Dad Retiring Soon looking for 401K advice

Is the pension enough to cover all his expenses?

1% is a lot to pay if you ask me but typical.

But if he has no idea and you think CD ladder but ask for advice w none of the pertinent factors to consider, I don't think you're well equipped to self manage.

What is his risk tolerance?
Projected income/expenses?
Desired withdrawal rate?
Age? Expected longevity?
Does he have a spouse? Does pension continue after death if so and what %.
Is pension inflation adjusted?
Does he plan take SS?
When and what is projected benefit?

That's just a few things off top of head that are pertinent.

If you self manage, a 3 fund portfolio (you'd need to figure out weighting based on above factors +) or even easier a target date fund that auto rebalances.

Can't just assume the target fund or a generic stock/bond allocation for his retirement year fits his needs or risk tolerance.

All the above mentioned by Flying Tiger plus most large brokerages offer some sort of low cost/no cost robo-advisor service where you put in all the data above and a little more and it will give you a suggested portfolio to invest in. If you really don't know what to do, that is as good as any place to start.

If you want a little more, you can pay a little more and get additional services but I think you'll end up paying that 1% for any serious upgrade.

I wouldn't do it, but if someone who knew nothing was asking me what to do I would say to do that, then watch the various investments and see how they behave, and if you want something different make some small changes until you like what you have.

On the other hand, some people just want to do this in autopilot. The robo-adviser is probably as good as any choice for them.

The free robo advisors take into account age and retirement status. Just use one of them.

quote:

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He told me yesterday he talked to someone at Fidelity who suggested rolling his 401k into a Fidelity IRA and let them manage it for around 1% fee.

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That’s the right answer.

Use the 400k as a down payment on an apartment complex and hire a management company.

I'm trying to steer my mothwr to a fee based fiduciary advisor to avoid that dilemma. I don't want the responsibility of her financial future on my shoulders and know I'll be challenged to convince her to stay the course in a downturn. She already made mistake of shifting too large a chunk out of market past couple years and is now sitting on a pile of cash in taxable doing nothing despite my urging to allocate it to something if only a HYSA. She need someone to take the reigns.
I just don't know how to vet a FA and find one that won't sell her and will charge for services only such as building and periodically reviewing a plan rather than charging AUM.
Looked at XY Planning Network and Fee Only Network but not sure how to determine who is legit and a good fit. Not to mention can't persuade them to take time to interview FAs and make a plan.
I'll probably just have to hire someone to look at my FIRE plan and if satisfied steer my mother to them.

Torch makes some good points.
When Dad turns 73 he'll also be required to take minimum distributions from his 401k. That's roughly 4% .While not an immediate concern something to consider in the overall plan.

The 1% fee may seem high for the DIY crowd but if your dad has no interest to manage it himself then it's fine.

When my parents retired, they let Fidelity manage their portfolio for a few years. My mom asked me if I wanted to manage it but I was hesitant at the time as I didn't want to screw it up.

After watching what Fidelity did for a few years, I changed my mind and took over management. My only real complaint with Fidelity was using funds with higher fees. The Fidelity Spartan funds didn't exist at the time.

Here is what I'd do with your dad. First figure out what his average annual basic expenses are for a comfortable lifestyle . Call that amount, X.

At a high level, I would build a TIPS ladder that would provide X income per year that is inflation adjusted. TIPS bonds are very attractive right now as they are returning 2% real (not nominal) return above inflation.
https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_real_yield_curve&field_tdr_date_value_month=202406

This site built by a Boglehead tells you exactly what TIPS bonds to buy for a ladder:
https://www.tipsladder.com/

Now since your dad has a pension, you could reduce X by that amount. Also if he will take SS, then you could reduce X by that amount as well. If he is delaying SS then you'll have to adjust and factor it in (that site lets you specify desired income by specific year).

Assuming that he still has money left in his portfolio after building the ladder, you could stick the rest in a stock index fund.

With this approach, every year his basic expenses are covered by the TIPS ladder/pension/SS basically risk free. The TIPS and SS are both inflation adjusted which is what most people worry about in retirement. Not sure if pension is COLA or not.

Every year, he can sell some of the stock index fund to increase his income for that year.

Fyi I'm in striking distance of early retirement and my plan is to build a TIPS ladder that will last until at least until I start taking SS at 70. I've already sold all bond funds in my IRA and have a built a 15 year TIPS ladder. Over the next few years as the stock market goes up, I will add more to each rung of my ladder. If TIPS yields in the future look terrible compared to nominal bonds, then I will buy regular treasuries instead.

One consideration for you is to self manage his account based on how your account is managed at Fidelity.

I have used a 3 bucket approach for years. It still works in retirement with an adjustment for the % in each bucket to fit your risk tolerance. I make adjustments about once a year to move money between buckets.

Short term/emergency fund. This should have enough money for a year or so of expenses. Cash, CD ladder, Treasury bonds

Medium term. Money you might spend in 1-5 years. CDs,Bonds, some stocks, ETFs, s&p500.

Long Term. Money you won't need within 5 years. Would recommend to put all of this in the s&p500. The 500 beats the market and most other options in the long run.

I retired 5 years ago and still have 75% of my 401k in stocks,with the majority in the s&p500 and Russell1000. Conventional thinking will tell you to have a smaller % in stocks in retirement, but history shows little risk of the market staying down for 5 years.