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FiLifers Resolve: Ron Lieber
Just over four months ago, I put together a personal-finance to-do list. It had about 30 items on it. I’ve gotten through six. Not bad for someone busy helping to build a new company and parenting a toddler simultaneously, but it’s not a performance I’m particularly proud of either.
In fact, some of the most important stuff remains undone. So I’m making a public declaration here that I’ll get these three things knocked off before my beloved Cubs play their home opener:
1) We still have no will. A bunch of you (including my childhood friend the trusts-and-estates lawyer) told me how foolish this is. You’re all absolutely right.
Our estate isn’t that complicated, and the Quicken will-writing software can at least get us started. In fact, this might be a good one to hand off to my wife the law-school dropout.
2) Switch to a financial planner who charges rock-bottom fees and lives and breathes index investing. Lots of people get the whole index-fund thing now. But many make you pay them 1% of your assets each year in order to work with them.
I don’t think we should be paying that much, given that we don’t need a lot of advice right now aside from asset-allocation guidance.
It’s the allocation, however, that has me a bit flummoxed. As things stand, we probably can’t afford to have another kid, send both kids to private school (if we want to, which we may not) and move up to a bigger place in our neighborhood. In fact, we may not even be able to do two of these things, depending on the combination and the circumstances.
Without knowing which of these things will give when, it’s pretty hard to create an investing strategy for the money that isn’t in our retirement and 529 accounts. So it would be helpful to have someone clever to bounce this all off of.
We’re thinking about using Rick Ferri at Portfolio Solutions. Anybody out there ever worked with him?
3) Disability insurance. After doing a bit more research and writing on the topic in preparation for the launch of FiLife, I now agree with the folks out there who insist that this is more important than life insurance (which we already have).
The question now is whether we have enough disability insurance through our respective employers. I know we’re pretty close, but we need to check the fine print of the policies.
If we manage to get all of this done, I just may reward myself with a plane ticket to Chicago for opening day.
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Ron, I have not worked with Rick, but I have read some of his threads at the often excellent Vanguard diehards investment forum. (see for example this recent thread on choosing ETFs vs mutual funds at http://www.diehards.org/forum/viewtopic.php?t=10522 ).
Have you considered using a fee-only rather than percentage-based planner? This would seem good fit for the “someone clever to bounce this off of” model. You are more than capable of implementing the investing mechanics yourself, so I’m not sure how you’d benefit by paying an ongoing percentage fee for your “assets under management” with a planner.
I have no idea how Rick charges…maybe you were thinking about something like this already.
Also, I absolutely agree with your thinking on the importance of disability insurance versus life insurance.
Thanks Dave, not surprising to see that Rick is a Boglehead but good to see him mixing it up in the public realm in any event.
As for the fees, we could look for a planner to pay on an hourly basis, but the number of hours it would take to find someone right and then pay them for their time wouldn’t be that much less than paying Rick (and having him execute the trades).
Part of what I’m paying for here is rigor and discipline — getting the stuff done on time, in time, no procrastination or forgetfulness or whatever. It’s starting to seem worth it to me, though maybe I handle the retirement/529 stuff on my own and leave the complicated stuff (taxable account) to a pro.
I have Rick’s book, if you’d like to take a peek.
FWIW that all makes sense to me Ron. We’ll have to have a discussion about various fee alternatives once the site goes live.
I would add one thing to the list Ron made over the summer- review each account and make sure that the beneficiary designation is up to date.
Many of your resolutions have made it on to my list- thanks for keeping me in line!
To help with the disability insurance goal, I wanted to share my experience.
I paid a fee-only insurance advisor to assess our current policies, and some alternative new policies. I was very happy that I did this since it gets fairly complicated, in particular in regards to whether the insurance covers you only if you can’t work in the same occupation you are currently working in (and sometimes this definition changes during your disability). (I paid something like $500 and was happy I did this. I used someone I found quoted by Jonathan Clement’s over at the WSJ. I would be happy to dig up the contact info if anyone is interested.)
In the end, the analysis led me to purchase a Guardian policy through this site: http://www.disabilityquotes.com/. They are very web-savvy (you can use chat/IM/email or the phone) which made it very easy to do. If I was doing it again, I might just have the people at this site analyze my current policies for me since they were very trustworthy and smart.
Ron, one other thing. I’m confused on why your asset allocation decision is so tough. I understand that you don’t know exactly how (house, education, living expenses) and when you will need different amounts of the money. But can’t you just pick one overall long-term asset allocation for all your assets, and then rebalance once a year to ensure that across all your assets you are line with this allocation? (The only tricky part I find is making sure that you then allocate the different asset classes to the types of accounts - taxable, roth, 529 - which are best for them.)
The only issue I see based on your note is if you are concerned that when you need some money (say for a downpayment to buy a bigger house or something), the asset classes in your taxable accounts will be at some low point and you won’t want to sell? Is this the issue or am I missing something on why you are concerned about the asset allocation on your taxable accounts?
I think you can handle that by selling them in your taxable account (say the tax efficient indexed equities you put there) and then buying them in your tax-deferred account (and selling the bonds you had put there). You might even have some good tax consequences if this happened. In effect, you would be net selling bonds so this approach let’s you both target a higher long-term return for all your assets, and be able to have short-term money available in bonds (or lower volatility classes).
The bottom line is that either I’m missing something which means I need to add this to my to do list for the year (since I use this approach of balancing across all my assets), or if I’m right then you can take this one off your list (and buy me or someone a hot dog at the cubs game with the savings from not needing a planner to figure out any complicated asset allocations questions)!
Hey, thanks so much for the comments Jeremy. You nailed it on the disability front — it’s the “own-occupation” clauses that can cause you trouble.
Great questions about the advice. Here’s the deal:
Retirement is 25-30 years from now. No real problems there.
We bust into the 529 (the first one at least — gulp) in 16 years. Again, no issues.
The taxable account is where it gets complicated. We might use all of the money tomorrow if the right home comes along. Then, it would be easy — we wouldn’t have anything left to manage (including much grocery money).
Or, we might have another kid, send both to private school and never be able to afford to move (or take a vacation) again as long as we live. Then, we’d be drawing down funds from the taxable account (and hopefully adding to them a bit) over 20 years or so, up until the point 15 years from now when two private school tuitions might well cost over $100,000 in after-tax income. Hooray!
Or we might chuck it all, sell our place, move to Northampton, buy a palace for cash, have a big pile of money leftover and freelance out our days, never touching the funds again. Then, 60 years from now, we’ll give it all away to good causes and our grandchildren.
Given that we don’t know what will happen (6 day time horizon? 60 years?), what’s the right allocation right now? Assume the most conservative stance? Or the most aggressive one? Or the least volatile one? Or what?
Even if I could (or was inclined to spend the time to, which I just can’t right now given the launch and whatnot) figure this out on my own, it’s worth it to pay someone to make me execute the strategy on time at the right time (or to just do it themselves for me). You can screw up mightily here in all sorts of ways by leaving yourself to your own devices, you know?
One more thing somebody told me once that’s stuck with me: 99% of us shouldn’t be running our own money because we can all improve our performance by at least 1% (which just so happens to be the cost of a lot of the good help out there).
I totally buy this. I could easily be doing 1% better, maybe 10% better. Couldn’t you?
Health-care proxies!!
If you die without a will, the great state of New York will probably dish out a solution that is like the solution you would want anyway — money to your wife and your kid.
But what if you’re in a coma? Would you want to be tube-fed to survive?
There is a fairly simple standard form that you can fill out that would express your wishes in each of a variety of situations — make it out when you make your will, and spare your survivors the agony of wondering what choices you’d want them to make.
Yup, it’s on the list Ali, thanks.
I’m hoping/assuming that Quicken will alert us to the option of doing this sort of thing. If not, we’ll make our own.
