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Hidden fees?


KandJBm

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Where did I post that I wanted to use an FA?

I think you should read what I posted. This is what I posted "Myself, I have no desire to use a FA. I will just stay with indexing/EFTs funds." I don't see any words in there about me using an FA now or in the future.

Of course you agree with using an FA as you use one.

 

 

All I suggest is that people do some reading and looking at the market and see what index funds can do for them. I think it is implied that after you read about index funds, than you can make the decision to use them or not. Somehow you seem to think that I have suggested that EVERYONE do their own investing regardless.

What I suggested is that one should understand the market by reading about it. Here is my suggestion that I posted before "I am trying to get people to understand that it isn't difficult to do your research yourself, or to read about the market and then make decisions that you allow an FA to do for you at a cost."

 

"There is much more involved in a good financial plan that just numbers." Gee I never knew that.

Where did you get the idea that I am totally in the market or recommend that others be totally in stock funds? I believe I posted that I have both BONDS and funds. Did I post what my split was? NO. It might be 90 percent in Bonds. Also I might have Oil stuff. How about real estate? Is that a good financial plan? It is not for me, but it might be for others.

 

I guess you just take the word of your FA that you are in a good mix. (I don't believe that). So if s/he said that a mix for you would be 90 percent stocks, you would just go along? No, because you have taken the time to learn the market and yourself.

If your FA said that s/he was putting you into 50 percent real estate as the market was surging, What would you say? I suspect because of your knowledge you would drop him immediately. Is that from knowledge or what?

 

By the way, my TOTAL return was not 16 % or 12 % . It was lower but my stock funds were 12% and I do not get in and out of funds.

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Index funds are pretty good today but I think that it is market conditions that make them so. I use index funds and others and made what market conditions allowed. However, the market changes and there were times that the risk/reward didn't favor stocks at all. A few years back my Mom asked for my advice. At the time municipal bonds were paying 13%. An all bond fund worked well for her for a few years. When market conditions changed we added some index funds. I don't use a FA but I do my homework. Some are not interested in that. I feel there is a lot more to the market than index funds and a FA can be a useful addition for some. The market changes and provides new opportunities for those ready to take advantage.

Randy

2001 Volvo VNL 42 Cummins ISX Autoshift

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Index funds are pretty good today but I think that it is market conditions that make them so. I use index funds and others and made what market conditions allowed. However, the market changes and there were times that the risk/reward didn't favor stocks at all. A few years back my Mom asked for my advice. At the time municipal bonds were paying 13%. An all bond fund worked well for her for a few years. When market conditions changed we added some index funds. I don't use a FA but I do my homework. Some are not interested in that. I feel there is a lot more to the market than index funds and a FA can be a useful addition for some. The market changes and provides new opportunities for those ready to take advantage.

I also vary the investment type depending on conditions. Or should I say, I do it in conjunction with my ML advisor. On my shadow portfolio I do that as well. You have to take advantage of what is paying well (considering risk). I also diversify outside of the market. You cannot have all your eggs in a single basket.

Jack & Danielle Mayer #60376 Lifetime Member
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We flip the funds in our USAA portfolio too depending on the market. we keep the tech and one more, but the other two vary every few years with the market. We get their input as the USAA investment advisors are not on commission.

RV/Derek
http://www.rvroadie.com Email on the bottom of my website page.
Retired AF 1971-1998


When you see a worthy man, endeavor to emulate him. When you see an unworthy man, look inside yourself. - Confucius

 

“Those who can make you believe absurdities, can make you commit atrocities.” ... Voltaire

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I don't use a FA but I do my homework. Some are not interested in that. I feel there is a lot more to the market than index funds and a FA can be a useful addition for some. The market changes and provides new opportunities for those ready to take advantage.

There are very few amateurs who are as expert or who have the resources available that a professional has. Of course, doing it yourself does avoid some expenses that come with the services of a real expert so the question is whether or not those services are worth that cost. I'll not get into that debate since some who will never accept that anyone is expert enough to do better than they do for themselves. It is very easy to make any claim you wish on public forums as no proof or supporting documentation is required here so be very careful about what claims you accept when you risk your life savings. If things go wrong you won't find much help from those who have been sharing their expertise.

Good travelin !...............Kirk

Full-time 11+ years...... Now seasonal travelers.
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I believe the expert on experts forgets that considering an FA a professional begs the question professional what? And what credentials make a professional? It can be devastating if one just picks one on the advice of a fellow who may be getting scammed themselves, and not know it.

 

I believe the topic was whether the OP could find out what hidden fees he might be subject to with his retirement plan but never answered, unless I missed it, whether he could actually withdraw his funds to move or rollover to another plan or institution.

 

If you get scammed by an FA I doubt any of those who blanket say that they assure you of professional status have the credentials to say that with authority. Otherwise if they knew enough to evaluate the knowledge of he FA, they would have to have at least the knowledge of the FA they are investigating.

 

Overgeneralizations are always false, including this one. :rolleyes:

 

There are folks who hang out their shingles as FAs who are scammers looking to defraud unsuspecting investors, of that there is no doubt either. Saying that going with an FA is always the answer is an oversimplification. There will be a few criminally inclined folks in all professions, then the well meaning incompetents, and then the average group which makes up the bulk. Remember that half of all physicians graduated in the bottom half of their class. ;)

 

Here are ten things to look for to avoid being defrauded by an FA:

http://www.scambusters.org/financialadvisor.html

This next one has four:

http://www.finweb.com/mortgage/4-warning-signs-of-financial-advisor-fraud.html#axzz3X1GLBNDy

Here are 80 fraud complaints about financial advisors from the website Ripoff Report, including some big names:

http://www.ripoffreport.com/reports/directory/financial-advisors

Here's one about a long time, established FA, going to jail:

"long-time Seattle financial advisor was indicted today by a federal grand jury with 23 criminal counts, including wire fraud, money laundering and investment advisor fraud, announced U.S. Attorney Jenny A. Durkan. Mark F. Spangler, 57, of Seattle is accused of diverting investor money from accounts he managed to risky start-up ventures in which he or his investment firm had an ownership interest."

http://www.fbi.gov/seattle/press-releases/2012/seattle-financial-advisor-indicted-in-46-million-investment-fraud-scheme

 

As I said earlier, not all FAs are frauds, but some are. Overgeneralizing that FAs are all professionals disregards the fact that the Warren Buffets of the investment world are far and few between. You can find some who make no money or less than other FAs but who are honest and try.

 

It's best for some to learn enough to decide whether they want to pursue it further and do their own, then learn enough to manage it. It's best for others to use an FA and learn enough to be able to separate the wheat from the chaff. Articles like I linked to can help there too.

 

The one thing I do know. If I do it myself, I'm at least dealing with an honest broker. The people who got took in the above links were not all fools either.

 

The bottom line is whether you choose to do it yourself, or hire an FA, regardless of what one thinks, both demand due diligence and effort to decide who what and how. Choosing an FA demands effort too, if one cares about the results.

 

There is no simple solution. One size does fit all of that size.

 

With due diligence an FA might be the solution. With due diligence managing your own investments might be the solution. Certainly none of those proposing an FA will be there if you get scammed either.

 

The only way to do either is to do and learn all you can. And then it's still a risk that only each can reduce themselves. I don't have the answer for anyone else but me. Most scoffed at what I did with some discretionary funds I had looking for a place to make money. But not now. The key was discretionary funds, not my life savings or accumulated investments. Had it been them it would have been even better in hindsight, but I'd have never risked it all going in.

 

So KandJBm,

I believe this thread has answered your original question and then some.

 

Safe investing!

RV/Derek
http://www.rvroadie.com Email on the bottom of my website page.
Retired AF 1971-1998


When you see a worthy man, endeavor to emulate him. When you see an unworthy man, look inside yourself. - Confucius

 

“Those who can make you believe absurdities, can make you commit atrocities.” ... Voltaire

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RV: " There is no simple solution. One size does fit all of that size.

 

With due diligence an FA might be the solution. With due diligence managing your own investments might be the solution.

The only way to do either is to do and learn all you can. And then it's still a risk that only each can reduce themselves. "

 

Obviously I couldn't have said it better, as I clearly did not say it better, and/or explain myself sufficiently. Thank you.

 

 

Interesting that the OP has stated that he is reading info by John Bogle, the father of index funds.

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A friend of ours has got us reading Jack Bogle. Are you familiar with any of his books? He seems conservative and was the founder of Vanguard (this is not meant to be a plug for V.)

 

About the 8%, is that what we should expect from here on out over the long run for a "balanced" (whatever that means) retirement account? Here is an interesting, but also depressing video (titled U.S. Retirement System a 'Train Wreck') of Mr. Bogle that does not like the 8% figure. Is he being too pessimistic? http://www.morningstar.com/Cover/videoCenter.aspx?id=571363

I was going to suggest Bogle's "little book of common sense investing". Read it once,then read it again. Everyone's personal experiences and comfort level will be different here. I am personally not comfortable with a fund company sucking the cream off the top of my funds. I've been self managed since the 80's and done very well without lining the pockets of some fund house where I'm just a number.

 

 

You're faced with a complex decision that has serious ramifications for your financial well being for the rest of your life. You've received a lot of good and valid advice but I get the sense that you feel very uncertain about processing that information and applying it to your situation. Without some fundamental knowledge of investing and all the related issues it's very hard to know whose advice to follow. Most financial planners make their money by giving you such advice and charging you a percentage of your assets under management. Here's an alternative you might consider.

 

Consult an attorney or CPA whom you trust already have a relationship with or perhaps can be referred by a trusted friend. Explain your financial situation and the decisions you face. Ask for their professional advice as to how to proceed in your situation. This way you should expect professional advice (which you're paying for on an hourly basis) rather than getting tied in with an advisor who has a financial interest in having you bring all your money to him for management. This will be the best way to get unbiased advice about how to handle your pension withdrawal.

 

If at some point you feel it appropriate to consult a financial advisor to help you manage your money consider using an independent advisor who will consult with you for an hourly fee. These are not so easy to find. Nearly all financial advisors want to only work for a percentage of assets under management or, worse yet, work for "no fee" but make all their money by selling you "investments" for which they get a lucrative sales commission. It is my opinion that it is best to use a financial consultant just like you'd use a professional like an attorney or a CPA. When you need help or advice go to them with your questions and pay them for their their help according to the amount of time and effort they spend on your problem. The hourly fees might seem high but in the end it can be far less expensive than the alternatives.

 

Here's one place to start looking:

http://garrettplanningnetwork.com/find-an-advisor-2/

 

---ron

 

I agree with Ron and we just used the Garrett Network he linked above to find an adviser for a 2nd opinion after we got a "go for it" recommendation from the first retirement planner we went to. We'll be retiring in our 50's in 2016. It was comforting to know that our adviser was not making recommendations that were creating financial gains for her. Her package to complete our forecast, recommendations, and retirement plan was about 60% of what a larger "fund house" had quoted us and far more personalized service. But no one here is going to have a "right answer" for you. It's personal and your comfort level is most important.

Cheers,

 

Don

 

 
 
 
 
 
 
 

 

 

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Folks that have decided they want or need to hire someone else to manage their money are faced with the rather daunting task of finding a good one. As several folks have noted, picking the wrong financial advisor (FA) or money manager (MM) can be very hazardous to your wealth. And picking a good financial advisor is especially difficult for the people that really need one. If one doesn’t know much about finances and investing then one, by definition, doesn’t have the knowledge needed to evaluate FAs. There is a way to address this problem and that is to hire an unbiased consultant to help you select a MM that will best match your individual needs. Here’s an article with some background information:

http://www.managerreview.com/pdf/Choose_a_Manager_PDF.pdf

 

And at that same website you can learn more about hiring such a consultant or gaining access to their evaluations of money managers.

http://www.managerreview.com/index.php?file=c-static&page=faq&top1=aboutustop

Ron Engelsman

http://www.mytripjournal.com/our_odyssey

Full-Timing since mid 2007

23' Komfort TT

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Folks that have decided they want or need to hire someone else to manage their money are faced with the rather daunting task of finding a good one. As several folks have noted, picking the wrong financial advisor (FA) or money manager (MM) can be very hazardous to your wealth.

Absolutely true but don't let the nay-sayers frighten you unduly as these people are licensed and regulated, much as most professionals are. While there is no doubt that not all of them are equal, there are very few who are actually out to cheat you and there are ways to avoid the bad ones. Ron's link is an excellent one that I too would recommend. I also like this article from the Wall Street Journal as well as this one that comes from US News ~ Money. For some ideas on how to interview a potential financial adviser I suggest Forbes Magazine's ~ 10 Questions to Ask a Financial Adviser. The person that I have been with now for quite a long time is quick to suggest that you not do business with an adviser who is not upfront about where he gets his fees and makes his money. I'd consider this subject to be one of great importance. Most of us on these forums are just amateurs the same as you (the reader) are and the fact that I've made a lot of posts on a subject don't mean I'm more expert on a subject than others but there are experts out there who can reduce the risk you take when investing.

Good travelin !...............Kirk

Full-time 11+ years...... Now seasonal travelers.
Kirk & Pam's Great RV Adventure

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The only thing needed to be said is that whatever you decide, it takes a lot of research and a learning curve. It is no simpler to be sure of an FA, as it is to be sure about your own planned strategy. I am sure however, that every one of the folks bilked out of their money in my links above surely cared about their money as much as the investors who manage their own money. As does everyone doing their own thing or using an FA. One size fits all, of that one size. Learn enough to decide which, FA or self managed. Then learn enough to make great choices either way. Don't feel alone, we all felt lost and had to go through as much learning curve s we needed too.

RV/Derek
http://www.rvroadie.com Email on the bottom of my website page.
Retired AF 1971-1998


When you see a worthy man, endeavor to emulate him. When you see an unworthy man, look inside yourself. - Confucius

 

“Those who can make you believe absurdities, can make you commit atrocities.” ... Voltaire

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Absolutely true but don't let the nay-sayers frighten you unduly as these people are licensed and regulated, much as most professionals are. While there is no doubt that not all of them are equal, there are very few who are actually out to cheat you and there are ways to avoid the bad ones. Ron's link is an excellent one that I too would recommend. I also like this article from the Wall Street Journal as well as this one that comes from US News ~ Money. For some ideas on how to interview a potential financial adviser I suggest Forbes Magazine's ~ 10 Questions to Ask a Financial Adviser. The person that I have been with now for quite a long time is quick to suggest that you not do business with an adviser who is not upfront about where he gets his fees and makes his money. I'd consider this subject to be one of great importance. Most of us on these forums are just amateurs the same as you (the reader) are and the fact that I've made a lot of posts on a subject don't mean I'm more expert on a subject than others but there are experts out there who can reduce the risk you take when investing.

We have been learning a lot lately, reading here, reading John Bogle and other articles recommended by a friend who won't offer me any advice except things to read, even though he manages his own retirement funds. He knows my and my partner's educational and work backgrounds and says if we read enough we will be able to make some good educated choices. So we read and learn and get confused and read some more. It is fun actually and it helps to have his direction to limit the overwhelming number of books and articles on financial matters that we could choose from.

 

This quote from your recommended article in the Wall St. J. really caught my eye and seems to agree with what Bogle has been saying.

 

Beware of market-beating brags. Warren Buffet outperforms the market averages. There aren’t a lot of people like him. If you have an initial meeting with an adviser and you hear predictions of market-beating performance, get up and walk away. No one can safely make such guarantees, and anyone who’s trying may be taking risks that you don’t want to take.

 

Neither of us happen to be great risk takers with our savings. In other areas of life we might be considered 'carefree as the wind', but even then it is more because we at least think we know what we are doing out there in the wind.

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Yes, very well said. One important thing to look at is how well did the mutual fund, etc. or even a FA do during downturns?

There are always young'uns out there in the early stages of their careers who may be great salesmen but have they managed accounts through market downturns? If so how did they do?

Back on the road again in a 2011 Roadtrek 210P

2011 Tahoe 4x4, 2006 Lexus GX470, 2018 Ranger XP1000, 2013 RZR 570LE
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Looking at performance in downturns is the single most important thing you can do. Also, thinking about WHAT you will do in a downturn is important. It requires thought to come up with your strategy for downturns, what your triggers are, and have a WRITTEN plan to follow. Otherwise it will not happen in most cases.

 

Downturns will totally screw up your averages over a short timeframe. Especially if you are withdrawing during that time. Over the long term they are not much impact...but long term is 30 years or more....and I don't HAVE 30 years.

Jack & Danielle Mayer #60376 Lifetime Member
Living on the road since 2000

PLEASE no PM's. Email me. jackdanmayer AT gmail
2016 DRV Houston 44' 5er (we still have it)
2022 New Horizons 43' 5er
2016 Itasca 27N 28' motorhome 
2019 Volvo 860, D13 455/1850, 236" wb, I-Shift, battery-based APU
No truck at the moment - we use one of our demo units
2016 smart Passion, piggyback on the truck
-------------------------------------------------------------------------
See our website for info on New Horizons 5th wheels, HDTs as tow vehicles, communications on the road, and use of solar power
www.jackdanmayer.com
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There are a lot of books out there that you can read regarding this issue. I have read a number of them. If I wanted a FA,

they should be fee paid. I would not give them my money or let them control my money. I have always managed my own

retirement funds using mutual funds thru my 403(B) account at my employer. They are 100% no load and no 12(B) costs with low

management costs. Stocks have been on a great run during the past 6 or 7 years so if you didn't get over 10% per year over that time, something is wrong?

I also remember in 2008 when they were down about 40%. That is something not to be forgotten! I have always done without over the last 30 or so years so that I could fund

a good retirement.. I am now 65 and I will be 66 in a few months. I will apply for SS and the better half as well and my retirement account has more the 1.2 million dollars and I will

retire in August. I also remember my mother and father in their retirement years and they required a lot less when they reached their mid to late 80s then they did in their 60s or 70s. Good Luck

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One good thing about retirement is - lots of time for reading. And boy have we been reading. We split up the books and compare notes as we have been reading:

 

Security Analysis by Benjamin Graham

A Random Walk Down Wall Street by Burton Malkiel

Little Book of Common Sense Investing by John Bogle

Stocks for the Long Run by Jeremy Siegel

The Four Pillars of Investing by William Bernstein

 

Given our backgrounds in math (but not finance or economics) we have been having a lot of fun reading and learning in this new-to-us mathematical area.

 

On our original question of hidden fees, I think the most important thing we have learned is that indeed some fees are "hidden." That is, there can be more of them than appears on the surface. For example the "expense ratio" of a particular mutual fund usually only includes the payment for the manager(s) of the fund and does not include other possible fees, such as: "redemption fees, brokerage fees, back-end load fees, inactivity fees, 12b-1 fees, transfer fees, minimum equity requirement fees, commissions, the cost of limit orders, and sundry overheads like consultancy costs, bookkeeping and accounting and even more...." Wowie!

 

After reading major portions of the books listed above, we have many questions, but one in particular for y'all.

 

If you are using a particular percentage (such as, 5% or 4% etc.) for annual withdrawals from your retirement accounts to supplement Social Security retirement benefits, what value do you use to estimate the most likely true value of your retirement accounts? In other words, as we look at the current value of our retirement accounts, how much faith should we put in that current number, given some likelihood that the stock and bond markets are currently elevated. How elevated? How in the world does one evaluate the creditability of the current market evaluation of our investments in stocks and bonds when we see the roller coaster rides up and down in stock and bond valuations over the last twenty years? It seems to us that when retirement fund valuations experience such huge swings in valuation (up 100% then down 50%, etc. etc.) it makes planning withdrawals over a twenty year retirement more than a bit of a puzzle. Comments on how you try to take this roller coaster of current valuations into account would be appreciated.

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Each retiree's situation is so different that I believe it would be hard to take anyone else's approach without doing a lot of further research. For further research you might take a look at this website to see if it helps answer your questions regarding withdrawal rates - I think there is a lot of good unbiased information at this site. AAII also has many unbiased articles on this subject - here's a recent one.

 

There have been many new approaches advocated in recent years but after all is said and done they all seem to center on something like the old "4% initial and adjust for inflation" approach. But there are many variations on that. A quick Google search will keep you reading for weeks and then still wondering which one makes the most sense.

 

Regarding "true" vs. "current" value of market. You can get some sense of this by looking at a long term chart of the S&P 500, look at where the market is now vs. the long term exponential regression, project over your expected withdrawal period, assume reversion to the mean over market cycles, and get some sense of what you term "true" value that you want to assign to your retirement portfolio when you make your withdrawal rate decision.

 

---ron

Ron Engelsman

http://www.mytripjournal.com/our_odyssey

Full-Timing since mid 2007

23' Komfort TT

2004 Chevy Avalanche 4x4 8.1L

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Each retiree's situation is so different that I believe it would be hard to take anyone else's approach without doing a lot of further research. For further research you might take a look at this website to see if it helps answer your questions regarding withdrawal rates - I think there is a lot of good unbiased information at this site. AAII also has many unbiased articles on this subject - here's a recent one.

 

There have been many new approaches advocated in recent years but after all is said and done they all seem to center on something like the old "4% initial and adjust for inflation" approach. But there are many variations on that. A quick Google search will keep you reading for weeks and then still wondering which one makes the most sense.

 

Regarding "true" vs. "current" value of market. You can get some sense of this by looking at a long term chart of the S&P 500, look at where the market is now vs. the long term exponential regression, project over your expected withdrawal period, assume reversion to the mean over market cycles, and get some sense of what you term "true" value that you want to assign to your retirement portfolio when you make your withdrawal rate decision.

 

---ron

 

 

I'll add to Ron's. One of the things we did, was carve out a portion of our investments and place them in a fixed rates of returns. We have two different such annuities. (And yes, I know annuities are evil:)! But, we met our desired level of retirement income, with these in the mix. They can a serve a purpose for some people, and are just another tool in the tool box.) As mentioned, many differences in where different retirees are coming from that will shape how they best should approach this phase of life in regards to their nest eggs. We have an OK pension for me, and we also have some rental's kicking out some income. Another personal bit about us is that my wife is 5 1/2 years younger, going to turn 57 in June. And, she does not like finance stuff at all, well - except for the part that allows her to go shopping:)! So, one of my goals was to try to set up an retirement account that was semi automatic if something were to happen to me, and safe. These two annuity buckets, plus I'm funding a hybrid life insurance up to the my age of 75, with balance remaining - will be enough for her along with my SS Survivor Benefit for her to live as she does today. (We have a folder of things for her to do if something happens to me. I review this quarterly, making only minor changes. The key thing, is for her to 'do nothing' for the first full year. Then we have a roadmap for her to follow to liquidate our rental properties and park those funds. Heck, even have a local 40 something CPA lined up for her to go in and give our Turbo Tax account too - so they can take over the taxes!)

 

On our nest egg. When I worked with my Financial Planner/Advisor, we laid this out in such away that as the market was doing well, we'd draw down from that those buckets of our investments exposed to the market. When, not if, the market dips - we'll reduce or stop pulling from market exposed investments, and lean heavier on the Fixed side to weather the storm. (A loss is only a loss, if you jump out while down.) We have buckets traditional Rolled Over IRA's from our 401K's. And we both had Roth 401K's available to us in our last years of work, so we have rolled over Roth IRA's too. This allows us to strategize for tax impact. The tax implications, any how you play the drawdown, can make a difference in the overall nest egg.

 

Only been about 2 1/2 years since we shifted over form 'work mode' and 401K/Roth 401K's into our retirement positions. The only tune up we've done in this time, was towards the end of last year, I had us start a 6 month period of monthly changes to reduce our bonds exposure.

 

Best of luck to you, and all, as you transition into retirement phases. Do your homework, make the best decisions that you can at that time. Be as conservative as you feel is your comfort zone (Note I said conservative vs aggressive:)!). Keep an open mind and attitude for changes, and a periodic review on how things are going. But then get out and have some fun - it's what this is all about!!

Smitty

Be safe, have fun,

Smitty

04 CC Allure "RooII" - Our "E" ride for life!

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Regarding "true" vs. "current" value of market. You can get some sense of this by looking at a long term chart of the S&P 500, look at where the market is now vs. the long term exponential regression, project over your expected withdrawal period, assume reversion to the mean over market cycles, and get some sense of what you term "true" value that you want to assign to your retirement portfolio when you make your withdrawal rate decision.

 

---ron

Thanks for the various links. We have been reading them and finding a lot of good information to consider, or should I say "bad" information in regards to the current vs. "true," or the apparently more common term, fair market valuation. Looks like a number of analytical tools for estimating fair market value for stocks puts the current valuation at about two standard deviations above fair valuation. Two standard deviations is not a good sign for future returns to say the least. We will be taking that estimate into account when we decide what the fair or true value of our retirement portfolio (don't think we ever called it that before!) is for planning out withdrawals over the final years of our lives. Oh well, we previously thought maybe we were going to live a little high on the hog, but no so much now. Good to plan, however, with more realistic numbers than be blind sided by having to cut way, way back on spending after getting used to a "richer" life style than we can maintain.

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Just finished skimming through all the past posts and realized that I had not mentioned that I can not take a lump sum from my Michigan state employee retirement fund. That "old fashioned" or defined benefit pension plan only represents a small portion of my working years. So our retirement planning is mostly concerned with our 401k funds.

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I also have one of those "old fashioned" pension plans. I compute its present value and consider that as a part of my overall portfolio that I would otherwise allocate to bonds or other fixed income investments. Same with social security.

 

---ron

Ron Engelsman

http://www.mytripjournal.com/our_odyssey

Full-Timing since mid 2007

23' Komfort TT

2004 Chevy Avalanche 4x4 8.1L

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  • 2 months later...

 

Regarding "true" vs. "current" value of market. You can get some sense of this by looking at a long term chart of the S&P 500, look at where the market is now vs. the long term exponential regression, project over your expected withdrawal period, assume reversion to the mean over market cycles, and get some sense of what you term "true" value that you want to assign to your retirement portfolio when you make your withdrawal rate decision.

 

---ron

We have spent a lot of time looking at these charts (coupled with our reading of other authors) and come away with a pessimistic view of future, long term, stock market valuations. Do they give you the same negative view? If reversion to the mean kicks in as it tends to do, but seems to be delayed by the Federal Reserve's so-called "easy money policies," then the future does not look good to us. The "Real Inflation Adjusted S&P Composite" has been above the exponential regression value since the mid 90s (small, quick dip barely below during the housing bust). This does not look good for future valuations. The other charts all show current Q Ratio valuations higher than all other historical high values except in 2000 and all those high values were followed by large drops. This comment about using the Q Ratio seems appropriate, "This metric is more appropriate for formulating expectations for long-term market performance." That is exactly how we think about our "fair" or "true" portfolio value, as a long term view, rather than its current value (short term view) which seems likely to be a bit bloated. Your thoughts would be welcomed.

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Do your research, take your guess and put up your money. Your research may pay off. But, just the same it may not. It is a risk!

 

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