When to hire a fee based CFP?

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MrMars
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When to hire a fee based CFP?

Post by MrMars »

I was listening to the most recent episode of the Bogleheads on Investing Podcast (primarily about taxes) and it kind of reinforced my thought that I should consider jumping into the use of a fee only CFP. I REALLY, REALLY like the idea of having somebody help us prepare for and navigate all of the choices we will have to make over the future (say ages 55-72). There are just so many implications for every decision you make during that time frame that having somebody with expertise guide our decisions is appealing to me.


Here's the thing though. We are in our mid-40's. Even in a best case scenario we are at least 8 years from potentially retiring at 55 (or so). In general, our finances are fairly straight forward. We have about 1.2M in retirement accounts, 20K in a brokerage. Our accounts are all pretty well aligned with the BH investment philosophy. Our debt is a 250K mortgage. On some level, I feel like we can continue to do as we currently are. Save, invest, don't take on debt...rinse, wash, repeat and then when we are 55 or so look into the fee-based CFP. Thereby saving 8-10 years of expenses. The downside is that those same 8-10 years is time that we might be doing something different to prepare us for and minimize whatever crazy, stupid, annoying, but unavoidable consequences of the roughly 10000 financial decisions you have to make as retirement gets close.

Additionally, is a fee based CFP really who would be most knowledgeable regarding those things. And by those things I primarily mean navigating tax codes in an effort to minimize how much goes anywhere other than our pocket?
Lee_WSP
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Re: When to hire a fee based CFP?

Post by Lee_WSP »

Which tax codes in particular are you referring to? The special taxes surrounding retirement accounts? If so, they're not all that complicated or hard to grasp IMO.
retiredjg
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Re: When to hire a fee based CFP?

Post by retiredjg »

You can get started now by reading this forum and, when ready, posting your financial information in the format we use to hep people with their portfolio questions (link at bottom of this message).

You'll learn a lot and it's free.
Topic Author
MrMars
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Re: When to hire a fee based CFP?

Post by MrMars »

retiredjg wrote: Wed Apr 07, 2021 11:08 am You can get started now by reading this forum and, when ready, posting your financial information in the format we use to hep people with their portfolio questions (link at bottom of this message).

You'll learn a lot and it's free.
I've done that. At this point I'm more interested in trying to determine how much value a a CFP can provide to somebody with a fairly straightforward financial picture that is still a solid 10 years from retirement.

The reason I'm considering the services of CFP is primarily to assist in navigating withdrawals, when to take SS, making sure we qualify for the best Medicare rate, managing RMDs, navigating through the tax implications of each of these decisions, etc etc
Topic Author
MrMars
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Re: When to hire a fee based CFP?

Post by MrMars »

Lee_WSP wrote: Wed Apr 07, 2021 11:03 am Which tax codes in particular are you referring to? The special taxes surrounding retirement accounts? If so, they're not all that complicated or hard to grasp IMO.

The reason I'm considering the services of CFP is primarily to assist in navigating withdrawals, when to take SS, making sure we qualify for the best Medicare rate, managing RMDs, navigating through the tax implications of each of these decisions, etc

I realize those decisions are far off. And frankly I don't expect to learn a CFP will provide that much insight given that my financial picture is relative straightforward. However, the reason for the inquisition is to see if others who might be similarly positioned have had experiences where they left saying "man, I could have saved 10 years of CFP expenses" or "you know, even at 50 years old and an an uncomplicated financial picture the CFP was still able to provide me with ideas and information that was quite useful and set me up even better than I had hoped".
retiredjg
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Re: When to hire a fee based CFP?

Post by retiredjg »

MrMars wrote: Wed Apr 07, 2021 11:45 am
The reason I'm considering the services of CFP is primarily to assist in navigating withdrawals, when to take SS, making sure we qualify for the best Medicare rate, managing RMDs, navigating through the tax implications of each of these decisions, etc etc
These decisions are probably too far out in my opinion. There could be a lot of changes before 10 years.

However, you have no need to use a CFP every year. If you want to hire an advice only advisor, that can be a 1 time thing. You could get the lay of the land now and and then try to keep up with changes for the next 10 years. Then have another consultation near retirement.

Consider using this service to find an advice only advisor. The service is offered by a person who also happens to post here on bogleheads'.

https://adviceonlyfinancial.com
afan
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Re: When to hire a fee based CFP?

Post by afan »

I agree that you could learn to handle most of this yourself from this site and others like it. For tax-related decisions specifically related to retirement, I also agree that it is probably too early, given the frequency with which the tax laws change.

Note that financial planners have confused the meaning of the word "fee" as it relates to how they are paid. Many would define commissions as fees. Some would say their assets under management charges are fees.

You want someone who charges ONLY an hourly rate, or a specified number of dollars for specific advice. No retainers, no ongoing charges of any kind.

Someone who will NOT manage your investments for you.

Someone who will NOT sell you any investment, insurance or other products.

They advise, you pay them for the advice and you both go your separate ways. If you have another question, you go back to them (or someone else who you think will know the answer), ask them for another bit of advice and get billed again.

These are well described as "advice only" but I don't think that is a standard term. I am not sure you could use it and count on getting to the right people.

"Fee based" could mean almost anything goes when looking for an advisor.
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Topic Author
MrMars
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Re: When to hire a fee based CFP?

Post by MrMars »

afan wrote: Wed Apr 07, 2021 12:20 pm I agree that you could learn to handle most of this yourself from this site and others like it. For tax-related decisions specifically related to retirement, I also agree that it is probably too early, given the frequency with which the tax laws change.

Note that financial planners have confused the meaning of the word "fee" as it relates to how they are paid. Many would define commissions as fees. Some would say their assets under management charges are fees.

You want someone who charges ONLY an hourly rate, or a specified number of dollars for specific advice. No retainers, no ongoing charges of any kind.

Someone who will NOT manage your investments for you.

Someone who will NOT sell you any investment, insurance or other products.

They advise, you pay them for the advice and you both go your separate ways. If you have another question, you go back to them (or someone else who you think will know the answer), ask them for another bit of advice and get billed again.

These are well described as "advice only" but I don't think that is a standard term. I am not sure you could use it and count on getting to the right people.

"Fee based" could mean almost anything goes when looking for an advisor.
Subject of post should definitley have read fee only or advice only. I mucked that up. As I have zero interest in anything other than 1x fee for the work.
tibbitts
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Re: When to hire a fee based CFP?

Post by tibbitts »

Lee_WSP wrote: Wed Apr 07, 2021 11:03 am Which tax codes in particular are you referring to? The special taxes surrounding retirement accounts? If so, they're not all that complicated or hard to grasp IMO.
If I had taken an exam covering tax implications for retirees when I was in my 50s, I'm pretty sure I would have had a nearly perfect score. Yet I managed to make mistakes with tax deferred accounts during that time that cost me at least tens of thousands of dollars. So, complicated or hard to grasp doesn't always translate into properly applying to your own situation. To this day I can't explain how I managed to make the mistakes I did. On the other hand, hiring a CFP doesn't always guarantee better results.
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JoeRetire
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Re: When to hire a fee based CFP?

Post by JoeRetire »

MrMars wrote: Wed Apr 07, 2021 9:52 am I was listening to the most recent episode of the Bogleheads on Investing Podcast (primarily about taxes) and it kind of reinforced my thought that I should consider jumping into the use of a fee only CFP. I REALLY, REALLY like the idea of having somebody help us prepare for and navigate all of the choices we will have to make over the future (say ages 55-72). There are just so many implications for every decision you make during that time frame that having somebody with expertise guide our decisions is appealing to me.
Makes sense.
Additionally, is a fee based CFP really who would be most knowledgeable regarding those things. And by those things I primarily mean navigating tax codes in an effort to minimize how much goes anywhere other than our pocket?
Probably. But that's why you interview candidates before you choose one.
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dbr
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Re: When to hire a fee based CFP?

Post by dbr »

MrMars wrote: Wed Apr 07, 2021 9:52 am
Additionally, is a fee based CFP really who would be most knowledgeable regarding those things. And by those things I primarily mean navigating tax codes in an effort to minimize how much goes anywhere other than our pocket?
You should assume a CFP will be neither able nor willing to do this problem until you have asked them specifically if they can and will and obtain some sort of specification for what work product they will actually deliver at what cost.

While an obvious suggestion is to go to a CPA specializing in tax, the same statement applies as most tax CPA's are selling tax preparation rather than tax planning. As an example I asked my parents tax guy for help with a tax planning question and he referred me to a planner in his firm who charged me $800 to plan some issues about management stock options. It was well worthwhile. Since that time I have learned enough that I would have arrived at the same answer on my own, but that was then.
Topic Author
MrMars
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Re: When to hire a fee based CFP?

Post by MrMars »

dbr wrote: Wed Apr 07, 2021 1:13 pm
You should assume a CFP will be neither able nor willing to do this problem until you have asked them specifically if they can and will and obtain some sort of specification for what work product they will actually deliver at what cost.

Good to know as I think I would have assumed that a CFP would be able to navigate those questions. There's not much chance I wouldn't have asked before agreeing to hire them but that's certainly something I would have thought would be in their wheelhouse. Or somebody's wheelhouse if not a CFP..
dbr
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Re: When to hire a fee based CFP?

Post by dbr »

MrMars wrote: Wed Apr 07, 2021 1:33 pm
dbr wrote: Wed Apr 07, 2021 1:13 pm
You should assume a CFP will be neither able nor willing to do this problem until you have asked them specifically if they can and will and obtain some sort of specification for what work product they will actually deliver at what cost.

Good to know as I think I would have assumed that a CFP would be able to navigate those questions. There's not much chance I wouldn't have asked before agreeing to hire them but that's certainly something I would have thought would be in their wheelhouse. Or somebody's wheelhouse if not a CFP..
Keep in mind a specific tax analysis for a person and recommendation of actual plans is a task in detail that requires a lot of work and a lot of information. While a general simple answer may be easy enough this is not just running some model that says at this savings rate and that asset allocation you can probably safely spend x dollars in retirement ten years from now.
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