Learning to Build Wealth

Parents Forum Parent Cafe
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Do any of you have recommendations for resources on learning to build wealth?

Dh would like to retire in about 10 years at 59.5. He may still work, but at that point he wants the option to scale back, consult, etc.

He makes really good money, but we also have a lot of responsibility - large family, 8 kids to put through college, plus caring for elderly relatives. 10 years from now, we will still have a 12 and 16 year old at home, and a couple of college kids.

We met with a financial planner, but he focused on trying to convince us to move our retirement funds. We are more concerned about an overall strategy and learning about different investment options.

We are already doing max annual 401K and HSA contributions. We have mostly followed the Dave Ramsey debt free plan. I recently got the book Consider Your Options that was recommended in another thread.

Would love to learn about additional resources.

Thanks!

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I don’t have resources per se, but I will say this. Get a really good Financial planner. Make sure that you talk often and plan for long term strategies. Often saving tons of $ in a 401K isn’t the best strategy. We topped out years ago and FP said put more $ outside 401K so you can balance in retirement. You need a good FP, great CPA and great attorney to retire well IMO. And you also need the insurance tools just in case ( will, life insurance, power of attorney, health care proxy, trusts etc).
Motley Fool is really good. I like to invest in stocks and have a Masters in a Final field so I don’t like many programmatic programs. But I do read them and take bits and pieces. For us, it’s all about minimizing taxes and maximizing return. You can have very large income and still not be doing the right things and vice versa.
For us, it’s about having balance. We don’t plan to downsize. We plan to travel in retirement and plan to have a second house and maybe an RE investment property of some type.
I don’t know how much you plan to pay for your kids education but since you have 8 that would be the first thing I’d look into. Also, I’d investigate how you are going to support the relatives and if any of that can be obtained by other services. We have a high income but my Dad who is a Vet, gets lots of services from them. They are services which he earned but save us a lot of $ that we would have to pay to support him. This can make a large difference.
I’d bet there are financial resources for people with large families too. We have friends with 6 kids. Very financial sound but that’s a lot of college tuition post tax.

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Am a FP and cannot / would not give specific advice via a forum. However, I would focus on finding an advisor who really listens to your concerns. Moving your funds to them may be part of the process but only after you agree on strategy regarding, taxes, retirement planning, income based planning in retirement, etc. If they’re focused on your current funds move on as the plan /strategy is more important.

You have unusually high expenses based on your family composition. As k yourself what and when retirement looks like. What has to happen over a 3yr, 5yr, 10yr time frame for you to feel good about your progress? Not an easy question to answer. But really think about that. What are the things (not just financial but personal)? How do your finances affect those things? What are your biggest concerns?

At the end of the day, I find most people have more resources than they think, they just need them organized better. That may be you.

And, per the other poster, having some nonqualified assets to balance retirement assets is a good idea. Tax diversification is part of overall diversification.

Good luck!

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If you have not been involved in the elderly family members financial and health planning up until now, see if that’s a conversation they’d be willing to have.

To be blunt- poor decisions regarding social security made at age 62 or 65 have long-range consequences; whether to go with Part B or another type of gap insurance isn’t important for a healthy elderly person (all things being equal) but can get quite expensive for someone in poor health; understand the look-back periods; figure out now what will happen to the surviving spouse (someone’s got to die first) financially. Figure out what happens if someone needs long term care. Etc.

This is likely the second biggest risk factor you guys are facing financially (the first being that one of you becomes ill or disabled). Most people with eldercare responsibilities don’t look at this stuff until there’s a crisis, at which point, you’ve got pretty limited options. If your financial planner is not savvy about inter-generational financial issues, it might be worth looking for someone else.

I have a friend who found out late in the game that an elderly parent would have received better and cheaper care as a veteran than he did as a “random elderly guy with multiple diagnoses”. I don’t know details- and I’m sure VA facilities vary tremendously in quality, but it’s worth wrapping your arms around “who is entitled to what” ahead of time, since your eldercare responsibilities are likely to be more costly than you can imagine right now.

At one point, I had an elderly relative in a facility which was costing (run rate) $360K per year. And not because we’re all dumb about finances- we’re not. Just that the “right” place at one point became prohibitively expensive once 24/7 care was necessary (there was no rehab center willing to take the patient, so had to go back to Assisted Living, which insisted on full time, private pay care for liability reasons), and it took MONTHS to find a good, less expensive option. You can’t just dial “1-800 eldercare” and have a facility say “of course, move her in on Sunday”. Even the bad places have intake requirements, evaluations by MD, social worker, etc.

Good you’re planning now!

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It’s not all that complicated, but you’ve asked a more challenging question than you realize…wealth building, but with a time horizon less than 10 years.

Risk and reward are inextricably intertwined. No planner can undo the math of that equation. The problem you’re running into is that the real discussions of wealth building should happen when your time horizon is longer, ideally much longer. By the time you get below ten years, you need to start taking risk and capital preservation into account in a more serious way. That means starting to move away from higher growth options.

I would focus more on strategies and vehicles to save more.

It’s great that you max your 401k. Does your plan allow you to put after tax money into it to ultimately create a mega back door Roth?

It’s great that you max your HSA. Do you spend it? I wouldn’t. I invest my HSA money, pay my bills with cash, and hold the receipts. You can reimburse yourself at any time in the future. you might as well do it with compounded money. You can also pay Medicare premiums with HSA money.

Have you purchased iBonds? They’re paying close to 10% right now.

Where planners come into play are more complex strategies like Roth conversion, strategizing Social Security (although that’s not rocket science), keeping your MAGI low the two years before applying for Medicare, etc.

If you use a planner, there’s only one way to go…fee only. You want a fiduciary that charges you a flat fee for advice, is legally bound to keep your best interests as their only priority and doesn’t comingle their growth potential with yours.

Good luck!

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They cover everything. And that includes every medication. The facilities vary a lot. Many have died due to poor oversight. Most Vets use VA and co-ordinate with other doctors. Most vets don’t know what’s out there in terms of services. They even have housekeeping, meals etc. But many Vets are old and can’t get the info they need.

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Yup, which is why OP (who is not old) might consider investing time into exploring “who has what coverage” before the time and money bomb goes off! Who has a pension, who has survivor benefits, who has an old passbook Christmas account which is now worth $30K but the bank has been bought and sold 6 times… It’s just a lot easier to deal with when it’s not a crisis…

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Yes, paying a flat fee is ideal. But paying a % is the norm esp on large portfolios. As we’ve gotten closer to retirement our portfolio is complex and it needs full on attention which I get because someone has an interest. Not to mention that as our savings has increased we’ve gotten the most experienced ( who get the best return) people in the firm. We haven’t had a junior person in years.

I pay a small %, and have gladly paid for years and my main focus is, did I beat the market? And am I diversified? Prior to that we had a fee only planner who invested in mutual funds and other funds. His fees were cheaper but his returns were also far less. To me, it’s the results that count. We’ve had many planners over the years, mostly fidicuiaries. ( In the beginning some ML types). Results have varied.
Naturally, YMMV. But we have lots of entrepreneurial friends in their 50’s, the ones who are retiring soon have FPS and not the cheap kind. If someone had a pension and saved less in their 401K, I’d say go with the flat fee. If the bulk of your retirement is based on your 401K and more complex planning I’d go with the % route. I have a close friend who went the big name low service route where they dump you in funds based on your age or make up some form and then send you into that format. She’s not doing as well as others who have been involved in the process.
I think you really have to look at what firms are offering. Don’t just price shop and know if you are a hands off person or want to get involved in what’s happening with your money.

YMMV. So follow what you think works for you.

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Some of the best regarded financial advisors are fee only. Rick Ferri and Jon Luskin are both great examples.

As for beating the market, no one does repeatedly. Bill miller of Legg Mason Value fund had the longest streak, 15 years. No one has ever come close since. His next two years were so poor, that he reverted to the mean overall for the 17 years. After fees were factored in, he lost to the market. Beating the market is an illusion propagated by the investment industry. After every fee is properly factored, no one does on a regular basis. That’s why you do as Jon Bogle’s thesis research and Warren Buffet both say, take what the market gives, and keep fees low.

I’ve been at this a long time and have amassed a sizeable portfolio, and multiple companies. Caveat emptor if you use an advisor that requires a percentage of assets under management. They take their cut no matter what your portfolio does. Even at 0.5%, that’s a large recurring fee on a big portfolio. No thanks.

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It’s not as simple as “did I beat the market” for someone with lots and lots of kids to educate, eldercare responsibility, and what is likely an actuarial lifetime of 30+ years of non-income producing years ahead.

I know a lot of planners who focus on beating the market and diversification- but they know nothing about how Medicare works, they know nothing about estate planning except “you need a trust”, they know nothing about smart tax planning in your 40’s and 50’s, and they know nothing about “how to handle my pension” (if you have one) or how to use life insurance in the most effective way possible, and know nothing about charitable giving and how to incorporate that into a financial plan.

So a complex portfolio likely means a lot of other complexity- and it’s worth paying for someone who knows the whole enchilada… or at least has someone in their shop who does.

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All great points!

I’ve never used a financial planner until recently. I needed to cover things like Social Security strategy, Medicare, particularly strategies around MAGI, sequence of return risk mitigation, Roth conversions, donor advised funds, long term care, etc. We have a large portfolio. He charged me a one time fee of $925. He’s a well recognized author and lecturer. Never once did we discuss “beating the market.”

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0.5% is in the ballpark of mutual fund expense ratios. Paying that for asset investment management seems analogous to having a private mutual fund, which may be better or worse than a publicly available mutual fund.

Obviously, as noted above, investment management is not the only financial planning topic that may be relevant.

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There’s an article in the current issue of Consumer Reports that has guidance on choosing an advisor. It could be helpful.

There are a lot of pieces to financial management. Investing a portfolio is only one.

Perhaps you can work through, with a fee only advisor, a strategy for making more and spending less - both hard to do. There may be ways to manage costs that have to do with older relatives, college, home, etc.

I know folks who have moved to lower tax jurisdictions, others who purchased a home for retirement that they currently rent out, etc. These aren’t options that will work for everyone but they are also not the kind of strategy every planner will think of.

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It’s not what you make. It’s what you spend. I like Dave Ramsey except some of his investment advice. The Bogleheads website is also pretty good.

Many years ago I was a TA for a Finance professor. For the average person his advice was diversify with low expense mutual funds. Put a little in regularly and forget about it.

I’m wary of some CFA’s. The latest downturn is a good example. Had several friends complaining about their 529’s losing so much. Especially with kids in college . I asked how that happened. All named their financial planner even after they expressed concerns. They don’t make money sitting in cash.

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Yes, it’s always worth it to pay for expertise v. looking on the internet or trying to save on fees and paying in other ways.

Funny since based on your points above you seem to think that no one beats the market and that all fee based planners are superior to % based ( with name drops). I’m happy with our guys as I said. Large portfolio and complex investments that have grown and diversified. I am of the opinion that you get what you pay for and that includes FP, lawyers and CPA’s. The cheap ones can land you in a lot of hot water. I’ll happily pay my fee ( and BTW, there are many fee only planners who steer clients right into products they get kickbacks in). Some are fiduciaries but there are lots of things going on.
I’m happy I’ll be able to retire in our 50’s. Haven’t had to save in our 401K in some time, can pay for college, and are financially sound so I’m sticking with what we have done. We’ve done far better than we ever expected to so there’s that.

I also don’t subscribe to what most people have done putting money in mutual funds and watch it ebb and flow. We’ve been active investors since our 20’s often in high tech stocks which we had an understanding of before they were mainstream. We have lots of people in the family in cutting edge fields and we’ve educated each other on these fields and invested as well. Made a lot of money here. Though I am glad that I got out of the bitcoin we held. YMMV>

FPs have to fit the client. Small ones for people starting out, larger ones with more services for high net worth and ready to retire ( and to build wealth over time).

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You may wish to explore Bogleheads.org. They have a forum and also lots of free resources you can peruse. I’d definitely only want a few only fiduciary financial planner, plus CPA working with me on this.

Sounds like educating your kids and figuring out your health insurance coverage are big things to figure out going forward. That’s a big thing many have to figure out if they retire before Medicare eligibility.

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If you use an advisor that uses mutual funds, you pay that and the advisors fee. BTW, I pay 0.08%.

I don’t think that. I know that. Sure, people beat the market, some times, but if you factor in all fees, over a whole career, no one does. There has been extensive academic research on the subject. The results are unequivocal. 90% of institutional investors don’t beat the market. They are the elite of the investing world. If they can’t do it, how can some random advisor down the street? That’s a myth driven by FOMO.

GREAT resource!

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Thanks, everyone!

Touching on some of the issues mentioned…

We are already helping elderly relatives - fully responsible for my mom who only has a small social security check. We may be there eventually with dh’s mom. She refuses all advice, but comes to us for the random new refrigerator, car ins deductible, etc. They are both on medicare.

Between the 8 kids, HSA funds are spent almost as soon as they go in - allergy shots, stitches, sports injury, braces, etc. We have healthy kids, but one of them always needs something.

Not sure if wealth building is the right word, more like strategizing. Dh has contributed to 401K since 18, so there’s a large amount in there. He’s fully vested for a company pension. We have a large amount of home equity. House will be paid off in 5 years if we don’t accelerate it. OTOH, do we just pay it off?

For college, we try to get the best value for as little as possible. The kids are thankfully on board with this. We aim for scholarships but also have lots of quality local and in state options. We have some college funds. I’m thinking we should increase contributions for the youngest 3 since dh might not be working by the time they go to school.

We don’t know anything about minimizing taxes.

The biggest thing is that over the past 2-3 years, dh has made some significant career moves. He already had a nice salary but has had large bumps in pay by way of bonus and annual stock options. We don’t know how to best utilize and maximize it.

The last time we met with a financial planner was 8 years ago. Someone from one of the big named companies was going door to door in our neighborhood. He analyzed all of our retirement stuff and showed us the projections. Gave us some recommendations for kids’ college, such as community college and transfer. Said we were on track, and he could help us move the funds to his company. We didn’t do that due to the cost.

Where would I find a planner who could help more with overall strategy? We have enough to meet our goals but don’t know how to best use it.

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I sent you a PM.

Have your husband ask if he can put after tax money into the 401k. It will set you up for what’s termed a backdoor Roth. It’s very powerful.

Good luck!

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Your H can start by asking his boss (or bosses boss) for names of who they use and would recommend. Options can be complicated (or not) so having someone who is already up to speed on the company’s long term comp plan could help. And that person can also suggest a lawyer to help you draw up your wills, make sure your other paperwork is in order, remind you to check beneficiaries on your life insurance, etc.

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