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:
This is a very good question that many people ask at various points in their life time, There is a short answer and a long answer.
The short answer is NO, do not sell and move all to cash.
The long answer is still NO because:
1. You and the wife will live for another 20 years, which will have periods of ups and downs, inflation, recession, bull markets and bear markets, higher interest rates and lower interest rates. Cash cannot give you returns over time that will provide the Required Minimum Distributions that you are mandated to take, plus grow for the future and increase your purchasing power over time.
2. The key to maintaining investments over the long haul is to have an asset allocation that holds both stock (can be ETF or Mutual funds) as well as fixed income (Bonds and cash) in the right proportion for your situation. I do not know what that may be. For instance: Do you own a home, is it paid for, what amount of SS income do you have, do you have a pension, are you supporting anyone else and many more?
3. What is the current percentage of stocks in your 401k? Without knowing anything about you, it is not possible for me or anyone else to tell you what is right for you, but if we were to look at the 42 different financial companies that offer target date funds the average of those 42 would suggest that 30% stocks and 70% fixed income maybe a reasonable allocation. If your current allocation is 60% or 70% it would be appropriate for you to decrease the percentage of stock but not going all to cash.
Your current RMD is about $29,000 to $30,000 but that that will go hiogher in the future. For instance an 80 year old with $800,000 would have an RMD of about $42,000 and at age 90 $72,000 RMD.
I would recommned that you talk to a CFP professional about determining the right allocation for your situation and if you should keep the funds in the 401k or move them to an IRA.
There are many things to consider when addressing your question.
- What was your source of income for the past 8 years? If it was the retirement plan it may be wiser to continue that and wait on the SS. Each year that you wait the benefit goes up 8%. Where can you go to get a 8% return on your investments that has a Cost of Living adjustment as well?
- Could one of you live on the larger of the 2 SS amounts? One of you will die before the other and at that time the survivor will receive the larger of the tow amounts.
- How would you pay for a Long-Term Care event and what impact would that have on the other?
- How are your retirement funds currently invested? Too much risk or to little or just right?
- What is state of your current health. If it is good, then wait on the SS. If you have conditions that will shorten your life expectancy, then maybe take it early.
- What is the longevity in both of your families. If all live to a ripe old age that would suggest waiting on the SS whereas if every tends to pass on in their 60’s or 70’s” then taking it sooner could be smart.
There is also the option of one of you taking SS now and wait on the other.
Giving you the correct answer for your situation cannot be done in this venue. You should seek out a CFP® professional and get their input after you provide a complete overview of your situation.
Hats off to you for being aware of the need to save for retirement and seeing that you may be beyond a bit.
In the good old days, before retirement plans, people would invest for the future by saving and putting it in the bank for the future. Bank accounts do not provide much return so people invest in the stock market.
In the current times, with retirement plans, the first step is to defer income to the company 401(k) when there is a match offered. That results in free money! The ROTH is good since that will be tax free income in the future. So to save more you can open a brokerage account and buy mutual funds or ETF's to additionally invest for the future.
The this fashion you will have a tax-free account (ROTH), a tax deferred account (401(K) and a Taxable account. It is like having three buckets of retirement funds that you can pick and choose from where to withdraw funds during retirement to be tax efficient.
There may be more to consider than just the income tax.
- How long have you been partners?
- Do you maintain separate accounts or are they joint?
- Do you live in a community property Sate or not?
- Do you have estate planning documents and who are the beneficiaries? The partner of your kids?
- If there were a long-term care event, are you OK having the bills paid out of just your accounts or are your partners accounts on the line for the bills as well?
- Is your partner a beneficiary of your pension income or not?
- Will you both get Social Security payments and in what amounts? What would be the impact for survivors’ benefits if you were married?
You may want to invest some time and money in talking with a local Fee-Only CFP® professional to be sure you are aware of all the circumstances before you make the big decision.
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