Why I Prefer DIY Retirement Planning

DIY Retirement PlanningWhen I was an engineer at my old company, I was able to buy the company stock at a discount. I also received some stock options and stock grants. All these shares were deposited in a brokerage account which has a somewhat reasonable fee. Recently, there was a change to the plan and I had to move my few remaining stocks to a full service wealth management account. The fees are much higher in this account. There is an annual fee (around $200) and the trading fee is a percentage of the transaction plus a fixed fee. I’d have to pay about $350 in transaction fees to sell the 400 remaining shares of my old stocks. That is ridiculously expensive when I can sell them for $4.95 at TradeKing. On the other hand, this full service account gave me access to a financial advisor who can go over our finances. I did that and I’m here to report that I like DIY retirement planning much better.

Our financial worksheet

I had to do some preparation before talking to the financial advisor. First, I added all our accounts to their site so they could see our net worth. Then, I filled out a worksheet. I’ll share it here.

financial worksheet

financial worksheet

Okay, that’s a lot of information. I’ll highlight a few things.

Retirement age

I plan to keep working part time until I’m 65. Mrs. RB40 would like to retire from full time work in a few years. She could transition to part time or maybe not. At this point, we’ll just assume she won’t make any income after she leaves her full time job.

Cash Flow

Our cash flow will probably be a bit short after Mrs. RB40 retires. I’m making about $30,000 per year and we receive about $15,000 from rentals and our dividend portfolio. We spend about $55,000 per year so we are short about $10,000 per year at this time. My online income looks like it will be better in 2017 so we might not be short that much, but we’ll just go with this for now.

Bottom line – we need to take out about $10,000 per year from our savings. To me, this is not a big deal. Our net worth is over $2 million and $10,000 is less than 0.5% of that. Personally, I think the 4% safe withdrawal rate is a bit too aggressive when it comes to early retirement. Most readers agree with me and they prefer to accumulate 30x their annual expense for early retirement.  Anyway, my point is that 0.5% withdrawal rate should be easily sustainable even if we spend 60 years in retirement.

Financial Advisor Analysis

I sent the financial advisor all our info and he ran it through their Monte Carlo model. This is just a software simulation to gauge your chance of having a successful retirement – not run out of money. I talked to him a few days after and our probability of having a successful retirement was a disappointing 73%.

Whoa, what happened there? I spent about an hour going over the result with the financial advisor on the phone and here is where it went wrong.

Different starting point

A rental property doesn’t compute well in their Monte Carlo model. Our rentals are worth about $600,000, but they only generate about $3,000 per year right now. It’s terrible cash flow, but the equity is steadily accumulating.

Their model doesn’t take the equity of the rentals into account so their starting point is around $1.5 million. I understand that it’s difficult to take the rentals into account, but ignoring them will really screw up our number. Their suggestion is to sell the rental when I’m 65 so the proceeds can be invested. It will be easier to model then. We’ll talk more about the rentals a bit later.

Social Security benefits

I told them we expect to receive about $25,000/year each from Social Security when we turn 67. However, they didn’t use the number I supplied. They derived the Social Security benefit from our current income. This means my benefit is estimated too low. I’m making $30k in 2016, but I used to make much more. My Social Security benefit is pretty much pegged at $25k per year at this point. By using $17k/year for my Social Security benefit, they’ve pushed our probability of success down a few points.

Traditional financial advisor is too conservative

So 73% probability of success is pretty low and I wanted to see if they have any recommendation. Surprisingly, the first suggestion they gave me was to move more money into bonds. Currently, our stock/bond allocation is about 80/20. My risk tolerance* is moderately aggressive and they recommend a 55/45 allocation. Wow, that is way too heavy on bonds for me. Other advisors recommend anywhere from 10-30% bonds for my risk tolerance. Anyway, this didn’t improve our probability of success, but it did drive down the standard deviation. This means our portfolio will be less volatile.

Their other suggestion was for Mrs. RB40 to work longer, of course.

*If you need help figuring out your risk tolerance, see my asset allocation post here.

 Turn around too long

I told them to fix a few things and they will run the numbers through and get back to me in a couple of days. A couple of days? That’s way too long. I want to see it now.

*Update – I got the 2nd pass result and it’s 87%. Much better than 73%, but still a bit low. In this model, we fixed the social security benefit and sold off one of the rental condo for a $300,000 cash infusion at 65. They really should include real estate holding somehow.

DIY retirement planning

So far, the financial advisor hasn’t added a lot of value for me. I think this service would be great for investors who have just started their retirement planning, but I’ve been thinking about retirement every day for years. For me, DIY retirement planning is better because the tools are available for free on the internet and I can see the result much quicker.

Free Retirement Planner

This is why I love Personal Capital. They have a great Retirement Planner which is very easy to use (and it’s free!) I can fill in all the numbers myself and see the result instantly instead of having to wait a couple of days. It also takes a lot less time on the phone. That phone meeting with the financial planner was exhausting.

Here is what I have in my Retirement Planner.

Personal Capital's Retirement Planner

Our real estate situation is a bit unusual so it is way easier for me to input the numbers myself than to explain it.

More about real estate properties

We live in a condo right now, but we’ll probably move into our rental home in a few years. We’ll most likely sell this condo and that will bring in about $100,000. Currently, we have about $3,000 per year in rental income from our duplex. That would disappear when we move into the duplex. I plan to sell the place when RB40Jr goes to college so we can travel the world for a while. This should be a big payday for us and I expect about $750,000 in cash infusion. Of course, plan can change and I will be able to get instant feedback from the Retirement Planner tool. It’s also a lot easier to try different scenarios than to give them to a financial advisor to run. It’s just a lot of back and forth.

Here is our result from Personal Capital – You’re in great shape for retirement (over 95% probability of success.) We forecast that your portfolio will comfortably support your goals, including $55,000 per year in basic retirement spending.

Personal Capital's Retirement Planner result

This graph is generally what I expect. We’ll see a slower growth as we withdraw about $10,000 per year from our portfolio when Mrs. RB40 retires. I also added $6,000 per year for health care at that time. In 12 years, we’ll downsize and sell our home (the duplex). This will bring some cash at a good time because we’ll have college expense for 4 years. After that, the big events will be social security. As long as we can keep our expense around $55,000 per year, our retirement looks like it will be in good shape.

I also added $15,000 per year for travel once RB40Jr left for college.

Not the right fit

In conclusion, this full service firm is not the right fit for me for several reasons.

  1. The fees are way too high. It’s ridiculous to charge $350 to sell stocks. This is 2017 and they should be able to do a lot better than that. The annual fee bites, too.
  2. Their bond allocation recommendation is too high for me. We have 20 years until we’re both fully retired and hopefully 30 to 40 years after that. Putting 45% in bonds right now is the wrong move for us. Sure, it will give us less volatility, but that’s not my main concern at this point. Even if the stock market crashes like in 2008, I think we’ll have plenty of time to recover. Putting 45% into bonds will neuter our returns especially in this low yield environment.
  3. I like DIY. I like messing around with the numbers and seeing how the result changes. Our plan is flexible and there could be changes at anytime. Hell, this winter has been particularly dreadful and I’m about ready to move to Hawaii. I don’t want to wait a few days to get feedback from the financial advisor. It’s just easier for me to do it myself. It’d be a different story if the tools weren’t available on the internet, but they are so I’m making good use of them.

All in all, I’m not impressed with this full service brokerage. I will probably transfer my share to Vanguard to consolidate sometime this year. I believe it will cost around $100 to transfer the account, but that’s still better than selling my stocks and paying the fees. Ridiculous!

Have you worked with a financial advisor? Have you met a financial advisor who supports early retirement? Let us know if you have a good story to tell about your financial advisor.

DIY retirement planning

If you like DIY retirement planning, then check out Personal Capital. They have a really awesome retirement calculator that takes all your real data to run the Monte Carlo simulation. They are very helpful with tracking your investment accounts and checking your fees too. I log in almost every day to check on my investments. I highly recommend Personal Capital. (This is an affiliate link and we may receive a referral fee if you sign up through here.)

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Joe started Retire by 40 in 2010 to figure out how to retire early. After 16 years of investing and saving, he achieved financial independence and retired at 38.

Passive income is the key to early retirement. This year, Joe is investing in commercial real estate with CrowdStreet. They have many projects across the USA so check them out!

Joe also highly recommends Personal Capital for DIY investors. They have many useful tools that will help you reach financial independence.

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85 thoughts on “Why I Prefer DIY Retirement Planning”

  1. Just wondering how you arrived at that $25,000 per year for social security? So as you probably know, SS is based on the 35 top earning years based on your SS earnings. SS earnings are only those earnings you pay SS taxes on, not rental income or capital gains or dividends. Of course this all assumes its not lowered by our President and Congress.

  2. RB40,
    Thanks for sharing. I prefer DIY retirement planning as well, as I know myself the best, and trust myself the most. Plus playing the numbers is fun. I know some people like hiring a financial advisor. In that case, still they have to do the homework and understand what they get. Blindly trusting the financial advisors is not a good choice, I feel.

  3. Are you still using TradeKing @ $5 per trade? I’d suggest moving that to Merrill Edge. $100k with a linked free Bank of America checking account gets you unlimited free Stock and ETF trades….

  4. Thanks for the insightful perspective. I definitely contend that you (and the rest of us here in the FIRE community), are more predisposed than others to think more about retirement. Nonetheless it’s neat to see the detailed breakdown, including all the different levers you have to pull in order to achieve your financial goals.

  5. Interesting to hear about how your vision and your financial advisors views are so different. Financial Advisers can be a great toll for people that lack your financial capabilities. But in your situation, there is no way that paying those fees would be worth it in the long run. You are more than capable of doing their work, especially considering they are most likely just pitching what their firm suggests instead of performing the detailed review and analysis that you performed.

    Thanks for the read!


  6. RB40 –

    Very interesting, especially on the bond allocation – I couldn’t agree more with you. Also… it’s not like you’re the first person to have rental properties? Shocking they don’t have a system in 2017 that can compute/include the reality of what you are doing within there!

    I am all about do it yourself investing. Think about what was said – have MrsRB40 work longer (what….); your Social security is going to be less (maybe…); and move into 45% bonds (huh???). So interesting. stick to your way, as you wouldn’t have been able to do what you’re doing by following someone else!!!


  7. It seems you do perfectly well. I have the feeling that most advisors don’t really understand the DIY and DIG way of taking care for retirement. As long as you are confident with what you do and you sleep well at night, then I believe you will reach what you want.

    And looking at your numbers you are doing perfectly well!

  8. Hey Joe, I feel your pain. I’ve never been a fan of financial advisors – mainly because if someone is being paid for advice then the advice is never truly impartial – particularly where kickbacks are earned from recommending certain products. Your complain that they the advisor would take a while to get back to you with the updated results is perfectly justified. Once a Monte Carlo simulation is built, updating the inputs should take a couple of minutes (depending on the complexity of the situation). There is no excuse for taking a couple of days, let alone a couple of hours – bear in mind that you’re paying them for a service and so it’s not unreasonable to expect that service to be quick! In addition, you’ve inspired me to use my financial modelling skills to build my own retirement Monte Carlo simulation – perhaps I’ll share it on the blog once it’s finished.

  9. New here so I have to ask (politely) … how did you get $2m in assets with that kind of income? Any inheritances or anything like that? No kids or student loan debt? Live in a really low-cost area? In any event, great job and I agree with other comments … that 74% number is way too low.

    • I was an engineer for 16 years and saved and invested since I started working. My wife also have the same money mindset. One kid and no student loan. Good luck!

  10. I love that you are so specific with your numbers. Your willingness to be transparent is what initially got me into reading the early retirement blogs two years ago, so thanks!

    Every time I go see a financial advisor thinking maybe they know a secret I don’t, I’m faced with what should be obvious to me from the start and that is that I care about my money more than they do. So why trust someone who by comparison, doesn’t care enough?

    Maybe I haven’t found the right person yet but until then I’m managing my own finances. It doesn’t hurt that my profession is numbers related.

    • That’s the key. Nobody care more about your money than you do. They are busy with other clients too. If you can do it better yourself, then there is no need for an FA.

  11. I’ve never used a financial advisor, so I can’t comment on that, but the thought of doing the prep work for an hour long review, then waiting 48 hours for follow-up information isn’t appealing to me.

    Just this year my employer offered each employee access to a financial adviser at no charge. I’ll definitely take advantage of the offer; hopefully it won’t be too painful.

  12. Sounds like all the numbers work out. I put in our numbers to PC and got an 80% success rate (once we eliminate more debt that goes up). I also had a plan done once for my wife and I and basically he said I would work until I dropped. I definitely prefer DIY.

  13. Didn’t know Personal Capital had that retirement planner. Might have to finally see what all the fuss is about.

    As for fees, the recurring ones with funds are perhaps even more insidious. Even with a .5% fee every year vs a $5 trade like you said, the opportunity to “beat” the market is actually fairly high because in reality you can ever under perform and still be gravy.

    • The Retirement Planner is actually very cool. It’s easy to use and use real data. I think it might be too optimistic, though. Also, check out FIREcalc. That’s another one I like.

  14. Financial Advisors – yuck!

    I inherited some money and along with it came a financial advisor. He was OK at first, in a time of grief, helping with the estate. Once the estate was settled, however, he wanted to do very little except collect his management fee. He never asked us about our goals or came up with a suitable investment strategy. He was misinformed about how to handle college expenses. He bought an individual stock for us, without asking first, and it promptly lost half its value (Chesapeake Energy). Always friendly, great guy to talk to, and a waste of time! Needless to say, he’s now gone from our lives.

    Save your money, and learn to do your finances yourself! You won’t regret it.

  15. Great article Joe!

    BTW, you are absolutely right about those full service brokerage or wealth management firms. I transferred all my Intel shares out of the wealth management company that Intel picked for its employees. I did this prior to leaving my job; otherwise they would have started to charge me expensive fee (some % of the principle amount).

    We might follow you to Hawaii as well in few years.

  16. ever think about getting your CFP certification and then offer up financial planning services?? – – call it a side hustle if you want but it’s a service that you can offer wherever you live both locally and online — you have what a lot of planners don’t, real world experience, a mastery of the available tooling, and thinking about this day in and day out where you are fully committed because it’s your plan and impacts you and your family – very impressive stuff Joe, you are leaps and bounds above the so called professional planner – i’d be more then happy to pay someone like you to assist with financial planning – how about CFPby40 ??

  17. Just to circle back to something we’ve covered before: I think you need more life insurance than you’ve previously mentioned. If your family’s economic plan includes $30k/yr from your website work, your insurance needs to be ready to replace that loss.

  18. Please keep calm and do not panic! As a professional engineer by education and trade for over 40 years, I been there and done that.

    First and foremost, there is difference between financial planners and advisors and free financial services from a fee based or a fee only Fiancial Planners. We used a fee only Fiancial Planner to validate our plan before I retired.

    Also I phased my retirement from part time to no time as my goal was to buy my time back from a job. This is the goal of Fiancial independence and retirement.
    About Monte Carlo, below is a link to an article by Micheal Kitces about the interpretation of the Monte Carlo simulations. It’s all about the thought process and the understanding of the use of probabilities.


    Your article reminded me of the first Fiancial Advisor we spoke to. He told us, we needed $4M in savings to retire and I commented that after looking at our social security statement that I had not earned and was not going to earned that much in my life time. He looked at me with a blank stare. Enough for that.

    A Fiancial Planner is a tool as it is a CPA, a lawyer or anyone that provides a service. How you use that tool is of upmost relevance and directly impact your planning and actions to mitigate risks.

    We used a fee only Fiancial Planner to validate our plan and his review service for a good part of five year until I retired.
    An independent set of eyes with experience is very valuable as we can easily convince ourselves of things that are not necessarily true.

    This is the case with on line tools such as Financial Engines which is the tool of choice for the free Fiancial Planning Services.

    Having said all of this, our experience with Fiancial Planners has been similarcto yours. It was exhausting gathering and inputing all the data into an aggregation tool. We used Money Guide Pro and got so good with that once we entered the information, we ran our own reports and scenarios in bad and good economies. We still got better than 95%. Partly because of time frame.

    This situation lead us to believe that it was not necessary to renew his service.

    For example, in your case you are missing some states. You should have now then Mrs RB40 retired, RBJR in school, Mr. and Mrs RB retired, Mr. RB dead and Mrs RB dead.

    We adjusted the numbers for the select states as we executed with actual. Life is not perfect or linear. When you retire early things are more subject to change than someone who retires at normal age. Also early retirement does not applies only to people in their 40s but also in their 50s or even 60s. Anything before age 65 is early. This is why a lot of my past comments refer to time as a variable to consider in your posts.

    There is an emotional and psychological aspect to FI and retirement. Part of it is ownership, understanding, and believe in your plan. Some things in life can’t be delegated. Like leadership or going to the bathroom. Point is regardless of what anyone says at the end of the day you own the plan, the advice, and the results.

    We are planning to use Personal Capital in the near future as our aggregate tool with the understanding that nothing can replace common sense and good judgement. Can’t wait for the showers of phone calls selling us their Fiancial Planning services.

    Things or other variables to consider. Taxes and inflation are the well known ones but deflation is rarely spoken about or discussed. In the plan, we added discrete events such as buying a newer car, improving our home or rental houses, planning trips, or other events of high probability such as getting sick or having an accident.

    Mitigation of some of these risks with an HSA or Long Term Care insurance is important.

    As stated before, we use Ray Lucia Buckets of Money to reach the proper allocations of monies and risk. As a reminder they are emergency, income, safety, and growth. We added legacy.

    Cash flows shortage in retirement is normal so do not panic, just manage. It’s an exsercise in budgeting. Give yourself 10% variation for execution. Do not be or assume thirftyness to make your plan work. Remember we are all driven by behaviors. We can control ours but not others so Mrs. RB, RBJr., and RBJr. kids might not share your vision of the world. This is a common occurrence.

    Finally and if is of any comfort. Based on my experience and looking at your numbers, you should be fine. I would use for example the Vanguard Target funds as an indicator of what level of exposure or risk you should have at your age. For example, if you turn 65 in 2045. Look at the fundamentals to see the allocation to stock now as an indicator. Also we found the buckets strategy helpful for allocation risk.

    80% exposure to stocks 20 years away from 65 seems a bit high but it’s all a personal preference and appetite for risk. The higher the risk the lower the probability of success at least based on historical data.

    Hope this helps or is useful and best wishes from our home to your home.

  19. I’ve always liked the DIY route. I do enjoy it though. Some people really hate dealing with financial issues and they don’t understand it very well. For those folks a financial advisor could be a good choice, but I would imagine that you have to chose one carefully – especially if you are thinking of retiring early. That concept is probably foreign to most advisors out there, and they will tend to be too risk averse, just to cover their own behinds. So you’ll probably end up working forever if you follow their advice.

  20. I went to a financial advisor for the first time this year. It was someone we can see for free through work. He’s affiliated with Fidelity. I’m still a little nervous about investing (I do it of course but hate the idea of losing money). I was disappointed in how generic his advice was and how he hadn’t heard of things that seem pretty common, like Boglehead’s 3 fund strategy. But he did confirm my thought of going with a 457 plan rather than a 403b for extra investing beyond our pension plan and my Roth IRA. But then he advised against paying off my mortgage early because of the tax deduction, which just seemed like a nutty thing to say. I understand there are reasons not to pre-pay, but that isn’t a valid one. So overall it wasn’t something I’d recommend although I’m sure there are better advisors out there.

  21. I agree doing your own retirement planning is much easier and simpler than going to a full-service financial advisor. It’ll also be more aligned to the individual’s goals because you can adjust it depending on how risky you would like to be.

    Also, $350 just for a stock sell is really high! I’d rather just use a low-fee stock trader like TradeKing or OptionsHouse for cheap stocks.

  22. I agree with you 100% Joe. The tools financial advisors use are all available online for free. With personal capital you can tweak your goals and assumptions and receive a result in a matter of seconds. Sure beats several days for an advisor to do the same thing.

    I flirted with the idea of hiring an advisor a few years ago. Going through the introduction process I realized there is very little value they would provide outside of the initial allocation of my portfolio. Yet they would still take 1.5% of my AUM each year. The internet has given us access to many of the same tools that they use. I just don’t see the sense in paying for it.

  23. Joe, A couple things here:

    * I have used several financial advisors. My parents started investing for me when I was 5. I still have the assets from the account they opened for me (I remember I was so proud signing my name on my savings bonds opening that account). The thing you have to realize or remember is how they get paid, and who are they looking out for? If they get a % of the book, then they want their book to get bigger. If they get paid on commission of sales, then they want those sales to be higher. If they get paid to provide advice, regardless of what you do, those are the people you want to talk to. Some firms have better models on retirement than others. Just take it with a grain of salt and move on.

    * I am not shocked by 45% in bonds. While your recoil in horror might seem on the spot, think about what they are trying to tell you. Right now you are investing heavily in market runs which have a higher than likely chance of going down 50% in the next few years. Protecting your assets is a key thing at times, and since you are going to want a guaranteed income from all this, you might want to look into this. Your risk tolerance might be high, but is your family’s? If you have the assets, and want guaranteed 4-5% returns, on 50% of your assets, then the -20% to +20% on the other 50%, you can see where this makes sense. It is all about hedging risk.

    * I agree with others, your healthcare cost estimates are way short. The costs will do nothing but go up. My parents spend around $20k a year on healthcare and insurance at 70. You maybe healthy now, but you are 1 car accident away from a bad back for the rest of your life.

    * The Monte Carlo simulation puts through numbers which are crazy extremes, which is why the percent likelihood is still at 80+%. As I said about the health care costs, what happens if you don’t have insurance and your house burns down, etc. These are all things that are put in there to see if you can handle them. Take them with a grain of salt.

    * Finally – The reason these people get paid is because most people won’t spend the time or effort to do the DIY approach. You have spent hours/months/years of your life researching this stuff and are probably as knowledgeable as any Financial Advisor (and specifically more-so to your scenario). DIY will work for you. However most people would rather an expert give them good ideas, pay them for it, and then follow it so that they don’t have to spend the time to research and become experts. This is how the free market economy works. Time or money. You spend money to reduce the time you have to do something else.

  24. I think you are obviously in much better shape than they predict 🙂 I’ve only met with a couple financial advisors, and was never very impressed. In both situations it did not seem like my best interest was inline with theirs. That being said, the guy you worked with was probably better aligned. Part of the problem is most financial advisors are not financially independent nor working towards it. This leaves them stuck using the same model for everyone, even if its not the best fit.

    That is a lot of equity in the rentals! Do you plan on keeping them mostly for equity appreciation rather than the cash flow?

    • Real estate is still pretty crazy here in Portland so we’ll probably keep it a few more years. Eventually, we’ll cash out, though. We want to travel and I don’t want to be a landlord forever. Maybe if we find a really good property manager…

  25. The only FA I worked with was when I took over the UGMA account my Dad set up for me. He was a big believer in his FA who worked at one of those white-shoe brokerage firms. My Dad was the tape reader and his FA brought in the ideas. Based on his old trading records it appeared to work well, until somehow he was talked into piling into Texas bank debt right before the big bust decades ago. Dad forgave him and kept his accounts there, but I moved mine to Fido as soon as I took control.

    WTF hundreds of dollars just to sell 400 shares of a liquid common stock? Schwab just cut their commission to $6.95, and in my experience their level of service is top notch.

    As for sounding boards, I think there’s always some level of conflict of interest when deailing with FAs. And I’m not sure the robo-advisors’ models are any better at hitting the unicorn ER corners either. So why not crowd source it with live human feedback from people who’ve been there done that? Check out http://www.early-retirement.org/

    • Great idea about getting feedback from early-retirement.org. I like that site.
      That transaction fee is ridiculous. I feel bad for other investors who use this full service brokerage. That’s pre-internet pricing.

  26. I met with a financial advisor, on a whim, just to see if he might have any worthwhile suggestions. Once it was determined that he didn’t know what an after-tax 401k contribution was (even *after* I explained it), I knew I didn’t want to hear anything he had to say.

    Despite that experience, I still have a small desire to review my numbers with a fee-only CFP. It would be nice to have a second set of eyes, so to speak.

    • Hopefully, you’ll be able to find a good local financial advisor. I bet most of them just have too many clients to pay a lot of attention to special cases.

  27. We retired two years ago (at 44). PC shows we’re at a 90% probability of our money outlasting us, which I’m pretty comfortable with.

    As for allocation – 45% bonds? Insane! We’re 100% in stocks and plan to stay with that allocation forever. We do keep two years’ living expenses in cash so we can ride out any market corrections though.

    • Wow, 100% stocks. Are you nervous about a crash? 🙂
      I put 20% in bond so we’ll have some powder in the keg when the crash happens. We won’t have much money to invest at the low point if we don’t have some bonds.

  28. Thanks for sharing, Joe.

    I do use a financial planner, but much like PoF, I also like to complete my own analysis and handyman work around the house 🙂 I use his expertise to help find the lowest fee’s in some of my investment accounts (401(k), taxable, HSA, etc). He also has a background in tax savings to help me be tax efficient now, as well as planning for tax efficiency in the future. He is a fee-only, fiduciary advisor – so his interests are what is best for me and my family. I’ve had to fire a few planners before him that definitely did NOT have our best interests in mind.

    We’ve developed a plan where I could retire early (40 is the target right now – I’m only 29 and I’m also an engineer!) I make a solid income now, and have been increasing my savings rate quite a bit in the last couple of years. However, early retirement is our second priority and saving for our daughter’s future (and one more little one) is our first priority. Once we get a better handle on the total cost of having two kids PLUS saving for their college, in addition to our other expenses and savings for retirement, will we be able to really narrow down on what our target retirement could be….

    • I think the tax advice is a huge piece. Unfortunately, my financial advisor just say talk to your tax accountant… Not helpful there.
      Good luck on your ER journey. Our cost of living will go up soon as well. We need to move to a bigger place now that our kid is getting older. We need a bit more space.

  29. I agree a financial adviser is mostly unnecessary in this day and age. With just a slight amount of research anyone can avoid ridiculous fees and manage their own finances.

    I also like Personal Capital and the services they provide for free, but even they hounded me for quite a while to talk to an adviser. I presume that adviser would recommend some sort of service from Personal Capital that I would have to pay for.

    • I talked to their advisor very early on when they first started. They didn’t do a hard sell on me. It might be different now. Talking to PCAP’s advisor was actually interesting. They showed me how to use the sector allocation which I’ve always ignored previously.

  30. Joe,
    Great article. I have had a similar experience with a financial advisor. It’s not that the person was trying to scam me or anything, but the computer model they used just didn’t fit all of my circumstances so they were disregarded. Thank heavens you can just transfer the account for $100 rather than having to sell the stock – that is nuts. I did have a question about your new website – it seems to have the same link this blog so I can’t sign up for new posts. Maybe it’s not ready yet? Thanks again.

    • Which link is that? Are you trying to sign up for email?
      I haven’t set up email distribution for Fit by 40 yet.
      Maybe the feed needs some work too. I will check. Thank you.

  31. I’m a big DIY guy whether it’s investing, retirement planning, or replacing bathroom faucets and ceiling fans. Not only do you save money, but you learn so much when you choose to DIY.

    The professional’s software only seemed to confuse the picture. Garbage in, Garbage out. You can make much better predictions on your own.


    • Our situation is just too unique. It takes a ton of energy to get all the right data in. It’s just a lot easier to DIY and tweak it myself. DIY is great for learning. That’s why I think investors should start as young as they can.

  32. Having worked with (as a retirement professional, so not for my own money) advisers, robo-advisers, and large-scale defined benefit and defined contribution administrators, I can confidently say that in almost all cases, early retirement breaks the models people use. Don’t take it personally; you’re just such a minority (successful relatively-high-net-worth early retiree) that even if they had known years in advance that you’d call, it STILL wouldn’t have made sense to program their simulator around your circumstances.

    I’m years away from retirement – 40 is a pipe dream at this point – but I’ve done my own projections and planning since 2011. For those of us who are already on this path, a financial adviser is and important second opinion…only because they might point out something you’ve missed. If you are comfortable with your investment risk level, don’t change it. Basically, only you can program an early retirement model which takes everything you have done and plan to do into account.

    • Thanks for your input. I think that you’re right. A financial advisor who can take the time to understand us would be a very small minority too. Good luck finding that person…

  33. Joe it’s ok to be a DIY retirement planner provided that you know what you are doing and you developed your expertise over many years. For the people that don’t know what they are doing or who panic when the markets correct having a financial planner is not a bad way to go. Back here in Canada I’m trying to convince the industry that they need to provide more value in return for the fees that they charge. They just focus on the investment piece but many people need help with the lifestyle piece. They need to have a good handle on exactly want they want to do in retirement, how much that lifestyle will cost and then making sure they have the financial resources to cover that cost. In short, I don’t mind paying fees as long as I’m getting value for my money.

    It would be fun for me to visit with a planner and see what they think about my investment approach. I’m 62 and invested in 99.8% equities. That should get them talking!

    • That’s just it. I haven’t been able to find financial advisor who can add value for me. I’ve talked to a few and they are all focused on their software or getting commission.
      Wow, 99.8% equities. That’s high! My guy would have a heart attack if he sees that. 🙂

  34. I have always been DIY when it comes to finances and investing. There are too many conflicts of interest working against the customer in the financial services industry. My only cost is the brokerage commission I pay. At 35 cents/trade, my dividend portfolio costs are lower than the lowest cost vanguard fund out there.

    I think that you are doing the right thing by transferring the account over to another brokerage. If I were in your shoes however, I would transfer the money into a broker that offers you money to open an account there. That way you are paying that $100 transfer fee, but you may also get reimbursed for it by the new broker, and even get some bonus cash as a result.

  35. I would run from this advisor! Sounds like there are using some very simple calculations and not thinking about your financial situation much at all. Based on your numbers, there is no financial planner with any expertise that would have any concerns. I tried a professional financial planner once and consider is the best money spent (wasted) because I realized I can do much better on my own. I’ll be much wealthier in the future now that I’m DIY! As I point out in some of my articles, the standard 1% fee is 25% of your actual expenses if you’re using the typical 4% rule! And it’s 1/3 of your spending money if you use 3% like you and several of us FIRE folks recommend!!! That’s crazy expensive for someone with a lot of assets and low withdrawals. The typical assets under management (AUM) business model simply doesn’t work for lots of people, especially early retirees.

    In your case, it’s a fee-based advisor, which is much better but maybe that’s why you’re getting such poor advice? The lack of ability to model real estate, the high bonds recommendation for a 60 year time horizon, and the crazy % success rate calculated all point to someone who knows much less than you do about investing. It sounds like a sales guy who was given a computer calculation, not a true investing professional. Don’t waste your time and money.

    • I think the software is pretty standard, but you’re right about not thinking. He sounds inexperience and didn’t have much opinion outside of what the software said. A good local financial advisor would probably be a better fit.
      DIY is the best if you take the time to educate yourself. There are a ton of material on the internet.

  36. I was actually shocked at how many bloggers and FIRE books suggest using a financial planner for retirement. If you know what you’re doing, you can successfully plan retirement without all of the ridiculous fees to maintain the servicing of your account.

    • I have suggested using a financial planner in the past. Now, I’m not so sure. If you’re young, I think just go ahead and make some mistakes. You can recover. DIY is the best way to go for early retirement.

  37. I’ve met with a couple of financial planners (only one was a fee-only, so of course the other one was only interested in commission on their products) – I agree that they are too traditional. Like folks outside of the FI community it’s difficult to explain what you’re doing (or maybe easy to explain, just difficult for them to understand). Very frustrating when you are paying a fee and they can’t think outside the box (who uses only one model? Why not use the model to get a baseline and then figure out how to incorporate your specific situation?!). I’m interested to see what they come back with when they present you with the updated numbers.

    Can I take a minute to be jealous about your home appreciation?? We have three rentals and although two of them are in a desirable area we’d be lucky to see that type of appreciation with them combined! But, what a treat that will be for your and Mrs.RB40 when Jr. heads off to college!

    • They gave me a better chance – 87%. We fixed the Social Security benefit and sold a rental when I’m 65. It’s just easier to fidget with the numbers myself. I think Personal Capital’s model is a bit optimistic, but I could tune it by increasing the inflation a bit.
      I bet you have a lot better cash flow with your rentals than our. The price is so high here so it’s really difficult to get positive cash flow. A lot of repairs too…

  38. I used a financial advisor back in August just to get a second opinion on things. I agree with Michael @ Financially Alert that he had my best interest in mind. He also gave me a couple good ideas that I hadn’t thought of that made sense.

    But, there was a limit to what he could provide. I think a lot of the struggle comes from dealing with people that don’t cater specifically to the software. Seems like if you’re not just a regular employee working a 9-5 until you’re in your 60’s they have to do some tweaking to make it work as good as they can.

    I was happy with what I got back just because I was just looking for him to shoot some holes into my plan and I got back enough to make it worth my while. I found out that, similar to you, I have free access to a financial advisor through our 401(k). I may try that one out sometime later this year since it only costs me some of my time.

    — Jim

    • What good ideas did he give you? Please share. 🙂
      I think you’re right about the model is made to fit the general population.

      • The biggest piece of advice that I took to heart was to stop trying to throw everything at my mortgage to get it paid off. With a 2.875% loan on 15-year loan, that should be the least of my worries. I wanted to get it paid off before quitting my job. He wanted my priority to be building up my savings and taxable accounts to tide me over for the first 5 years of the Roth IRA Conversion Ladder I’m planning to do. This made a lot of sense in my scenario.

        He also told me that for my game plan to stay 100% successful (which it was in the simulations – yay!), I need to consistently raise rents on my rental properties. His calculations were to do a minimum increase of 2% per year. Obviously, when you have good tenants that’s sometimes hard to do as you prefer paying tenants versus no tenants.

        Probably the most interesting wasn’t so much related to my investments, but more on maintaining what I have. It was to dig into my long-term disability because my coverage through work probably wasn’t as good as I might think it was. He was right. I’m actually going to do a post on this one hopefully next week because that surprised me.

        He had some other thoughts as well. Here’s a post I did with more info on my experience:

        — Jim

  39. I struggle with but the guy I’ve been using 25 years has saved me in the downside in bad times more than nonmanaged money I have. And I know he’s not a ponzi scheme. Locally, John Elway lost 14mil to one of those and went back to work with the Broncos. I do fear things like that left to fend on my own. Not that I have 14mil, but what I do have is all I’ve got. I guess without the Merrill guy I’d do index funds and wing it with Fidelity. For now inertia holds me.

    • What were some of his advice during the downturns? Did he tell you not to sell and kept the panic to the minimum?
      What kind of fees are you paying?
      Thank for sharing!

      • I pay one percent but only on about one third of what I have with him. But he still helps on nonmanaged funds. His advice on MLPs was timely. I knew what they were, midstream energy, but didn’t know they’d been made available to small investors like me. It overall helped me recovery from the meltdown more quickly.

  40. Financial planners are also not for me. I don’t see the point of a full service advisor, but I do see the point of a fee only or a one time checkup. It’s still not for me, but if I didn’t have my financial house in order and in made the difference between getting started and not, then I’d be all for it. I think that’s an advisors value add. They are not for people like us with detailed plans. They are for the person just starting out that doesn’t know where to start.

    • Exactly. It’s intimidating to start planning by yourself. There are a ton of information on the internet now, though. That’s why I think it’s best to start investing young. You have a lot of time to learn and recovering from mistakes won’t be too expensive.

  41. 45% Bonds sounds insane to me – that is a very conservative portfolio for a couple that has a long timeline.

    With a .5% withdrawl rate I don’t think you have anything to worry about!

  42. Agree with everyone’s comments, just one note on your personal capital spending model. 6000 per year for two people in healthcare expenses is too low, plus it shouldn’t stop at 65. I work with free insurance navigators under contract with federal government. They are reporting average healthcare expenses per year for a couple on Medicare if around 10000 per year. part A and Part B premiums may be low, but your supplemental coverage premiums, deductibles per hospital visit and your drug costs plus vision and dental, which are not covered to any great degree, will hit your 55k budget hard. Then there are the surprises, like hearing aids, 5000! One dental implant to replace one tooth? 5000 or so. Healthcare is an area where technology is not bringing down prices. You can always go overseas to get treated, but Medicare doesn’t follow you there. And this doesn’t reflect any changes in the PPACA. It’s current state. And I hope you have budgeted for long term care, that’s another whole bag of donuts.

    • Thank you for your input. I’ll increase the healthcare spending a bit later. It is influx today because of the change in ACA. We wouldn’t have to pay much under the current law, but that’s going away very soon.
      Wow, $10k per year even with Medicare? That seems very expensive. I’m pretty sure my older relatives aren’t spending that much. I will check with them.
      Yeap, vision and dental will be medical tourism.

  43. I’m a DIY person myself but I wouldn’t mind a second opinion someday closer to when I’m ready to retire. But I am really surprised how inflexible your advisors model is. How come he couldn’t adjust for the real estate and social security better is beyond me. You’d think they would have the best and most dynamic systems! It goes to show how good the free tools are though. Interesting, thanks for sharing your experience!

  44. I wonder what went through the advisor’s head when and if he took a step back from their computations. I mean, you guys have $2 million AND really solid future social security income AND plan on living a fairly conservative lifestyle. I’m shocked as you are at the percent of success number he came back with. I gotta believe you are right at 99.9% for the situation you are in. I really don’t think financial advisors for the most part are equipped to deal with people who are on an early retirement trend line.

    • Right! You can’t just go with the software model for everyone. He has to give me some of his own opinion too. He sounds pretty young…

  45. Joe & Mr. Tako- I’m on board w/you guys. Advisors charge way too much for stuff you can figure out/do yourself. They are always selling their “products”-annuities, etc. Don’t buy “products”, my accountant tells everyone. I have heard the sales pitches from advisors from the big name investment firms-I won’t name names here-everything they suggested was expensive and benefited them through big fees/commissions. No thanks!
    My first thought for your stocks was, yes, transfer it to Vanguard. My second thought-watch out for bonds. Everything I hear/read from Wall St. says the same thing. Tread carefully.
    Once your biggest expense, RB40JR$-yes, I added the $ sign, ha,ha, is grown and gone, living expenses will come way down. My biggest complaint/expense is property taxes.
    You are in good $hape Joe! Keep on investing.

    • At least this guy didn’t try to sell me any product yet. 🙂
      I’ll transfer my stocks to Vanguard a bit later this year. That fee is crazy in this day and age.
      I love RB40Jr, but I’m looking forward to cheaper days ahead. heh heh.

  46. Joe, I’ve worked with a few financial advisors in the past. They all seemed to be genuine people with my best interest at heart. However, I also observed that they’ve bought into their own system of plain vanilla advice and had no problem pushing funds with ridiculous fees. When I spoke about early retirement, they didn’t quite understand how to process that. To them it seemed “risky” and always came back to managing risk to ensure my family’s future. Anyhow, to make a long story short, I’m 100% DIY now. Personal Capital really opened my eyes up to the fees I was paying on some of the funds we had as options in our 401K. I feel lucky to have had that insight earlier than later. 🙂 Did you ever have a moment when you realized you were paying ridiculous amounts in fees and that it would stifle your early retirement?

    • I had one when I first started investing and he was terrible. He sold me a bunch of crappy funds. I finally figured it out and took my money out after a couple of years. This guy is better, but we just don’t fit their model.
      You’re right. It seems like their main focus is managing risk. I know our portfolio will go down when we get a crash, but we’re investing for the long term and we can handle it.

  47. I think you guys are going to be just fine Joe! Regardless of what some financial advisor (snake) tells you your chances are. 73% is laughable.

    So I’m completely with you when it comes to DIYing retirement planning. I won’t let a financial advisor touch my millions with their high fees!

    • I think this guy is actually not that bad. We just don’t fit their model and it sounds like he is not very experienced (young.) I think a good local fee only financial advisor might be better for unique situations like our.

      • Great post Joe. I agree with Tako on the futility of most advisors, however well-intentioned yours may be. Your Personal Capital results are closer to the truth as you found out – DIY is best for FIRE cases like us. I am curious though, why you put both Dividend income and assets (which include both index funds and dividend stocks) in the Assets column of PC. Dividends are an outcome of the financial assets, and they probably use some SWR estimate using the assets you entered. I don’t include dividends as a separate income item, let PC figure out whether financial assets I have entered are sufficient for spending needs.

        • To clarify my earlier comment, I don’t think you want their software to ‘double count’ – which I suspect can happen if you entered Financial Savings separately and Dividend income separately, as the dividend income comes from financial savings. The software probably treats your labeled ‘dividend income’ as completely different income stream, independent of Savings-derived safe withdrawals. You may want to check if your $11K dividend income is counted over and above the software driven SWR from the Savings figure. If so, you should remove it from the income flow. I have found PC isn’t designed for stock dividend investors because their software is geared more towards fund investors.

          • Ahh.. I see what you mean. I’ll remove the $11k dividend income. I think the Monte Carlo simulator count it as gain already. Right, dividend stock just get counted as equity. That’s fair enough.

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