Bylaw 1.7(a)(4-3) of this blog’s charter states:
“A topical post relevant to retirement must be published at least three times a year.”
No matter how much I try to avoid that requirement, the home office always fires off nasty missiles on how late I am with yet another update on my retirement journey. One of these days I’m going to find the ombudsperson there and give them a piece of my mind.
Nevertheless, there have been developments over the last several months, this time related to our savings. So I do ask for your indulgence here as I fulfill this compulsory blog housekeeping task.
To keep your interest, I’ll offer a few meandering sidebar breaks along the way (with apologies to blogger Ellen at Notes from the U.K. because I’m shamelessly imitating her wonderful “irrelevant photo” maneuver. We trust she won’t sue for infringement).
Additionally, for those of you who stay all the way to the end, we offer some freshly-baked bundt cake as a reward. Rumor has it that there’s bourbon whiskey infusion involved, though Gorgeous ain’t owning up to that. Don’t ask, don’t tell.
The big change with our financial situation is that we’ve begun working with a financial advisor.
This is a move that evolved ever so slowly since my taking early retirement in 2014. I started out on this adventure a bit cocky; strong in the belief that I had enough confidence to preserve the nest egg all by my lonesome.
My 401(k) was safe in its protected cocoon of low fees, along with an array of maintenance options via a custodial web interface. Ditto for our IRAs, which we could easily monitor from their respective mobile and tablet apps. In a cheeky move shortly after relocating to Florida, Gorgeous once made a contribution to her Roth account on her iPhone while we were out on a day trip somewhere. Fearless, I tell ya!
Slowly, though, doubts begun to creep into my confidence during the last couple of years. Some of the concerns were in reaction to the rollercoaster stock market of late, itself stemming in part by that mercurial leader who has a belief that tariff wars are “easy to win.”
A more underlying source of insecurity, however, came courtesy of that handsome fella who stares back from the mirror each morning. He’s just not so cocky about all this stuff any longer. The more I rebalanced at the end of each year, and the more I stared at my supposedly appropriate 60/40 stock-to-bond allocation, the less confident I felt about my financial certitude. The swagger was gone; it was time to call in the cavalry.
Starting last January I began looking at the websites of certified financial planners. I didn’t want someone to micromanage us and our money; I did want someone who could offer advice on the best way forward, now and and in the future.
I also needed a professional that understood the particulars of my specific pension and 401(k).
I was an employee of the federal government for 30+ years, and among the many “beltway bandits” in the DC region are financial planners who advise both active and retired civil servants. It took about a month of searching and reading up on each person. I eventually settled on someone with whom I had been familiar from articles he had written on retirement savings.
A certified CPA and financial planner, this gentleman’s focus is on what I consider to be my main achilles heel when it comes to personal finances: taxes. All those accumulating worries that had been growing over the last couple of years ultimately went to a concern about whether I was prepared for the distributions I would be taking from my 401(k) at age 62 ( two years from now). With Gorgeous still working full time, I worried about making sure any withdrawals I take will still keep us safely within our current tax bracket.
One of the most common mistakes retirees make is to underestimate (or simply ignore) the role taxes play on distributions from a tax-deferred account such as an IRA or 401(k). Take too much out and there are cascading repercussions. Since Gorgeous is now our primary wage earner, I didn’t want to jeopardize our tax position by making this same mistake. Each quarter like clockwork she faithfully pays estimated federal taxes on her income. So I am therefore determined not to muck-up her perfectly crafted system two years from now. Our new advisor’s job then, as I saw it, is to get us in financial harmony.
Sidebar: And speaking of harmony, PBS and Ken Burns inspired us to see Marty Stuart last week! I’m not a huge country fan, but Marty is a consummate performer. It was a terrific show.
Our Advisor:
After an initial “get to know you” video meeting, we followed-up by sending the advisor our vitals: social security estimate statements, my 401(k) statement, both of our separate IRA statements, my pension information, mortgage statement, life insurance policies, long term care policies, and the past two years of federal income taxes. He also asked for a detailed list of our current monthly expenses
I held back the wine expenditures. Some things are too private to share.
All of the above information was entered by his staff into two exhaustive spreadsheets. Their number-crunching display forecasts for both inflation and the estimated growth of our savings into the future. This information became the primary discussion point in our first full meeting, and going forward the advisor devised a personal strategy for us based on it.
We had about six video meetings in all over a period of seven months.
The process and ultimate outcome exceeded all of my expectations. As I initially expected, each of his suggestions are made with taxes being the primary focus. It is followed closely by our current savings accrual, and finally a future diversification plan for part of my 401(k).
Suggestions/Changes:
For Gorgeous, the advisor suggests that she put her current savings accrual into warp speed. Up to now she’s been socking away into a Roth IRA. However, the maximum she can invest into that is only $7,000. He instead suggested that since she’s self-employed, she open an Individual 401(k) plan (also called a Solo 401(k)). The Individual 401(k) offers up to $25,000 of savings in a combination of both Roth and traditional IRA-type savings components.
For years now, Gorgeous has felt like the proverbial poor relation because I have a 401(k) and she doesn’t. Now, she not only has her own, but she’s listed as both “owner” and “administrator.” Show off.
For me, it’ll all be about diversification over the next several years.
Since I’m not touching my 401(k) for two more years yet, the advisor suggested two minor changes to my current allocation: We’ve increased my exposure of bonds up to 45%, and also added an international stock fund at 15%.
We will also contemplate some small distributions in a few years for the purpose of making some conversions into a Roth IRA. We have until 2026 to do this, before the tax rates change again. [A political rant about the 2017 tax cut law has been deleted here by the Home Office]. However, any Roth conversion will be dependent on Gorgeous’ income during those years (so that we aren’t in any danger of creeping into the next tax bracket).
Finally, we will further discuss and contemplate the purchase of a life annuity sometime after I start social security at my full retirement age (FRA). My 401(k) conveniently offers such a purchase with a third party.
Summary:
I’m relieved I did this. The cocky me of five years ago was certain that I could pull all those distribution levers for my 401(k), Gorgeous’ IRA savings, and then somehow manage all of the other moving parts of social security, medicare, etc. Ultimately I probably would have been victim of not only my own hubris, but also Uncle Sam’s tax bite to boot. Our advisor has given us a plan now, one that I feel is workable.
For those interested, this helpful article from Kiplinger’s Magazine offers up some warnings about 401(k) distributions in retirement.
Now then… we promised cake for all good boys and girls who made it this far, didn’t we? Enjoy, and many thanks for reading.
Until next time…
Snakes in the Grass 
Just the words, “irrelevant photo” made me smile and wonder, what the heck does Marty mean?
Working with experts in a field is a good idea. It depends on who the expert is. Their qualifications. Their philosophy. And will they actually listen to your needs and concerns, yet give you informed advice. Yes, cavalry. Glad to hear all exceeded your expectations and you have a workable plan.
You are reminding me Marty that my husband and I need to get an overview and possibly re evaluate our wills. We have wills from many moons ago. A whole other topic. Or is it? Still part of the financial picture.
Your Gorgeous bakes a beautiful bundt cake. Lucky you! I now “get it” on the irrelevant photo. Nice touch. Also, great photo of the two of you🙂
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Hi, Erica. Yeah, Ellen at Notes from the UK is really very funny. She’ll write about all these topics and then insert this “irrelevant photo” of a flower from her garden. I just love her.
Oh, I did forget to list wills too. He wanted a copy of our will, which I duly forwarded to him (there was massive scanning going on for that project).
I actually feel bad for the international readers such as yourself when I write these kinds of posts. They’re so intensely focused on American tax and personal finance strategies, but I do hope you were able to somehow compare it to Canadian standards and practices.
BTW, I thought of you as I wrote this. The Gutenberg editor completely failed me for this post. I had to throw in the towel and go back to the classic editor (which worked marvelously, btw). There were all kinds of frozen screens going on with Gutenberg, honestly!
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Hi again, Marty, I will check out Ellen from Notes at the U.K.. I still learn from you and I am always curious how everyone lives and does things around the world.
Thank you for the Gutenberg update. I am still cautious about touching any button or making a change unless I need to do this. How frustrating for you.
Our Thanksgiving weekend around here and I am grateful for sooooo much. For one, how we are even able to have these conversations 🙂
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We’ve also made a few adjustments as of late. My husband started out wanting to manage our portfolio and, since he knows his stuff, that was OK with me. We have done well but lately he has wanted to take a step back. We’ve decided to go with an advisor from Fidelity (after, like you, we did a lot of research). All we need is someone to talk things over with, not actually make the transactions. Having someone who understands more that just portfolios is so important. Recommending financial moves without regard to how it will impact your taxes is just nuts.
Lucky you for seeing Marty Stuart! I hadn’t heard of him before the Ken Burns series, but I became a fan (after I got over his haircut 🙂 ). Oh, and thanks for the bundt cake! Gorgeous used just the right amount of booze.
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I completely understand, Janis. For years my quasi-mantra was, “It’s index funds, what’s to think about?” Well, as it turns out there’s still plenty to think about. So, yeah, I decided I needed a little hand holding. This guy has been great in that he’s not asking to get in on anything extra in what we have to do. We paid him his flat fee (as we will in the future as he watches over our situation), and that was that. It was a very clean transactional relationship. And, as I just responded to Judy, it’s made for slightly better sleeping lately.
I know, wasn’t Marty Stuart just great in the documentary? His commentary added so much helpful context that when they advertised him being in our area (literally just 30 minutes from where we live), we just had to go. His on stage persona is exactly as you saw him in the documentary: candid, funny, informative, and entertaining. And… the man is a great picker. He has a really tight band in which all of them are given a time to shine in the spotlight. He’s a total class act. But admittedly does need a bit of a haircut!
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Great couple photo. 🙂 Glad all is well on your financial and tax front. I can’t comment on either of these topics and expect to go to bed in three hours.
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lol Judy. I suppressed, but my regular saying for all of these things is, “One has to sleep at night.” So do make sure you sleep tonight! 🙂
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I did the same thing you did. Full of bravado I managed it myself for a few years then decided that it would be best to have a professional involved. Sadly the first one I chose (who was someone I’ve known for 30 years) didn’t pan out (never do important business with friends). I’ve been with my current guy for over 5 years and have been very happy. I deserve a piece of that cake! Also, I saw Marty Stuart in a concert with Roger McGuinn. I wasn’t familiar with him but they were fabulous, completing each other. On a slightly different topic, I read your post originally on my Kindle and got the most bizarre ads for toe fungus. (I thought ads were targeted! I don’t have toe fungus!) I’m responding on my desk top which has the more proper shoe ads. Is that weird or what?
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I’m laughing hard here, Kate. Toe fungus?!!!! Yeah, that’s me alright. Glad to know WordPress gets me. 😉
Re: choosing a consultant. An old friend of mine and I have been conversing about this. He and his spouse purposely chose someone younger as their advisor because they wanted to make sure this person would be around as they got old. I almost mentioned that in this post, pretending that I was lurking outside high school business and finance classes in the hopes of signing up one of the up-and-coming experts. But I decided that joke is 10 years too old now. 🙂
Wow… Marty Stuart and Roger McGuinn? That must have been amazing. That does give some context because in his encore, he did play a riff that sounded an awful lot like the beginning of “Eight Miles High.” Now I know why. 🙂
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I went with someone younger too. It’s a small local firm and many of the employees are 30s to 50s. Slightly related to that, I’m trying to find someone younger than me to be executor of my will. All most close trusted relatives are close in age or older.
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Hey, I got the toe fungus ad too!! I assumed that everyone got them. I hope that it was not just me and Kate!
I also use a financial advisor. Although I take an extremely cautious approach to savings (I’m still scared from 2008), she seems happy to work within that framework!
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WordPress sure gets me, Donna. 😏
Scared is much better than reckless indifference when it comes to money, me thinks!
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Sounds so complicated. We only got super over here. I don’t have much so it wouldn’t matter. I’d be hopeless too.
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I always feel bad when I write these financial updates about my retirement, Vy, because the American system is so bloody complicated. So many moving parts! Hope it wasn’t too-too confusing for you.
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It’s well explained Marty. I’m glad you’ve got it sorted.
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I got numerous “Days Inn” adds, from several cities (much better than toe fungus!) I’ve been using a financial planner since before I retired. The best thing he did for me was to prove I could retire early. We went through a similar process of evaluating investments, expenditures, etc. and now he updates my stuff quarterly. I love not doing all the work behind this analysis because, well…I’m retired. Thanks for the retirement related blog, with benefits!
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Thanks, Tracey. I always feel bad for some readers (especially international ones) when I write these financial updates because they can get pretty dry. But if one has a blog ostensibly about retirement, I’ve decided I need to so now and again. Similar to having to take cough medicine. 🙄
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I’m glad you found an advisor who is competent and makes you feel comfortable with your decisions. Understanding the process is more than half the battle when it comes to all things monetary, in my experience. Good move to find someone.
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Thanks, Ally. Now, will I be blogging in 20 years to tell everyone how it all worked out? 🙂
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Oh, I’m sure you will. You like blogging too much to ever let it go!
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You done your obligatory post…and I ate a non-caloric slice of that yummy virtual lemon cake.
🙂
I have to say that as we’ve been transitioning (FYI- one should begin the process three months before eligibility and with no gaps in previous insurance coverage or you’re toast) into Medicare etc that it seems the older you get, the more alert and brainy you need to be on all things related to retirement, health care etc. Fine for now, but gee….how about when I’m in my 90’s????
I’m blessed to have a ‘spread-sheet’ geek as a hubby and he’s on top of all that SSA stuff, too. But then each year IRS/SSA/Medicare/etc things change and then along with that each year our brains get older, too!
Regardless – you and Gorgeous seem to have it all together. Although, I advise not making a big deal about that t-shirt!!!!
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You’re a sage, Laura. I promise not a peep about the “undercover” t-shirt. 😉
I definitely am in agreement about how challenging all of these decisions are as we all age. We all thought the hard part was accumulating the savings, but that’s nothing compared to when you have to enact everything. Jane Bryant Quinn has written about the challenge seniors have in monitoring their Medicare coverage each year to make sure their doctors are still in network, their medications are still covered, etc. The older one becomes, the harder it is for some to focus on all of that. Good luck on your transition — I hope it all goes smoothly.
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Thanks Marty, despite being based over the pond, this has been useful as I recently realised I need to add something to my lengthy to-do list – learning about the tax implications (both here & there) for my Mum should she be granted permission to relocate to the US. It’s really a task I should be able to share with my sister over there, but she’s still lagging *way* behind on important information gathering from a year ago, so I think I’m going to have to buckle down myself or I’ll just worry myself into a state of rampant anxiety. After reading your post, I’m thinking finding an expert in each country could be a better way to go.
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Hi, Deb. Taxes implications are admittedly not something most people focus on until sometimes it’s too late. But definitely no need to worry about ahead of time. Just keep it on your radar so that you can get someone to help you through the process. I do hope your mother gets that clearance!
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Thanks Marty, I do too & am keeping everything as it’s a long process.
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It sounds like you guys are on the right track financially, Marty. I applaud you for regularly reviewing and writing about your financial decisions. Financial monitoring is such an important factor in a successful retirement, and it can easily be ignored and put off. I have been a customer of Fidelity Investments for nearly 35 years. To minimize fees, we mostly manage our own portfolio using a diversified set of stock and bond index funds and some individual stocks. We also meet with our Fidelity advisor on a periodic basis. Every time, we see him, he finds new ways to make us money or cut our tax bill. Continued success!
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Thanks, Joe. Yeah, I make fun of having to write these posts (admittedly they’re not everyone’s cup of tea), but my initial intention for this blog all along was for it to be about retirement issues. That got boring fast, so I decided to mix it up. But I do like to return to the topic now and then.
That’s terrific that you have everything under one roof. We haven’t done that yet, but consolidation is an aim of ours. In fact, come to think of it, that would make for a future post wouldn’t it? 😉
Fidelity is a great company. You chose wisely.
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Excellent post. My guy started out like you did, particularly when he was working for a larger firm and feeling good about our 401K, etc. But then when he began to work for himself, and I have always worked for others part time, and for myself full time, he decided we needed to bite the bullet and use a financial planner. Best decision ever. They have helped a lot. And we found them via our friends who recommended this group because of their own experience with them, which helps. But. Still. We all need to watch everything carefully and weigh pros and cons on all financial decisions. Taxes. Long-term health care insurance (which has increased for all, it seems), wills/trusts. It could still be a full-time job.
But bourbon-infused bundt cake helps.
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Thanks, Pam. Yeah, I think I had a bit of overblown hubris when I retired, thinking that I had it all under control. But honestly, I was never good with understanding tax issues. So that alone was probably the driving influence here. Well, perhaps a small helping of humble pie to go along with the cake. 🙂
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Pumpkin humble pie sounds just about right for us…. 🙂
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I’ve had a financial planner for years. As a single woman, I wanted to make sure I was being smart with my money and had no interest in doing it myself. Now that I’m married, he’s been great at combining our individual accounts and creating a unified plan for us. It makes me feel much more confident about our financial future.
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Definitely. I also think that the older we get the more some of our hidden insecurities begin to spread their wings, so to speak. So it’s good to get some reassurance sometimes even if we have to pay for it.
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I tried copyrighting the word irrelevant, but they say irrelevance existed before I did. I’m crushed. But it does mean I’m in no position to sue anyone.
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Then in your case, you can have TWO slices of cake. I hate writing these financial posts because they can be a little dry. So I needed a device to keep interest, and I’m afraid I stole shamelessly from you. Thanks the grace even if it was only because you didn’t have proper jurisprudence in your corner. 😉
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Truth be told, I’m honored to have an idea or three stolen.
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After noticing you had visited my blog, it is my habit to return the favour. I’m glad I did. I enjoy your light narrative style of blogging. It’s a gift the way you spin a story, I bet you can tell a Tall Tale. I noticed some similarities between us, I also spent 30+ employed by the Federal Gov’t, albeit in Canada, and I retired 2014 (January 3).
Looking forward to reading more of your posts.
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Are you kidding? My whole blog is a tall tale! Glad you came by for a visit, fellow civil servant. We’re a subset fraternity within the retirement blogosphere. 🙂
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Chuckle
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Retirement is wonderful, isn’t it? Well, maybe except for all the potential financial fears and complications that may keep some of us up at night, not to mention causing us to sprout more gray hairs (though the silver ones glow from your Gorgeous’ beautiful head!). These emotions of course may drive us to drink re the subject of trying to figure out what we’ll run out of first – breath or $!
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True enough! I have to laugh at how “hard” I thought saving was during my working years. So many different fund options, coupled with so much confusion about having just the right investment allocation. Oh, to only have that problem right now. 😉 We just have no choice but to keep plodding on, sleep or no sleep! Many thanks for reading…
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