I am not a CFP, but have one, but have been happily retired for over 5 years and am doing quite well.
As mentioned, the age of required withdrawals has increased. However, I’d recommend you estimating how much you’d have to withdraw at this point. I was under the impression that the tax implications would be horrendous, but when I ran the numbers they were quite reasonable, and I have a good bit in my 401(Ks) which I’ve moved into IRAs.
One thing about being retired is that you have control over your taxable income. You can take money out of your IRAs and move them into Roths or cash and still keep your taxes very low. It would pay to get an accountant to walk you through this at least the first time.
Roth IRAs have the requirement of having to hold them 5 years after the first investment before you can withdraw money tax free. (And also an age requirement.) That’s fine if you know you won’t need the money before then, but something to be aware of.
What I’ve found is that the crucial metric is cash flow. If you can generate enough money to live on, you don’t have to worry about what the balance of your accounts is. We’ve put a fair chunk of our equity portfolio into lower volatility income producing stocks (through dividends) and with that and Social Security I’ll get at 70 we’ll have to sell very little stuff to live on. When to take social security depends on what you think your life expectancy will be.
The biggest benefit I’ve gotten from my CFP is that he suggests investment strategies - like the dividend stocks - that I never would have come up with myself. Just before I retired he ran a Monte Carlo simulation of how much I could expect to have from retirement until age 92. You get probability bands, so you might have a 10% chance of having $X and a 50% chance of having $Y, where Y < X.With the increases I’m above the best estimate, which had me still with plenty of money at 92. That was valuable also - the online retirement income planners are useless.
Another advantage of the CFP - when I was still working, he helped me choose 401(K) funds which balanced my portfolio over all my investments. That was useful.
As to how to find one: you should be comfortable with them, and the first thing they should ask you is the level of risk you are comfortable with. If they don’t do that, walk, since they can recommend strategies you won’t be comfortable with.
Nope. 401k’s grow tax-deferred. Roth’s grow tax-free. Very different beasts.
Incorrect. 401k accounts can have both traditional and Roth contributions made to them. Depends on the employer for setting it up that way. Employer matching dollars have to be made as traditional contributions, but employee Roth contributions are becoming very common.
Thank you - with the waiver of RMDs this year due to the CARES Act, this one got lost in the shuffle this year.
That might be true of some 401(k) accounts at some employers but not at mine - it’s just as true that some employers have very, very limited options for the 401(k)'s
I’d be delighted to find out how a Financial Planner can offer value for money on an investment of $5k - please elaborate?
Something that always annoys me is that most of the financial advice out there seems geared towards people who have a lot more assets than I do. The thing is, people with few assets also need financial advice and planning.
The Roth sounds like it might be a fit for me, but I’m still interested in looking into other options.
The thing is, at least in the UK (and I suspect most other developed economies including the US), financial planners are required to conduct rigorous research into both their clients’ finances and products available in the market, before they can make a suitable recommendation. For that reason, I would be amazed if anyone can run a business doing this where the cost to the client is less than $500. That’s already 10% of your investable assets, hence my comment about value for money.
You are right that this area of the market is chronically underserved as a result. But it’s very hard to do so while maintaining a reasonable level of service. That being the case, I suspect simply investing directly into some sort of US or global tracker fund, e.g. via Vanguard, is a good solution, as it’s very low cost and over the long-term should provide a better return than savings - as octopus has already suggested.
Let’s just say that there are certain posters that I simply do not engage with or even look at anymore due to near-constant disagreements and leave it at that.
A few other have also mentioned Vanguard and their kin.
For the very small scale household I’d say that getting out of debt and starting savings should be the first priority because you want to stop paying interest to other people and keep that money for yourself. As a result, instead of eternally paying interest I now have a nest egg to do something more for me.
I just haven’t figured out the next step after that.
But thanks again to everyone for your input.
I suspected that might be the case, which was one reason I mentioned it 
.
Congratulations on making that very important first step! You’re doing great - everything after that is gravy.
As I mentioned, a CFP would be providing recommendations for Broomstick’s entire retirement portfolio, not just the $5k liquid funds, as well as provide a financial plan going through retirement. There’s certainly a cost to it, and that’s up to Broomstick to decide if it’s worth it.
I see, fair enough. The way I read the OP, it seems there isn’t much/any scope to change the investments in the 401k. Does the US system allow for money to be transferred from a 401k to another similar vehicle that offers more investment choice, while leaving the original 401k open to continue accumulating contributions? This is fairly straightforward to do in the UK pension system without losing any tax-efficiency, no idea about the US. It’s fairly uncommon, certainly without advice from a financial planner. But yes, potentially this could add value given the OP is still ~20 years from planning to access the money.
Correct. And I might be worth it to me to get professional input at least to set something up.
After all, I still use a professional account instead of doing my own taxes even though I could because “outsourcing” that task to someone else is my choice and works well for me. It’s not my first recommendation to most people in my income bracket, unless they have significant side income.
I also dropped some money this year on getting legal documents regarding power of attorney, medical power of attorney, and my will done. That’s in part because I have few living relatives and it’s also nice for others to have some idea of what I want done in the event of my demise. While I do not have a great deal of monetary wealth I do have preferences for what happens to my stuff, some of which is actually antique, when I am no longer on this mortal coil. The POA’s are so if I am incapacitated someone can manage my affairs until (I hope) I recover fully.
My initial research indicates that hiring a CFP would probably be in a similar cost range to what I spent on “estate planning” with the attorney. So it is within my means, if I choose that option.
Another thing to remember is that I used to be solidly middle class - remember, I used to have the very expensive hobby of flying airplanes. I’ve done a lot of this sort of household money management, like getting out of debt and sticking to a budget, all before and the second time around it’s easier than the first. However, I’m now behind rather than in front of 30 years of working which changes the equation somewhat.
But, before I hire a CFP I’ll want to do some research on my own - which this is part of. Just one part of.
I believe while you are working for an employer your money must stay in their 401K. Once you leave you can roll it over to another 401K that has more options.
This is all very (unfortunately) true. And it alone is a good reason for people to set up an IRA or Roth outside of their employer’s retirement plan (be it a 401k, 403b, SIMPLE, etc.) - it gives you flexibility both in terms of investment options as well as where you go to seek advice.
The number one most important thing you need to find when taking investment/retirement advice is understanding the advice given. There are a lot of people super-eager to throw out their 2 cents of advice when it’s not their retirement on the line. And that’s equally true of people in my industry - there are too many clients that I work with who come from somewhere else, and have been set up in a product that they don’t understand, and start making bad decisions because of it.
If you do contact a CFP, and decide that a fee-based plan is too expensive for your taste, your 401k should have an advisor attached to it, who is required to offer assistance as needed. (I’ll also predict their suggestion will be a Roth in an account with their brokerage, and they’ll tack on a 1%+ fee. That’s not necessarily a bad thing, considering that they also have to give advice on your larger 401k balance.) I view my job as one of a mentor - I have to present a number of different options to a client. give them advice on how each of them works, what their benefits and downsides are, give them my preference, and let them decide.
It entirely depends on how the plan was set up. I’ve not seen any that allow that, but they’re out there.
Thanks for your responses - looks to me like you’re one of the good ones 
. I had feared from your initial comment that you might be one of the bad ones such as you describe, either looking for unjustifiably hefty fees upfront or wanting to sell something that is ‘free’ but gives large commissions to the planner (which of course are ultimately paid by the investor as part of the cost of the product). No offence meant (I don’t remember any of your previous posts and I didn’t want to judge based on one line of text, hence my initial question).
Frankly, I just loaded the extra money into my 401(k), figuring the company has hired investment professionals to manage that money, maxing out the allowable contribution for someone approaching 60. I’ve made some choices about how that money is allocated - pre-election I moved everything into a fund that was basically a cash option, fearing what our current political state might do to stocks. I gambled on the wrong side of that, maybe, as the market still shows gains, but I’m going to leave it until the end of the first quarter next year.
My farm is paid in full. My only debt is a rental home I own. I have 2/3 equity in that and it should be paid off when I’m ready to retire, to give me a nice second source of income plus a house in town if farm life gets to be too much as I age.
Considering I’m a single woman without a college degree, I’ve done okay.
StG
Bolding mine. IMO, @broomstick, you should be looking at “Fee Only” CFPs. These professionals will give you financial advice at an hourly rate, but do not sell investment products. Mine charges about $300/hour, and I have never needed more than a 1.5 hour consult – it helps to have all your questions written down before you start. My CFP also offers the option to “manage” my portfolio. But I would never give anyone else, fee only or with a brokerage, the power to buy/sell investments on my behalf, no matter how much I trusted him/her.
If you trust your accountant, he or she may be able to recommend a good Fee Only CFP. I’ll pm you the name of mine (in CA) if you want.
I’ve done both, and as I said, a session with my CFP runs to a max of about $500. The estate plan was about $7000 (though it’s probably more complex than yours, since I had to set up a special-needs trust).
When you retire, you don’t have to leave your 401k with your employer; you can roll it over to another investment firm that will offer more investment choices. I’ve got mine with Fidelity, and they’ve been excellent so far, but you should do OK with any of the big low-fee firms (like Vanguard or Schwab). I echo the advice to put as much of your $5000 as you can into a Roth IRA (Fidelity or the other brokerages will set one up for you). I wish I had done it.
Good luck!
Yes, again, that’s part of the current research - figuring out what questions to ask, as well as what I want in 5,10, 15, 20, etc. years.
Actually, there is a certain appeal to that for me although I know you still have to keep an eye on things. It’s like the guy I use to sell stuff for me on eBay - it’s a good situation, but I keep an eye out to, let’s say, keep honest people honest. So far it’s been win-win, but I’m also aware that not everyone offering such a service is as honest and ethical as my current guy, nor does everyone have the same goals I do (my current guy understands I want profit over speed - I have room for storage and can afford to take time to unload things. Other people emphasize speed over everything. What’s your priority?) It comes down to the fact I’m pretty crap at selling things on eBay and this guy is really good at it.
It’s relevant to investments because right now I don’t know enough to be good at investing, so finding someone who IS good at it and can be trusted not to screw me over would be wonderful. But I suspect in this area I’ll have to educate myself and learn how to do this on my own.
I’ve got feelers out there, thanks 
Yep. My “estate planning” was a package deal for $450 - but then, it was a lawyer I used before and he knew how thorough I am at coming in knowing what I want and having it organized. What he did was basically translate what I said into legalese and ask one or three questions to clarify things or make sure I was aware of certain details of the law. And it was very simple. Most of the work went into the POA’s, not the will. No trust set-up involved.
The prior thing I’d used a lawyer for was to straighten out legal confusion over my legal name - it was stupid but due to the RealID bullshit and bureaucratic error I wound up with one name on my pilot’s license and a different name on the ID that would allow me into the airport. Which was just whack. THAT cost me $700 to straighten out, but in that case all I did was tell the lawyer what I wanted my legal name to be, provided the required documents (which I already had) and she did absolutely everything else, which also included a court appearance which of course increases the price of anything.
So… like I said, a CFP for what I need would probably be in the same $300-800 price range. I suspect the more I do beforehand the less I will have to hand over to someone else. I have found that expert opinions can be well worth the fees because they’ll know about pitfalls you won’t.
Fresh post, because new questions.
I’ve heard a lot about Vanguard, Schwab, and Fidelity. How do people here view them? I’ve got a friend who is VERY gonzo on Schwab right now, but then he does that every time he changes to a new firm/advisor. Also, he’s one of those guys who’s convinced he’s just barely into the middle class but in reality he’s actually quite wealthy.
How good/useful are books like *Investing for Dummies" and “Complete Idiot’s Guide to Investing”?
Any other beginning-level reading you’d suggest?