Lessons Learned: Investing in Retirement, Am I on the Right Track?

This post is from my other half, Greg. He’s very much into investments and financial goals, which are weaknesses of mine.

I’m not getting any younger.
I have hairs popping up in places I don’t want to find them and to add insult to injury they’re gray. Music that sounds cool and modern to me is being played on classic rock stations, and I can walk down main street of my home town and point to a building and tell you every business that occupied it since 1978.

These sorts of revelations get my mind churning once again over my retirement, my daughter’s future, and my net worth in general.  This is not the first time I tried to master my financial destiny, mind you, but this time I really want to get it right.

Some years back I decided to let my ex-wife’s younger brother’s ex-girlfriend’s new boyfriend, a fellow who would pass out drunk on my sofa a few nights a year, manage my finances.  Now before you say I am insane he did grow up, graduate college and get a job as certified financial planner at Ameriprise.  Not too shabby, right?  Wrong.  Let’s just say some class A mutual funds and a universal life plan has derailed my retirement planning, and as we jump back to the present I am wiser yet significantly poorer.

I can’t mess around anymore.  It’s time to get this whole retirement stuff locked down.  I took action. I canceled my universal life plan and took the huge hit in penalties, and am in the process of moving all my remaining funds out of Ameriprise and into an account at Vanguard.  I’m very lucky that I’m able to do an ‘in-kind transfer’.  This means I do not have to sell my investments at Ameriprise and buy new investments at Vanguard. Instead, the investments are moved as-is and continue their lifespan at Vanguard.  This is important because selling them right now would mean a rather large hit.  I would much rather hold them and hope they recover.

Vanguard appears to be a better place for me.  Ameriprise assigned me to a new financial advisor after my first one quit, and he was kind enough to only charge me $600.00 instead of his normal $750.00 a year fee.  This fee was basically to twice a year print me up a whole bunch of fancy charts and documents in a lovely binder that showed what I already knew all too well.   I am not on track to retire.  The last page of binder was filled with a vast array of suggestions to get me back on track, but the obvious tip was missing: Stop paying this guy $600.00 a year to invest you in funds that carry tremendous fees, under perform, and chain me to a financial organization, Ameriprise, which also goes out of its way to rob me blind in other miscellaneous account fees.
The best example was my last investment when I was persuaded to put $1,000 into a roth IRA.  A small amount, I know, but I need some tax free investments and it was that or waste it elsewhere.  My adviser showed me a mutual fund and assured me the fees were low and I knew to make sure it was not a class A fund like the last time where 5.5% is taken right off the top.  It all looked good until a year later I was admiring my 6% gain only to realize there was a $40.00 a year custodial fee on the account.  $40.00 is 4% of $1,000.00.  My celebration over the 6% gain lead to utter disgust.

Vanguard has much lower fees associated to their funds and if you have more than $50K worth of investments or you sign up for e-statements they waive their account fees.  They also have advisers available that are not commissioned based and their services are far less expensive than Ameriprise.  This is even more so when you have 50K + in your account.
All of this makes me think maybe I am finally on the right track and it spurred me to dig deeper into the world of investing.

I re-discovered Sharebuilder recently.  I used to use them back in the late 90’s to buy stocks with very cheap brokerage fees.  I was happy to see they were still alive and well.  It seems ING Direct bought them.   Sharebuilder allows you to buy stocks for only a $4.00 brokerage fee.  The catch is you don’t make the purchase in real time.  Instead, you set up an order with Sharebuilder and specify what Tuesday of the month you want that order to be made.  For example, buy $1,000 of IBM on the second Tuesday in May.  Sharebuilder will then make that order for you at whatever price IBM is at that time.  This is clearly not a good way for a day trader to operate, or anyone who wants to buy in or sell out at specific triggers.
It works for me though, and I opened two accounts.  One is just for my play money where I can buy a couple shares of whatever strikes my fancy at random times throughout the year.  The other is for a portion my daughter’s college fund (the aggressive portion).  I have this account set up to automatically buy certain stocks/ETFs on the last Tuesday of the month.  If all goes well, this bit of forethought will prevent me from having to sell a kidney in 15 years to pay for her education.

I tend to think I am on the right track now. I love how Vanguard has super low fees and their advisors don’t work on commission.  I am also very happy with the way Sharebuilder allows people looking to make smaller investments able to do so.  With only a $4.00 brokerage fee you can make investments in the $400 – $500 range and not have to pay more than 1% of the total investment to get into the action.  Not to mention it always makes me smile when I watch my 3 year old running around bumping into walls with a blanket over her head, knowing that she owns shares of Google.

So what do you guys think?  Are you going to retire before your break a hip?  Do you think it is wise to pay for your kid’s college and, if so, how are you going about getting it done.  Please share!