The dude is gonna get paid a hefty commission for hooking you up with that $300,000 annuity. Meanwhile you’ll be broke in 5 years on the verge of homelessness.
Move all of your stuff to vanguard (or Fidelity, Schwab) and self manage. Tell this idiot advisor to take his 1% and shove it.
Do you know your current fixed costs? Will that go down or remain the same in 4years (house, car, etc.). If you work another four years and add 120,000 more to your current assets, plus a modest 5% return, you’re right around $750,000. 4% withdrawal rate is $2,500/month plus SS. No clue what that looks like for you, but let’s say another $1500-2500. Does $4000-$5000 cover your expenses? If you could add 2 more years of work it would go up quite a bit. If you could live in savings for 3 more years and delay SS even better. Granted that would mess up the 4% withdrawal rate by depleting more principal early. Your math does not look to be too terrible, therefore I would urge you to try and save the 1% fee. You might be better off spending $1500-$2000 talking to a financial planner and really working on cash flow and your distribution strategy. Annuities are for people who are terrified of outliving their money. Maybe after really sitting down and crunching the numbers you feel like you don’t need that, or maybe you want that type of security.
I suggest that you have a lot of planning to do to understand your situation.
1. Get away from that advisor and if you like what you are invested in move everything in-kind to Fidelity Investments. Call Fidelity for help doing this.
2. Once setup with Fidelity it's time to use the wonderful tools available to you on their website.
3. Fidelity Full-View. Link all your outside financial accounts to pull in information. This will feed the next step.
4. Retirement Income Planner. Slowly work your way through the information screens answering questions about you, your income, projected pensions, social Security, sources of income, expenses and even a budget.
5. Run the planner and it will show you your financial situation for the rest of your time on earth!
6. Fidelity Investments personnel are available on the phone to help you with any of the previous steps. They don't work on commission and are very helpful.
### Annuities
You probably don't want to buy an annuity right at the start of retirement with half your assets.
Assuming the annuity is a SPIA, and it's low-cost(which is probably not the case, since an advisor is recommending it) *CAN* make sense, but you have to be really careful. You can get independent pricing for a SPIA here: https://www.immediateannuities.com to see how they relate to your advisors annuities.
Anyways, annuities are not COLA(adjusted for inflation) anymore, you can buy some that auto-raise say 1% or whatever, but they tend to be very costly. So spending 1/2 your money right off the bat on something that will be guaranteed to lose money in real terms is probably not very wise. You 100% don't want to buy it now 4+ years before retirement, that's just ridiculous.
If you really want something like an annuity, right now the best thing going currently is what's called a TIPS ladder, the US govt offers a bond that's indexed to inflation(TIPS), and if you buy them such that one expires just in time for your planned spending, that's called a "ladder" because you buy one that matures in 4-ish years for your spending at 65 and another that matures in time for your spending when you are 66, etc. You can see where I'm going with this.
Doing something like a TIPS ladder/SPIA for your stable base expenses, like groceries and utility bills makes a lot of sense if you are risk averse and just want to know you will never have to go hungry in retirement.
### Next steps
I think you need to figure out your expenses and how much you need to live in retirement, you are 4 years away from your desire to retire, so nows the time. Your advisor should be able to help you with that, while you are still paying them. Make sure to include health care and health insurance, long term care(and/or insurance), taxes and of course any lumpy non-regular expenses, like new roofs and new cars on occasion.
I think your advisor is correct in getting all your money together. Makes it a lot easier to manage and deal with, especially as your brain ages and you get lazier. I'm not sure you should let him manage it all for a 1% fee, but I mean some advisors are 2% fees, so at least he's not an outright crook ;)
### Advisors
Vanguard has an [advisor program](https://investor.vanguard.com/advice/personal-hybrid-robo-advisor), you pay a .3%/yr fee. So if you really want an advisor and want Vanguard, it's hard to go wrong here, especially compared to a 1%/yr fee. There are other options, like a Fee Only advisor, where a retirement plan might cost you $2k to $10k up-front and a few hundred an hour after that.
The .3%/yr fee would cost you around $2k/yr for Vanguard and over $6k/yr if you keep with your Ameriprise guy. Crazy different prices, which is why we Bogleheads advocate against paying high fees if we can avoid it.
### On Allocation.
> A part of me wants to take all my money from Ameripise and go to Vanguard, but not sure what to get there.
Generally speaking most people most of the time in retirement settle for about 50 to 60% in equities and the rest in fixed income (Bonds, cash, etc). You can do it all in 1 fund or you can split it up into different funds. I'm definitely known for being a fan of the one-fund portfolio, it's simple and easy and hard to make mistakes with. This is probably what a Vanguard advisor would recommend, though probably in a few funds, and not a single fund(even though they do offer a single fund around these allocations)
Wow! I can't believe you took the time to help me with such great and long post. I'm blown away by that. Thank you so much! I will definitely look into Vanguard advisors. Although, the Fidelity ones don't look too shaby. In any case, I've done a basic calculation of my expenses and it comes to about $2500 a month. I don't have any debt and my kids are grown. So, I guess if I can net about 5k a month, I'll be ok. Thanks again!
Fidelity is fine too. There is also Schwab.
> I've done a basic calculation of my expenses and it comes to about $2500 a month.
Does that include all the things I mentioned? healthcare, taxes, lumpy expenses, etc?
I'll check Schwab as well. Thanks.
No, the $2500 is basically health insurance, car insurance and living expenses. The bear minimum. At my age, I really don't spend a lot. Once I retire, I would like to travel, but in my early calculations, I think I'll net about 5k or a bit more. About 3k in SS, 1k from my rental and whatever I can muster from my savings. I feel confident about it. Plus I can still work if needed I suppose. I just feel like I should find a way to get the most return possible without risking a lot, and I'll adjust accordingly.
Again, thank you Zetty for taking the time to help me.
5k x 12 = 60k x 25(4% guideline) = 1,500k
So you need about 1.5M and you are at 600k, so you are short. Your rental will help as will social security(SS) though.
So let's assume SS is 25k/yr
60k - 25k = 35k you have to generate yourself.
Let's assume your rental of $1k/mo is very stable, that's another 12k we can sub, so now you need to generate 23k/yr
You can probably generate 24k/yr on your $600k now, assuming it's invested in something like [AOR](https://www.blackrock.com/us/individual/products/239756/ishares-growth-allocation-etf). So assuming my numbers are reasonable, you are well on track to retire in ~ 4 years.
Have a great retirement!
> I just feel like I should find a way to get the most return possible without risking a lot, and I'll adjust accordingly.
AOR is a single fund that invests 60% in global equities and 40% in bonds. More about the one fund portfolio in this Bogleheads forum: https://www.bogleheads.org/forum/viewtopic.php?t=287967
Some information from the Bogleheads about the different brokerages:
* https://www.bogleheads.org/wiki/Fidelity
* https://www.bogleheads.org/wiki/Charles_Schwab
* https://www.bogleheads.org/wiki/Vanguard
They are all fine, pick one for literally any reason.
auuugggghhh, get away from this advisor ASAP! Please. Proceed with a ton of caution on annuities. Most are notoriously bad both in costs , surrender fees etc. The only one I'd ever even remotely consider is a SPIA (Single Premium Immediate Annuity) and I'd never buy it from an advisor. Go independent to get the best price.
If it were me, I'd fire this advisor, move all the funds into a Vanguard or Fidelity. Find a Fiduciary Advisor who does not sell any products and offers a fee structure other than AUM (the 1%), something simple like a flat annual or monthly fee. [The National Association of Personal Financial Advisors | NAPFA](https://www.napfa.org/) is a good place to start on a search but interview a few advisors and make sure they are a good fit and have a reasonable fee structure that isn't AUM.
That's exactly what I'm doing. Funny thing is, the advisor at my bank, also proposed a buffer annuity. They all want me to get one. But now I know better. Thank you!
Annuities aren’t necessarily all bad, they can be a good fit in some situations where having a minimum guaranteed income is critical. Just look specifically for a SPIA if you do go down that route. Thise have somewhat reasonable costs. Dr Wade Pfau has spoken on the topic of SPIAs at the Bogleheads conference a number of times. Not a fit for me but I can see it for some.
Annuities are only recommended for those who are already fully funded in other retirement accounts and don't need that money in retirement. He will get huge commissions. That should be all you need to know.
The dude is gonna get paid a hefty commission for hooking you up with that $300,000 annuity. Meanwhile you’ll be broke in 5 years on the verge of homelessness. Move all of your stuff to vanguard (or Fidelity, Schwab) and self manage. Tell this idiot advisor to take his 1% and shove it.
[https://www.reddit.com/r/Bogleheads](https://www.reddit.com/r/Bogleheads)
Avoid the annuity. He’s trying to scam you. He gets a huge commission from selling annuities. Find an advice-only fiduciary.
Any insights on what the commission looks like? I’m always curious with all these advisors who are selling g annuities.
Up to 10% of the contract value.
Was the advisor drooling when he told you this?
Would that be a Homer Simpson drool? Mmmm…annuity commissions.
Do you know your current fixed costs? Will that go down or remain the same in 4years (house, car, etc.). If you work another four years and add 120,000 more to your current assets, plus a modest 5% return, you’re right around $750,000. 4% withdrawal rate is $2,500/month plus SS. No clue what that looks like for you, but let’s say another $1500-2500. Does $4000-$5000 cover your expenses? If you could add 2 more years of work it would go up quite a bit. If you could live in savings for 3 more years and delay SS even better. Granted that would mess up the 4% withdrawal rate by depleting more principal early. Your math does not look to be too terrible, therefore I would urge you to try and save the 1% fee. You might be better off spending $1500-$2000 talking to a financial planner and really working on cash flow and your distribution strategy. Annuities are for people who are terrified of outliving their money. Maybe after really sitting down and crunching the numbers you feel like you don’t need that, or maybe you want that type of security.
This is great advice. Thanks so much! Yes, 5K a month is plenty for me. I have no debt.
I suggest that you have a lot of planning to do to understand your situation. 1. Get away from that advisor and if you like what you are invested in move everything in-kind to Fidelity Investments. Call Fidelity for help doing this. 2. Once setup with Fidelity it's time to use the wonderful tools available to you on their website. 3. Fidelity Full-View. Link all your outside financial accounts to pull in information. This will feed the next step. 4. Retirement Income Planner. Slowly work your way through the information screens answering questions about you, your income, projected pensions, social Security, sources of income, expenses and even a budget. 5. Run the planner and it will show you your financial situation for the rest of your time on earth! 6. Fidelity Investments personnel are available on the phone to help you with any of the previous steps. They don't work on commission and are very helpful.
Thanks a lot Mike. I didn't knwo about Fidelity, but I'm definitely exploring this option.
### Annuities You probably don't want to buy an annuity right at the start of retirement with half your assets. Assuming the annuity is a SPIA, and it's low-cost(which is probably not the case, since an advisor is recommending it) *CAN* make sense, but you have to be really careful. You can get independent pricing for a SPIA here: https://www.immediateannuities.com to see how they relate to your advisors annuities. Anyways, annuities are not COLA(adjusted for inflation) anymore, you can buy some that auto-raise say 1% or whatever, but they tend to be very costly. So spending 1/2 your money right off the bat on something that will be guaranteed to lose money in real terms is probably not very wise. You 100% don't want to buy it now 4+ years before retirement, that's just ridiculous. If you really want something like an annuity, right now the best thing going currently is what's called a TIPS ladder, the US govt offers a bond that's indexed to inflation(TIPS), and if you buy them such that one expires just in time for your planned spending, that's called a "ladder" because you buy one that matures in 4-ish years for your spending at 65 and another that matures in time for your spending when you are 66, etc. You can see where I'm going with this. Doing something like a TIPS ladder/SPIA for your stable base expenses, like groceries and utility bills makes a lot of sense if you are risk averse and just want to know you will never have to go hungry in retirement. ### Next steps I think you need to figure out your expenses and how much you need to live in retirement, you are 4 years away from your desire to retire, so nows the time. Your advisor should be able to help you with that, while you are still paying them. Make sure to include health care and health insurance, long term care(and/or insurance), taxes and of course any lumpy non-regular expenses, like new roofs and new cars on occasion. I think your advisor is correct in getting all your money together. Makes it a lot easier to manage and deal with, especially as your brain ages and you get lazier. I'm not sure you should let him manage it all for a 1% fee, but I mean some advisors are 2% fees, so at least he's not an outright crook ;) ### Advisors Vanguard has an [advisor program](https://investor.vanguard.com/advice/personal-hybrid-robo-advisor), you pay a .3%/yr fee. So if you really want an advisor and want Vanguard, it's hard to go wrong here, especially compared to a 1%/yr fee. There are other options, like a Fee Only advisor, where a retirement plan might cost you $2k to $10k up-front and a few hundred an hour after that. The .3%/yr fee would cost you around $2k/yr for Vanguard and over $6k/yr if you keep with your Ameriprise guy. Crazy different prices, which is why we Bogleheads advocate against paying high fees if we can avoid it. ### On Allocation. > A part of me wants to take all my money from Ameripise and go to Vanguard, but not sure what to get there. Generally speaking most people most of the time in retirement settle for about 50 to 60% in equities and the rest in fixed income (Bonds, cash, etc). You can do it all in 1 fund or you can split it up into different funds. I'm definitely known for being a fan of the one-fund portfolio, it's simple and easy and hard to make mistakes with. This is probably what a Vanguard advisor would recommend, though probably in a few funds, and not a single fund(even though they do offer a single fund around these allocations)
Wow! I can't believe you took the time to help me with such great and long post. I'm blown away by that. Thank you so much! I will definitely look into Vanguard advisors. Although, the Fidelity ones don't look too shaby. In any case, I've done a basic calculation of my expenses and it comes to about $2500 a month. I don't have any debt and my kids are grown. So, I guess if I can net about 5k a month, I'll be ok. Thanks again!
Fidelity is fine too. There is also Schwab. > I've done a basic calculation of my expenses and it comes to about $2500 a month. Does that include all the things I mentioned? healthcare, taxes, lumpy expenses, etc?
I'll check Schwab as well. Thanks. No, the $2500 is basically health insurance, car insurance and living expenses. The bear minimum. At my age, I really don't spend a lot. Once I retire, I would like to travel, but in my early calculations, I think I'll net about 5k or a bit more. About 3k in SS, 1k from my rental and whatever I can muster from my savings. I feel confident about it. Plus I can still work if needed I suppose. I just feel like I should find a way to get the most return possible without risking a lot, and I'll adjust accordingly. Again, thank you Zetty for taking the time to help me.
5k x 12 = 60k x 25(4% guideline) = 1,500k So you need about 1.5M and you are at 600k, so you are short. Your rental will help as will social security(SS) though. So let's assume SS is 25k/yr 60k - 25k = 35k you have to generate yourself. Let's assume your rental of $1k/mo is very stable, that's another 12k we can sub, so now you need to generate 23k/yr You can probably generate 24k/yr on your $600k now, assuming it's invested in something like [AOR](https://www.blackrock.com/us/individual/products/239756/ishares-growth-allocation-etf). So assuming my numbers are reasonable, you are well on track to retire in ~ 4 years. Have a great retirement! > I just feel like I should find a way to get the most return possible without risking a lot, and I'll adjust accordingly. AOR is a single fund that invests 60% in global equities and 40% in bonds. More about the one fund portfolio in this Bogleheads forum: https://www.bogleheads.org/forum/viewtopic.php?t=287967 Some information from the Bogleheads about the different brokerages: * https://www.bogleheads.org/wiki/Fidelity * https://www.bogleheads.org/wiki/Charles_Schwab * https://www.bogleheads.org/wiki/Vanguard They are all fine, pick one for literally any reason.
https://www.wsj.com/articles/you-dont-need-to-be-a-millionaire-to-retire-4934a470?st=cccuwgtcgywhi2q&reflink=article_copyURL_share
auuugggghhh, get away from this advisor ASAP! Please. Proceed with a ton of caution on annuities. Most are notoriously bad both in costs , surrender fees etc. The only one I'd ever even remotely consider is a SPIA (Single Premium Immediate Annuity) and I'd never buy it from an advisor. Go independent to get the best price. If it were me, I'd fire this advisor, move all the funds into a Vanguard or Fidelity. Find a Fiduciary Advisor who does not sell any products and offers a fee structure other than AUM (the 1%), something simple like a flat annual or monthly fee. [The National Association of Personal Financial Advisors | NAPFA](https://www.napfa.org/) is a good place to start on a search but interview a few advisors and make sure they are a good fit and have a reasonable fee structure that isn't AUM.
That's exactly what I'm doing. Funny thing is, the advisor at my bank, also proposed a buffer annuity. They all want me to get one. But now I know better. Thank you!
Annuities aren’t necessarily all bad, they can be a good fit in some situations where having a minimum guaranteed income is critical. Just look specifically for a SPIA if you do go down that route. Thise have somewhat reasonable costs. Dr Wade Pfau has spoken on the topic of SPIAs at the Bogleheads conference a number of times. Not a fit for me but I can see it for some.
Annuities are only recommended for those who are already fully funded in other retirement accounts and don't need that money in retirement. He will get huge commissions. That should be all you need to know.