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Questions to ask a financial planner

I was hoping to request some advice. I am meeting with a new financial planner today to do some retirement plannig and review our investment portfolio. I'm about 10 years from retirement and will have a government pension. I'm interested in the planner providing recommendations on asset allocation and steps we should take to achieve our goals. I would value the board's suggestions on questions I should ask the planner or links to such questions. The planner works for Merrill so I'm sure he will be recommending their various products. Our situation is a little complicated in that we have a special needs son that we need to plan for. Thanks so much for your advice.


  • Thanks so much Ted. Very helpful
  • Take a close look at the retirement benefits that are being offered through your government employer. Ten years may be a bit off in the future, but start paying attention to what's being offered now and what might be on the chopping block.

    Employers usually have a retirement packet that they share with new retirees. Gather as much information about the retirement process with your employer. I did this and discovered there were many choices I needed to consider with this part of retirement planning. In my case, I selected to move some of my 403b investment to purchase an "extra annuity" through my employer (a somewhat unique option). I shared this option with a few financial planners and they confirmed that using some of these 403b dollars to buy this annuity was a very good option. I fine tuned the amount of the "extra annuity" based on my projected retirement income needs.

    These financial planners typically will not be experts on all the options that your employer's your job to bring these choices/options for discussion.
  • beebee
    edited August 2018
    Not often mentioned, but another planning topic is your debt to income ratio. Prior to retirement I had very good credit (partly due to my low debt to a higher working income). This "debt to income ratio" will change instantly in the first months of retirement...probably due to a lower income... and as a result your credit score may suffer. More importantly you will qualify for less credit.

    I applied for a 30 year mortgage (actually a 15/15 ARM @ a rate of 2.875 fixed for the first 15 years) and also took additional cash out on this loan. I planned to use the cash for home improvements that I knew I now had time to do myself (retirement offers time to do this) as well as serve as a on demand cash for opportunities. Another story for another time, but cash was king back in 2010.

    This decision to refinance my home loan prior to retirement effectively locked in my principle/interest payments for 15 years into retirement and since I completed this process while I was still working I qualified for a much larger mortgage due to my higher "debt to income ratio".
  • Thanks very much Bee. I will explore whether an extra annuity is an option. I work for the federal government so I don't think they offer this but I will ask. We have 3 sources of income as feds. 1) An annuity that's based on years of service. 2) Social security. 3) The Thrift Savings plan which is like a 401K program with a limited set of investment options -- equity and bond indexes.
  • @MikeW: In the Thrift Savings Plan, do you own the C Fund ?
  • @MikeW,
    Will you be able to keep the Thrift Savings Plan?

    Often, at retirement, these plans can no longer be contributed to and may also have to be transferred out of the Thrift Savings Plan. This was the case for a relative who work for a government employer (military) who recently retired a few months ago.

    Any health care benefits for retirees?

    Any life insurance choices?

    Any death benefits for spouse/dependents?

  • Hi Ted
    Allocation is currently 26% C fund, 21% S Fund, 10% I fund, and 43% G fund.
  • bee said:

    Will you be able to keep the Thrift Savings Plan?

    Often, at retirement, these plans can no longer be contributed to and may also have to be transferred out of the Thrift Savings Plan. This was the case for a relative who work for a government employer (military) who recently retired a few months ago.

    I'm not that familiar with TSP (all I know is what I read in the papers). Still, the situation you're describing sounds unusual.

    TSP holds itself out as " similar to a 401(k) plan in the private sector." In the private sector, by law you must be allowed to keep your money in your 401(k) so long as you have at least $5K there.

    Many plans allow you to keep your money even if you have a lesser amount. With TSP, "If your vested account balance is $200 or more, you can leave your entire account with the TSP until the account withdrawal deadline." The deadline it's talking about is just the usual rule that RMDs begin the later of age 70.5 or separation from service.

    It's pretty obvious that someone who is not working for an employer cannot make payroll contributions to that employer's sponsored plan (TSP, 401(k), 403(b), etc.) But TSP seems very flexible in the types of other post-retirement contributions it allows.

    It accepts rollovers from IRAs and transfers from retirement plans at other employers. "Not only can you leave your money with the TSP, you can simplify your financial life by moving money from plans into your TSP account." However, it doesn't look like it can accommodate Roth money, as it limits IRA rollovers to traditional IRAs.
  • beebee
    edited August 2018
    Thanks @msf, I may have misunderstood this. I will follow up with him. Compared to other T.IRA plans, it appears TSP plans have a limited number of withdrawal options, no?

    This link lists them ( this link does reference Roth balances)
    Withdrawals After Leaving Federal Service: Withdrawing Your TSP Account
  • Usually one reads about what to do when one leaves an employer. Basically, roll it over (into an IRA or another employer plan), take the cash, or leave it there. But one usually doesn't think about what happens to the money that one leaves there, other than it being subject to RMDs.

    I'd always assumed that one could take partial withdrawals on demand. It does look like TSP is very restrictive here - limiting you to one partial withdrawal.

    On the other hand, it looks like it's more flexible than most 401(k) plans (though not necessarily 403(b)s), in giving retirees the option of taking the money as an annuity (effectively as a traditional pension). It also strikes me as flexible in allowing you to define your own mix of options - lump sum, fixed payments (until the money is exhausted), RMD payments, and/or the "pension" (annuity) option.

    So you have a lot of options that you can mix and match, but you're locked into them. You can't take bigger or smaller monthly payments as needed. More flexibility in some respects, less in others.
  • I retired from USAF back in 2008. What money I had tied up in TSP even though the management fees were really cheap, I rolled it all over to Vanguard. I don’t know how Federal retirement works, but with military retirement you get medical care, dental and vision. I have it deducted out of military retirement check. Of course there are deductibles of going to the doctor unless your have a disabled rating from VA, in which case if your over 30% disabled you can go VA but your family would be covered under Tricare.
  • Thanks very much for the feedback everyone. I had a good first meeting with planner where we laid out our goals. He appears to be fairly conservative in his approach which matches well with me. He charges a flat 1% fee for assets that he will actively manage and he will recommend a combination of individual stocks, bonds, mutual funds and ETFs. I'm curious from your experiences -- is 1% fairly standard?
  • Yes, and increasingly higher, for God knows what justification --- the base charged fees have gone to 1.1%, 1.25%, and more.
    They reduce w/ higher assets; if you turn over millions, they go under 1%, and increasingly well under (marginal).
    There are institutional advisers (yours is one, maybe, being w/ ML?), whom one is always advised to stay away from by indies even though many do very good work, whose fees are lower sometimes, or were back in the day, because they were getting spiffed from placing you in the institution's funds and paying said brokerage small fees for stock transactions. The pricing revolution of the last decade has reduced much of that, I hear.
  • edited August 2018
    Thought if u you have large amount in boa Merrill edge ( Preferred Rewards Platinum or Preferred Rewards Platinum Honors programs) think there should be no fees at least this is what my cpa in Merrill edge stated... Free meeting and account evaluation

    You probably get more answers in mfo here than most private cpa or investment advisor imhi
  • @MikeS , before you make any transfer, ask whether some of the funds you currently have will transfer to ML. Some may not and you will have to choose from funds they sell, as they d o not sell all funds. Many Vanguard Funds are not available on their platform for instance. It is why I left ML two years ago although I liked my advisor.
  • msf
    edited August 2018
    Most of these wrap accounts seem pretty similar, and as davidrmoran noted, the fee is typical. So what follows is not a criticism of Merrill Lynch in particular, so much as observations about these plans in general. They do work well for many people.

    SEC, Investor Bulletin: Investment Adviser Sponsored Wrap Fee Programs
    [highlighted section] Tip: ... But if there is little or no trading activity in your advisory account or the trades being made would not otherwise have a transaction fee, a wrap fee arrangement may cost more than separately paying for the services. You should check your account statements to review the level of trading, and periodically talk to your adviser about the level of trading in your account, the fees involved, and what sort of account makes sense for you. Of course, there may be considerations other than cost, like access to certain managers, that make a wrap fee program right for you.

    We address conflicts from this compensation in a variety of ways, including the disclosure of the conflicts in this Brochure. Moreover, our Advisors are required to recommend investment advisory programs, investment products and securities that are suitable for each client
    All of the links that people posted here to questions to ask include the question: is there a fiduciary relationship. "Suitability" is a term used to indicate that the advisor isn't a fiduciary. I hope your specific client agreement does require your advisor to act as a fiduciary.
    as a general rule, we only include for purchase in the Program and other Merrill Lynch securities accounts a mutual fund share class that provides for a payment to be made by the mutual fund to one of our Affiliates for providing certain The manager of a particular mutual fund may have a fund share class that does [not pay for these services]. Accordingly, you should not assume that you will be invested in the share class with the lowest possible expense ratio that the mutual fund provider makes available to the investing public. ... As a result of such Fund-Related Compensation, we may have a conflict of interest in selecting certain mutual funds for inclusion in the Program over others.
    That would explain why as @slick noted, you'll have problems getting Vanguard funds.

    Note that in retirement accounts (IRAs, 401(k)s, etc.) an advisor must give you credit for any 12b-1 fees and management fees paid by a fund that is run by (in this case) Merrill Lynch or affiliate. But not for 12b-1 fees paid by any other funds.
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