Financial planner/ retirement planning for parents

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Topic Author
kzombie
Posts: 13
Joined: Fri Feb 17, 2017 12:07 pm

Financial planner/ retirement planning for parents

Post by kzombie »

My father is retiring this year at 67.

I understand this is a big transition for him and would like to make sure my parents are starting retirement on the right foot. He mentioned he was thinking of meeting with his "Charles Schwab guy" who has been sending Christmas cards from for the past 10 years. He doesn't have any working relationship with the guy and I worry he won't be looking out for his own interests.

Some Background:
Paid off house
Father will start withdrawing SS this year
Mother has been retired for 10 years, receives pension.
I believe the SS and pension provides a majority of their living expenses.
Invested assets are pretty much a SEP IRA with approx 1m (from what I gather, approx 50% in balanced funds, 50% cash)

I think their finances are pretty straightforward but I know planning the withdrawal phase has many considerations.
I did some research finding a fee only fiduciary in their area. Most seem to charge a 1% of asset fee. Seems expensive especially because I'm not sure how much "planning" they really need.

Questions
1. Given my parents situation would you advise them to seek advice through a fee only fiduciary?

2. Any good alternatives to an adviser? Put it all in a life strategy fund and just withdraw as needed?
marcopolo
Posts: 3488
Joined: Sat Dec 03, 2016 10:22 am

Re: Financial planner/ retirement planning for parents

Post by marcopolo »

kzombie wrote: Thu Jan 02, 2020 1:46 pm My father is retiring this year at 67.

I understand this is a big transition for him and would like to make sure my parents are starting retirement on the right foot. He mentioned he was thinking of meeting with his "Charles Schwab guy" who has been sending Christmas cards from for the past 10 years. He doesn't have any working relationship with the guy and I worry he won't be looking out for his own interests.

Some Background:
Paid off house
Father will start withdrawing SS this year
Mother has been retired for 10 years, receives pension.
I believe the SS and pension provides a majority of their living expenses.
Invested assets are pretty much a SEP IRA with approx 1m (from what I gather, approx 50% in balanced funds, 50% cash)

I think their finances are pretty straightforward but I know planning the withdrawal phase has many considerations.
I did some research finding a fee only fiduciary in their area. Most seem to charge a 1% of asset fee. Seems expensive especially because I'm not sure how much "planning" they really need.

Questions
1. Given my parents situation would you advise them to seek advice through a fee only fiduciary?

2. Any good alternatives to an adviser? Put it all in a life strategy fund and just withdraw as needed?
What makes you think your father needs help? Has he asked you for advice?

Schwab is a pretty good place to invest. He is much more likely to get good advice from them than the 1% of asset advisors you have found for him.
Once in a while you get shown the light, in the strangest of places if you look at it right.
HomeStretch
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Re: Financial planner/ retirement planning for parents

Post by HomeStretch »

Your parents’ situation seems straight forward to DIY. But if they want or need professional advice, it is certainly better IMO to use an advisor as needed for a fee at sn hourly rate rather than engage in an AUM arrangement with an advisor.

It is not unheard of for AUM relationships to have a cost of 2% per year of AUM between the advisor fee and high-ER funds. Ask your parents if it’s worth paying $20k per year to an advisor to manage their $1 million IRA and what services they will be getting besides choosing investments (likely complex and high-fee), scheduling RMDs when the time comes and Christmas cards.
marcopolo
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Joined: Sat Dec 03, 2016 10:22 am

Re: Financial planner/ retirement planning for parents

Post by marcopolo »

HomeStretch wrote: Thu Jan 02, 2020 1:58 pm Your parents’ situation seems straight forward to DIY. But if they want or need professional advice, it is certainly better IMO to use an advisor as needed for a fee at sn hourly rate rather than engage in an AUM arrangement with an advisor.

It is not unheard of for AUM relationships to have a cost of 2% per year of AUM between the advisor fee and high-ER funds. Ask your parents if it’s worth paying $20k per year to an advisor to manage their $1 million IRA and what services they will be getting besides choosing investments (likely complex and high-fee), scheduling RMDs when the time comes and Christmas cards.
The parents are not the ones seeking an AUM advisor. They are going to talk to someone at Schwab, probably their a signed representative. It is the OP that has been searching for fee only fiduciaries, and somehow found only 1% AUM advisors. It is not clear that the parents need (or want) much help.

If a true fee-only planner is needed many here have suggested the Garret Planning Network. I have never used them, so don't know about the quality of the advice, but at least they will not harm your portfolio with ongoing 1% fees.
Once in a while you get shown the light, in the strangest of places if you look at it right.
Jack FFR1846
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Location: 26 miles, 385 yards west of Copley Square

Re: Financial planner/ retirement planning for parents

Post by Jack FFR1846 »

What questions does your father have?
Bogle: Smart Beta is stupid
obgraham
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Re: Financial planner/ retirement planning for parents

Post by obgraham »

I'm missing something here: Why not find a "Fee Only" FP charging either by the hour for time spent or a flat rate, rather than a percentage of the portfolio?
Minot
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Re: Financial planner/ retirement planning for parents

Post by Minot »

I'd suggest giving him a copy of Jane Bryant Quinn's How to Make Your Money Last.
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Sandi_k
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Location: SF Bay Area

Re: Financial planner/ retirement planning for parents

Post by Sandi_k »

obgraham wrote: Thu Jan 02, 2020 2:14 pm I'm missing something here: Why not find a "Fee Only" FP charging either by the hour for time spent or a flat rate, rather than a percentage of the portfolio?
I know someone who is a CFP, and his party line is that AUM fees are indeed fees - so he advertises as "fee only."

Note that this is NOT the same thing as a "flat fee" advisor.

I think that is what the OP should search for, but only if Schwab gives questionable guidance. Honestly, it sounds like Dad is doing just fine.

;)
NotWhoYouThink
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Re: Financial planner/ retirement planning for parents

Post by NotWhoYouThink »

Exactly. First OP needs to learn what "fee only" means, before suggesting his parents meet with one. It means someone who charges fees to manage money and does not charge commissions on trades. If you want an "advice only", "one time consultation fee" or something else, those specifics need to be clearly considered and communicated.

The "Schwab guy" may be a fiduciary, OP's father can ask.

Other than that, I'm not sure OP's father needs help. His investment style might not be my investment style, but if he isn't seeking input he probably won't value what comes to him unsolicited.
Topic Author
kzombie
Posts: 13
Joined: Fri Feb 17, 2017 12:07 pm

Re: Financial planner/ retirement planning for parents

Post by kzombie »

Minot wrote: Thu Jan 02, 2020 2:19 pm I'd suggest giving him a copy of Jane Bryant Quinn's How to Make Your Money Last.
Thanks for the recommendation. Will surely do that.

The fee structures of these advisers confused me. Many advertised as "fee only" as in not taking commissions from financial products but majority seemed to be paid AUM. I'm not one to give unsolicited advise but I just wanted to make sure their years of hard work is protected at this time.
Glad to hear Schwab has a good reputation, probably just have him try that first. Thank you.
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BL
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Re: Financial planner/ retirement planning for parents

Post by BL »

kzombie wrote: Thu Jan 02, 2020 4:08 pm
Minot wrote: Thu Jan 02, 2020 2:19 pm I'd suggest giving him a copy of Jane Bryant Quinn's How to Make Your Money Last.
Thanks for the recommendation. Will surely do that.

The fee structures of these advisers confused me. Many advertised as "fee only" as in not taking commissions from financial products but majority seemed to be paid AUM. I'm not one to give unsolicited advise but I just wanted to make sure their years of hard work is protected at this time.
Glad to hear Schwab has a good reputation, probably just have him try that first. Thank you.
I have the above Quinn book and Bogleheads Guide to Retirement Planning; both are good.
Katie
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Re: Financial planner/ retirement planning for parents

Post by Katie »

If your parents haven't asked for any help, perhaps you could just start a conversation with them. Maybe mention that you're planning your own retirement and as someone working on the process you're interested in the experience of someone going through it right now. Ask them what kind of info or advice they want from "the Schwab guy" and what suggestions he's given. You can indicate that you're interested in this topic and that you're happy to discuss the suggestions.

If they've asked for your help, it's a lot easier to be more direct, but it sounds like your parents have good financial habits and have been smart about their money so far.
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