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Message
Need recommendations for someone close to retirement UPDATED INFO
Posted on 9/19/18 at 11:41 pm
Posted on 9/19/18 at 11:41 pm
So a little long, sorry in advance.
I have a in-law that just turned 62. This person is very frugal but had a nasty divorce and very long custody battle immediately followed by being laid off and out of work for two yrs. Needless to say this all wrecked his fiances. This was a long time ago but a set back that big is hard to come back from especially because it was a substantial amount of money.
Fast forward: A couple weeks back finances and investments came up at a family get together and he made a mention about his managed account losing money which I found hard to believe. Long story short we had a sit down and went over his fiances and investments. One in particular is being ran by Chase, about 360K and he paid more in fees than the account made last yr which blew my mind. I wasnt sure what he should put it in but told him he definitely needs to move it out of that dumb asses hands.
Q1: What would the board recommend moving it into? I assume some passively managed Vanguard account?
He also brought up the fact that he was thinking of using it to pay off his house. He owes 105K @ 3% interest.
So he has the 360K in the Chase fund, and then another roughly 332K in 401K, stock, and a IRA.
He would like to retire now but realistically hopes to be able to at 68.
Q2: Should he pay off the house?
Also the stock he has is all tied up in one company which is susceptible to major industry swings, about 185k. I suggested moving at least half of it to something else more stable. What does the board think about this and any recommendations on particular funds?
Sorry for the length, any help is greatly appreciated.
I have a in-law that just turned 62. This person is very frugal but had a nasty divorce and very long custody battle immediately followed by being laid off and out of work for two yrs. Needless to say this all wrecked his fiances. This was a long time ago but a set back that big is hard to come back from especially because it was a substantial amount of money.
Fast forward: A couple weeks back finances and investments came up at a family get together and he made a mention about his managed account losing money which I found hard to believe. Long story short we had a sit down and went over his fiances and investments. One in particular is being ran by Chase, about 360K and he paid more in fees than the account made last yr which blew my mind. I wasnt sure what he should put it in but told him he definitely needs to move it out of that dumb asses hands.
Q1: What would the board recommend moving it into? I assume some passively managed Vanguard account?
He also brought up the fact that he was thinking of using it to pay off his house. He owes 105K @ 3% interest.
So he has the 360K in the Chase fund, and then another roughly 332K in 401K, stock, and a IRA.
He would like to retire now but realistically hopes to be able to at 68.
Q2: Should he pay off the house?
Also the stock he has is all tied up in one company which is susceptible to major industry swings, about 185k. I suggested moving at least half of it to something else more stable. What does the board think about this and any recommendations on particular funds?
Sorry for the length, any help is greatly appreciated.
This post was edited on 9/20/18 at 9:42 am
3
Posted on 9/20/18 at 6:19 am to GREENHEAD22
quote:
Q2: Should he pay off the house?
At a minimum he’s paying 22% (in tax) to do this since it’s coming out of an IRA.. if his mortgage rate ain’t higher than that then he’s a fool to pay it off with IRA $.
Posted on 9/20/18 at 7:59 am to Shepherd88
I have to look at it again, that may not be a IRA, I may have miss spoken. It's a fairly recent account, 4-5yrs old. But yea I didn't think about that.
Posted on 9/20/18 at 8:18 am to GREENHEAD22
quote:
Q1: What would the board recommend moving it into? I assume some passively managed Vanguard account?
Whatever it is - make sure about all the rollover consequences/fees before you start. I agree that Chase is obviously not the answer and that Vanguard probably is, but don't make a bad situation worse with unexpected taxes and fees.
quote:
Q2: Should he pay off the house?
Not unless it is seamless (which I doubt is possible at this point). Remind him that Social Security is coming up and it, alone, might be able to handle the debt services on $100k.
I'm normally for debt reduction, but his planning and focus needs to be laser-like at this point on the subject of income. When he stops working, he needs all the income he can get. Between now and then (assuming a 4 or 5 year window), he needs to still participate in growth, but in a more risk averse fashion (minimizing loss is probably more important than growth at this stage of the game) and be ready to transition to income.
Just my $0.02 and probably not worth that. Frankly, he needs quality retirement planning about 8 to 10 years ago. But, absent a time machine, he cannot afford any more big money mistakes.
Posted on 9/20/18 at 8:29 am to GREENHEAD22
I highly recommend Schwab's intelligent portfolios. No real fees other than ETF costs and it is actively "robo" managed with rebalancing regularly and adjusting portfolios appropriately.
It is the best free IRA option, IMO.
It is the best free IRA option, IMO.
Posted on 9/20/18 at 9:48 am to notsince98
I will tell him to look into this, thanks. With a possible recession and bear market looming at the same time as retiring I really cant offer him much advice.
So it has been awhile since we had this discussion so I double checked my numbers with him and updated it in the OP. The situation is a little more tight than I first posted.
So it has been awhile since we had this discussion so I double checked my numbers with him and updated it in the OP. The situation is a little more tight than I first posted.
Posted on 9/20/18 at 9:52 am to Ace Midnight
Yea from what I could tell he has been pretty conservative which has probably cost him especially with the growth in the market the past decade. I think all the financial woes from the past made him gun shy.
Posted on 9/20/18 at 11:54 am to GREENHEAD22
He needs a real advisor.
The company stock may fall under NUA rules. He has to withdraw it a certain way to get the favor able treatment.
The company stock may fall under NUA rules. He has to withdraw it a certain way to get the favor able treatment.
Posted on 9/20/18 at 3:43 pm to mikie421
I agree with you. And if he pays off the house it will be out of the chase account. It is not an IRA like I thought. It is just a managed account.
Posted on 9/20/18 at 8:16 pm to mikie421
quote:
He needs a real advisor.
This right here. He needs to talk with a CFP.
Posted on 9/20/18 at 9:05 pm to GREENHEAD22
quote:
With a possible recession and bear market looming at the same time as retiring
What on earth?
Posted on 9/20/18 at 9:37 pm to Old Sarge
Everything I have seen and read suggests an end to this current bull market in the next couple of years. You are expecting it to run another 5 or so yrs?
Posted on 9/20/18 at 9:52 pm to mikie421
quote:
He needs a real advisor.
Additional vote for this.
Posted on 9/20/18 at 10:07 pm to Ace Midnight
Let me just clarify that I am not trying to be his adviser, I mostly just suggested that he would be better off moving the Chase managed account to something else. During this discussion he brought up possibly using it to pay off his house.
Posted on 9/21/18 at 6:30 am to GREENHEAD22
Understood. I still agree with the recc above to refer him to CFP. He needs professional advice not opinions from strangers on a message board who are relying on a modest amount of info re his financial condition. That said, I probably wouldn’t pay off the house.
Posted on 9/21/18 at 6:32 am to dirtsandwich
Also, what is the investment held in the chase account? If it is something where the costs are upfront, liquidating shortly after buying might not be the right decision. Impossible to know on info provided (unless I missed something in the thread).
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