Investing savings after retirement (55, pensions, supplement, financial advisor)
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I'd like your take on my situation. When I retire next year, I will have income from a couple of pensions (from the UK and here) and some (but not a lot because of the windfall exclusion provision) social security. I also have some savings that came from an inheritance. My monthly income will be enough, I think, but I know I will have to pay tax on it, so I am wondering how to fund that. So, it's my savings I am asking you all about.
Right now my savings are in an online savings account earning less than 1%. I have been talking to a financial advisor at my bank (Chase) and could invest in a balanced portfolio with the understanding that (a) I will be paying fees (1.44% a year) to have the investment managed and (b) I could lose money. I am a bit scared to try and invest on my own, so a managed account like this seems a better choice for me. But is it? Might it be better just to leave my money where it is and not have to worry about it decreasing? My biggest fear going into retirement is, like everyone else probably, if I will have enough money to last me my whole life. I am single and have no family to bail me out.
Qs - 1) Age, 2) Amount of pension(s) income and type?, 3) Amount of investment capital, 4) What are your BLEs (basic living expenses), 5) Health Insurance situation, 6) Debts
Answer those Qs and perhaps some useful comments may be possible.
Thanks guys. It feels a bit weird talking about this personal stuff in public, but I need the advice, so here goes:
I will be 65 this November and want to retire next year to get as much social security as possible. But I don't want to keep working beyond 66.
No debts. Rented apartment, utilities, home and car insurance, security alarm about $1400 a month. Gasoline about $100-$150 a month while working, less when I stop. Car (1999 Honda Accord) is paid for. Other expenses food, clothing etc variable. State university employee. Medical Insurance paid for now and after I retire, although I am not sure yet exactly what that means.
UK pension about $1200 a month; US pension about $1300 a month; social security about $700 a month. Savings about $180,000.
Last edited by CaroleF; 08-28-2013 at 03:16 PM..
Reason: typos
I would never pay someone close to 1.5% of my capital a year to manage my money.
If you answer Pilgrim's questions - I may have some other ideas as well. Robyn
It seems to me that as long as the managed funds produce a reasonable return, plus the management fee, the management fee becomes somewhat irrelevant. In my case, I really don't have the patience, technical skill or personality to efficiently manage my own stock portfolio (I never seem to get in or out at the right time). For the past 3-years, my managed account has been up at least double digits every year ... thus, the 1.5-percent is a good investment for me. --- However, I can understand why others would not want to do this.
Thats what many people who have financial knowledge forget. There are millions of folks who have neither the knowledge, the temperment or the desire to manage their own money.
If it is a choice between a cd or losing money then the fee for a good advisor is well worth it. Aside from the fact there is lots of other stuff a planner can do besides investment allocations.
For many there index isn't markets, it is cd's or money markets. They judge everything by the fact that is what they would have done if they had no advisor.
Personally i love using my newsletter the last 26 years. I don't go around wondering what my next move is or do i buy or sell. Nope,all emotion is out of it and i couldn't be happier doing it this way.
One more thing, my UK pensions are index linked. They will increase, and I am no longer being taxed in two countries, just here.
Does your university use TIAA-CREF for pensions and/or supplemental retirement? If they do, are you a member? They have excellent funds, lots of free info for neophyte investors, and they have free financial advisors.
If you are concerned about making good choices with your investments, you can use professional management while you yourself start learning about investing. You also need to monitor what your adviser is doing, and he/she should be willing to talk to you about your portfolio fairly regularly. If you don't think you're getting the result you should, don't be afraid to question why that's happening.
Whether you want to actively manage your savings or not leave it to a professional, you still need to be knowledgeable enough to be able to monitor how your nest egg is faring.
I'd like to weigh in on the side of caution. You need to remember that a person selling investment advice at a bank or brokerage firm does NOT have a fiduciary responsibility to you. Their main concern is to sell what will generate the highest commission. This is a very important point, especially for people who don't fully understand what they will be putting their money into. The second point is that at a bank the person may not be licensed to sell all types of investment products and so they will only pick products that they sell but which may not be your best choices.
My suggestion would be for you to contact a fee-based financial planner to help you determine how you should (or if you should) invest your savings. You can find a fee-based financial planner by Googling: how do I find a fee-only financial planner. A list of professional organizations will appear... NAPFA being one of them.
It is TIAA-Cref that I have at the university but I was very conservative with my money there, so my pension isn't going to be very big. On the plus side, I didn't lose my shirt when the recession hit. I have been thinking about maybe opening a brokerage account online and putting a small amount of money into it and educating myself with it, but understanding investments does not come naturally to me and my mind kind of glazes over when I read articles about it. Hence my investigating putting money into a managed portfolio.
The financial planner at Chase is fee based. And the products are not all Chase products, although most of them are. There are no fees to buy or sell. A 0.36% fee is taken quarterly, so I am assuming that the bank earns more if my money does better. They do have a minimum investment of $50,000, but I can take it all out without a penalty if I want. The man I spoke to is a certified financial planner and was very knowledgeable. He used to work for Merril Lynch and mostly with retirees. I liked him and feel confident he will communicate regularly with me. The balanced portfolio he is suggesting has moderate risk. He said the least earnings he would expect would be 4-5% after the fee has been taken out. It all seems fairly reasonable, so long as I can stand the fear of losing it all .
I just want to know from you all what other alternatives you might suggest.
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