Newly retired, new to you, seeking a plan we can trust

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learningcurve
Posts: 4
Joined: Mon Jan 07, 2019 3:56 pm

Newly retired, new to you, seeking a plan we can trust

Post by learningcurve » Mon Jan 07, 2019 4:27 pm

I am a newbie here and would love help. I have been stuck for a while. I want to take action soon. I appreciate any insight you can give me. We are newly retired. My goal is to not have to think about it much anymore and enjoy retirement! So here goes.

Emergency Funds: More than enough
Debt: We own our home outright and have no debt anywhere else. We also own the house next-door.
Tax filing status: Married filing jointly
Tax rate: 12% Fed, 4.63% State
State: Colorado
Age: Husband 70, Me: 65
Desired asset allocation: We can easily imagine just going into CD's and money markets - but if we stay in equities we will want to play it very safe. Maybe 60 fixed, 40 equities
Portfolio size: $1,550,000
Assets: Currently we are about $450K in fixed (including cash which mostly isn't doing anything)and 1,100,000 in equities. With another $200.000 sitting in various low-performing or non-performing accounts.
Retirement: Mine is about 400K. His is about 475K. The rest is taxable.
Financial shortfall: We need about $24,000 per year from our investments to meet our expenses
Estimated RMD: $12,820
Values: We would prefer to be SRI - fossil free. (Our slightly better performing advisor is SRI)
Priorities as I see them: 1) Get cash working for us 2) Move money away from our higher priced advisor 3) Move investments toward sustainability and eventually 4) Manage it ALL myself or with a low cost service like Vanguard or Schwab.
We want to enjoy a comfortable but not extravagant life style and leave some for our son.

Questions:
1. What is the best way for us to achieve simplicity and peace of mind. The market turmoil unsettles us and it is tempting to ladder CDs and get out of the market but we don't want to be stupid!
2. How SHOULD we invest our cash? We currently have some in Schwab U.S. Treasury Money Fund and some at DCU earning 1.46%. But most of it is earning us nothing.
3. What would a very conservative yet reasonable portfolio look like. We would like to invest in SRI index funds if we stay in equities at all. I will post a potential allocation below to get that conversation started.
4. We have two financial advisers and one unmanaged account. I am so ready to stop paying high fees and with one advisor, Jeff, high expense ratios (1.25% management and upward of 1% expense ratios) - just to lose money. (We were down 6.2% in 2018 with Jeff and 3.66% with Chris.) I would like your input on these advisers to help me take heart to take action. And to decide if I want to take this on myself or align with a Vanguard or Schwab advisor. Or, perhaps hire and advice only financial adviser to get it started. (???)
5. Do you prefer Schwab or Vanguard? One of our current managed accounts is in Schwab and I have an unmanaged one there too. I opened an account with Vanguard when I got a review(which made sense to me) but haven't funded it.


Advisors:
Jeff:
We have $839,987.95 with Jeff. $250K of that is fixed. Since 10/15 he has averaged 1.99%. In 2018 he was down -6.2%. His fee is 1.25% and he uses mutual funds with 1% and higher expense ratios. Our portfolio is complex. He has us in scores of funds. I had limited trust in him and always thought he was confusing and salesy and pricey, but now that I understand costs better, I am more concerned than ever. To top it off, he has been hard to reach with travels, illness and family issues. When I told him in October that I was freaked about the market and wondered why we don't just put our money in CDs because that would earn enough for our retirement without the fear factor, he responded by proposing a variable annuity with 3.6% yearly fees and also a Blackrock REIT. I felt sold to, not heard. I sent him a list of questions 3 weeks ago that he said he would get back to me on and hasn't yet.

Chris:
In 2017 I wanted to move to SRI so when we got new money I placed it with Chris who does SRI. She was down -3.66% in 2018. We have $263,000 there now. Her fee is 1% - she buys actual stocks so expense ratios aren't an issue. She has the cash holdings in SNSXX Schwab U.S. Treasury Money Fund™ - Investor Shares


We also have S419,687.77 in an unmanaged Schwab account. That is down 3.81%. $150K of that is uninvested cash. Those funds are not screened for sustainability.

Potential Allocation:
I felt such an urgency to get out of the market in October but that ship sailed… There still is a part of me that would like to be all CDs and play it really safe. October would have been the time to do that!

If we stay diversified I am thinking along these lines:
30% Vanguard FTSE Social Index Fund Investor Shares (VFTSX)
5% ESGV VANGUARD WORLD /ESG U.S. STK ETF
5% VANGUARD WORLD /ESG INTL STK ETF BATS: VSGX
25% Vanguard Total Bond Market Index Fund Investor Shares MUTF: VBMFX
25% CDS, MMF and other cash equivalents.

Does that make any sense? I am citing Vanguard funds but have not yet decided for sure on Vanguard over Schwab. And I don't know how I would compose the cash part. Brokered CDs?

This is so not my area and I look forward to having it settled. It's like writing with my non-dominant hand. I also am error prone and can imagine buying the wrong product and not noticing for months. I have a $25K check that I haven't done anything with because I don't know what to do with it! Help!!!

Thanks so much!

Dandy
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Re: Newly retired, new to you, seeking a plan we can trust

Post by Dandy » Mon Jan 07, 2019 5:53 pm

Based on a need of about $24k an year you seem to be in great financial shape. You don't need to take much risk. When I retired I couldn't decide what overall allocation was right for me. Was 40% equities too low, was 50% enough? etc. What worked for me was Dr. Wm Bernstein's idea of keeping 20-25 years worth of drawdown "safe" (my word) and invest the rest anyway you want.

At the time I needed about 40k per year to supplement my pension. So, put about $800k in "safe" products e.g. CDs, money markets, other FDIC products and short term bond funds. That gave me an overall allocation or 43% equities and 57% fixed income. But, what it really did was provide a bottom up way of securing our retirement funding and avoid being overly worried about the stock market.

I just make sure every once in a while that our expenses haven't crept up and that we have enough "safe" assets. My withdrawals are mostly from my RMD which is a combination of equity and bond funds. That means I don't only tap "safe" assets. My 'safe" assets are available for withdrawals but unless stocks have a really bad year I intend to withdraw from both stocks and fixed income. The "safe" assets are for peace of mind -- and it has worked well and took a lot of the guesswork of what allocation is right for us in retirement.

With a much smaller drawdown need you could implement the above for much less. Put $480k in "safe" products and invest the rest anyway you want. Many would classify intermediate bond funds as pretty safe -I just wanted "safe" to be really safe and I could afford to do it.

Woodshark
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Re: Newly retired, new to you, seeking a plan we can trust

Post by Woodshark » Mon Jan 07, 2019 6:46 pm

You obviously have enough investments to meet your current goals. The points that I think you are making is that you would like to get away from your current higher cost advisors and possibly simplify your overall investment plan.

Both Schwab and Vanguard both have wealth management services with fees under 1% of AUM. I would recommend calling both and asking for a phone appointment to discuss their services. Be sure to write down specific questions in advance and take notes during the call. After that, review your notes and decide it you would prefer to stay with your current advisors or make a switch.

RadAudit
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Re: Newly retired, new to you, seeking a plan we can trust

Post by RadAudit » Mon Jan 07, 2019 7:44 pm

Welcome to the forum.
learningcurve wrote:
Mon Jan 07, 2019 4:27 pm
Values: We would prefer to be SRI - fossil free.
I have a slightly different value system, so please feel free to ignore whatever part of my opinions you choose. And. because of those differences, I don't know any funds that are predominantly SRI.
Dandy wrote:
Mon Jan 07, 2019 5:53 pm
Dr. Wm Bernstein's idea of keeping 20-25 years worth of drawdown "safe" (my word) and invest the rest anyway you want.
Dr. Bernstein has a very good point. You have 1.5 mil and require 24k per year. That's 62 years. You could put 40% of your portfolio ($600,000) in safe assets, and draw 24k/yr for 25 years. So, first off, relax. You've got time.
learningcurve wrote:
Mon Jan 07, 2019 4:27 pm
Move money away from our higher priced advisor

Great idea.
learningcurve wrote:
Mon Jan 07, 2019 4:27 pm
Her fee is 1% - she buys actual stocks so expense ratios aren't an issue.
Yes, but; diversification may be an issue. BH's usually favor low cost, and wide diversification of stocks and bonds in a portfolio. They can achieve both of those goals with four or fewer funds, total. Additionally, Vanguard has an advisory service for 0.3%,(IIRC), so 1% is not necessarily that low nowdays.
learningcurve wrote:
Mon Jan 07, 2019 4:27 pm
Desired asset allocation: We can easily imagine just going into CD's and money markets - but if we stay in equities we will want to play it very safe. Maybe 60 fixed, 40 equities
That'll work. May be a tad too conservative; but, it's your money. I put my wife's IRAs into Vanguard's LifeStrategy Conservative Growth fund. It is 40% stocks / 60% bonds. The stocks and bonds are diversified across the globe; but, I doubt if they are particularly SRI - whatever that is. However, it is a balanced portfolio with a targeted risk (60% bonds). And it is simple. It is also something she should be able to live with for the remainder of her life.

Another approach is a three fund portfolio. viewtopic.php?t=88005 (Just read the first post in that thread and it's linked articles.) Again, a simple to manage but sophisticated and well diversified portfolio. I invest in a similar portfolio; but, I've added a fourth fund - international bonds [lot of discussion on that]. You could substitute CDs and money markets for the bond side of the portfolio.
learningcurve wrote:
Mon Jan 07, 2019 4:27 pm
2. How SHOULD we invest our cash? We currently have some in Schwab U.S. Treasury Money Fund and some at DCU earning 1.46%. But most of it is earning us nothing.
Actually, the purpose of the safe portion of the portfolio is not necessarily to earn money. It's primary purpose is to have enough safe assets to allow you to pay your expenses for a long time, and to sleep at night and not to stay up worrying about which way the market is going.
learningcurve wrote:
Mon Jan 07, 2019 4:27 pm
If we stay diversified I am thinking along these lines … Does that make any sense? I am citing Vanguard funds but have not yet decided for sure on Vanguard over Schwab.
Yes. What does Vanguard say?
FI is the best revenge. LBYM. Invest the rest. Stay the course. - PS: The cavalry isn't coming, kids. You are on your own.

radiowave
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Re: Newly retired, new to you, seeking a plan we can trust

Post by radiowave » Mon Jan 07, 2019 9:53 pm

learningcurve welcome to the forum! And thanks for a well crafted first post. You obviously have been reading the Wiki and the basic philosophy and approach here on the forum. Let me make a few basic comments and follow up later in the thread.

It seems you have a number of different accounts. We started a little over 5 years ago with a dozen and a half accounts, may from different positions we've had so I spent nearly a year consolidating into rollover IRAs. That helped a lot to better understand our investments and manage the portfolio ourselves.

For cash managment, there are a number of well regarded online banks, I'll name Ally as that seems to be the most recommended, that will give you a better yield on both savings (2.0%) and short term CDs (currently 2.75% on a 1 year at Ally). Basic strategy with short term cash is to minimize or eliminate inflation risk. So at 2.75% for short term, after considering taxes, you would be at or just ahead of the current inflation rate. There is no real growth of CDs or high yield savings but they are FDIC insured up to $500k/joint account.

As for asset allocation, well you have a substantial porfolio for your lifestyle, one rule of thumb on the forum is to not take too much or too little risk so some reasonable stock portion would be worth considering, 25-30%?

As for the two advisors, you will likely get a majority of posts here to get rid of both and manage your porfolio on your own. There is plenty of help here on the forum and with thought and patience you can succeed in managing your investments.

Regarding Schwab vs Vanguard, both are highly regarded here (along with Fidelity). I don't have any experience with Schwab other than seeing their new campus here in south metro Denver (Lone Tree). I've had good to excellent service from Vanguard and Fidelity (several offices in metro area). I like Vanguard for it's mininimalist website, have had good recent phone support help on transferring a Roth IRA to them. It's easy to move money via ACH transfer (2-3 days) and if you stick with their mutual funds, they are easy to manage on the website.
There are a number of prior threads Vanguard vs. Fidelity vs. Schwab, you may want to read through them but the differences are minor and any would meet your needs for high quality, low costs index funds.

Last, there has been a thread about starting a local Boglehead chapter here in Denver, but never seem to get to critical mass. Just an FYI, that might be a possibility in the future to gather in person somewhere if you are in the metro area.
Bogleheads Wiki: https://www.bogleheads.org/wiki/Main_Page

2015
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Re: Newly retired, new to you, seeking a plan we can trust

Post by 2015 » Tue Jan 08, 2019 1:23 pm

Dandy wrote:
Mon Jan 07, 2019 5:53 pm
Based on a need of about $24k an year you seem to be in great financial shape. You don't need to take much risk. When I retired I couldn't decide what overall allocation was right for me. Was 40% equities too low, was 50% enough? etc. What worked for me was Dr. Wm Bernstein's idea of keeping 20-25 years worth of drawdown "safe" (my word) and invest the rest anyway you want.

At the time I needed about 40k per year to supplement my pension. So, put about $800k in "safe" products e.g. CDs, money markets, other FDIC products and short term bond funds. That gave me an overall allocation or 43% equities and 57% fixed income. But, what it really did was provide a bottom up way of securing our retirement funding and avoid being overly worried about the stock market.

I just make sure every once in a while that our expenses haven't crept up and that we have enough "safe" assets. My withdrawals are mostly from my RMD which is a combination of equity and bond funds. That means I don't only tap "safe" assets. My 'safe" assets are available for withdrawals but unless stocks have a really bad year I intend to withdraw from both stocks and fixed income. The "safe" assets are for peace of mind -- and it has worked well and took a lot of the guesswork of what allocation is right for us in retirement.

With a much smaller drawdown need you could implement the above for much less. Put $480k in "safe" products and invest the rest anyway you want. Many would classify intermediate bond funds as pretty safe -I just wanted "safe" to be really safe and I could afford to do it.
I have followed the same approach and agree very much with Dandy's statements I underlined above, particularly regarding the peace of mind aspect. Like Dandy, I avoid lifestyle creep by keeping an eye on expenses to ensure they are in line with projections.

I became quite peaceful about all things related to investing after I knew that all liabilities for the remainder of my lifetime had been provided for. In my case, I have followed longinvest's recommendation to secure lifelong income in a separate account maintained outside of the risk portfolio. Delaying SS until 70 has also augmented my liabilities floor. I remain disinterested in the many debates over SS breakeven dates as those debates do not serve me.

I have ignored everything ever written about having a risk profile and have instead chosen a risk portfolio asset allocation of 50/50 based on my own particular historical relationship with risks of all kinds. In this manner, my risk evaluation is grounded in reality as opposed to theory. Having all of my income needs met for the rest of my lifetime allows me to completely ignore market activity and all of the attendant mindless commentary.

In retirement, I have chosen to find the juice in every moment as much as possible, knowing it will never come again so I better treasure it while it's here. For me, fulfillment is a much better way to spend retirement than chasing a fistful of dollars.
Last edited by 2015 on Tue Jan 08, 2019 1:42 pm, edited 1 time in total.

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David Jay
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Re: Newly retired, new to you, seeking a plan we can trust

Post by David Jay » Tue Jan 08, 2019 1:38 pm

learningcurve wrote:
Mon Jan 07, 2019 4:27 pm
Values: We would prefer to be SRI - fossil free
It is almost impossible in this interconnected world to be in "fossil-free" investments. The investments that are out there typically are less than they claim to be and even then only take those values to the first level (investing in companies that claim to be "green", but in reality are part of a supply chain that is not particularly green). Many investments are simply "branding" efforts.

The method that many Bogleheads follow is to accept market returns on market investments and then donate money/time in a focused manner towards the individual causes that are important to them.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

elainet7
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Re: Newly retired, new to you, seeking a plan we can trust

Post by elainet7 » Tue Jan 08, 2019 6:21 pm

Look at the three fund portfolio
Retirement is all about how much financial and psychological risk you can take
Where to put the $$$ is the easy part
You might want to place your fixed investments in CDS and bonds to cover fixed expenses
The rest in stocks, corp bonds, hi yield, reits, small cap, etc
LEARN the TRINITY STUDY and what SEQUENCE OF RISKS MEANS!!

Topic Author
learningcurve
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Re: Newly retired, new to you, seeking a plan we can trust

Post by learningcurve » Thu Jan 10, 2019 10:38 am

I am thrilled by the input and will put it to use. It gives me a lot of homework! I plan to respond specifically when I get enough time to do all the excellent input justice. For now, thanks! It is very heartening, reassuring and empowering! More soon!

Topic Author
learningcurve
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Re: Newly retired, new to you, seeking a plan we can trust

Post by learningcurve » Tue Jan 29, 2019 8:48 pm

Hi back to the posters and thanks again for the great support!

Here is our update. I took Woodshack's advice and called the local Schwab office. I had already spoke and worked some with Vanguard. The advisor there is able to provide advice-only support at no cost. He created a proposal which I am reviewing now. He will help me transfer the funds and make the trades and walk me through the whole process. And answer the questions. I feel really good about this, and about him. He spent plenty of time with us, answers questions clearly, is responsive to our preferences values and concerns, and so far seems to be everything I had hoped to find - in someone I would have to pay for! My husband particularly likes being able to meet face-to-face.

He liked my initial portfolio in general. His recommendation includes three equity funds including two of the Vanguard funds I proposed. (FTSE, VSGX, plus NUSC.) He recommends two different bond funds, and holding a small equity index fund and two small bond funds we already own due to tax and liquidation cost considerations. He is still reviewing what he recommends for an annuity I have held for a long time.

ALL of your input was very helpful. Dandy, it was great to read about your process and how you chose what fit for you. We probably will put somewhat more in "fixed" than your example, but less in cash itself. Woodshack, great - advice to call and compare. And thanks for noticing how much crafting i did on my post. I had been all ready to post and then read the guidelines. Following the format was very helpful to me - and to the adviser I ended up speaking with. RadAudit put me at ease about having time. You asked what Vanguard thought of my thinking. By the time I spoke with my Vanguard guy, we were pretty much decided to go with Schwab, we were brief. He did suggest it was high on cash and cash equivalents. Oh - and RadAudit - I appreciated the graceful way you shared your different thinking from mine on SRI. You too, David Jay. I am quite aware that everything is tainted - but want to do the best I can without martyring myself! ;-)

Okay - here are the positions.

Large Cap Vanguard FTSE $156,000
Small Cap NuShares NUSC $126,326
International Vanguard VSGX $127,000
Bond Taxable PIMCO PIMIX $100,000
Bonds Tax Exempt USAA USAIX $242,000
Cash: SWVXX and laddered CDs $315,377.91

!?!?!?!?!? Any and all input is invited. My main questions are: PIMCO is actively managed and has a relatively high expense ratio of .74%. The advisor suggests that it is worth it because returns are significantly higher than the index. USATX is also actively managed. It has an expense ratio of .51%. I see in the Boglehead investment book that Bogleheads aren't completely rigid about active management.

The rest is in holdings that we already have that we will strategically wait to liquidate.

The allocation is Large Cap 25%, Small Cap 10%, International Equity 10%, Fixed Income $30%, Cash Investments 25%.

I feel very good about moving things over to Schwab and this adviser. His recommendations are a starting point. I welcome input on any of it. Thoughts? Thanks!

dave1054
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Re: Newly retired, new to you, seeking a plan we can trust

Post by dave1054 » Tue Jan 29, 2019 9:30 pm

Wow. Your advisor fees are too high and you are in way too many investments. I spoke with Schwab and Vanguard. The Schwab people are slick. They provide good service and their management service is more expensive.

Do u really want to spend your retirement managing allthese funds with “advise” from Schwab. For about 0.3%, go with Vanguard Personal Advisor Service. It will be on autopilot and I suspect will do a lot better than you have done in the past.

ExitStageLeft
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Re: Newly retired, new to you, seeking a plan we can trust

Post by ExitStageLeft » Tue Jan 29, 2019 9:41 pm

Welcome to the forum!

I'm still in the accumulation phase, so my thinking on bonds may not be in line with what you need. To me though, you shouldn't be chasing performance with your bond fund holdings. The PIMIX fund does have a good reputation as a managed fund, but it gets its returns by holding much more corporate bonds. As a result it has a pretty high correlation with the US market. See the Portfolio Returns section at this Portfolio Visualizer link: https://www.portfoliovisualizer.com/bac ... ion2_2=100

I want my bonds to have as close to zero correlation with market performance as is practicable. I get that with the Vanguard total bond market fund. That way when the market plunges, I don't have a bond fund that tracks its way down as well. Rather than the PIMIX fund, I would suggest something with a low ER that uses the Barclays US Aggregate index.

radiowave
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Re: Newly retired, new to you, seeking a plan we can trust

Post by radiowave » Tue Jan 29, 2019 9:46 pm

OP, let me give you two links to the Boglehead wiki and recommend you read these before you make any final decision:

Three fund portfolio: https://www.bogleheads.org/wiki/Three-fund_portfolio
Tax efficient fund placement: https://www.bogleheads.org/wiki/Tax-eff ... lacement

There are less costly and less complicated alternatives to your proposed fund selection. More to come . . .
Bogleheads Wiki: https://www.bogleheads.org/wiki/Main_Page

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BL
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Re: Newly retired, new to you, seeking a plan we can trust

Post by BL » Wed Jan 30, 2019 3:09 am

Besides reading in the Wiki, I would like to suggest a couple "retirement" books that I have read.
Have had Bogleheads Guide to Retirement Planning quite a while now, and more recently
Jane Bryant Quinn's How to Make Your Money Last, latest update which I found used at Amazon but these are also available at the library if you want to look before paying. Jane's book is a good reference to have on hand if I have questions on a particular subject.

There is a new book on the three-fund portfolio, as well as a long thread here and a page in the Wiki. Simplicity is good, and three funds is quite simple.
1.Total Stock Market
2.Total International Stock Market
3. and bonds/fixed income such as:
Total Bond Market (or municipal bonds, short term bonds, CDs, money market funds, high-yield savings accounts, usually online banks or CU or I-Bonds)
maybe international bonds if using Vanguard PAS as they insist on them.

Topic Author
learningcurve
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Re: Newly retired, new to you, seeking a plan we can trust

Post by learningcurve » Wed Jan 30, 2019 5:36 pm

Thanks all! Dave1054 - your question about wanting to manage myself - a year ago I would not have imagined that my answer would be yes! I do want to be the one to make the trades. I have had so many issues around all this and it feels good to dive in this way - with guidance. And it doesn't seem like too many funds to me. I am asking my adviser about it but my guess is that the SRI is one factor that makes it necessary to have more funds.

ExitStageLeft - your comment about PIMIX is very much appreciated. It makes a lot of sense to me. In addition to not chasing the market, having it separate in terms of performance sounds wise indeed.

In related news, one adviser suggests cash in treasury MMF (SNSXX) and the other in Corp: (SWVXX.) Any thoughts? Does the concern apply to money market as well?

Thanks!

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sergeant
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Re: Newly retired, new to you, seeking a plan we can trust

Post by sergeant » Wed Jan 30, 2019 6:27 pm

Say goodbye to Jeff and Chris (actually don't, let Schwab or Vanguard do it for you) and go with Vanguard PAS to get everything set to how you want it. In a year or two dump PAS and do it yourself. Schwab is good too if you insist on the face to face time.
Lincoln 3 EOW!

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