Retirement is quickly approaching on the horizon and it is time to start planning where my money will go.

I have a employer backed account I will need to roll into an IRA once I retire (1-2 years). I don’t expect too be a real “hands on” investor, just want to be able to expect a relatively “safe” annual return of 7% or better.


Researching online, the one I keep going back to is Fidelity for good service and low costs. Anyone here use them and have any input?

They seem to offer the range of do it yourself to fully managed with all the bells and whistles along with research info and multiple account options for no to little fees.

Before I take the leap and open account(s) thought i would check here to see what other’s experiences with them have been.


Additionally, I am a little behind the curve but I am also thinking it might be a good idea to open a Roth IRA as well. I have a respectable amount in a savings account that isn’t earning squat interest. I am thinking if we open Roth accounts for both myself and my wife, I can move $28,000 into accounts right away (for 2020, 2021) and then another $14,000 a year for the next and that money can start making interest (hopefully) in the same 7% range.

I get that the Roth accounts will lock the money up for 5 years from initial deposit, that isn’t a problem. Being able to eventually move $50-60K from a .1% APR savings account to an account earning 5-7% APR and with no Fed income tax on future withdrawals seems to good to be true, am I understanding that correctly? It would make a sizable improvement in my retirement outlook.


Not totally committed to Fidelity, but they seem to be a big name. If there are others folks want to suggest, I am all ears.


And yes, I do plan on talking to a professional- just trying to get a better understanding on basics to make the best of that consultation when the time comes

This message has been edited. Last edited by: 911Boss,

I have Fidelity. I have a long time rollover IRA account with them. I DIY the investments.

Fidelity and Vanguard seem to be the two most common recommendations for providers of "set it and forget it" IRA retirement accounts at very low costs.

Personally, my Roth IRA is with Vanguard. Vanguard offers a number of well-regarded "one stop shopping" all-inclusive diversified mutual funds (such as Target Date Funds or LifeStrategy Funds) with very low expenses, which are more attractive to many retirement investors who want to be hands-off, as opposed to personally researching and picking each individual stock and bond. But I'm sure Fidelity offers something similar.

The downside to Vanguard is that they don't offer the same super-robust research and analysis tools that other fancier brokerages do, so may not be the best option for someone who wants to be an active investor with lots of research.

quote:

I get that the Roth accounts will lock the money up for 5 years from initial deposit, that isn’t a problem.

Actually, no. Roth IRAs allow you to withdraw your contributions (the up to $6k you put in each year) at any time tax-free and penalty-free.

It's only the earnings from your investment that cannot be withdrawn until after 5 years and 59.5+ years of age, otherwise you face taxes and penalties.

That's one of the big selling points of the Roth... You can still access your contributions as part of an "emergency fund" if needed, without the steep penalties of a traditional IRA for early withdrawals of any of the money inside.

(Early withdrawal from your retirement savings is still not a great idea unless the need is dire, due to its effect on potentially hobbling your future compounded earnings, but at least with a Roth IRA you won't also get the double-whammy hit of additional penalties like with a Traditional IRA.)


However, as to whether you should do a Roth instead of (or in addition to) a Traditional IRA, you'll definitely want to run that past a professional financial advisor, who can look at your specific financial situation and help you determine the best way to proceed. There are pros and cons to each, much of which is centered around your current tax rate vs. your expected tax rate during retirement.

My wife had a 401K with a former employer that used Fidelity. When time came to consolidate her 401K's, IRA's, etc. we chose another company. Just why I don't remember exactly, but I do recall a general dissatisfaction with Fidelity, perhaps due to less-than-desired transparency/reporting, or maybe higher fees. Admittedly, my memory is dim on this, but the bottom line was that we didn't stick with them, but instead rolled everything into a T. Rowe Price IRA, that has proven very solid. Enough so, that when her dad dies, and she inherited his IRA, we moved that to Price as well. Funds are held at Price in a low-fee mutual fund, and returns have generally been acceptable. Service, especially WRT the inherited IRA, has been stellar. I use TD Ameritrade for my self-directed retirement plans, and for a family trust, and I have been happy with them as well. If I were seeking another investment firm at this time, I don't think Fidelity would be on my short list.

I have had accounts with Fidelity for almost 25 years and I think they are pretty good.

They have a good front end presentation for your account and they have good research tools.

I have Fidelity and they are fine. Now about that relatively safe 7% return, that can be a challenge depending on your definition of relatively safe.
Pulling 7% out each year is more aggressive than most planners recommend.
For example my scenario is based on a 4% average distribution.

"Too aggressive" depends on a number of factors. His retirement situation may be different. So that's where the pro's individual advice, tailored to his specific situation, comes in.


For example, if he has other ways to cover all his expenses through things such as passive income, pension, Social Security, etc., and the investments would just be additional wealth and fun money, he could potentially afford to be more aggressive. But if he's relying on the IRA to pay most of his expenses throughout retirement, then he'd probably want to play it a lot safer.


Also, age and time until retirement comes into play. Just because he's 1-2 years from retirement from his current employer doesn't necessarily mean he's going to be fully retired in 1-2 years. If he's still relatively young, and full retirement is still a ways off, he can potentially afford to be more aggressive for a time.

(I'm going to be retired from my current employer in 13 years. But I'll only be 50 at that point. I won't be "fully" retired for another 10-17 years afterwards. So I could likely afford to continue to be more a bit more aggressive with my investing for a while after my initial retirement.)


Bottom line: Talk to a pro about your specific financial situation. Don't rely solely on free interweb advice, or what the "average" retiree does, or what "most" planners recommend for "most" people.

This message has been edited. Last edited by: RogueJSK,

Our company's 401k is managed by Fidelity; when I took a lump-sum retirement I rolled it over to a Fidelity IRA.
I have always found Fidelity's customer service to be outstanding; I'd recommend it highly based on my experience.

Fidelity has a lot of managed funds, whereas Vanguard tends to encourage indexed funds. But you can choose Fidelity and non-Fidelity, managed and indexed funds, pretty much everything you want.

Fidelity or vanguard or Schwab would all fit your needs.

stick with low cost broadly diversified index funds for the bulk / core of your assets.

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There are two kinds of financial advisor out there. Both require your investigation and trust, but they operate differently.

First, there are the Fidelity/Edward Jones/Prudential, etc. type of managers. They advertise themselves as "free" (they're, not, but more on that later) and then there are individual money managers, sometimes within these firms, and some times independent, who charge a fee for services, typically quarterly, to manage your money within a risk tolerance.

The "free" corporate managers are typically in the business of selling you mutual funds, annuities, guaranteed products, etc., all of which pay a commission to the advisor, and all of which pay what are called "12(b)-1 fees" back to the managing investment house to market, promote and sell the fund.

The total "load" on these funds, between commissions on purchase, 12(b)-1, loads on sale and insurance paid if the product has a guaranteed rate of return is typically in the range of 1.5% to 2.3% of the asset value invested. For example, my parents are with Edward Jones and they asked their broker who has treated them very well to do an analysis of their total load, and it came to 1.7% annually, of the money they have invested. The problem with this system is that you really don't see the load, because it isn't billed to you, and it MAY incentivize a less than totally ethical broker to sell funds that have a higher load that make the broker more money.

The other kind of broker charges a fee, typically 1% of investment (paid .25% quarterly) on the value of the invested money at the start or end of the quarter. This fee is paid on total assets, and is paid whether the value of your investments went up or went down. A good broker of this kind will also not sell any commissioned or 12(b)-1 products so there are no hidden fees, and will always also buy some of the investments selected for you for their own portfolio to expose themselves to the same risk to which they are exposing you. The benefit of this system is the broker is incentivized to have your investment grow as that is how they make more money, they are incentivized for you to be happy and tell all your friends how great your personal investment guy is, and they are cheaper on an annual basis than the funds that hide the load.

My guy charges 1%, does not sell any commissioned or loaded products, does not push "fund families" or most annuities (although he will sell a certain set of annuities) and he holds your money as advisor in a TD Ameritrade account which is in your name so you always have visibility to, and access to your money, and can fire him by the simple expedient of calling Ameritrade and having him removed as advisor.

If you can find a smart, reliable guy I think that the asset based fee broker is CLEARLY the smart way to go.

I'd be happy to introduce you to "my guy" if interested as he can and does do business with clients all over the country.

Years back I moved over to T Rowe Price with my 401k rollovers. I had the right amount so that I got personal service, where one of their investment advisors sat down with me for a couple hour, and came up with a good mix of funds. I can call them up any time and get someone experienced to give me personal service still. Overall the choices we went with were great, top performing funds, with only 2 that didn't pan out over the long run.

I started out investing with Fidelity in the mid 80’s, went through the crash of ‘87 where I sold my Magellan (big mistake). Then I went to Vangaurd for several years but felt that the depth of their research teams wasn’t as good as Fidelity’s so in the 90’s I went back and have been with them ever since.

I retired from my primary company 2 years ago and at that time sliced off a portion of our portfolio to their managed accounts. Their returns have been fair but my own accounts have faired better but my Beta is also higher and therefore riskier than what they have managed. For some reason they like bond funds which I have never been convinced make any sense but I’m OK with them making the choices in that sub account.

There were a couple of comments above about just putting your money in a low fee index fund and letting it ride which is not a bad idea in and of itself but, for me anyway, there are better options out there. Would you pay a higher fee of say 1 to 1.5% if your return was 5 or more percent higher over the long term? That is my philosophy and what I’ve done with quite a bit of success...

I’ll give you 3 different funds that have consistently over performed in the long run...

1. Fidelity Blue Chip Growth. FBGRX
It has a 10 year average of 19.32%/year and a lifetime (since 12/87) average annual return of 13.32%

2. Fidelity Contrafund. FCNTX
It has a 10 year average of 15.2%/ year and a lifetime (since 5/67) average annual return of 12.8%

3. Fidelity Select Semi Conductor FSELX.
It has a 10 year average of 20.8% / year and a lifetime (since 7/85) average annual return of 13.64%.

These 3 funds along with a few others make up the bulk of our portfolio. It is hard to argue that these are some of the best long term managed funds in the whole investment market. Averaging 7% over the long term with funds like these is a strong possibility but as stated above I would not, and do not, plan on pulling out that much each year...

A little more info on my situation...

When I retire from my employer I will be retired, if all goes as planned I’ll be 59.5 years old and starting to collect immediately.

Currently our combined income from two sources is “X” and I figure to be comfortable I need about 85% of X at the start of retirement, adding in a “cushion” I would like to plan on 90%.

Source 1, my current pay is 72% of “X”
Source 2 is 28% and won’t be changing.

At start of retirement, I will have four sources:
1- Defined Benefit Pension which should be approx 29% of current “X”
2- Same as above, 28%
3- Defined Contribution (money being rolled into IRA), planning for disbursements to provide 33% of “X” initially, but will reduce as time goes on at 62, 65, and 66ish
4- Current savings, some potentially being moved into Roth IRA -reserve not touched initially.


I plan to take early SS at 62, adding a 5th source that should be approx 25% of current “X”. This will allow me to reduce IRA disbursements to 8%.

At age 65 when we both qualify for Medicare, monthly expenses should drop to allow 80-85% of X to be sufficient, and sometime shortly after that the sale of our house and moving out of WA state will further reduce budget hopefully allowing for 70-75% of “X” to be sufficient.

Initially, the annual disbursement from the IRA would be about 8% of the expected starting balance. At 62 it would drop to an estimated 5%, then would not be any regular disbursements from age 66 or so on.

At that point:
1- 29%
2- 28%
3-
4-
5- 25%
Total = 82%

Should no longer need regular IRA disbursements so those can grow to be reserves to cover unexpected expenses, inflation, travel, etc.


I’ve done a couple of Excel “what if” spreadsheets and basically as long as the employer rollover account averages 4.5-5% or better, That combined with current savings at no appreciable interest, I should only need to draw on the IRA for the first 8-10 years and then no longer. Would still have a savings cushion and the IRA would be growing from that point on.

I stopped my spreadsheet at age 90 as it seemed pointless to continue watching balances increase and I don’t expect to live that long anyway.

I have the bulk of my investment portfolio in Vanguard's STAR, Wellington and most recently a rollover into Target 2015.

I started with them back in the mid 80's. Looking at it over that time span, even with the downturns the trend has always been upward.

What are you going to do for medical insurance between the time you retire and start Medicare?

quote:

Originally posted by smlsig:
What are you going to do for medical insurance between the time you retire and start Medicare?

Employer offers “Retiree medical” coverage, great plan, but at a cost of about $1800 a month for the two of us. At 65 Medicare kicks in and I am planning for about $1200/month in supplemental and out of pocket expenses at that point.


One other thing, for at least the first 5 years or so I could pretty easily cover about 10% of my current income by continuing my side gig of Real estate listing photography. That income was not included in the current “X” amount.

Don’t want to rely on it, but it is a safety net of sorts.

My IRA is with Vanguard; the wife's is with Fidelity. We're happy with both fund companies.

Fidelity has been great for us over a long period of time. Over the last 20 years the accounts have grown faster than we have spent them down.

We have seen some tough years and some great years, but I don't expect to average 7% return.

If you go with someone ensure they are a fiduciary. If you have never managed your own accounts I would put some money into one and start doing it now to see how it goes. FYI if you retire earlier than 59 1/2 you can pull money from a company sponsored IRA penalty free at 55 (but is is taxable).

I have a Roth and Brokerage account with Vanguard and a Roll-Over IRA and brokerage accounts with Fidelity.

Hands down, Fidelity is better vs Vanguard for the UI, research, free Active Trader Pro, etc. I use Fidelity to purchase Vanguard ETF's so that's not a problem.

I like Vanguard investments but don't like their UI. I'm slowly transitioning over to Fidelity.