Do I Need a Financial Adviser Anymore?

Money and butter: both are lubricants.

When my wife and I started our full-time jobs several years ago, my wife was interested in getting a financial adviser that would keep track of her/my/our money (we weren't yet married) and suggest investments. We found a very nice, qualified person who has more or less done well for us. As we were young and didn't start out with a lot extra to invest beyond our 401(k) plans, our financial adviser exclusively invested our money in a couple of mutual funds.

In the last year, as I've grown more interested in money topics, I've started to do a lot more research on investing and what my wife and I will need to do to retire. I've taken what I've learned, and I started a Roth IRA for myself last year, and I put money into it and chose investments for it. While I don't want to go into the details of it, suffice it to say that I have not (knock on wood) lost any money in that account, and I'm even a few hundy in the black.

The problem is that I, like a good number of other adults, have come to realize and understand that mutual funds (while coming with the positive of being diversified) are not without the negative of annual fees. When you take into account that my wife and I pay an additional fee each time we make a purchase from our financial adviser (it is how she gets paid, which is fair enough), I'm not convinced that I need a financial adviser any longer to recommend which mutual funds I should invest in, particularly since Sharebuilder (my online brokerage) offers certain mutual funds for which I don't need to pay any fee to purchase.*

I guess I'm just saying that if I weren't so interested in learning about saving and investing right now, I would be a lot happier spending the money on a financial adviser to take care of my money. However, since I do spend a good amount of time each week researching money and investing, the work of a financial adviser (at least in the capacity that ours has thus far helped us) seems a little bit unnecessary.

I'm bring this up now because my wife and I met with our adviser last week, and we mentioned that we both had old 401(k) accounts (the company we work for has had three different owners since we started working for it, and with each new owner comes a new benefits program), and our adviser suggested that she facilitate rolling them over with the other accounts that we have with her. While this might be a good idea if we were especially concerned about having all of our accounts in one centralized location (which isn't necessarily a bad idea), I'm a little concerned about the fees we'll be charged to roll the money over (both from the banks as well as the chunk that will go to our adviser). When I reviewed my investments in the 401(k) last month, I verified that my money is already in low-cost mutual funds; why should I pay a chunk of money to move them to another set of mutual funds?

On the one hand, I think that I might just be being cheap. As I mentioned above, our adviser has done well enough by us, so I shouldn't be nonplussed by the fees that she gets to do her job (do I begrudge a waitress a tip for doing her job? Well, sometimes [at least on take out]). On the other hand, with my own burgeoning competence at investing, the money we pay her just seems like extra money out.

What do you think? Am I just being a jackwagon? Have you used a financial adviser, and, if so, have you had positive experiences? Let me know in the comments.

*To be fair, we're meeting with her next week, and, now that we have a bit more money to invest, it's possible that she'll advise us to invest in other avenues. We'll see.

Photo by emdot.

Real Answers to Money Questions, or Why I Hate the Radio

Trust ye the voices that come from this?
Do so at your peril!

As I was driving to work this morning, I was switching between my preset radio stations.  One thing that adds to the pain of my morning commute is that most of the music stations that I listen to don't actually play music in the mornings.  What they play instead are these annoying morning shows where the local talent, scrambling for something to talk about, comes up with incredibly stupid things that I can't believe anybody would want to listen to.

Perhaps you're familiar with shows like this too? The ones that make you want to merge across 6 lanes of traffic and take out as many people as you can? No? That's just my own murderous rage? Good to know.

With how little I think of these programs, you can imagine my surprise when I heard that the station was going to have a segment where people could call in and get answers to their money questions ... by some guy who was adopting a Boston accent.  I say "adopting" because he didn't keep the accent up the whole time.  That should have been my first clue that I wasn't going to like the segment.

Having said that, let's take a look at the callers' issues and see if I can provide better answers.

Caller 1:  This guy's issue was that he had received a speeding ticket, and he had not paid it on time.  Because of this, the original cost of the ticket ($391) had increased to $700, and he wanted to know what to do about it.

DJ's Advice:  On his way to the courthouse to pay the fee, the DJ recommended that the caller should keep an eye out for change that was minted prior to 1965 because of the higher silver ratio that this change contained.  At one point, the DJ referred to pre-1965 coins as coming from "the early nineteenth century, " ostensibly to clue listeners in to the fact that he was dropped repeatedly on his head as an infant.

Pictured: Money from the early 1800s.
Never mind the obvious date.

And that was it.  That was the actual advice given.  While I consider myself to have a pretty good sense of humor, even in humor of the irritating and the absurd, I wanted to reach my fist into the radio, have it travel through the airwaves, and punch this mouth-breather right in the back of the head.

REAL Advice:  In the first place, don't be the moron who doesn't pay his ticket on time (also: don't be the moron who speeds).  But since this caller was already past this, the only reasonable advice I can give would be to get into contact with the county clerk to see if you have any options.  Beyond that, you might attempt to appear in court and explain your situation and throw yourself at the mercy of the judge.

However, because our friend the speeder is already late in payment, I suspect that he'll have to pay the full amount.  With that being the case, I'd advise him to sign up for traffic school if he's eligible, so that he can get the ticket off of his record to ensure the ticket doesn't affect his insurance.

Caller 2:  From a theoretical standpoint, this question was more interesting to me.  This person asked if he should save money for retirement by putting money into a 401(k) or a Roth IRA.

DJ's Advice:  The DJ told him to put money in the 401(k) because the caller would not have to pay taxes on that money.

This is absolutely not true!  Money is put into a 401(k) pre-tax; that is to say, you don't pay taxes on the money right now (and money contributed lowers your current tax obligations), but you will have to pay taxes on the money when you take it out.

REAL Advice:  A frequent benefit of 401(k) plans is that your employer will usually match what you put in, up to a certain amount.  Because of this, if you can swing it, you should max out what you put into your 401(k) to ensure a full company match.  When you do so, you are receiving a 100%, immediate return on your money.  You can put up to $17,000 into your 401(k) for tax year 2012 (up to $22,500 if you're older than 50).

If you have more money that you'd like to invest for retirement beyond maxing out the company match with your 401(k) (and if you'd like to have a comfortable retirement, you should pretty definitely do so), I recommend looking into a Roth IRA, assuming you are not making too much money to contribute.  You can put up to $5,000 a year into your Roth for tax year 2012 (up to $6,000 if you're older than 50).  Studies have shown that people who have both a Roth IRA and a 401(k) tend to have more retirement savings than those who only have one account or the other.

I guess the real take away for this article is that, if you have a money question, you should NEVER CALL IDIOTS ON A MORNING RADIO SHOW.  Search the internet instead.  Google is your friend.

Photo 1 by infousX.
Photo 2 by Kevin Dooley.

People with Both 401(k) and IRA Save the Most

According to a recent analysis of its customers by Fidelity Investments, those people who had both a 401(k) and an IRA had more money saved for retirement than those people who only had either a 401(k) or an IRA.  How big of a difference are we talking?  Those with both types of accounts had saved 2-4 times as much money as those with only one type of tax-advantaged retirement account.

While this correlation might be explained by simply realizing that with more funded retirement accounts comes more saved money, I suspect there's more to it than that.

One possible explanation that I find plausible is that it stands to reason that people with both types of accounts may have spent more time thinking about retirement (such as figuring out that there are different tax implications for a 401(k) than a Roth IRA, for instance).  If these people have thought more about retirement, it stands to reason that saving for retirement is a higher priority than those with just one account, and as a result, these people stick more away for their golden years.

What do you think?  Why do you think there's such a marked difference between the two groups?  Let me know in the comments.

July 2011 Retirement Status

Well, it's a few days late, but here are my latest retirement figures.*

Overall, I'm not very pleased, and I am fairly confident that nearly anybody is probably not pleased with how their accounts have gone in the last month. I haven't added to either my old 401k or my Roth IRA, and they both have made precipitous drops in the last month (I lost about $2800 in my old 401k, and you know what? It didn't even call me in the morning).

Still, I am happy and blessed to be this far along towards retirement, but I guess one never really loves to get taken along on the whims of the market (at least not when it goes down).

My plan for August is to get another three to four hundred smackers in my Roth while the market is down. I am fairly confident in the mutual funds that I've chosen, so (allegedly) it's just a matter of waiting this dark period out. We'll see if I'm doing any better come next month.

*I thought I'd wait for S&P to downgrade the U.S.'s debt before I posted. It seemed the most equitable.