Time Well Spent

 In Advisers, Agents, Asset Allocation, College Savings, Expectations, Fees, Financial Planning, Forecasts, Future, Goals, Happiness, Inspiration, Interviews, Investments, Motivation, Past, Personal Finance, Retirement, Roth IRA, Saving Money

This is a story from John Morrow of the Twin Cities.  John and his wife Megan recently assessed how they stand financially for their future and evaluated their investments as well.  They were uncertain about their fees and allocations and wanted to make sure they were doing the right thing.  Here is what John had to say:  

We have accumulated assets in a few different places and types of accounts, such as 401k’s, Roth IRA’s, traditional IRAs, and an on-line brokerage account.  We also had been receiving guidance from advisor(s) at banking locations in helping us determine where to invest and what type of things to invest in.  We don’t have debt other than our home.  Our net worth is healthy.  We think we might want to retire early, even though we are not sure exactly what that would mean – yet.  Our biggest goal would be to have financial flexibility in the future. 

We wanted to assess, in general, how we were doing for the future, how our overall investment mix looked, and try and simplify things as well.  Was it ok? How much risk did we have?  How much were our fees, etc…

Our retirement projection was great!  It showed that we were tracking very well for our future.  We still have to work for many years, but should have flexibility in the future.  We should be able to eliminate all of our debt and have enough in assets so that we can do some of the things that we want to do.

What we found is that we were paying a lot in investments fees in the products we were using.  In fact, in one of our larger accounts we had C shares (which are brokerage fees that are very costly over a long period of time).  As we discussed our options and learned more, we decided to try and transfer as much as we could to Vanguard. 

Our goal was not to reduce our investments in the stock market.  It turns out that we were ok with how our investments were allocated.  But we wanted to reduce our fees.   Vanguard’s cost structure and focus on index investing seems to make the most sense.   We are not financial gurus, but we now better understand index investments and how they compare to more actively managed investments in performance and cost. 

Our costs were reduced by about $7,000 a year on an investment of $400,000 after we transferred to Vanguard.  That works out to be 1.6% each year.  This is a lot of money.  And it would have been even more over time as our investments grow.  We are very happy to be keeping this money for ourselves and our Family.  As you can see, the savings on our investments over our lifetime will add up to hundreds of thousands of dollars.

In addition, we had a child after completing the analysis!   We started contributing $250 month to a college savings plan for him through Vanguard and have increased our term insurances since we now have a dependent.

Thanks for sharing, John – and congratulations on your baby!  A great example of how investing a little time can save a lot of money.  How do you stand for retirement? Do you know your investment fees and how much you could save?  Do you have a similar story (or do you need to create one)?

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