I took the lump sum from State Street directly to Fidelity and plan to invest in index funds as soon as the market stabilizes. I keep getting emails and calls from financial advisors telling me they can generate better returns and tax strategy.
Perhaps this is not the right forum, but would like to ask the recent retirees. Did you go with a financial advisor? And if so, what are you paying them to do?
First, congratulations on taking the lump sum. You made the right choice. You’ll do better than Ford’s pension monthly payout. A lot of good examples in this thread. You don’t need a financial advisor. Get a book or two on financial planning in retirement, and take baby steps. Also lookup Rob Berger on YouTube, he is not going to sell you anything.
Institutional investors on Wall Street hate defined pension plans. We are thankful we got this opportunity because anyone hired after 2004 has just 401K plan
My fiduciary only charges 1%, however I did put some funds in an annuity having a guaranteed death benefit for my wife then son. That actually came to 2% with the death benefit rider. Yes, it's high but only put 1/2 of funds into that so there would be something guaranteed for our son. I have not touched my 401k because I did find other employment.
I'm managing myself and moved nearly all accounts(HSA, IRA and ROTH IRA, Brokerage, Checking) to one provider (Fidelity in my case) to make it easier to manage.
I retired on 11/30 and took my lump sum and transferred it to Vanguard. Before that I transferred/rolled over 50% of my 401k to vanguard. If you just leave your money in the settlement account you will make ~4.5% but it is pretty easy to do better. I purchase some high dividend stocks and two bond funds. They are all doing better than 6% plus I put 500k into an annuity paying 5.4%. As of 2/28 ytd I have made 28k. You can do it just do not buy anything that is risky, stick with ETFs they are managed by pros.
Unfortunately Financial Advisors will recommend what makes THEM money NOT YOU.
Watch John Oliver's segment https://www.youtube.com/watch?v=gvZSpET11ZY
Like mentioned by @1wwh+1lomAclq it would be best if you spent some time learning about saving for retirement. If you know a knowledgeable trusted family member or friend, it would be best to consult them.
You don’t need a financial advisor. While you are retired spend some time learning about the market. It will keep your mind fresh and you basically pay yourself. That said, place your money in multiple areas. Diversify and understand the financial risks with each of your decisions of a potential recession. Interest rates are high everywhere so you can’t go wrong putting it into CDs offered by multiple banks. There’s also Robinhood offering 4.15% interest with a gold membership and you can withdraw the money at any time. Just know that if Robinhood collapsed you probably wouldn’t get your money back but that’s very unlikely. Avoid real estate at this time.
I also moved the entire lump sum to a rollover IRA with Fidelity. Bought some Tbills and 3-5 yr CDs and a few target funds, but the vast majority is in FDZXX for now. Currently 4.47%. Look into that as a substitute for FDRXX. Also using my 401k for semi annual withdrawals for cash until age 59 1/2.
I’m managing my own finances and not willing to pay for it. I still have the option to touch base with my selected Financial advisor, but I don’t pay a management fee.
@OP here. Thanks for the replies. I did get a couple of 17 and 26-week T-bills, but most of it is currently in FDRXX money market. Not the best yield (~4%), but it is better than nothing.
Financial advisors scare me. It’s a lot of money to give up for 1% (one guy wanted 1.65% LOL). I suggested that I pay them an hourly rate whenever I need an “advice”. Most of them laughed at me, others got offended “how dare I suggest such an arrangement”.
@OP @dcm+1lomAclq has the right idea. I for one am putting 2/3 of my SSIP into short term CDs to generate some income and the remaining 1/3 is in equities and cash.
@bwv+1lomAclq mostly agree. But one has to consider risk in retirement, especially sequence of return risk. Some retirees realize they have won the game and totally de-risk to safe-fixed returns, which presently works well with current interest rates.
Others put money in Vanguard Wellesley/Wellington and let those funds manage the fixed income-equity mix. Others pay someone to manage their money.
The thing I don’t like about paying an investment manager is I take 100% of the risk and pay the investment manager whether they lose or make money. Enough prior investment managers/advisors have told me how their business models and incentives work that I tend to question the advice. Just one frugal guy’s viewpoint.
Time in the market is more important than timing the market. But I know what you mean. Try 20% every month for 5 months.
Vanguard advisor fee is .3%
1% is way too high.
I have $500K still in the 401K that matches the balance in my lump sum and Roths at Vanguard. I plan to spend down the 401K till 59 1/2, roll over the balance to VG then start pulling from where the advisor suggests.
You can't selectively sell investments inside your 401K to fund withdrawals. It takes equally to maintain your current investment mix.
If you have your money sitting there, take advantage of current interest rates and buy
If you are thinking you will have a long investment horizon then gradually buy some vanguard/equivalent funds. You can’t time the market
No need for a financial advisor. The fees erode your wealth. The fee loss compounds over time. For example if you have $500,000 and your financial advisor takes 1% fee annually. Over the span of 20 years that 1% is $110,095 loss of value. Said another way- if you were not paying 1% fee your portfolio would have $110,095 more $ in it. Just search of compounding interest calculation and do your own calculations. It’s eye-opening.
Best of luck to you, I find de-accumulation to be much more challenging than accumulation. But also do not want to give my hard earned $ to an investment advisor. Bogleheads have a lot of good info on web and youtube. They have tracks for retirees, and its free.
@OP. I like your optimism ... "as soon as the market stabilizes". That may take a while. Recessions are like the "reset button" of the capitalism, erasing the wrong doings during the good times. Investing before the recession is a big no-no, since you may lose it all.
We should had a big recession in 2020, during lockdowns. The problem is that no administration wants to be held responsible for a recession (losing votes and all that), so even as the tightening of the monetary policy should continue until it ends in recession, we have an administration willing to flood the country with money (undoing the monetary policy gains), and delaying the recession.