I spent yesterday – Memorial Day – getting ready for an upcoming meeting with our Financial Advisor. We’re sitting down Friday for the first time in more than a year. We usually meet and do a ‘check up’ one time a year, but last year we skipped it due to the CV19 pandemic.
Before our annual meeting, I give him a summary document of all of our current assets and investments. He needs to know how much $ there is and how it is invested – down to the specific funds it is in. It takes about 90 minutes for me to pull together.
From that, he assesses everything based on what is and what might be. His firm has a proprietary Monte Carlo model that includes their research on where the markets are heading (not just historical information) and offers specific recommendations on how to best invest going forward.
I try to provide a few questions for him to be prepared to answer in advance, but this year’s are pretty straightforward …
⁃ What much might we spend annually going forward?
⁃ How much cash cushion should we be maintaining?
⁃ How does your firm feel the markets are valued today?
⁃ How might we rebalance our overall portfolio?
⁃ Opportunity for 0% capital gains in low-income 2021?
We’ve been spending roughly equal to our original FIRE budget over the last 5 years, but our investments have been performing well. I’m guessing we could increase our spending about 20-30% while maintaining a 90% confidence interval in the Monte Carlo analysis, which would be nice to know. Since we’ve been talking about a Florida place, we need to know how far ahead we are.
We try to maintain a 2-3 year spending cash cushion, but stretched it out in 2020 before the election. I’m concerned about the stock market’s valuation, so we’re sitting on more cash than usual right now. I’d like to hear how his firm’s expert economists feel how the market is right now with all of their sophisticated thinking.
I’m not sure I could easily tell you how much $ we have in stocks, bonds, and fixed notes right now or if it’s appropriate for our age and risk tolerance. The stock market has been red hot and I’m guessing we might be a bit more tipped to risk than we should be. Our mix of stocks & bonds also needs to be assessed against the potential for greater inflation. I tend to guy broad index funds, but maybe we should seek more exposure to sectors that might weather inflation better?
Lastly, we are between very high income years of working / selling stock options and future years of pensions, social security, and taxable investment sales. While our income is low, our accountant has pointed out a big opportunity to realize some capital gains, when we can pay just 0% or 10%, rather than higher rates in the future. I want to get our Financial Advisor’s take on that plan before we get much further into 2021.
Overall, I’m looking forward to the meeting. Our portfolio did especially well last year with our St. Patrick’s Day ‘Lucky Inflection Point’ and I think we can enhance our FIRE lifestyle with a Florida place and some other niceties. It’s nice to have an objective party assessing our investment and spending goals to make sure we aren’t getting ahead of ourselves.
Do you utilize a financial advisor and how often do you have them conduct a full assessment?
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