Do You Really Need a Financial Planner?
June 03, 2015

Do You Really Need a Financial Planner?

Q. Do I really need a financial planner? I have a 401(k), employer pension, and Social Security for retirement. I have $70,000 in savings and I want to invest. Should I go with the guy that charges 1.2 percent per year or a fee-based only person? ---S.S., by email

A. Start by making a distinction between financial planning and investment management. You might see a financial planner on a consulting basis, paying a fee at an hourly rate. A visit to review your finances should give you an idea of whether you’ll have enough money to retire when you want to retire. (With Social Security, a pension, a 401(k) plan and some savings things are looking good!)

For most people financial planning is about getting a handle on whether your expected income will cover your expected expenses. It can be complicated. It can be simple. For most people it is pretty simple.

The second part is managing the money. That, thankfully, has become very inexpensive as index funds have displaced managed funds and as employers have offered life-cycle funds in 401(k) plans. Basically, the burden is now on the managers to prove that they can justify their expenses. And they can’t. So look for a simple low cost balanced fund such as Vanguard Balanced Index. And with $70,000 you can buy the even lower cost Admiral shares. Ticker: VBIAX.

Q. My husband is convinced there is going to be a total devaluation of the dollar.  His solution is to turn a large portion of his 401(k) into gold-backed vehicle.  How would be the best way to do this?  He doesn't want a mutual fund that invests in gold, but rather the gold itself stored in some manner.  He has been reading Peter Schiff online for his info.  I am very concerned that this is not safe.  Your comments would be much appreciated. ---S.C., San Antonio, Texas

A. If you really get into the financial collapse thing, your husband should buy lead, not gold. The lead should be in the form of bullets, preferably of a large caliber. I am told that when these lead bullets are inserted into a good handgun, the lead can be turned into gold very quickly. This does not require converting a 401(k), or any other form of investment, into gold.

If you’re going to bet on gold, the best way to hold it is in the form of gold coins that you store in a secure place in your house because if there is a collapse, our financial institutions won’t be doing business as usual.

In the meantime, our first duty is to take part in the world “as is, where is.” That means participating in the system of saving and investing that we have, trying to make it better, and hoping that our collective wisdom exceeds our collective stupidity. Yes, it’s looking like it will be a really close call.

Q. I have a question that I have never seen answered before. What does one do with the stocks that have not done very well in an IRA?  In a regular account I could rebalance and take a loss on my taxes. Then I could move on to a better performing stock. But what does one do with the underperforming stocks in an IRA? Is there no way to mitigate the loss? Could I transfer the stocks to my regular account and sell and then take the loss or am I just out the money? If I am truly just out the money then investing with IRA funds could pose a significant threat to ones future retirement. Careful selection is really more critical in an IRA than a regular taxable account. ---J.R., by email

A. You don’t get to deduct stock losses in your IRA because the money that goes in is tax deferred labor income. When it comes out, it is treated as ordinary earned income. Basically, you can’t get a tax break on a tax break.

What you can do, however, is adapt. If you can invest more than the money that goes into your IRA or 401(k) plan, make the tax-deferred investments more conservative and make the riskiest investments in a taxable account. That way you’ll be able to deduct capital losses when they occur, at least up to the legislated limit.

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This article contains the opinions of the author but not necessarily the opinions of AssetBuilder Inc. The opinion of the author is subject to change without notice. All materials presented are compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. This article is distributed for educational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, product, or service.

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