I think it was a good checkup. The recommended portfolio allocation was sound. It provided a good roadmap for getting on the right course. For this reason, it should be done early, not when you are already close to retirement. I wish I had done it when I was 25 or 30.
Narrow Focus But Right
Coming from Vanguard, the financial plan was heavily focused on the investment part. The recommendations fell in line with the composition of a Target Retirement fund. That’s not a negative. The recommendations by account still gave a clear roadmap for how to go from here to there while taking into consideration tax consequences. Inexperienced investors won’t be led down a wrong path.
It would be better if the financial plan was broader in scope. The written plan didn’t cover much else except investing for retirement. However, I’d rather have one thing right than more things wrong. I read many reports from people who received a broader plan from companies whose names start much earlier in the alphabet than Vanguard, only to have been steered into expensive investments.
The ultimate test: would I be happy if a family member takes the plan and follows it exactly? I would.
Limited Retirement Outlook Tool
The interactive tool for tracking your retirement outlook was useful but limited.
For young investors, it didn’t allow inputs for salary increases above inflation, varied savings rates, one parent staying home for a few years, etc. For older investors, it didn’t allow inputs for lifestyle changes such as downsizing residence, health care expenses before and after Medicare, and so on.
Because it only used the aftcasting method with historical returns, the outlook may be too optimistic. I would look elsewhere for a better planning tool.
The advisor answered both investment and non-investment questions in the consultation session. After one session that comes with the financial plan, you get continued access to the advisor either by having Vanguard manage your accounts for 0.3% per year ($100k minimum) or through the free Ask a CFP Professional service offered only to Voyager Select or Flagship customers ($500k or more at Vanguard).
For a young investor, having Vanguard manage $100k for a year at a cost of $300 is a better deal than paying $250 one-time because you then have the advisor for one full year versus just one session. I think getting coached by an advisor for one year early on will help shape a young investor’s path forward. $300 is a very good price for that. You can cancel after you are fully trained.
If you already have $500k at Vanguard, I think it’s worth it to have an advisor on standby to answer questions. It’s free. You earned it. If nothing else, for the spouse. You will help create some jobs at Vanguard. It’s good to get an opinion from a trained, salaried advisor versus talking to friends, family members, or random people on the Internet. Why go it alone when you can walk with a guide?
I know some financial advisors read this blog. If you are an advisor, please let other readers know where and how you do it better. I know some readers have a financial advisor. If you have one, please let others know where and how your advisor does it better. Thank you.
[Photo credit: Flickr user SalFalko]
Refinance Your Mortgage
Mortgage rates hit new lows. I saw rates as low as 3.25% for 30-year fixed, 2.625% for 15-year fixed, with no points and low closing cost. Check mortgage rates in your state.