I know what you’re thinking: Stephanie is wasting her money! Doesn’t she know you just put everything in low cost index funds and call it a day?
Well, here’s what I’m doing, and why.
Remember years ago when I tried out Financial Engines? I was given a free trial to have someone manage my 401k for 3 months. It was beneficial for getting some of my portfolio re-balanced, but it wasn’t quite enough to make sure I had everything in order.
So, now, we’ve signed up with Financial Engines again (FYI, this isn’t a sponsored post, just sharing what we did). Luckily, my employer still has a deal with them, so managing the 401k portion of our portfolios will be cheaper (only a fraction of a percent for managing this part of our money). They are also managing our IRAs for a higher fee.
Why did we do this? Honestly it’s because we were stuck in “analysis paralysis”, unsure if we should have everything in one index fund or many, how to balance between lower and higher risk options, and just needed to make a move. We had too much money sitting in the “cash” part of our accounts that we never invested, and we knew if we didn’t pay someone to take care of it for us, our accounts would continue to sit stagnant and poorly invested.
We discussed our risk threshold and retirement goals and they selected the funds that matched our needs. I confirmed with them that they’d be doing mostly low cost index funds and ETFs, and that they were a fiduciary (working in our best financial interests). They were!
Our intention (and we should make sure we set a calendar reminder for this) is to cancel the service after 6 months. This was basically our way of jumpstarting our retirement accounts and getting things in order. We don’t plan on staying with this service long term, as the fees definitely would add up over the long run.
Yes, it will cost us a little money for these 6 months, but compared to how much gains we could potentially lose out on having our accounts sitting mostly in money markets and a few target date funds (that were a little bit more expensive than standard index funds), I think (and hope) we’ll come out ahead. I liken this decision to signing up for a personal trainer: you might hope to get in shape, and you have a basic idea of what you need to do, but you need that extra push and guidance to get you going in the right direction and kick you into gear!
Have you ever paid someone to manage your finances? Was it worth it?