Are there any rich people here?

I'm not rich so I don't count.
But I would tell you to sell one of your Ferraris and take the proceeds and put the
max amount allowed into a ROTH IRA and pick a mutual fund that tracks the S&P 500,
and put the rest into a 'traditional' IRA that also tracks the S&P 500.
Be sure to look for one that has a low expense ratio, nothing crazy like 2.0%.

You also said house(s) - more than one? Unless they are giving you good rental income
and don't cost a fortune in upkeep, I'd sell one and invest that, too, or are they appreciating
in value like crazy - are the proceeds from selling a house your actual retirement?
Capital gains taxes may come into play no matter what you do, will those taxes be
higher in 10-15 years than they are today? Maybe

This is exactly how Warren Buffett would tell you to invest - research what he says about this very subject, it's true.

You need to consult your tax man for the max amounts allowed for each.

 

Talk to @JSinNOLA.

All the best,
Andrew.

 

If you are or can be considered self employed with 1099 income you can do a defined benefit plan to catch up and put away like $250k/ yr. And defer taxes until your RMDs kick in. Get together with your accountant who will know some financial planers and the team can form a plan.

 

Too bad the IRS did away with Income Averaging years ago. That would have been a useful cash flow tool for you given your large income swings.

 

I have five kids who love me - 2 of my own, and 3 steps - all living wonderful and happy lives.

I have three absolutely beautiful granddaughters - two of them are twins (Natalie and Nora, 1.5 years) and from another daughter, Neah, 5 months.

I have a wife of 20+ years who loves me very much, I own my house and my cars, I am retired, and to me? I have more than the richest man in the world.

That's my advice

edi

 

I am also in a hire/fire segment (Oil and Gas Engineer). You can't go wrong with low fee index funds, like those that mimic the S&P 500 or the DJIA.....or index funds in segments you like (there are a bunch of those). You won't get filthy rich, but they are relatively safe (probably 7-9% a year on average).

I'm with others that if your extra houses aren't able to return 10%, sell them.....and if the Ferraris aren't blue chip collectibles, sell one of them too. You are WAY behind most of us in terms of retirement resources it seems.

 

How many of your houses are paid off? You said houses

 

FBB for the win - a defined benefit plan is awesome for socking away a tidy sum every year before taxes…

Kevin

 

You have a better foundation than most with two paid off houses, two paid off Ferraris, and no debt. Worst case scenario, you'd survive on SS if you sold the extra house and two cars and had that cash buffer in the bank. If you want to not hate your life the next 10 years, bc you decide to grind a j-o-b with a high 401k match, or become a landlord, or put everything into the stock market that may tank anyway - why not keep doing what you're doing and just start accumulating bitcoin? Companies and countries are gobbling it up and it keeps marching higher, not to mention the etfs. If you can stomach the up and down cycles in your daily career, why not maintain your foundation and add something with a higher risk/reward for the chance to maybe live in comfort.

My parents 'did everything right' and had their 401k wiped out twice. My in-laws have a pension and 401k, but still have to work in their mid 70s. One of my closest friends spent the last 15 years (25-40) maxing out his 401k and wishes he hadn't bc he could've done better with more money to invest on his own. Healthcare industry is designed to steal all your money before you die anyway. So in a way, not guts no glory on this thing at this point.

 

You should just get a professional to handle this.

 

How did this happen? I have had a 401k since the early 90s and have had good sized hits (25% or slightly more) 3 times I believe, but the market came roaring back each time.

 

When the company went public, they converted existing 401ks into a new plan that was weighted pretty heavily with their own stock. I think he was there for like 20 years at that point. I'm not sure if there was even a choice, but the stock did really well the first year or two, but then it came out the execs were hiding falling sales. I think the stock itself lost between 80-95%+ depending on the issue dates. But he didn't just lose the nut from those first few years, it included the money converted into the plan. So basically, it doubled under false information then reversed and slid until it was about 15% of the original converted value - and that was before the gfc crash.

There was a settlement but it was a joke and the leftovers were moved into a regular plan. A few years later with some recovery, the gfc hit, and it lost a ton of its value again and they had to tap into it to save their house. Granted, they had a hand in the second round, but it was a better option vs losing the house, and trying to sell would've created more problems. If the principle wasn't so devastated in the first place, it would've just been a blip but bc it was such a small number, they chose not to restore it.

I don't dig too much deeper than the highlights, but the beats they've shared align with what I could find in the news. I still recognize that a 401k is a solid route for most people and has done well for many who stick it out. It's just hard to trust conventional wisdom these days when the goalposts move so much. I look to max mine out most years, but tbh, just like social security, I don't trust it to be there when I'm 65.

 

Sorry to hear, very similar to fellow co-workers who lost everything with Enron.

A diversified 401k account is a good retirement vehicle. Never just go with your employer's stock.

One thing I have learned over the past 2-3 years however (from watching Troy's Oak Harvest videos) is that having a retirement account 100% comprised of pre-tax investments is that it is sometimes not the best tax situation. So we have started to accumulate cash to balance the pre-tax investments out to keep us in lower tax brackets.

I never trusted SS either, but decades later I'm getting closer to finally start seeing some of the money I gave them.

 

The big secret to managing finances is that most people, including your "rich" buddies, have no idea how. There's no big secret... they just don't know... either because they are so rich that others manage their money for them (doesn't always end well) or they are showoffs rather than being truly wealthy. The other big secret to finances is that, to not screw it up, you have to have a lot of money.

Please read this sentence carefully: The definition of being "rich", in my book, is that you have to have enough liquidity (not net worth) that you can invest in treasuries (risk-free asset), live comfortably in the style you want off the annual returns of that, and never eat into your principal. That's real wealth. It's you enjoying life and not having to worry about money all the time.

Now, Shaq's definition of living comfortably is totally different from mine, and we are totally different from a retiree in a trailer home park living off a railroad pension in Erie, PA. Shaq and I have to manage our expectations, which means we have to be reasonable. Shaq can't buy Twitter and I can't buy Donald Trump's airplane from him, even though business class now sucks in my opinion.

For the average person who has a taste for nice things but is not off the rails with airplanes, boats, fancy cars and the like, that means about $5-10 million or more, at the very minimum. Unfortunately, it seems you are not where you need to be. But you can catch up. For you, if it can't earn money, get rid of it. Now. Sell the houses except the one you live in. Now. They've likely appreciated about as much as they are going to. Definitely ditch the Ferraris. They are just cars and toys, they cost way more to maintain than they should, and the likelihood is they won't appreciate meaningfully unless it's a 288 GTO and even then, you should not be taking that kind of speculative risk. Same with any other toys you may have e.g. boats, etc. The only person who cares that you drive Ferraris is probably you. Sorry to break that to you but it's true.

Now that you have converted the net worth boat anchors into cash, we can discuss investing. I am an investment banker (retired since 53 - your age). My first boss out of college was Michael Milken and we still chat from time to time. I am an expert in analyzing companies and figuring out what their real cash flows and IRR are. Not what's in the financials or in management guidance, but the real numbers. My first investment advice to anyone who will listen is: NEVER invest directly in stocks. Because you can have all the expertise in the world and still not have the information you need, nor do you have the resources or time to research the type of diversified portfolio you need to have to not get destroyed at some point. At your age, you cannot afford mistakes because there is no time to recover from them. Unfortunately, there is nothing safe in equities today as the market is manipulated by powerful forces that most of us do not understand. Fundamentals investing has become as risky as technical investing.

So be conservative. Shoot for 5-6% rate of return. That puts you in the range of reasonably safe A-rated annuities, highly diversified corporate bond funds with a coupon element, modest growth strategy mutual funds and the like (low-load/expense index funds), or vehicles that invest in a diversified portfolio of dividend stocks. HY bonds, "growth stocks" "energy stocks, tech stocks and the like, are not for you.

You do not need an "investment professional" and you should never "ask your broker" for advice. That last one really kills me... it's like asking your car salesman how much he thinks you should pay. Put your money in a self-directed investment account at your bank, and use your common sense.

Hope this helps, and good luck.

 

You almost had me until recommending that a person with zero investment experience and self-described as awful with finances go with a fully self-directed investment account (plus annuities) knowing just how susceptible a person of that profile may be to making emotional decisions given how big the stakes are at this point.

You really sure about the odds of that working out well?


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That said, I’ll certainly concede that I’m not sure the original poster would be able to even enlist competent outside help without paying a very significant premium given that there are no assets under advisement of the size it would take to get quality advice. And that’s because like you, I think 90%++ of “advisors” aren’t worth a lick of anything and are mostly bottom feeders without the requisite experience, education, intellect, and emotional control to be even good for themselves let alone others.

Unfortunate, but true.

 

Quite sure, yes. Because he is not actually fully self-directed, in the same way some dude with a schwab account, is. The bank's investment affiliate still has a financial advisor who can propose the investments that might match the customer's objectives. So as long as our OP follows the rules... nothing aggressive... target returns in the 5% range, net of fees, he will be fine. Annuities get a bad rap, but as long as they are not the type which cap and regulate your payout, or are in fact a version of whole life policies, they can be a decent way to invest with far better returns than CDs or treasuries in times of stabilized interest rates. Just as an example, you can currently get a Mass Mutual, Ascend, or Athene product that returns 5.05% after fees and charges for 5 years and allows up to 10% to be withdrawn per year without penalty. That's not a bad deal, especially if the investor is poorly disciplined.

But you are right to comment on this, because it is true that even the Bank FA will have incentives driven by compensation. It is virtually guaranteed that he/she will recommend a CD right off the bat, which is typically a crappy deal.

I still say that is better than a full-on directed account, in which he will be charged 1.5% per year on AUM regardless of how they perform. That too is a crappy deal. Even the private FAs just wind up with a poorly diversified clone of an indexed fund. At that point, you are better off just buying a no-load ETF...

I agree that it's 11pm and pickins in the fridge are slim, but you have to start somewhere.

 

that’s too bad your profession is so bad. I would need the “ requisite experience, education, intellect, and emotional control” to ferret out that less the 10%’er “worth a lick.” But if I had all those things I would just manage my own assets…humm…..

 

I don’t believe that. They do know. They just keep doing what they always have done. I think retirement is a concept of working class people. I don’t say that in a demeaning way. Retirement is living within means of finite savings like the t bill thing generated primarily from a single income source. Even living off an investing portfolio is finite. I don’t know what “rich” is but they don’t really retire. They shift income streams. I know richer people have assets and multiple income streams and continue to grow them into death. Real wealth is generational, passed on and continues to grow. There is saving for retirement. Then there is investing for retirement. Then there is growing income streams.

 

I have yet to find anyone willing to do this but how about a second job.

I had 2 for 42 years. Those 2 jobs afforded me everything I wanted including retirement.

 

It simply is what it is.

Should not come as a surprise that there are far too many folks on their fifth sales job and very few with strong technical backgrounds and a lifelong passion for markets.

You should have seen some of the ones I’ve encountered…

 

I know there’s at least one poor person here.

 

Hold my beer if you really want to see poor

 

I'm so poor, I can't pay attention!