Ask Terry Questions Fee Managed Portfolio Accounts vs. Target/ Index Accounts

Fee Managed Portfolio Accounts vs. Target/ Index Accounts

By Terry Savage on November 22, 2014 | Investments

Terry, I am 66 and retired a year ago. I recently rolled over $100,000 from my 401K into the following. Half into a fee based Fidelity Portfolio Advisor Account and the remaining half into a Vanguard Target Account (2020). The Fidelity account is being charged approx. 1.5%. Family members have told me I made a mistake going into a fee based account and should stick with no load Index or Target accounts. My wife is still working and the earliest we will need to start withdrawing will be in five years. Appreciate your thoughts on the matter. Thank you.

Terry Says:  Well,  I’m not sure that these are the only two — or even the best two — alternatives!  Did you use Fidelity’s Retirement Income Modeling service, which is designed for people in your position, to tell you how to invest and how much to withdraw, using Monte Carlo modeling?  It’s free if you have an account at Fidelity.  That’s the place to start — before you move anything around.  The counselor needs the entire picture — all your investments, and your personal goals, income needs, and desires to pass on some money to your heirs if possible.

If you feel “funny” about asking Fidelity, now that you’re invested there and are not sure they want to lose you as a fee-paying customer, contact T. Rowe Price and go through the process there.  (If you don’t have an account there, it will cost a small amount —  but you can assure them you will move some money to them.)  They also have a wonderful Social Security advisory process that tells you how/when to best take your benefits to assure the largest, and most appropriate, ongoing benefits.

The thing is you need a big picture analysis of your entire financial situation.  I agree that it’s probably unnecessary to pay 1.5% annually — especially if that’s on top of any other charges levied by mutual funds in the program.  But it’s not just a question of the cost: it’s more about the picture of planning for investments and withdrawals on a very personal basis.



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