Finance anyone?

[MetsFan]

I've been trying to get my family's finances in order for a couple of years now. Now with a second child on the way, I think it's definitely time to get it all straightened out - college savings!

Do you guys handle it all yourselves or do you have an adviser help you out with that sort of stuff. I've been doing a lot of reading on investing options and such, but I don't know if this is something I should consult a professional about.

 

[knight1fox3]

Our finances got a good deal more complicated with me adding a small business and consulting on the side. Plus with both of us working engineers, we simply didn't have time to devote to researching all the best options. So we went with a financial adviser through Northwestern Mutual who also handles our life insurance policies among other things like monitoring our 401k investment options (quarterly). Huge weight of our shoulders by having him spend time on those things. We also consolidated a few of our 401k plans from previous employers into IRA accounts (also where he controls the investment options). We also have pretty solid retirement goals set in that we know when and by how much we need to change our contributions.

 

[matt267 PE]

Before my wife and I had our daughter, we went to a financial adviser. All he did was sell us product, ie: Roth IRA, life insurance, disability insurance, etc.

 

[knight1fox3]

^ same here. We searched, read reviews, and interviewed multiple advisers before we finally found one we liked. Took close to a year before we made a final decision. But in that time, most of the ones we saw were basically just sales people trying to get you to buy some type of policy. It got to be quite frustrating.

 

[matt267 PE]

I wonder if a financial adviser from a local community group or church would provide sound and unbiased advise. It is good to talk with someone who knows what they are talking about. But I don't trust a salesman.

 

[knight1fox3]

Basically we had a "list" of things we wanted to accomplish. If the adviser we were meeting with strayed from that list to talk about a different "product", we didn't even give it a 2nd thought and it was on to the next candidate.

 

[MetsFan]

Before my wife and I had our daughter, we went to a financial adviser. All he did was sell us product, ie: Roth IRA, life insurance, disability insurance, etc.

That's what I'm afraid of. I met with one before, but he was always calling and very, very eager. He made his money from what he sold, so I stayed away. I haven't met with anybody else since though.

My wife works at a school and the people that handle her retirement account offer services too, so I'll check in with them too.

Basically we had a "list" of things we wanted to accomplish. If the adviser we were meeting with strayed from that list to talk about a different "product", we didn't even give it a 2nd thought and it was on to the next candidate.

That's a good idea. I have a pretty good idea of how I want to invest, but it's just a matter of having the time to monitor them like you said.

 

[knight1fox3]

With my previous employer (small power engineering consulting firm), this particular adviser had worked with the owner and also had a few other fellow employees as clients. So I figured I would give him the chance to see what he had to offer. Plus he was local and didn't bring up anything about life insurance until WE asked him. None of the other candidates we met with did that so we opted to go with his services. He also didn't hound us either while we were making our final decision. Another plus IMO.

 

[mudpuppy]

Finance/Investing is one of my hobbies so I spend a good amount of time reading about it, and I'm also president of a small stock buying club.

Most financial advisers have no legal fiduciary duty to their clients, so they are free to advise you to buy the investments that give them the best kickbacks rather than the best investments for you. The best ones make you feel like you're getting a good deal, when behind the scenes they are making a fortune off you. I prefer to do things myself, but If I did ever seek advice from an adviser--and there certainly are times when this makes sense--it would be someone who charges a set hourly fee rather than directly managing what I'm investing in. I just could never turn over my entire future to someone else.

Engineers are pretty intelligent and math-oriented so finance is often a natural fit for us. Picking up some reading material on investing here and there certainly can't hurt. For instance, the cover story of the latest Money magazine talks about why so many financial advisers push for their clients to roll over their 401ks into IRAs (more fees for them), and what the pitfalls of doing this could be.

 

[Road Guy]

[SIZE=medium]We do ours ourselves, I will echo what mp said, most of it is simple math and the research can be fun..[/SIZE]

[SIZE=medium]I have an MBA (Finance), coolest class I ever took was a stock valuation class, basically it teaches you that most all of those hip ratios people use on TV commercials are bullshit. [/SIZE]

[SIZE=medium]ROI, Debt to Income are good ones, but there really is no magic formula that will predict a future stock price.[/SIZE]

[SIZE=medium]There are lots of free tools you can get to look at what % to put in stocks, bonds, and such. We have a healthy make up of blue chip stocks, and things built more for long term. I feel we have done pretty well.[/SIZE]

[SIZE=medium]The main thing is just to put as much as you can into your 401K that you can afford to live without. It adds up quick when you do it that way..[/SIZE]

[SIZE=medium]I don’t recall what our exact breakdowns are for each account though..We started out more aggressive 20 years ago than we are today.[/SIZE]

[SIZE=medium]I have been slowly rolling up some old 401K’s into my current work 401K and it’s a pain.. these people don’t want to let go of “my” money…. My current employer has Vanguard, whom we were using for personal investment accounts so I am happy to put them all in vanguard.[/SIZE]

 

[MetsFan]

mudpuppy, good advice, thanks!

RG, I had my 401K for my past 3 employers in the same accounts up until last year. My wife and I then met with an adviser at Citzens Bank and I rolled it all over to one of their IRA's. I'm pretty happy with the return I'm getting, but I feel I could be doing better with less fees. I started a Roth for me and my wife at Vanguard and love their funds so I'm thinking of taking everything out of Citizens and moving it to Vanguard as well.

I still have a lot to learn though. I've read about those four fund lazy portfolios on bogleheads so I might do that to start with. I've also been itching to buy some stocks so I ended up buying AAPL before the split and it's been doing pretty well for me. On the down side, I bought ZGNX and that has been a dog. Luckily, I only invested a tiny bit into that one.

 

[knight1fox3]

Finance/Investing is one of my hobbies so I spend a good amount of time reading about it, and I'm also president of a small stock buying club.

Most financial advisers have no legal fiduciary duty to their clients, so they are free to advise you to buy the investments that give them the best kickbacks rather than the best investments for you. The best ones make you feel like you're getting a good deal, when behind the scenes they are making a fortune off you. I prefer to do things myself, but If I did ever seek advice from an adviser--and there certainly are times when this makes sense--it would be someone who charges a set hourly fee rather than directly managing what I'm investing in. I just could never turn over my entire future to someone else.

Engineers are pretty intelligent and math-oriented so finance is often a natural fit for us. Picking up some reading material on investing here and there certainly can't hurt. For instance, the cover story of the latest Money magazine talks about why so many financial advisers push for their clients to roll over their 401ks into IRAs (more fees for them), and what the pitfalls of doing this could be.

I was waiting for your response on this. As the comment was seemingly directed at me based on previous conversations, we certainly haven't turned off our future to someone else. Merely relegated some of the trivial tasks to someone more qualified. My time is worth more spent elsewhere.

Our adviser charges us for his time. The only kick-back he received was from the life insurance policy we bought (albeit a small percentage). But show me a policy where this isn't the case. NW Mutual was very good at being up front with their policy and any non-hidden fees. And they have one of the best customer satisfaction ratings in the financial investment sector. Hopefully we'll never have to encounter a situation where we need to collect.

I've read a few articles before in Money magazine and I often find myself disagreeing with the points they try to make. And the advising against 401k to IRA roll-overs would be one of them. None of us are to the point in our lives yet where we can be taking out of our 401k retirement funds without penalty. But I can tell you getting your money out of an IRA when YOU want it is infinitely easier than if it were sitting in a 401k. It's not a good idea to have multiple 401k plans just sitting there from the research I've done. Especially if you don't continually monitor where the funds are invested and how they are trending.

I will also say (as others have pointed out) there is no one fool-proof recipe for the most optimal retirement plan. All one can do is their due diligence in putting forth some effort up front into researching the best course of action for their specific financial situation.

 

[Road Guy]

if everyone would shop at Home Depot and buy insane amounts of Coca Cola I would really appreciate it

 

[knight1fox3]

Fiber optic and solid state technology is what's trending and will continue to.

 

[Road Guy]

www.etoys.com was trending in the 90's also...

 

[Road Guy]

and my "real retirement" accoutns are pretty diverse, those are just the only stocks I physically own outside of my long term investments

Home Depot- got free stock when I worked there, its done well, and the Coke stock is something I have had forever and it is still a staple..both have been using DRP's and its amazing what a decade will do for you.. one of those may very well pay a few years of early retirement...

My only real investment advice is do not buy any stocks or any short term investments until you have 100% taken advantage of your tax free opportunities via 401K, i.e. put back the max uncle sam will let you each year before you buy seperate stocks..

 

[mudpuppy]

KF, I wasn't trying to pick on you, just want to make sure people go into this with eyes wide open, the main point being financial advisers have very little legal obligation to you, so it's always a good idea to do your own homework. Which it sounds like you have done.

I will argue with your response a little bit though. "More qualified" is pretty subjective because it doesn't take all that much education to be a financial planner--obviously some planners have a lot of education and decades of experience, but some do not. I'd also argue in some cases against the idea the it's not worth your time. The answer to this really depends on how your adviser is paid. A lot of advisers (not all--and I'm not saying this is true in your case) are paid as a percentage of assets, such as 1% per year. 1% doesn't sound like much, but if you're starting with $100k, over 30 years that 1% could cost you $200k (the difference between 7% and 8% return). In that case spending a couple hours a month keeping tabs on your investments works out to $275/hour (fatty money!).

As for Money magazine, I agree it isn't the greatest publication out there. SmartMoney was a lot better, but it got sh!tcanned when Rupert Murdoch bought out the Wall Street Journal. However, again, the point of the article I mentioned was more about being cognizant of the risks than saying it's never a good idea to roll over a 401k. Heck, I wish I could roll my 401k into an IRA because IRAs offer a lot more investing options. And as you said, having multiple 401ks lying around can be a PITA. But the article was warning about advisers pushing people into rolling into an IRA with advising services that cost as much as 1.2% per year.

So what I was trying to say boils down to be wary and do your homework. In the end, everyone should do what they are happy with as long as they aren't getting gouged by their advisers. It sounds like you put a lot of work into finding an adviser you trust and the relationship works for you I think that's great! Other people like to take an active role in this stuff and I think that's great too--personally I'm passionate about investing (can you tell?) and I'm always pushing people around me to learn more. Kind of like doing taxes, I used to be intimidated by investing but in the end it doesn't have to be very difficult and can be rewarding--if that's where your interests lie.

 

[Road Guy]

If you roll Pre-Tax money into an IRA its still going to penalize you when you take it out early.

If you roll or place post tax money into an IRA then you can take it out minus the 10% penalty

I am getting down to one 401K & one 457 Plan (once T. Rowe Mother Fucking! Price) sends me my damn check! Had 4 accounts (4 jobs since college) and just recently merged them all together (did I mention I really like Vanguard?)

But since I have a healthy amount in a 457-B Plan and I can take that money out without the 10% penalty at any age so I am leaving that there as my rainy day fund- hope to never use.. I am not sure why government plans allow the money to be take out without the penalty (its specific to local governments) but I wont argue...

I am thankful my wife was a pain in my ass and made me put close to the max in our 401K for most of our life, (and doing that raising 3 kids has not been easy at all), barring any setbacks in 10 years I am quitting my job, moving to Breck, Frisco, etc and getting a part time job driving a snow plow on I-70 with Co DOT and skiing until my knees cant take it anymore.. wife can still make fatty RN money up in the mountains I imagine..

 

[mudpuppy]

mudpuppy, good advice, thanks!

RG, I had my 401K for my past 3 employers in the same accounts up until last year. My wife and I then met with an adviser at Citzens Bank and I rolled it all over to one of their IRA's. I'm pretty happy with the return I'm getting, but I feel I could be doing better with less fees. I started a Roth for me and my wife at Vanguard and love their funds so I'm thinking of taking everything out of Citizens and moving it to Vanguard as well.

I still have a lot to learn though. I've read about those four fund lazy portfolios on bogleheads so I might do that to start with. I've also been itching to buy some stocks so I ended up buying AAPL before the split and it's been doing pretty well for me. On the down side, I bought ZGNX and that has been a dog. Luckily, I only invested a tiny bit into that one.

I'm a big fan of Bogle--that guy is a legend. It's hard to go wrong with his ideas about indexing and keeping costs low.

If you're interested in selecting individual stocks, I'd recommend reading Stocks for the Long Run by Ben Graham--it's pretty much the Bible of value investing. Also this may sound like a funny recommendation, but "Starting and Running a Profitable Investment Club" has some really good information about how to analyze stock fundamentals using publicly available data (it also has several chapters on how to set up an investment club which you could ignore). If you can get access to it, the Value Line Investment survey has all the data you need to do fundamental analysis, and they also provide their own analysis and ratings. Subscriptions to Value Line are expensive, but most libraries carry it (and some offer access online).

I only keep about 10% of my money (fun money) in individual stocks. My biggest winners have been GOOG and UA (Under Armour) which have doubled to tripled. My worst pick was YRCW (Yellow, Roadway, Conway trucking company) which went bankrupt, and GE, which I bought soon before the financial crash and goes to show that no matter how safe a stock looks it can still drop in half.

In the near term I plan to take a look at HD (like RG) and Lowe's and I'm thinking of buying more Qualcomm. I'm also thinking about selling MCD. Remember that deciding when to sell is just as important (or more) than when to buy.

 

[mudpuppy]

(did I mention I really like Vanguard?)

+1 Yeah Bogle!

But since I have a healthy amount in a 457-B Plan and I can take that money out without the 10% penalty at any age so I am leaving that there as my rainy day fund- hope to never use.. I am not sure why government plans allow the money to be take out without the penalty (its specific to local governments) but I wont argue...

I don't know anything about 457-b plans, have to go do some reading. Does the money go in pre-tax or after tax?

I fully fund a Roth IRA partially because you can always withdraw your contributions without penalty, however you don't get a tax break for them. But it's nice to have that peace of mind that if anything ever goes really bad that money is there. Plus you never have to pay tax on the earnings (to be fully honest this is why my tax rate is so high--I get no deductions for my Roth IRA or Roth 401k contributions. But I'll be paying almost no tax once I retire.)