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Any idiot can google a portfolio. Some can even stick to it.
But the big mistake is folks only know what they know. By the time they are ready to retire the tax mess they created has them giving back way more than what they should have had they had a planner who knew how to play the 2nd half of the game.
A planner who can do that for you early in the game is worth every penny.
If you think the cost is high for a planner to get things organized for tax efficiany you can't afford free.
Any idiot can google a portfolio. Some can even stick to it.
But the big mistake is folks only know what they know. By the time they are ready to retire the tax mess they created has them giving back way more than what they should have had they had a planner who knew how to play the 2nd half of the game.
A planner who can do that for you early in the game is worth every penny.
If you think the cost is high for a planner to get things organized for tax efficiany you can't afford free.
Very good point. "You only know what you know."
From a recent survey adults that did not have some sort of a household finance class in school are making a lot more mistakes that those that did. My assumption is that very few of us had a class and could be making mistakes we do not realize.
At work we had a financial planner available to employees, at no costs, to help them with any planning needs. I don't think they discussed income taxes during retirement. The point is it is a good assumption that not all planners will discuss everything. Thus it looks like you have to study sites such as this and on line broker/mutual funds retirement sites to develop your own list of questions. Then you will be better educated when you meet with a planner. Then you can decide if occasional visits will do for now or on going help. If you tend to try and time the market for your investments I would lean toward needing a planner full time.
Instead, we plow everything we can via our SIMPLE IRAs (wife and I are business owners) into a Vanguard Target Retirement fund, same amount, month after month, year after year, no matter the market. And we never think about it or do anything with it, especially in 2008, other than keep adding more. And the fees are extremely low.
Aside from that, we invest in real estate.
Smart investing is like losing weight. There is no secret, it's not complicated, anyone can do it. But the failure rate is high because people can't stick to a plan. Those people need external accountability, so the cost of a Planner may very well be less than the cost of their exposure to emotion-based mistakes.
investing is only a piece of what a financial planner should be doing . in fact a good one should not be doing any stock picking or investing at all.
that should be farmed out by your cfp as that is a full time job watching markets all day and keeping up on news.
a cfp is far more than allocations . a good one will be very key to how much you get to keep by laying the building blocks for a comprehensive plan.
like i said i can put portfolios together in my sleep but i blew it tax wise because i outsmarted myself thinking i knew all i needed all those decades. now i will pay the price for thinking that because i could invest well i needed nothing else.
a life time of taxed social security , heavily taxed rmd's , loss of subsidized medical from 62 to 65 ,no tax free growth on any of the rmd money i have to pull out and reinvest , the risk of surcharges on medicare or the new medicare surcharge tax, loss of the ability to now use the zero capital gains tax brackets.
the amount of taxes i will now give back because i learned about these issues to late is now a lifetime of tax pain.
investing on your own like a champ means little when you end up just giving it back later on when with some better instruction early on you wouldn't have to..
Last edited by mathjak107; 04-30-2015 at 03:39 AM..
Mathjak - regarding taxation issues of retirement funds, what would you have done differently early on? As I asked earlier, would you have used a tax accountant in conjunction with a CFP? I'm clearly in the camp of "I don't know what I don't know" and paddling furiously to study and learn.
I would have matched assets to the type of accounts better.
putting equities in a deductible ira or 401k where they get taxed at regular tax rates may be silly.
income generating stuff like bonds ,reits ,cd's etc get taxed at regular rates regardless so they belong in the deferred accounts.
equities belong in a roth or taxable account where they can take advantage of special capital gains rates or zero capital gains taxes. they pass tax free to heirs and you can write off losses.
I would have done way more roths where I could.
I would have over funded my life insurance and borrowed out tax free money now .
because I blew it now I have my social security being taxed , no medical subsidy from 62 to 65. I have rmd's that are very high , I have no chance of utilizing the zero % capital gains brackets at this point. I have taxes due everywhere I look.
all with no change in tax brackets I may add.
great I did so well investing . now I get to give it back because I consulted no one early on.
^^^^^^ MJ, get a grip dude. You are in a financial rose garden. Yes you could have a weed or two less but the overwhelming number of people would love to be in your garden. Kick back and smell the roses you have earned them. I will be glad in another seven years when all of this is in your rear view mirror. Yes I remember being in the same stage.
no one wants to pay more than their fair share of taxes and your fair share is legally whatever you can reduce them to .. remember this isn't as much about me as it is those asking the question.
the less you have the more important it is to get right .
going out of your way to use the lowest cost funds you can find as well as indexing , and then negate that by less than good tax planning does not make a whole lot of sense .
no one wants to pay more than their fair share of taxes and your fair share is legally whatever you can reduce them to .. remember this isn't as much about me as it is those asking the question.
the less you have the more important it is to get right .
going out of your way to use the lowest cost funds you can find as well as indexing , and then negate that by less than good tax planning does not make a whole lot of sense .
I understand all of that but at some point you will be focused so much more on your lifestye and less about the financial management history of what could have been. Your enjoying the scent of the roses surrounding you will superceede thoughts about roses gone. My garden today is my reminder of the plants flourishing and not the ones that died when getting it here. Yes getting up each day is a reminder and perhaps one of the benefits of a non urban/suburban life.
To be fair, I asked Mathjak the specific question and appreciate his detailed answer.
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