Navigating the Retirement Transition

Comments on “You May Need a Different Kind of Financial Professional for Retirement,” by Julie Jason, in the January 2020 AAII Journal:

A certified financial planner (CFP) is the only really safe way to go. Of course, one still needs to do their due diligence, but a CFP is where the odds lie.
—Ronald McNay from California

It is, Ronald, but what’s important is if you need the help of a financial adviser, you understand the tasks and reasons why you need this adviser to execute and counsel over. It’s also paramount that one does due diligence in picking an adviser, including compensations. I would also see the hybrid: a broker dealer for picking up the transactions and the adviser at the higher investment level. Tasks are based on customer retirement requirements, services needed and compensation needed and agreed with.
—Jon from Massachusetts

When I retired at age 60, healthy and active, this transition was the one thing that I had not given much thought. And I made some mistakes. One was following some of the retirement advice of financial “experts” who almost unanimously say, “Draw down your taxable accounts first, thus giving the tax-deferred accounts a chance to run.” Well, that ain’t necessarily so. One needs to make sure that all decisions, even what we may think is obvious, such as this, match their individual situation. In my case, I would have been better off taking some of my traditional IRA withdrawals earlier and letting my taxable accounts grow because of the capital gains treatment of the taxable holdings versus the fully taxed IRA withdrawals.
—Bud from Washington

After 20 years of retirement and mostly being a DIY investor amid many recent abrupt changes in the tax laws, I felt a need for some advice. Not to pick my investments or “manage” my portfolio but rather someone to talk to. I ended up with a certified public accountant (CPA); they didn’t really recommend any changes but (mostly) confirmed what I had already done.
—DEM from Arizona

CPAs also have a certification as a registered investment adviser (RIA), as well as in financial planning, etc. Consider a CPA/PFS for your personal financial specialist. We must also abide by the highest industry standards and our code of ethics.
—Bruce Bohannon from Illinois

Broker Considerations

Comments on “Comparing the Discount Brokers and Investment Apps,” by AAII Staff, in the January 2020 AAII Journal:

A huge cost could be money market fund (MMF) fees. I’m cured of trading and try to stay fully invested. I moved across the country, bought a big house and for the first time had a substantial sum in the Fidelity MMF. The fees are 0.50%. That’s about five times what I paid at Merrill (a full commission firm) 40 years ago, so fees are not declining. If you trade a lot (contrary to all empirical evidence that the more you trade, the less you make) you probably have money stashed between trades and would be better off paying the modest commission. The insured bank account gives an even lower return. If they don’t get you coming, they will get you going. Brokerage firms are financial predators and you must always look for the hidden fees.
—Barry Estell from California

Thank you for updating this very helpful article. My experience with brokerages is that their sign-up agreements are 10 to 15 pages long, highly curated, refer you to multiple sub-units (that may contain undisclosed terms and fees since they are independently incorporated and regulated) and contain many important conditions positioned in many different subclauses and paragraphs. When you sign up, you agree to risks of a degree similar to the dangers you incur when clicking “your agreement” to cookie statements at their websites. Every click you make from that point into the future will be recorded, stored in a database and “shared” with various “affiliated” organizations. The big question is: Are you sure you want your financial history “out there” on the web?
—Barry C. Johnson from Texas

Benefits of a Self-Education

Comments on “The Financial Advice Gap,” from Dispatches in the January 2020 AAII Journal:

This study appears to prove that if you tell people to save more, they will save more and retire with more money. The self-motivated could easily accomplish this without paying an adviser for “good financial advice.” Let’s assume your adviser receives 1% of your assets per year as a fee for their advice and you want to save $1 million for retirement. Your average annual asset balance is $500,000 and you have 30 years until retirement. Your adviser is going to receive $150,000 for their advice. This is not a good trade-off against the cost of AAII membership and the time and cost to educate yourself.
—John Lambert from New Jersey