Retiree’s brain says yes but heart says no to a financial manager
Investor resists paying a 1.5% fee and giving up control of assets. How about a fiduciary advisor instead?
Dear Liz: I’m about to retire. A friend’s money manager has done well by her, doubling her portfolio in five years. This manager would charge a 1.5% fee to take control of my money, invest it, and generate income to supplement my Social Security. My heart is uncomfortable turning over control of my life savings to professional management, even though my head tells me it makes sense. Would a fair compromise between my heart and head be to pay a financial advisor to tell me what to do, but allow me to retain control of my hardearned savings?
Answer: Yes. You may have to search a little harder to find such an advisor, but you could be better off.
First, don’t be too impressed by a manager who doubled a portfolio in the last five years. An investment in a plain vanilla S&P 500 index fund would have performed about as well, at a much lower cost.
Speaking of cost, a 1.5% fee is relatively high for asset management. A 1% fee is much more common. If instead of a money manager you hired a fiduciary, feeonly financial planner — one committed to putting your best interests first — you typically would get comprehensive financial planning advice as well as investment management for that 1%. Such planning could include a tax-smart, sustainable plan for tapping your retirement funds, advice on Social Security claiming strategies, help picking the right Medicare coverage and a review of your estate plan, among other services.
If you’d rather not have someone else manage your portfolio, though, you have other options. The Alliance for Comprehensive Planning (acplanners.org) and the XY Planning Network (xyplanningnetwork.com) represent fiduciary, fee-only planners who charge retainer fees. You can find fiduciary, fee-only financial planners who charge by the hour at Garrett Planning Network (garrettplanningnetwork.com).
Social Security survivor benefits
Dear Liz: My mom passed away recently. She had a teacher’s pension as well as Social Security benefits. Am I eligible to receive part of her benefits? If so, what steps must I take?
Answer: Social Security survivor benefits are meant to help a deceased worker’s dependents. Dependents include spouses, minor children and disabled children, as long as the disability started before the child turned 22. If you qualify, contact Social Security at (800) 772-1213.
Similarly, pension survivor benefits are typically limited to spouses and dependent children. You may be eligible for a onetime death benefit, if your mother named you as her beneficiary.
Should living trusts be DIY projects?
Dear Liz: I have a living trust. I’ve also got family who have become estranged and priorities that have changed in terms of charities I’d like to benefit. Can I set up a trust that allows me to make these changes without having to pay an attorney?
Answer: There are certainly do-it-yourself options for estate planning. But if you can afford to pay for expert help, why wouldn’t you?
Estate planning is complicated, and the cost of making a mistake can be significant. That’s especially true if there are disgruntled family members who could challenge your estate plan.
The good news is that updating a living trust typically costs a lot less than setting it up in the first place. As mentioned in previous columns, you should consider having an attorney review your trust about every five years, and after major life changes.
Liz Weston, Certified Financial Planner, is a personal finance columnist for NerdWallet. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.