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Posted on 01/20/2012 7:40:19 AM PST by Kaslin
Dear Carrie: We are getting older and need help managing our investments. What do you suggest for people in our circumstances? --A Reader
Dear Reader: You're wise to be asking this now because, as much as we don't like to think about it, the older we get the more likely it is that we'll need help managing our finances. In fact, a study out of Texas Tech University last year measured how our knowledge of the basic concepts needed to make good financial choices changes as we age. It found that financial literacy scores declined by about 2 percent a year after age 60. Considering that the most recent Survey of Consumer Finances estimates that over 50 percent of the national wealth is controlled by people over 60 -- now about 12 percent of the population -- there are probably a lot of folks who could use some financial management assistance.
The first and hardest step is to acknowledge that you need help. You've done that already, so you're on the right path. Now you just need to look at your options. Fortunately, there are a number of ways to get financial advice.
CHECK WITH YOUR FAMILY
You could start by talking to an adult child or other relative who has investment knowledge and would be willing to look at your financial picture with you. Sometimes it just takes another perspective to help you feel more in control. Someone who's close to you and whom you trust could help you review your current investments to see if they're appropriate for your life stage. Or perhaps you just need someone to periodically look over account statements with you and help you stay on top of everything.
CONSIDER A FINANCIAL ADVISOR
If your financial situation is complicated or your assets are substantial, it's probably better to have a professional financial advisor. Advisors offer a wide range of services, from one-time consultations to periodic check-ins to complete hands-on management. The type of service that's right for you depends on the amount of your assets, your knowledge of investing and your feelings about financial control.
If you just want someone to review your portfolio with you and make suggestions, an advisor who will meet with you quarterly or every six months could be adequate. However, if you want someone to actively manage your investments, you should look for an advisor who will create a plan for you and then carry it out.
Another option is a Certified Financial Planner (tm) professional who can advise you on aspects of your financial life beyond your portfolio, including things like tax planning, estate planning or insurance.
TAKE YOUR TIME
Finding the right advisor for you takes time and effort. You want someone you're comfortable with both professionally and personally; someone who will listen to your questions and provide clear, understandable answers; someone who truly has your interests at heart.
Most advisors offer an initial complimentary consultation so you can talk about what you want and what approach the advisor would take. You also want to get a clear idea about how the advisor charges. Will you be charged a flat fee or a fee based on the size of your portfolio? Does the advisor receive any commission, reimbursement or incentive for selling specific types of investments?
ASK QUESTIONS
When you meet with an advisor, don't be afraid to ask questions. Do they follow a particular investing style? How much money do they manage? Also ask about education and qualifications, recognizing that there is a difference between a broker who primarily sells investment products and a professional whose primary business is giving advice. If you're talking to an independent advisor, ask to see Form ADV, which he or she is required to file with the SEC or their state. This gives broad information about an advisor and proves they're registered.
Then get references -- and be sure to check them. If any of this makes you uncomfortable, perhaps a friend or family member would be willing to help you.
If you already have a relationship with a brokerage firm, you could start your search for an advisor there. Another good resource is the Financial Planning Association website, FPAnet.org. There you can search for a financial planner by city, state, zip code or specialty and read a bit about what each offers. I'd pick three or four to start and make appointments to interview each.
Whatever type of help you choose, it may initially feel strange to have someone else being involved with your finances. That's why it's so important to find a down-to-earth, caring individual that you trust -- one you'll be happy working with now and for years to come. Best of luck.
>> the older we get the more likely it is that we’ll need help managing our finances... financial literacy scores declined by about 2 percent a year after age 60
I resent that.
There’s not a damn thing wrong with my financial management skills that having more money wouldn’t solve.
:-)
Most of the advice that you get is from people (professionals, relatives and friends) who are mainly
out to help “manage” some of your money away from you (to them).
Invest where you have the least amount of risk so you can sleep at night, and try to get that “magic of compounding” to work for you.
What ever you do, don’t let one adviser make your decisions. Make a concerted effort to examine your real investing time horizon. Your needs and goals have changed since you were 20. Your investments need to reflect that you won’t live forever.
That being said, if we get Hussein for another 4 years you won’t have to worry about investments, just which pill you are going to be given.
It’d be nice if there were some books in-between “How to Run a Hedge Fund for Seniors’ and “Squeezing Pennies from Food Stamps”. A few financial advise books for middle class seniors would be a help...
There’s my problem; I am at an age where I do not want to take risks and the returns are lousy. Where can I put some money to make some money without risk. Heck, at this point, 5% would look great.
The most eggregious “taking of Seniors’ money” comes from outright greed on the part of the senior investors.
Unrealistic high returns are the first key. Madoff investors should have taken a clue on this. Secondly, unrealistic expectation of annuitized payments on a fixed sum are the next loser - high payouts usually result in an eventual loss of prinicpal.....
If you aren’t greedy and are careful, AND HAVE SAVED AND PLANNED, then you are less likely to get screwed.
If all you have are Social Security and the prospect of an EBT card, then you have royally effed up, in my opinion.
With investments, there is more risk, and there is less risk. There are no investments without ANY risk. Generally speaking, you should make more money on investments with more risk, but that's not always the case.
Sure, we'd all LOVE to have a 5% investment that was a sure thing, but that return is elusive in this climate.
There are some stocks and ETFs that pay dividends in the 3-6% range, but your principal is always at risk because stock prices are still volatile. Some advisors are now saying that dividend stocks and ETFs are now over-bought...hard to say.
Good luck.
I have to do something. We're using our capital.
Do you mean that you're using your principal? (And you're eating into it without replacing it?)
IMHO, you need to look into some income-producing investments. Dividend stocks, and perhaps a bond ladder. (Unfortunately, I can't go into all the details, but perhaps some other Freepers can.)
Part of this depends on how much you have in principal savings, how much you need to live on per month, and how long you expect to need it. If your savings are smallish, you're not going to be able to generate much through dividends or interest on bonds. If your principal savings are larger, perhaps you could look into annuities--they can provide a guaranteed return, though I think you potentially can give up a lot in fees.
Perhaps it would be wise for you to sit with an advisor who specializes in managing your retirement. I would look for those that charge by the hour (as opposed to those who charge as a percentage of your savings.) It shouldn't take too long for them to understand your needs, and suggest a route for you to take. Make sure you're comfortable with any suggestions, and get a second opinion from someone you trust before doing anything.
You can take your savings and buy an immediate annunity. This will pay you (and a spouse if desired) a fixed income until death. If you need more income you can get a reverse mortgage which will provide additional fixed income until your death, at which time they take your (paid for) house.
We have plenty of assets so that is not a problem but I don't like using my assets, if it can be avoided.
Your beneficiaries can take the responsibility for the loan and pay off the part the bank owns or let the bank sell it and get their share out of the sale.
Of course if the loan payments equal the value of the house, the bank will own it all.
I’m not an expert, but I do believe retirement funds should be conservative with no loss of principle. Some annuity companies provide up to a 10% bonus for moving your funds into their programs and you have a fixed income. Some have health care riders.
Maybe other good ideas on this thread.
We don’t need to do that. We’re not hurting for cash, it’s just that what we need exceeds our income. We have plenty of assets. I just wish we could get a good enough return on our assets that we didn’t have to use them.
freepmail to you
Well, if you have a joint annunity, the spouse keeps getting checks. When you (or both you and spouse) die, then the checks stop. There is no money for anyone to get, sort of like Social Security. It is actually an insurance product. The financial provider takes your money and uses insurance tables to estimate how many years you have left, and calculate a monthly income stream. The older you are, the bigger your check. It is recommended if you are in good health and afraid of outliving your money. It is like making a bet where if you live longer than the insurance tables, you win. Die early and they get all.
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