Ask Terry Questions My financial planner suggests . . .

My financial planner suggests . . .

By Terry Savage on October 22, 2017 | Financial Planning / Retirement

Terry, I am 66 and plan to work until I am 70. I am in the 28% tax bracket and have 50% of my non deferred savings in muni bond funds. The rest is in stock funds. My financial planner suggests I sell these muni bond funds, go to 100% stock funds in this account, and go to a 50/50 stock/bond split in my IRA. What do you think? Should I go to 100% stock in my non deferred savings? Thank you

Terry Says

First, I'm betting that your financial planner will reap a tidy commission -- most of it hidden -- if you do this transaction.  (Brokers make not only a commission, but reap a reward in pricing, when they buy or sell munis for a client.  If you follow this advice, you're likely doing a lot more to help your "planner's" retirement than your own! So first thing:  Ask your "financial planner" -- ARE YOU A FIDUCIARY?  Will you put my interests ahead of your own?  Will you FULLY DISCLOSE any fees or commissions or rebates you receive from this transaction?  And will you put that in writing? Ha, I thought not!   Now back to your original question.  You get tax-free income from those munis.  That's a real benefit it you are in a high tax bracket.  But the column that will be published next week highlights the problem with all bonds -- especially those with longer maturities.  When interest rates rise, bond prices fall.    And rates are starting to rise.  So you only want to hold on to those munis if you are prepared to hold them till your death -- or nearly to that point, or till they mature!  Then you can keep getting the interest, which likely will remain tax-free even with tax reform on the horizon. I cannot imagine why you would want to be 100% in stocks at this age, and at this point in the market cycle.  Did this advisor suggest that you keep a larger cash reserve -- what I call "chicken money"?  That might be a good idea -- both inside and outside your IRA.   Suggest you contact a certified financial planner who promises to charge only fees-  not commissions or hidden rebates.  Search at, the association of fee-only financial planners.



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