[Caymus]

So, I am currently interviewing advisors. In my case, I am trying a find a fee-based advisor who can help me determine how much money I should be "paying" myself (before RMD's kick in). I have always lived below my means and am finding it difficult to open the spending floodgates during my first year of retirement.

The advisor I recently talked to has a relationship with my former company. They have a reasonable fee structure to develop a plan - Monte Carlo Simulation etc. One thing they suggested for income are Nontraded REITs. I read that they may not be easy to sell, and I assume they have high trading fees. Any opinions? I already have REIT funds inside my Roth IRA. They have done well until recently.

[Plinker]

Originally Posted by Caymus

So, I am currently interviewing advisors. In my case, I am trying a find a fee-based advisor who can help me determine how much money I should be "paying" myself (before RMD's kick in). I have always lived below my means and am finding it difficult to open the spending floodgates during my first year of retirement.

The advisor I recently talked to has a relationship with my former company. They have a reasonable fee structure to develop a plan - Monte Carlo Simulation etc. One thing they suggested for income are Nontraded REITs. I read that they may not be easy to sell, and I assume they have high trading fees. Any opinions? I already have REIT funds inside my Roth IRA. They have done well until recently.

Tread cautiously. Fees range from 10 to as much as 15%. Must be an accredited investor to purchase. May have long commitment period and may be hard to sell quickly. Strongly suggest you switch to a fee-only advisor. Fee-based is another way of saying commission. My opinions.

[Stu from NYC]

Originally Posted by Caymus

So, I am currently interviewing advisors. In my case, I am trying a find a fee-based advisor who can help me determine how much money I should be "paying" myself (before RMD's kick in). I have always lived below my means and am finding it difficult to open the spending floodgates during my first year of retirement.

The advisor I recently talked to has a relationship with my former company. They have a reasonable fee structure to develop a plan - Monte Carlo Simulation etc. One thing they suggested for income are Nontraded REITs. I read that they may not be easy to sell, and I assume they have high trading fees. Any opinions? I already have REIT funds inside my Roth IRA. They have done well until recently.

Why would a non traded REIT be better than a standard one? The difficulty in selling would certainly turn me off not to mention high cost of trading.

[retiredguy123]

My opinion is to stay away from non-traded REITs. If a fee only advisor recommends them, find another advisor. The people who make money on REITs are those who set them up and manage them, and the brokers who sell them for a commission.

[Caymus]

Originally Posted by Plinker

Tread cautiously. Fees range from 10 to as much as 15%. Must be an accredited investor to purchase. May have long commitment period and may be hard to sell quickly. Strongly suggest you switch to a fee-only advisor. Fee-based is another way of saying commission. My opinions.

Thanks

I do not have an advisor at this time. I have about 6 that I am evaluating. This last one also appears to be suggesting annuities without using the word annuity.

[retiredguy123]

Originally Posted by Caymus

Thanks

I do not have an advisor at this time. I have about 6 that I am evaluating. This last one also appears to be suggesting annuities without using the word annuity.

I would run away from that advisor.

[CoachKandSportsguy]

Originally Posted by Caymus

So, I am currently interviewing advisors. In my case, I am trying a find a fee-based advisor who can help me determine how much money I should be "paying" myself (before RMD's kick in).

This question should not be difficult:

The answer should be something like this:
1) What are your annual expenses before ANY discretionary spending?
2) what are, if any, pension payouts, annually?
3) what is, if taking, your social security payout, annually?
4) what is your non qualified, taxable investment interest?
5) what is line 1 minus line 2 minus line 3 minus line 4 to cover all living expenses?

6) What percent is line 5 of your IRA + taxable account total?
7) if less than 4%, then rule of thumb, great!

7) take 4% of your IRA , and subtract line 5 and that is your discretionary, fun spendable amount. .

Note: this calculation is only a starting point, and doesn't take into account the taxable implication of your income less the standard deduction times the income bracket rate of say 12% (estimate)

I am not an advisor, but can help you create an excel workbook model to start to estimate this over your lifetime. . background experience includes corporate finance forecasting and operational spending model building. .. which is a bit more complex than you as an individual or as a couple.

Once you actually see the assumptions, and the balances and outflows. . the light bulb should go on to answer the question: How much should you pay yourself? prior to RMDs?

excluding any conversions to ROTH IRAs. . DM me if you want to do it yourself prior to seeing a fee based advisor just to have perspective of how many zeros should the answer be. .

finance guy

[CoachKandSportsguy]

Originally Posted by Caymus

I have always lived below my means and am finding it difficult to open the spending floodgates during my first year of retirement.

Lets agree on a concept:
you can take out any amount from your IRA, but you don't have to spend all of what you take out. You can rollout it over into your taxable account, and keep on having the money grow tax free if you like, so don't think in terms of paying yourself and having to spend it all. .

So you can still maintain your lifestyle as long as you pay the required taxes and reinvest whatever you don't use, tax free. .

finance guy

[Caymus]

Originally Posted by CoachKandSportsguy

This question should not be difficult:

The answer should be something like this:
1) What are your annual expenses before ANY discretionary spending?
2) what are, if any, pension payouts, annually?
3) what is, if taking, your social security payout, annually?
4) what is your non qualified, taxable investment interest?
5) what is line 1 minus line 2 minus line 3 minus line 4 to cover all living expenses?

6) What percent is line 5 of your IRA + taxable account total?
7) if less than 4%, then rule of thumb, great!

7) take 4% of your IRA , and subtract line 5 and that is your discretionary, fun spendable amount. .

Note: this calculation is only a starting point, and doesn't take into account the taxable implication of your income less the standard deduction times the income bracket rate of say 12% (estimate)

I am not an advisor, but can help you create an excel workbook model to start to estimate this over your lifetime. . background experience includes corporate finance forecasting and operational spending model building. .. which is a bit more complex than you as an individual or as a couple.

Once you actually see the assumptions, and the balances and outflows. . the light bulb should go on to answer the question: How much should you pay yourself? prior to RMDs?

excluding any conversions to ROTH IRAs. . DM me if you want to do it yourself prior to seeing a fee based advisor just to have perspective of how many zeros should the answer be. .

finance guy

I understand all that. The problem (as I see it) is that I have always lived too fugally and have done so for years. Doing my work years most of my income went into investments or taxes. I was hoping to find a mathematical model that tells me how much to spend based on my assets. Maybe I need a psychoanalyst instead.

[manaboutown]

I am certain the internet is replete with retirement budget forms and worksheets.

TIAA offers fairly comprehensible all-inclusive separate retirement income and retirement expenses worksheets. https://www.tiaa.org/public/pdf/r/re...worksheets.pdf

[Stu from NYC]

Originally Posted by Caymus

I understand all that. The problem (as I see it) is that I have always lived too fugally and have done so for years. Doing my work years most of my income went into investments or taxes. I was hoping to find a mathematical model that tells me how much to spend based on my assets. Maybe I need a psychoanalyst instead.

A very very rough starting point would be figure out your normal expenses for the month with total.

Take your investments total them up and multiply by 4%

How do the two numbers compare? That should give you a basic idea of your financial condition.

Remember I did add two very's.

[CoachKandSportsguy]

Originally Posted by Caymus

I understand all that. The problem (as I see it) is that I have always lived too fugally and have done so for years. Doing my work years most of my income went into investments or taxes. I was hoping to find a mathematical model that tells me how much to spend based on my assets. Maybe I need a psychoanalyst instead.

OK, so you want to change your basic lifestyle because you can? or you should? or why? You do realize that people have a really hard time changing after the age of about 35, unless a major life event happens. This concept is very strong in people, and you appear to be struggling with that if you understand the concept, and are paying someone else to convince you to do it? or you can? But lets say the number is $X. . . do you have a plan for $X? or are you now going to make one up because someone is giving you permission to spend $X because you can't give yourself permission? or even know how to spend it?

Maybe I need a psychoanalyst instead might be more accurate than you realize. . and you did admit to it in a freudian slip. .

behavioral finance guy

[daniel200]

I have heard the pitches for nontraded REITS. I have never invested in them. The fact that they are nontraded means that if you desire to sell it will be to someone who knows he is the only buyer. You will get a bad price and he will get a good price.

The fact that they are non traded, significantly impacts the accounting rules that they must abide to. You will have less protection.

There is a wealth of information available for publicly traded reits. There is a dearth of info available for nontraded reits. And because these nontraded reits are very small (as compared to public traded reits), means that very few people (if any) are analysing their finanvials.

If you really need REITS, buy publicly traded ones, where the fees will not take 10% of your money on day 1.

I would run fast from any advisor promoting these.

[retiredguy123]

Originally Posted by Caymus

I understand all that. The problem (as I see it) is that I have always lived too fugally and have done so for years. Doing my work years most of my income went into investments or taxes. I was hoping to find a mathematical model that tells me how much to spend based on my assets. Maybe I need a psychoanalyst instead.

The math is easy. If you have a balanced portfolio, you should be able to spend about 4 percent of it every year. But, if you have been a saver most of your life, forcing yourself to become a spender will not make you happy.

[La lamy]

Originally Posted by Caymus

So, I am currently interviewing advisors. In my case, I am trying a find a fee-based advisor who can help me determine how much money I should be "paying" myself (before RMD's kick in). I have always lived below my means and am finding it difficult to open the spending floodgates during my first year of retirement.

The advisor I recently talked to has a relationship with my former company. They have a reasonable fee structure to develop a plan - Monte Carlo Simulation etc. One thing they suggested for income are Nontraded REITs. I read that they may not be easy to sell, and I assume they have high trading fees. Any opinions? I already have REIT funds inside my Roth IRA. They have done well until recently.

I relate to what I've highlighted above. I decided to let myself spend as I wish for a year and totalled how much it was. I still wasn't able to go to restaurants (what a waste of money, too much salt, can't put my feet up, etc...), and the only thing I did end up doing more is a bi-monthly massage.

After being burned by bad investment advising in the past, I educated myself and now only buy dividend stocks that I believe in. I live off the dividends and leftover cash from sold home and keep my income at 15% taxable (up to about $53,000 in Canada).

I would definitely stay away from non-traded REITs. Here is a quote about them which is an absolute NO GO for me:
"In a non-traded REIT, investors usually have just two options for selling shares of the stock: wait for the REIT to have an IPO and become a publicly traded entity, or wait for the REIT to liquidate its holdings."



Good luck and do try to treat yourself!