that need to be answered.

My assumption has been that PAS advises on and manages money invested at Vanguard and does not do anything else. It is unclear what they take into account when assuming risk level for that money and unclear what they include in devising an asset allocation. I haven't thought they advise on anything else, but could be wrong.

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