We found a fee only (ie hourly rate) Certified Financial Planner. She started working with us about 2 years before we both retired, balancing our investments, consolidating. We ended up 50/50 in stocks and bonds in some Fidelity and Vanguard EFTs. She recommended I convert 401K in Voya to IRA, as Voya choices poor and high cost. She recommended my wife stay in 401K with her employer as funds were excellent and low cost. Advantage of a fee only vs “fee based” (percentage of assets under management) planner is that the latter will get a huge bump in annual fee when you leave a 401K so how unbiased is their advice to leave employer plan?
In our early years of retirement I have done some Roth conversions, just being careful to stay under IRMAA Medicare surcharge AGI level. Once we start SS, that might be the end of Roth conversions. Mainly the Roth moves are to benefit our heirs, although might also be a safeguard against future tax rate increases.
Also, my idea, we put about 10 years worth of charitable giving into a donor advised fund before retirement so we could itemize that year (post Trump tax changes) and then move to the standard deduction after that. The SALT cap of 10K means the standard deduction works better for us. It is nice to have money in a DAF because you don’t feel like you need to change your charitable giving levels because you are now “retired on a fixed income”, as the money is already parked and all you do is designate recipients. Fidelity plan has a low $50 per gift minimum, which is convenient vs Vanguard where the level is $500. On advice from our CPA, we just did about 10 years of giving, as (A) Trump individual tax law changes sunset and might change and (B) when you hit mandatory distribution years, the amount might exceed your needs and you can do a charitable gift out of the mandatory distribution and avoid paying taxes on that portion of the withdrawal.
You’re correct: rules of thumb, as a rule, don’t take into account specifics like that. A 70YO with $100K who needs to fully withdraw it over the next four years is clearly an outlier for whom this rule is not adequate. Likewise for someone who is so wealthy that having a tiny percentage of their wealth in bonds is enough to provide all the secure income they will ever need for many years to come.
But for a typical American in or near retirement who expects to live a typical lifespan and doesn’t have the level of numeracy and cognitive understanding of risk required to formulate investment strategies of any complexity, the “bond% ~= age” rule is simple, easily implementable advice that can help protect them from the usual economic fluctuations…
I see your point, but sometimes I see otherwise intelligent people literally spend less time picking out their investment allocation than they do adding a movie to their Netflix queue jump on that bonds equal to age rule and leaving a metric buttload of money on the table. Over the past five years the money in my stock market index has doubled while my bond index has gone up by 15%. I’m sure glad I didn’t have nearly three quarters of my money in that bond fund.
Agreed. I recently mentioned in another thread that a lot of people take in important advice and apply it only the simplest, most thoughtless of ways - and then stop thinking about it. These are the people whose surgical masks are never up over their nose, or who wear their bicycle helmet or seat belt wrong - or who hear “save and invest for retirement” and don’t do any of the math to figure out how much money they might actually need, or how to grow that kind of wealth.
But the people that are mindlessly following this advice are very likely the ones that would panic when the market went down 20% in one day and sell everything. Yes, they are leaving money on the table, but (assuming they are in a position where they don’t need further growth) a simple metric to follow is exactly what a lot of people need. And it isn’t bad advice - if you don’t want to (or feel you can’t) spend the time to optimize things, 100-your age for stocks is workable.
Yes, but teelabrown is smart enough to be asking these questions now, so we can take her out of the mindless population.
The problem is that advice during the deaccumulation period of retirement is harder to come by, at least if one looks to the advisors that are geared towards the accumulation phase. It’s a fairly simple problem to define though - how much money will I need in retirement, and where will that money come from?
I’ve found that the resources to answer those questions, or at least informing one to what all may need to be considered, can be found on message boards that are dedicated to retirement. I frequent three myself: Mr. Money Mustache, Bogleheads, and Early-Retirement .org. Each has it’s own flavor, but there is something worthwhile at each site.
Unfortunately, the message boards at Fool. com haven’t been any good for a long while, but I recently found the Motley Fool Answers podcast at Spotify. The show recently was folded into another podcast as an occasional segment, but the older shows are archived. They tend to be more into single stocks than index funds, so be aware of that. This episode is pretty good: Spotify
It seems to me that the common concerns with retirement and money are:
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How much money will I need? How much do I spend pre-retirement and how will that change?
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What are my income sources, and when should they start or end?
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What will I do for health insurance? If I retire early what gets me through until I can get Medicare?
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What about taxes? Do I need to act to minimize taxes?
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Will I need long term care insurance?
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Is my housing reasonable? Should I downsize? Is it a place for aging? Do I have a mortgage? Will I need to rely on the value of the house to fund retirement?
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What should my asset allocation be? What if the market tanks?
Start thinking about these questions, and use available resources like message boards to educate yourself on possible answers. It may be a bit bewildering at first, but as you start to understand the issues you’ll eventually figure out quite a few things on your own, or at least be able to intelligently evaluate any advice you go get from an advisor. Once you have a fuller understanding of your entire financial situation, the you should be able to determine how much you should have in stocks vs bonds vs other assets.
Yeah, the Retire Early Board there used to be pretty good, but was overtaken by right-wing political talk (and the occasional invasion of left-wingers). A new “Retire Early Liberal Edition” board talked retirement for a while, but inevitably became a left-wing politics board.
Nah, I’m talking about NADA.
Sad day when it lost its ticker.
I am not exactly sure if the link I had for the Spotify podcast actually goes where I wanted it to go, so I did find the transcript:
Two interesting items in that podcast were asset location, and addressing sequence of return risks.
In the past I have worked with an advisor, and while I generally agreed with their philosophy, the recommendations they had for how they would handle my money were a bit limited in asset location, and I decided against using them.
It is the sequence of return risks part of the conversation that caught my attention. Like the OP, I am probably going to retire in a year. While the last several years have been good to stocks and not good to bonds, there have been a couple of events that demonstrate the risk, first COVID, and now the current situation. The sequence of return risk looks very real to me. And the defense outlined in the podcast has me reconsidering my asset allocation going into retirement.
The problem is that this treats “stocks” as a thing, when you can classify stocks into various classes. I have more than 100 - my age in stocks, but the stocks are less volatile than the norm, and so it is a compromise with bonds. Plus you can take more risks if the downside of a market downturn is reduced since you have a good income source.
But so many people make stupid decisions as it is that this level of analysis might be expecting too much.