I highly recommend that you hook up with a certified financial advisor. Their insight and advice is invaluable. We, too, are not financial savy; and we didn't go to one until about 3 years before we retired because we didn't think we had enough money. I was wrong. I referred a recently divorced friend who was learning to live on the income from her "just barely above entry level" job. She would receive a portion of the proceeds of the sale of their house. The financial advisor was able to make recommendations regarding renting vs. re-investing in a house...what price house she would be able to afford, what she could do, even with limited funds, to begin to plan for her retirement in 20 years.

We originally went for ourselves to find out if our dream of going full-time was feasible. He was invaluable in looking at the big picture and advising us of what we needed to do to realize it. We went full-time last July. On his recommendation, we invested the proceeds from our house as well as the buyout amount Paul received at retirement.

The great thing we liked about ours was that he only made recommendations and provided us with three scenarios....high risk, moderate risk, and conservative risk. We made the decision that we felt was best for us.

When I took over my dad's finances when it became too confusing for him, we took my dad to our financial advisor. He was able to make recommendations for consolidating all the cd's, life insurance policies, etc. that mom and dad had accumulated over the years.

I always thought financial advisors were for the rich....I only wish we had gone to one sooner. Ours works with whatever amount available and advised us on realizing long-term AND short-term goals.

The other bonus is that now whenever anything happens to my husband OR my dad, I'll only have to call our finance guy and he'll take it from there.

Don't think you have to go it alone. I encourage you to check it out.  The peace of mind is worth it!

I must preface these comments with "IMO" in my opinion.

There are many good financial advisors and financial planning services out there BUT there are also too many of those types who are not even honest much less benevolent.  Here is the rub, most make their living providing the service so it is to their advantage to get you to do what makes them money.  I know that a wise business would do just what you need and optimise your profits so that they will be profitable in the long term.  Unfortunately it is very tempting to encourage you to do what you want hoping for instantaneous gratification which will surely gratify your advisor who most often makes a profit when you buy, sell and change your plan.  If you ask the right questions you will find out how they make their money.  They can't affort to provide all of the time and services for free and they deserve a fair price for their service.  All that I am saying is, just make sure you get a good service at a fair price.

How do you do that?  Educate yourself before you make a decision.  Consumer Reports has annual articles on the investment tools you mentioned.  There are also a number of books by consumer organizations who help you understand the financial instruments and even advise you on finding a good advisor if you still need one.  My personal opinion is that a financial advisor who makes money from your investment etc and says they offer the service free is a dangerous route.  I would rather pay for the consulting time and then make my decisions based on long term performance of any investment.

You won't get rich quick without taking high risk which means you will likely lose most of you investment unless you are lucky.  Many tried and true systems exist but they all yield somewhere between 3% and 4% of spendable income if you want to assure that you protect your nest egg against inflation and keep your inflation loaded capital over the rest of your life.

Of course I am assuming you don't have money you can afford to lose in an attempt to make a big one time profit.

I am sorry if this sounds too negative but in truth it sends chills down my back when I see the phrase "I'll only have to call our finance guy and he'll take it from there."   Chances are better than even that if you don't educate yourself in this area that he will indeed "Take it from there."  Don't through caution to the wind.  If it sounds too good to be true it is too good to be true.

I hand the pulpit back to the forum.
Larry

Point well taken, Larry. You're right....I should have included IMO. We chose our financial advisor through recommendations of friends who had a track record with him. He was managing the investments for a number of retirees who had alot more money that we. His percentage is not based on what we buy or sell but based on our total investment he manages for us. Our first few appointments with him were at no charge because we had not yet made a decision on how to invest and we didn't have the money yet.

You're right...there are some mine fields. I let my enthusiasm for our experience downplay that.

Please let me preface this with several statements:  First I am not a financial planner, and Second these are my opinions and things that have worked for us.

First let me say that I have a golden rule when taking financial advise, and that is to Never take financial advise from some one who is still working for a living.  If they so so good at it, why are they still working?

Second I never trust investment of OUR money to someone else.  These investments are our responsibility and we need to know all that we can about it.  Anything else is risky at best.  I consider it a recipe for losing your money.   Take the time to do your own research and educate yourself.  Certainly there are some hard decisions to make.  First have a goal.  What do you want your money to do and how fast do you need it to get there.  This is essential to knowing how much risk you must take to achieve the goal.  Many of us can not afford to lose our money because we are simply too old to grow another nest egg.  Therefore we want very low risk.  Vehicles such as CD's, Money Markets are about the safest investments you can make but you pay for your safety with lower gains.  Mutuals funds are probably the next lower risks but not as safe as the other two previously mentioned.  Investing in stocks on the market are probably the most risky thing you can do but they also come with the possibility of the largest gains.  Only you can make these decisions.  A planner should never be left to contol your money without your approval of anything they do.  

I am glad to know there are some honest and capable financial advisors out there, we didn't find any. We had some bad luck while we were working and could fix it and found we had to take control ourselves. Diane did raise a stink with one place and got a bunch of free trades out of it, the "advisor" didn't listen to us and went with the company line. Diane and I have both worked in the financial field some of our working lives and my father was a banker, so we have an edge on most people.

The area we were sensitive to was how tax efficient the investments were. Many mutual funds buy and sell a lot and you end up paying the capital gains taxes on all those sales, some are more tax efficient and keep the tax numbers low. Most financial advisors were completely insensitive to tax consequences, it is not their money and they just look at overall returns. You don't find out the tax consequences until the year is over, it can really mess up your estimated taxes.

Buying and selling your own stocks under one year is short term capital gains, which is the same tax rate as income, but over a year you have a lower rate. If you are trying to invest for long term please try to hold for more than one year.

$75K is not a large amount, but you are ahead of many. Right now you can get about 5% on savings from online banks like Capital One, Ing Direct or Etrade Bank (we use Etrade for both brokerage and banking), so you want returns better than that. Many bank CDs are lower, they don't want you to realize there are better rates online. A good way to handle the stock market is to use a low fee tracking mutual fund like the ones Vanguard has to track the Dow Jones Average.

I can recommend The Motley Fool, they still have good advice for mere mortals about investing and retirement planning.

Of course I don't mean to comment on someone elses comments as such. I do think there is advantages to using the services of a person(company) who has the resourses to research and analyze all the various ways to accumulate and build your nest eggs.These people know what is available in money markets, individual equities ( including international), mixed funds ( Corp bonds, debentures, building funds, ect) and can provide background data on a variety of items/categories to allow you to make more informed decisions. I believe you should establish your investment objectives and stick to those objectives. I would never get involved with someone who would have discretionary power to handle "MY" funds without my individual approval on each line item. I feel that if these people are so good why aren't they retired on the money they have made. Tis funny that all the so called wealth buiding advisors seem to go after those people who have already accumulated a nest egg. I personally use money markets for accumulation of funds between reinvestments because I can get in and out on a daily bases without penalty and I get a little better rate. Can only offer that I have been the general stock market game since the early 50's and I belives I have been fairly successful. Remember your objectives for investing will change as you get older. Income vrs growth vrs risk vrs security. It is all your personnal preference/circumstances and what is right for one person may not be right for you. Do know the last week has killed me, but I haven't lost any money until I sell. Am in the market for the long run and have no intention of changeing. Of course tomorrow everything may and my objectives may change. but for now I'm content where I am.

I agree with Howard but I got the impression you were a bit risk adverse so I didn't give specifics. If the $75K is all money you will not need soon, like for a major repair, then his strategy is great. If you need to hold some back, put that portion into the highest paying money market savings you can get so you can withdraw it without penalties ($25K??). Now we can talk about the rest.

Believe it or not, $75K is too small to diversify with individual stocks so mutual funds are the way to go. You want to buy stocks in increments of 100 shares, so it is difficult to have a good mix of stocks and stay under $75K. Watch those load and other fees when buying mutual funds, that is how many get the big bucks. The breakdown of four groups that Howard recommends is a good one.


-- Edited by bjoyce at 16:27, 2007-03-03

All great advice. I used a broker, I went to him told him what assets I have, when I wanted to retire and how much I wanted to have then. I said you tell me how to get there. He drew up an investment plan, I looked it over, agreed to it and over the last two years I have had gains of about 15% per year. However, there is an alternative to the brokers and insurance agents, who just happen to advertise as "financial advisors", what is available are people who do not sell you anything they charge hourly fees and advise on the best way to make your assets work for you and help clear some of the tax hurtles. I would ask around in your local area, maybe the bank, accountant friends etc. It is possible to get the help you need without feeling like you have to buy from the advisor.

We use one of the large banking institutions brokerage divisions to handle just about all of our finances. We have a "managed account" for the investments. They charge a quarterly fee based on the portfolio value and do not charge for any trades. They make all the decisions on what and when to buy/sell and after 5 years we are very happy with the results. I sleep much better not having to second-guess myself! They provide us with a free Visa card and money market account for paying bills, etc. The Visa balance is paid off every month right from the money market account and 99% of our bills are electronically paid from this account also. When we need cash we just go to an ATM and any ATM fees are reimbursed to us by the bank. This setup will be ideal when we go full-time.

WOW what an amazing thing is happening here.  Many points of view about a very sensitive subject are being expressed without someone getting upset at another's comments.

My Hat is off to Howard and Linda.  They have a unique ability to develop an atmosphere of open discussion and trust not found on any other forum we visit or are members.

We have been diversely invested in a variety of low load mutual funds with good track records since the 80's.  About 90% of our investments have therefore been in the stock market and some funds do better than others at times depending on their investment strategies.  As everyone should be aware there are bad times to be in the market but most would say the most risk is in trying to time the market.  Since retiring we are now about 65% in the stock market and about 35% in money market/Treasury bills etc with less risk and less yield.

It was only after much research and some good advice from friends and yes an advisor we came up with our plan.  By the way we did pay the advisor for his time but we did not choose to invest with an advisor.  By taking advantage of good mutual fund management we can do what is necessary ourselves.  We did get into one fund that had all of the weaknesses listed above like bad tax practice, poor performance, weird loads, and we finally canned it after giving it 5 years to prove itselt.  Glad we stayed diverse even in choosing several mutual funds with diverse management styles.  We have been please with the overall returns since.

Happy investing,
Larry and Jacki