Updated: May 3, 2013 12:14PM
Originally published: April 24, 2006
The nation’s top two mutual fund management companies are now in a hot contest to provide financial planning services for those nearing retirement. Mutual fund companies have always competed to attract assets. But now the stakes are higher.
With 8,000 baby boomers turning 60 every day, it’s no surprise that financial services firms are gearing up to provide advice along with investment options for getting to -- and through -- retirement.
The latest entry is Vanguard Financial Planning Services (www.Vanguard.com, 800-547-3332). It will offer individual attention from Certified Financial Planners who will help investors in four areas: asset allocation, investment recommendations, retirement analysis (including withdrawal strategies) and college savings analysis.
Although the process starts with an online questionnaire or basic telephone interview, it progresses quickly to an appointment for a telephone conversation with your personal planner.
That will eventually result in a customized series of recommendations that are easy to understand and implement. Plus, there’s an annual follow-up conversation to adjust the plan for changing circumstances.
Implementation is Job 1
John Marcante, head of the advisory service, says the latter point is most important: making sure the advice is put into action.
Vanguard planners will help transfer investments to the desired location, whether as a rollover from a company retirement plan or merely a shift from one fund to another. Vanguard’s service does not require selling long-held stocks or shifting from other providers.
Vanguard will develop a personalized mix of stocks, bonds and short-term cash reserves that take into account the individual’s stage of life and risk tolerance. It also will let you know if you’re not saving enough to meet stated retirement goals.
Then Vanguard will use its “time pathing” statistical modeling service to make individualized fund recommendations for appropriate investments in both retirement and taxable accounts.
This type of modeling is particularly helpful in creating “draw-down” strategies and projections for those nearing retirement. It incorporates multiple retirement income sources, including Social Security, corporate pensions and other retirement plans to advise you how much and from where money should be withdrawn.
The cost: All of this is free to Vanguard clients with minimum balances of $250,000 or those who bring new assets to Vanguard of at least $100,000. Vanguard clients with smaller accounts can pay a flat fee of $1,000 for the same service. And for people with more complex issues, Vanguard also will provide advice on estate planning, insurance planning and other issues for an all-inclusive flat fee.
This new Vanguard program will compete with Fidelity’s Retirement Income Advantage (www.Fidelity.com or 800-544-5230), a free planning process for Fidelity customers.
Fidelity’s RIA program is an asset-gathering and record-keeping service designed specifically to help retirees stay on budget when it comes to withdrawals of retirement assets.
You can have your Social Security or pension check deposited directly to your Fidelity account. Then create a monthly “allowance” withdrawal into your money market fund, and from there use Fidelity’s online bill-pay service to pay bills. You can even sign up for telephone or e-mail alerts if you’ve deviated from your agreed-upon plan.
Yes, baby boomers probably haven’t saved “enough.” But that becomes a moot point when retirement time arrives. You have to live on what you have, and what you earn on your investments.
Three reasons to roll over
Rolling over company retirement accounts into an IRA makes sense on two levels: You’ll have more appropriate fund choices, and IRA beneficiaries often have more options to keep the money growing in case of your death. Now there’s a third reason to roll over: free advice from the people who brought you those funds.
Of course, thousands of financial planners around the country will still offer their individualized retirement planning services, and many use the same statistical modeling techniques and low-cost no-load funds offered by Vanguard and Fidelity. So there are plenty of choices.
It’s your money -- and your future. There’s plenty of good advice around. Now all you have to do is make the effort to find it. And that’s The Savage Truth.
Terry Savage is a registered investment adviser.
Copyright © Terry Savage Productions