Everybody’s situation is a bit different. It is very easy to say don’t get a Financial Advisor charging 1% because that is about a quarter of the return. That glib advice does not work so well for people who do not have children or younger siblings who can manage things. My wife and I have no children. We live in a retirement community where everybody is a senior - the neighbor we trust is just as likely to die next week as I am. History says few people are able to handle things like grocery shopping, bill paying and medical decisions in the last couple of years if they die from congestive heart failure - about a quarter of deaths.
After interviewing 5 different advisor options (including 3 different brokerage firms via “Zoom” meetings) we signed on the dotted line January 27th.
I think you are wise to address your risk tolerance with Ms Alpha. Maybe you have to assume risk - there are two kinds - market risk (which I sense it Ms Alpha’s concern) and inflation risk (which may or may not be real).
Here is one way to view those risks.
First Step - how long do you want to plan for. Myself - we are in better health and physical condition compared to other people our age. We also had parents who lived beyond average life spans. Just by reaching age 65, a person’s expected life span is significantly above the average – you are not one of those people who died at age 50 or 60 or 64! Go to here: https://www.ssa.gov/oact/STATS/table4c6.html
As an example - assume your are female age 64. In the table you can see your life expectancy is 21.51 years. That means if you get a 1000 age 64 females in the Social Security system in 21.5 year 500 we will still be alive. No 64 year old wants to spend their last dollar in 21.5 years because at age 85 the average female life expectancy is 7.05 years. (Facing 7 years with no money is not a good plan.) So the prediction is 28 years ahead (21 + 7) 25% of the current 64 year old females will still be alive.
Personally I run this until there is less than 10% chance of being alive. The string goes 50%, 25%, 12.5% and 6.25%
Second Step - while nobody wants to waste money, there is a big difference between not having money to live comfortably and just not have as much as we could have had if we had done something different.
Continuing for the now 64 year old female we have 21 years + 7 years + 4 years – that is age 96 – 32 years in the future.
In the zero risk, zero return plan if you have $1,000,000 you can spend $31,250 of the pot each year. Now if we assume inflation is 2% a year for the last two years of this evaluation the $31,250 will have purchasing power reduced by 54.5% – so in terms of meat, potatoes and auto repair you will have the equivalent of $17,046. If you have many millions the loss of purchasing power is probably won’t matter. But if you really need to spend the $31,250 to be comfortable at the start of retirement life will not be very comfortable 25 or 30 in the future.
The market risk is real. But only look at the pile of money twice a year and stick to the plan even if you don’t want to. There is huge amount of evidence that says – if you use the 4% plan you will not run out of money for at least 30 years and might even have a very large pile of money 25 years out.
The 4% plan is roughly 60% in the S&P and 40% in an all bond index. Start in year #1 by taking 4% out i.e. $40,000 from the $1,000,000 and increase the withdraw each year by the amount of inflation - i.e. the same percentage your social security payments increase. (Note: the actual inflation for seniors is higher than the average - we spend more on things like medical where costs increase faster. We will spend less on cars and technology were prices do not increase as fast.)
You and Ms Alpha may not agree, but this kind of examination will make it easier to look at data and not fear of this risk vs that risk.
If your pot of money is in an IRA, the Required Minimum Distributions don’t exactly follow the 4% plan, but you will never run out of money because RMD tables never say take all the money out this year.