Since the topic has popped up from time to time I just thought I would throw this out there as one persons way of thinking. I have a feeling that many MFO'ers already are aware of, and practice, several of the tips and ideas presented. If anyone has some additional thoughts let's hear them.
From ColoradoWealthManagement through Seeking Alpha
http://seekingalpha.com/article/3969979-retire-62-without-millionaire?ifp=0
Comments
But I see the gist of the article is how to cut costs in retirement which personally, I don't want to move to a different state or drive an old car or watch every penny I spend in retirement. But there is a big cost that bugs me lately about using financial advisers and high cost managed mutual fund portfolios.
If you work with a financial adviser, he may set you up with a portfolio that might make 5-6% in retirement. That is the typical return estimate now used for planning. Then he says that 6% has to account for say 2.5-3% inflation, so you can safely withdraw 3% of your nest egg. But wait, your adviser is skimming off 1% for himself and his company in lieu of their expertise in "watching and rebalancing" your portfolio, so maybe the safe number is 2%. Then you think, well even if stocks and bonds go up 6%, I'm paying another 1% or more to own stocks and bonds in managed mutual funds. And you are likely in those funds because because the financial adviser's company likely gets a kick-back.
So lets see, 6% estimated portfolio returns going forward in retirement - 3% inflation on average - 1% financial adviser fees - 1% mutual fund expenses... Now is the safe number a 1% withdrawal? I see 2 places a retiree can cut costs very easily.
The more and more I think about this, the inexpensive robo-portfolios and paying for financial advice as-needed are the biggest ways to cut financial expenses for most retirees.
Yes it basically is about that along with more of the same. And I understand your position but there may be others who don't mind doing those things and are trying to figure out how to go about it and what may work. David Tepper comes to mind.
Mike goes on to make valid points about advisors and fees which are other ways to cut costs and manage your goals. There is more than one way to the top of the mountain.
I will also add that advisers and managers never experience the emotional decision making that investors endure during a bear market (20% loss) that often leads to permanent losses (selling low) for individual investors.
Advisers and managers merely experience a 20% loss of their fee if the investor sells during a downturn...which is still a positive return.