Chamberlain Financial Planning and Wealth Management
Michael Chamberlain has been helping people to make better financial decisions to improve their lives since the 1980’s. Chamberlain Financial Planning was established in 2007 to assist people on a fee-only basis, which means that we do not sell investments or insurance, unlike 95% of other firms.
Michael's education includes both Bachelors and Doctorate degrees from the University of California, Berkeley. Accredited Investment Fiduciary course work was from The Center for Fiduciary Studies at the University of Pittsburgh and CFP® course work was from Boston University.
Michael lives in Santa Cruz with his life partner, Patty, but most of his family is in Sacramento. His daughter Cathi, her husband and three kids, his two brothers and Mom and Dad are all living there. In 2009, Michael opened a branch office in Sacramento so that he could visit with his family more frequently. His son Mitch lives in Austin Texas with his wife and two little girls.
Sailing is one of Michael's life passions. It is a great way to get in touch with nature and he is fortunate enough to have a sailboat at the Santa Cruz harbor.
Doctorate, UC Berkeley
Assets Under Management:
Drum roll please! And the answer is... it depends!
If your 401(k) is from a large corporation, it may have low fees and really good investment options than if you had you been with a small company. The reason is that small business owners are more concerned with keeping the company going then to spend time on making the 401(k) great. Big companies have more resources and some 401(k) plans like at Apple are really good.
I do not know your age, what income you have, nor your expenses or your family situation, so giving investment advice specific to you cannot happen.
You say your Fidelity advisor is pushing you to roll over the 401(k). So, the all-important question is “will the advisor and Fidelity benefit from the rollover?” Are you paying Fidelity to manage your IRA? If the answer is yes, then when you roll the 401(k) into the IRA, the management fee will (in most cases) be higher. This could be a reason to not roll it over!
The next question would be to review the investment options in the 401(k) and compare them to what is in your IRA accounts. Some 401(k) plans have investment options outside of Fidelity. If you were to roll the 401(k) over to an IRA, the Fidelity advisor might suggest more Fidelity funds, which could be a conflict of interest since Fidelity would benefit from more Mutual Fund fees.
After understanding a clients situation, I often suggest that those retirees that have a 401(k) via Fidelity to roll it over to an IRA so that we can have improved investment options and with lower fees than what is in the 401(k).
My advice to you would be to ask more questions and to read the following articles.
9 Considerations Before Rolling Over Your 401(k)
Busting 5 Financial Myths
Good question. It is one that should be asked more often.
The old saying is that Annuities are sold not bought. The reason that they are often sold is due to the commissions that the salesman generate, which can be over 6%.
Keep in mind, there are different types of annuities such as a fixed, variable, and indexed annuities. Each have different selling points. Since you mentioned the purpose would be to pay for medical premiums, I am guessing that you are thinking of a fixed annuity.
I would not recommend a fixed annuity, which has a fixed pay out each month, quarter, or year to pay for insurance that will have rising premiums. Lets say that your health premium is $800 a month the first year, but next year is $1,000, and the following year is $1,000. If you do not have access to additional dollars, you will not be able to afford to pay the rising premiums.
Without more info, I can not be more specific, but in general, NO I would not covert $70,000 to an annuity.
There is much to consider when addressing when to take Social Security, but in general, if you are still working and making over the max allowed so as to not reduce your SS monthly benefit, you are negatively impacting your situation in the long term.
For those readers that do not know about the topic, please review what SS has to say on the subject:
"You can get Social Security retirement benefits and work at the same time. However, if you are younger than full retirement age and make more than the yearly earnings limit, we will reduce your benefit. Starting with the month you reach full retirement age, we will not reduce your benefits no matter how much you earn.
- We use the following earnings limits to reduce your benefits: If you are under full retirement age for the entire year, we deduct $1 from your benefit payments for every $2 you earn above the annual limit.
For 2017 that limit is $16,920.
- In the year you reach full retirement age, we deduct $1 in benefits for every $3 you earn above a different limit, but we only count earnings before the month you reach your full retirement age.
If you will reach full retirement age in 2017, the limit on your earnings for the months before full retirement age is $44,880."
Again, with out knowing your situation I would advice you not to take your Social Security benefit until after you stop working. For each year you wait, the monthly benefit will be permanently higher.
There are different levels of complexity in what seems like a rather straightforward question.
We know that for each year you wait to take your Social Security benefits, your monthly payment would be 8% higher when you do start taking it. This is the current rule and is seemingly guaranteed by the US government. But as you know, our government leaders could change the program in unknown ways in the future.
Even with this uncertainty, I routinely counsel clients to utilize their IRAs and 401(k), and delay taking Social Security. The reason is because you’re taking those funds off the gambling table. You state that investment funds might earn 5 to 6%. That is true some years, but in other years, the investments can actually lose money. The 8% of increased SS benefit looks pretty stable to this old guy!
The direct answer to your question is, yes, the general advice of delaying Social Security does take into account the loss of compounding growth in retirement savings.
You cannot use this general observation as specific investment advice to your situation. Consult your own advisor.
You have asked two questions, but anyone responding must make numerous assumptions in the attempt to answer your two questions. Those assumptions may be wrong or right so I won't go down that path.I am sorry that I cannot answer your questions specifically since I do not have more specific information about you or your portfolio.
What I will say about international equities is there are a number of financial services companies such as Vanguard, Fidelity, and Charles Schwab that offer Target Date Funds. These TDFs are professionally managed by each financial services company. The reason I mention target date funds is that EVERY financial services company offering them has international equities in their portfolio no matter their level of risk. If all of the big players think they should be in there, perhaps you should too
Diversification is well-known as a way of mitigating risk. Adding international equities to your portfolio could dampen volatility.
The level of risk in your portfolio should not be dictated by your tolerance for risk (even if you are a low risk profile kind of investor), but rather by your goals as to when you'll need the money and how much money you will need to fund your future cash flow needs.
As for international equities, it has been established that large international companies' ups and downs are similar to large US companies. As a result, you may want to utilize small and mid cap international equities, which are less correlated to US stocks.
Hope that helps.