Ask M-Network: Move Retirement Account Or Stay Where I Am?

My Two Dollars reader Bud sent in the following question to the M-Network’s new feature “Ask The M-Network“:

I just turned 57 today. I retired from a company 2 years ago. I took a lump sum and gave it to Fidelity in a managed account. Needless to say I am down 30+%. My question is or should I say I’m looking for direction whether I should remove it out of the managed account to save the cost of paying Fidelity to manage it and just invested in Fidelity or Vanguard index funds. I would at least be saving the quarterly expense.

And here are the responses from several of the M-Network members to try to answer Bud’s question…

Pinyo from Moolanomy says:

It’s difficult to say without more information, but here are a few things to consider.

1. Fee – I am not sure what Fidelity charges you, but in general, I don’t like advisor who charges a percentage of your portfolio. Also, do you know if they’ll charging you any additional fee to stop using their service? I have two basic rules which I think applies to most cases (1) stick with fee-based advisor (e.g., someone who work for you by the hour), and (2) keep fees and expenses as low as possible. Believe it or not a difference of 2.5% in fee can lower your investment performance by 50% over the course of 30 years.

2. Investment skills – I don’t know how comfortable you are at managing your own portfolio. If you are not, I would caution against doing it on your own just to save a few bucks. Again, a fee-based advisor would be really helpful here.

3. Investment Performance – If the -30% performance is the factor that prompt you to make this decision, I think we need to better understand the managed account investment objective. For example, you would be down -23.77% if you invested Vanguard Target Retirement 2010 (VTENX), and -38.94% if you invested in Vanguard 500 Index (VFINX) fund. So comparatively, -30% was not bad. The account is probably somewhere between the two funds in term of risk vs. performance.

In the end, there are too many variables to provide concrete feedback here. If you have substantial assets, I would recommend talking to a fee-based financial advisor.

And Gather Little By Little says:

Pinyo’s answer is dead on. Personally at 57, I would be looking to move my retirement money into more conservative places. A 30% loss indicates you are still in fairly risky investments, but that is just an assumption.

Personally, for people in their late 50s and early 60s, it’s time to be more conservative to avoid risking the money you worked so hard to earn and save. I would leave the money in managed accounts, but just far more conservative mutual funds.

Hope these answers can provide a little guidance, Bud. Do you have a question you would like to have us try to answer? Send it in to Ask The M-Network!

And please remember that our answers are opinions and should not be considered professional advice and we assume no responsibility of any kind. Please consult a certified financial expert as needed.

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Comments (2)

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  1. Michael Harr says:

    I would add that if you are retired, you should also be very careful to keep a significant portion of assets in cash–usually two years’ worth of expenses or more. By doing so, you can avoid worrying about these kinds of market swings, as your withdrawals will come from cash and not the market. The biggest problem I’ve seen with investors is that most were over-positioned toward equities and few realize that a 50/50 portfolio has experienced higher returns with less risk than an all stock portfolio in the last decade plus. In addition, Fidelity’s own research demonstrates this fact. Also, the odds are pretty good that you can find a fee based manager by the hour that will save you money compared to a percent fee based account.

  2. David says:

    Thanks for the advice Michael!