Prime Time - Jane Fonda [118]
THE WITHDRAWAL PHASE
The withdrawal phase is just what it sounds like: the time when you have fewer if any earnings beyond your investments and you have to carefully prioritize what you spend: Do you get a new car or a new dress, or downsize your home?
SOME SOURCES FOR MONTE CARLO MODELING
T. ROWE PRICE (www.troweprice.com). T. Rowe Price Advisory Services was one of the first to use Monte Carlo modeling. It sees the accumulation and withdrawal phases as integrated parts of the advice process. It advertises itself as offering a top-performing and diverse group of mutual funds and providing individualized investment advice. The service is available to company retirement plans and to individuals who pay a fee ($250 as of this writing) for the initial analysis and annual updates. You do not need to have an investment with T. Rowe Price to use this service.
FIDELITY (www.fidelity.com). Fidelity offers a more all-encompassing financial service that may be attractive to baby boomers. The Fidelity Retirement Income Advantage program starts with Monte Carlo modeling and goes further, notes Savage, “providing the framework for planning, investing, withdrawing, and reassessing all your retirement assets, from Social Security and pension checks to IRA rollover assets and other savings, whether invested with Fidelity or elsewhere.”5
VANGUARD (www.vanguard.com). The Vanguard Group manages some of the largest funds, specializes in index funds, and has provided a type of Monte Carlo modeling to its clients for years. As of this writing, fees for its services range from free to $1,500, depending on the size of the account. The standard fee covers a one-time consultation with a certified financial planner, who is supposed to help you examine your choices and develop a plan, using both Vanquard and non-Vanguard investments. A complete and ongoing money-management service is also available, at a higher cost.
Professional Advice
Terry Savage points out that even with all these amazing tools and services available online for people who, like me, are challenged in technological and financial domains, there is nothing like a trusted, certified, experienced professional to help make sense of it all. To find such a person, Savage suggests going to the website for certified financial planners (CFP), www.cfp.net. There you will find a search engine that gives you a list of CFPs in your area and lets you check a planner’s credentials and find out if they have anything questionable in their history. Some CFPs charge an hourly fee for creating and updating a plan; plus, they receive commissions on products they sell, such as life insurance or mutual funds. Fee-only planners receive no commissions on sold products. Fee-only planners are credentialed through the National Association of Personal Financial Advisors (NAPFA). NAPFA members can be reached at www.napfa.org.
Never give any financial adviser the power to make independent decisions without your knowledge. If you don’t understand what is being offered, ask questions—and keep asking—until you do, and be sure you understand all the risks. You can check out any financial professional’s disciplinary history at www.FINRA.org, the website of the Financial Industry Regulatory Authority.
One last word of advice from Terry Savage: “If it sounds too good to be true, it usually is! There’s nothing wrong with keeping a significant portion of your money in what I call ‘chicken money’ investments, such as short-term, insured bank CDs or money market accounts. You won’t get rich with these low-yielding investments—but you won’t get poor either! They give you peace of mind so you can invest the balance of your money for growth and income.”
Long-Term Care
It may surprise you to learn that 80 percent of older people are fully independent. The 2005 National Health Interview Survey revealed that only 7 percent of people between the ages of seventy-five and eighty-four and only 25 percent of those over eighty-four depend on someone for their personal