ONE OF MY BIGGEST retirement surprises: how difficult it is to maintain a robust social network.
My wife and I decided last Thanksgiving to travel overseas. In the past, we would have spent the holiday with family and friends. But now, most are no longer near us—or with us.
My mother passed away about four years ago. Afterward, my sister and brother-in-law moved to Tennessee to be closer to their son. My cousin Barb and her husband moved to Florida to be near their daughter. Elaine, my other cousin, moved to Colorado, where her son lives. My wife’s longtime friend Tina and her daughter Jessica no longer live close by. My stepson, who lives in Virginia, was planning on visiting at Christmas, instead of Thanksgiving.
Meanwhile, I had lunch with my three old high school buddies from my 1969 graduating class. Seeing my old schoolmates reminds me of the good old days, but also the uncertainty that lies ahead. There used to be five of us, but now there are only four. Jeremy passed away a year ago. Bob, who attended the lunch, has cancer. He was given six months to live, but he’s beaten that dire forecast.
While our social network is shrinking, we still have close friends in the area. But most of them are about our age. The rest of our family are scattered across the country. If we stay in California, I can see us becoming more socially isolated as time goes by. Maybe we won’t have the support we need in our later years, especially when it comes to our financial affairs.
That’s one reason we decided to have Vanguard Group’s Personal Advisor Select help us manage our money. If we were basing that decision strictly on cost, we might be making a mistake. But I’ve learned not all financial decisions can be made with a spreadsheet. In our case, there’s a human element involved. We might find ourselves alone one day, with no trusted acquaintances close by. Getting a financial advisor on board now seems like a wise move.
Here are four other strategies we’ve adopted to make it easier to manage our financial affairs in our declining years.
Keep it simple. I’ve found that, when you have fewer things to deal with, you have a greater sense of control over your life. You’re also likely to make better decisions, because there are fewer opportunities to make a mistake.
For these reasons, we’ve simplified our finances by consolidating investments at Vanguard, while keeping all our savings and checking accounts at our local credit union. It makes managing our money so much easier. Indeed, in my head, I can calculate our net worth in a matter of seconds.
All I have to do is add up our total assets at Vanguard and the credit union, plus the equity in our home and cars. Then I subtract our total debt, which is zero. This is our total net worth.
Our emphasis on financial simplicity is also a plus during tax season. Our uncomplicated finances allow us to easily file our own income-tax returns.
Do nothing. I learned an important lesson during my 30-year career in manufacturing: You never want to make changes to something you’ve already built unless absolutely necessary. Why? There’s always the risk you could make things worse.
I remember overseeing the delivery of a digital signal processor unit for use in a satellite. After the unit was assembled, we had to replace an electrical component that didn’t meet specification. In the process of removing and installing the new part, we damaged the other components around it. Not only did this rework cost us a lot of money, we missed our delivery date. We made a bad situation worse.
The same thing can happen with your investment portfolio. Whenever you make changes, you run the risk of incurring trading costs, triggering taxes, and selecting an inappropriate or underperforming investment that can lead to lower returns. This is why doing nothing, except for rebalancing, is usually the best strategy when managing a portfolio.
Delay Social Security. I made a lot of bonehead mistakes with my money during my lifetime. But waiting until age 70 to claim Social Security benefits was one of the best financial decisions I’ve ever made. It helps address one of the biggest threats to our retirement: running out of money.
If you can afford to wait until 70, your monthly check might be 77% higher than at age 62, plus you get an annual cost-of-living adjustment on this larger sum for the rest of your life. According to the Social Security Administration, “About 1 out of every 3 65-year-olds today will live until at least age 90, and 1 out of 7 will live until at least age 95.” In addition, married couples at age 65 have a 50% chance that at least one of the spouses will survive beyond age 90.
Autopay bills. To combat scams, it’s best to avoid writing checks and to keep tabs on all money going out. An easy way to do that: Autopay your bills using a credit card. That also ensures your bills get paid on time.
But when it comes to paying critical bills—such as gas, water, electricity and cell phone—credit cards can be risky. What if the credit card is denied because the card is compromised or you forget to update the expiration date on a company’s website when a new card is issued? To avoid the potential disruption to our life if these bills aren’t paid, we autopay them using our checking account.
Dennis Friedman retired from Boeing Satellite Systems after a 30-year career in manufacturing. Born in Ohio, Dennis is a California transplant with a bachelor’s degree in history and an MBA. A self-described “humble investor,” he likes reading historical novels and about personal finance. Check out his earlier articles and follow him on X (Twitter) @DMFrie.
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Unbelievable that a safe deposit box could be stolen! I update “The Letter” about every two years, but passwords to financial accounts are kept only on paper in a secure spot, with updated copies hand delivered to the two stateside adult children (trusting that they also will keep them secure). Important documents are kept in a nondescript container in my house that is very portable should I ever need to depart in a hurry or leave it with a trustworthy person while I’m gone for a while. It seems to me that keeping important documents locked in a bank can create unnecessary problems when you are faced with an emergency, such as a sudden serious illness, injury or death. Better to keep, at the very least, the wills and health care proxies at home and handy.
Good piece. Agree with all the main points. We have a flat fee FA and get holistic planning advice at slightly less than 0.3% for the streamlined advice provided by Vanguard. Maybe it will be a bit more if we successfully spend own our assets.
Been with Vanguard for many years. The Life Strategy Growth fund meets my requirements perfectly. Do not need to change from it until my final departure. Why pay Vanguard an additional 0.3% annually to “advise” or “manage” my account – amounts to $3000 annually for every $1m in assets. Rather spend it on a cruise or something else.
Love the article and its message. I’m younger but have always “worried” about the future. It’s probably in my nature being a CPA and always thinking about what could go wrong. My wife has not been engaged in our finances no matter how much I try to get her involved. I have a letter as others have stated below in my shared drive with my family. The thing about simplifying is something I highly consider but more looking for retirement planners than someone who could do my investments only. Can you share why you didn’t go with a full-blown retirement person? Thanks.
I appreciate why some people find Vanguard appealing, but I found them and Fidelity to be inflexible and they charged a fee for “robo” portfolios that anyone can manage for free. Vanguard would not take into account our appreciated stocks, and selling them would incur significant taxes. Their inflexible %allocations to international securities in their portfolios have cost their clients large amounts of money in the past decade. I won’t even start to delineate the recent problems with their outdated and inadequate technology.
Schwab’s Intelligent Portfolios are “free” and OK but suffer from the same heavy International concentration. Zero growth from 22 to 23.
Fidelity’s suggestion (for 0.5%m) was 50/50 Fidelity Growth Fund and Value Fund. No thanks.
Read a few books like “ Bernstein’s “Four Pillars” google “couch potato portfolios” and pick a well diversified group of ETFs (mainly US where your living expenses are) at one competent custodian, calculate how much $ you need to live comfortably after Social Security etc (Bernstein is very good on this stuff) and rebalance once a year. You can outline these steps on one sheet of paper for your executor or POA.
Hi Dennis,
Great article as always! Would you please expound on your experience with Vanguard’s Personal Advisor Select? That is potentially on my future to do list when I get to the point that I feel I am no longer willing or capable of managing my portfolio with an occasional fee-based only CFP consults. Would rather pay a lower fee with Vanguard than our current CFP if they are a good option.
Here’s an early article that Dennis wrote about the Vanguard advisory service:
https://humbledollar.com/2018/09/a-word-of-advice/
He’s done a few subsequently.
I appreciate these observations, Dennis … I am about a decade younger than you, but our situation parallels yours in several respects. I am two years away from retirement at age 66, then will also defer claiming Social Security until age 70. We’ll use bridge funds from the portfolio to cover expenses during that time.
We are also mostly consolidated with Vanguard, with the significant exception of assets at TIAA-CREF, to which I am still contributing. When I retire I’ll shift most of that into Vanguard. I use Vanguard website’s “Outside Investments You Update Yourself” to add other accounts and track net worth … in addition to TIAA-CREF, that includes checking, high-yield savings, and Treasury Direct accounts. I update that once a month, right after new contributions go into my 403(b). It’s a fairly trivial amount of labor, and I am much more comfortable tracking in this way rather than using Mint (which is going away) or something like RocketMoney. I’m not willing to give my account login information to these kinds of services, even if they do offer the convenience of a more automated form of tracking.
I’m not opting for a Vanguard Personal Advisor at this point, as I have a fairly simple allocation of broad index funds. I’ll keep an open mind as to whether that could be a service I would use in the future. What is the specific services and value that a Personal Advisor provides, and what is the cost structure associated with that?
I think automating regular payments with credit cards is the ideal option if you have it. At a minimum, you should get 2% cash back on all payments, which does add up. Some bills charge extra for paying by credit, and for those we do use electronic checking. I keep a list of all the autopayments and the date of the month in which they are due in a master spreadsheet, so hopefully we won’t get tripped up by somehow missing a payment.
Given all this … I’d say that the social connection piece is the most important. We’ll be relocating in a couple of years back to Texas to be closer to family and friends, but have made it a priority to cultivate and nurture relationships near and far. We are active in our faith community, which is a big plus in terms of connection. As Catholics, we can plug into the life of a parish community no matter where we live and find pretty strong and robust connections there.
3% for me is too steep a price fo pay as they will put you in a TD fund or similar; all index funds and I like vanguard
fee based hourly or yearly will be the norm; aim fees are just bad
Kenneth, I imagine that you got some of those ‘down votes’ simply because your statement is incomprehensible. I would like to read what you are saying; can you add punctuation and define ‘TD’ and ‘aim’? thanks.
I’m not Kenneth (so please don’t downvote me, lol!) but I think “TD” = target date” and “aim” is a fat finger mistype of “aum”.
So he’s saying that (1) he doesn’t want to pay 3% just to be put in a normal target date fund because they’re al index funds and there’s no value to 3% and (2) Fee-based advisors (by hour or year) are better than AUM (fee based on assets under management).
All in all, not terrible or controversial points, but I agree that the statement is incomprehensible, and I only figured it out because I don’t have much to do today, lol.
Thanks for interpreting. But I’m curious: Which advisors charge 3% a year?
…. most likely they missed the “.” and should have been 0.3%
My thoughts on the Vanguard Personal Advisor services. The most compelling argument I found, is to consider PAS as a future plan for a spouse/partner that may very well be capable but not interested in investing. Or more importantly they have better things to do with their day 🙂
We spend ridiculous amounts of money on insurances for things that probably won’t happen. But leaving someone in a situation to rely upon random phone calls from unknown advisors is a likely situation. And for those who like to manage their finances you can allocate just one account to PAS and when it’s time, all of the accounts can be placed under the single PAS account. This is how I have it setup.
My advice is that if anyone doesn’t feel like PAS is for you, have a conversation with your partner/spouse before dismissing it entirely.
btw… I’m new to HumbleDollar, very nice. Wishing everyone all the best!
Welcome to HD — and thanks for the thoughtful comment!
Great article Dennis. I especially enjoyed the reference to reworking the digital SPU. I observed many similar situations in my career. I agree so much with the KISS strategy. This year in doing volunteer tax prep I’ve come across several widows, and one woman with a husband with dementia. who had complicated portfolios that they struggled to understand. One was amazed at the fee page on her year-end composite statement; she was paying $2,500 a year for a dozen mutual funds I’d never heard of. We also moved recently to be close to children and grandchildren. It has been a very positive move.
I can relate to what you say Dennis. We consolidated with Fidelity, auto pay every bill possible.
On the other hand, we are fortunate all our family is within an hours drive of where we live.
I’d add one item to your list – the letter.
The final instruction letter that tells where all your finances are, about credit cards, bank accounts, what’s on autopay, about property taxes, insurance, etc.
In other words if you aren’t here, what does your wife or others need to know to make things easier for them.
I email a copy of The Letter to my wife every year and print out a copy that goes into the safe.
I also print out a copy that goes on top of my desk every time I travel.
I created not just a letter but an entire manual, a blue print of our life. This was to help my spouse, family, executor, etc. i stored it in our safe deposit box at the bank. Last month I went to update it and the entire safe deposit box inside had been stolen. When you draft these letters assume it will end up on the internet and be careful what you include. One takeaway for us going forward is that some master passwords, PINs etc will have to be memorized and never recorded anywhere.
A stolen safe deposit box?? That’s horrifying.
Wow — that’s terrible. I’m so sorry that happened to you.
The letter is very important as well as appointing someone who gets it.