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Author: harryot Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75381  
Subject: What Should We do? Date: 4/25/2001 1:27 PM
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Hi,

I am 53 years old and my wife is 51. Through the Grace of God I will be getting a lump sum pension and a severence package from my company of 33 years. The total with the 401k is about $1.3 million. I have other investments totaling about $300k which are more liquid. I have been seeking financial advice, however am still confused. One financial planner recommends Variable Life Annuities with a large insurance company. What do you guys think? I have been investing for a few years and I would like to think it was skill and luck that got me to $300k, however it scares me to think that I could manage a portfolio of $1.3 million without professional help and so much on the line.

Thanks in advance for your responses
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Author: PMcMullenCT Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29315 of 75381
Subject: Re: What Should We do? Date: 4/25/2001 2:07 PM
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One financial planner recommends Variable Life Annuities with a large insurance company. What do you guys think?

Have you read this Fool article on annuities?:

http://www.fool.com/retirement/annuities/annuities01.htm?REF=PRMPIN

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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29316 of 75381
Subject: Re: What Should We do? Date: 4/25/2001 2:23 PM
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harryot: "I am 53 years old and my wife is 51. Through the Grace of God I will be getting a lump sum pension and a severence package from my company of 33 years. The total with the 401k is about $1.3 million. I have other investments totaling about $300k which are more liquid. I have been seeking financial advice, however am still confused. One financial planner recommends Variable Life Annuities with a large insurance company. What do you guys think? I have been investing for a few years and I would like to think it was skill and luck that got me to $300k, however it scares me to think that I could manage a portfolio of $1.3 million without professional help and so much on the line."

First, if the severance package is what you wished for, congratulations.

Second, I do not think much about annuities, and I also beleive that your advisor would also thank God if you elected to place $1MM in an annuity through him.

Third, you ought to visit the Retire Early board here at TMF (in Speakers' Corner) and read its FAQ and the related The Retire Early Home Page. If you accept the 4% "rule" as set forth therein (and related corollaries), your $1.6M (which assumes that the $1.3M package is net, after taxes) should support a first year income of $64,000 (pre-tax, you would need to be confident that you could cover whatever taxes were due on your income)that you should be able to inflation adjust every year thereafter for 40 years.

Fourth, If you really want to discuss annuities, you should also post on the Insurance board --- several of its regulars visit here (but I do not recall seeing all of them here).

Fifth, you said nothing about tangible assets, required budget needs (maybe still college expenses for a child(ren)), etc., or even if you were intending to retire or look for another position.

Hope this helps. Regards, JAFO




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Author: Greenerd Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29317 of 75381
Subject: Re: What Should We do? Date: 4/25/2001 2:24 PM
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Sure you can manage your portfolio.

Let's see: 1.3 Mil at 2% management fee, yield 26,000 so you could have a part time job managing your own money.

Lots of options for managing your own money.
Personal advice, run from the annuity salesman.

Start with making concept decisions such as what will your portfolio allocation be. One suggestion as a starting point, dependent on your risk tolarence would be 50% Equity, 50% Fixed.

Equity portion, Mutual Index funds or ETF (DIA, SPY, QQQ) or individual stocks (Max % for each stock) say 12 stocks @ 4% of the 50%.

Fixed Income portion, Money Market for current expense, Laddered bond/CD's (1 year expenses coming due in year 1, 2, 3, 4 and 5) with balance in a bond fund or other individual bonds.

Take your time, Read, Study, you could hold your 401k in the company, or transfer (pending rules) to a brokerage placing it in a Money Market Account while you take time getting educated (Fool School or other Fool offerings such as the other boards). You will get income from the Money Market Account so you don't have to rush into any decision.

May God Bless
Bob

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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29319 of 75381
Subject: Re: What Should We do? Date: 4/25/2001 2:56 PM
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I would recommend setting up a plan and sticking with it, so that as little time is spent maintaining it. That way you don't need to worry about managing it; you just make sure the plan is followed.

You can either come up with a plan yourself, or get an advisor to do it. I recommend an advisor who gets paid by a flat fee based on the time spent preparing the plan. There are also advisors who want to be paid by commission or who are paid based on a percentage of your assets; I don't think that's a good idea.

Some big mutual fund companies will charge you a flat fee to look over your portfolio and make a suggestion -- for instance Vanguard.

Do you want your portfolio to be actively managed (either by yourself or for a fee) or are you happy with just setting up a plan and sticking to it?

Are you completely retiring or will you still be working? Have you decided about Social Security?

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Author: dgbd One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29324 of 75381
Subject: Re: What Should We do? Date: 4/25/2001 4:48 PM
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Hi, Harryot

There is a good discussion of criteria on choosing a financial planner in the book "How to live well and retire early on less than a million dollars" by Gillette Edmunds. I'm sure there are other books out there also. Basically he states that by carefully choosing a fee based financial planner you can get inexpensive objective advice. You don't have to do it alone. Avoid "free" consultation with a commission based insurance saleman selling an expensive product that doesn't fit your needs.
DGBD

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Author: harryot Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29325 of 75381
Subject: Re: What Should We do? Date: 4/25/2001 5:17 PM
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Thanks for the response.

Yes the severance is what I wished for.

College Education for the kids is done, although I do have a grandson that I would like to help someday.

I will take your advice and post on the insurance board.

As far as working some more I still don't know. It depends on the job market. Financially I would like to have some options.

again thanks for the advice

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Author: carylanne Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29326 of 75381
Subject: Re: What Should We do? Date: 4/25/2001 5:18 PM
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Also, visit http://wwww.morningstar.com and click on the conversations site. There are helpful posters there also. Take your time. Don't take your money until you determine if you are going to do a tax deferred rollover into another account such as an IRA. If so, you want an institution to institution transfer so that the money does not come into your hot little hands and 20% (or more) is withheld for the feds. Go to the bookstore; you will find lots of titles that will benefit you reading them. Peruse a few, take one or two to the coffee bar and browse while having a coffee or soda. Maybe buy several to get a flavor of the kinds of opportunities and pitfalls are out there.

Remember, the sharks will be smellling blood (your money) and they will be swarming around you. Don't sign anything until you have consulted a qualified CPA you trust. Move slowly, get those funds into a money market fund at Vanguard or Fidelity or T.Rowe Price and take your time to determine how you want your investment allocation to evolve. You will probably need some estate planning advice also, but first things first.

Good Luck and Lucky you!

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Author: harryot Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29327 of 75381
Subject: Re: What Should We do? Date: 4/25/2001 5:26 PM
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Thanks for the advice.

I am currently in information overload. Book piled on the side of the bed .

I have already consulted with my lawyer and he recommends a By Pass trust once I get the all of the qualified money.

I already know about the institution to institution transfer and the tax penalties if I don't do it.

Again thanks for the advice.



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Author: JLC Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29330 of 75381
Subject: Re: What Should We do? Date: 4/25/2001 9:44 PM
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<<<What do you guys think? I have been investing for a few years and I would like to think it was skill and luck that got me to $300k, however it scares me to think that I could manage a portfolio of $1.3 million without professional help and so much on the line.>>>

I have a low opinion of annuities, primarily because I think I can do better.

Next question, did you feel comfortable managing your investment? If yes, there is very little difference between managing 300k and 1M. If you were able to follow the plan for 300k in good and bad times, it shouldn't be much different with a larger sum. Think of the movie "Hoosiers", when the small town team made it to the state finals and showed up in the hugh city gym. The coach had them measure the heigth of the basket, and the distance of the foul line. Both the same as their gym (and any other gym). Your investment strategy should "measure" the same.

You have plenty of time to study and think. The simplest thing to do is the 4% rule with an S&P 500 index fund. Place 20% (4% x 5 years, which should roughly be 5 years living expenses) in cash, money market, CDs) and 80% in index fund. Each year draw out another 4% from the index fund to replace used living expenses cash.

Take your time and good luck.

JLC



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Author: buc99 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29331 of 75381
Subject: Re: What Should We do? Date: 4/26/2001 1:48 AM
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In this case a commissioned advisor may be the best choice. If you put over one million into many fund groups the load is not charged. Thus, you can use an advisor at the same price as no load funds. Assuming one finds an advisor that they are comfortable with, and that advisor has a good family of funds to use, it may be a way to go.

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