“The thing that makes me hesitant about having my money professionally managed is the 1% annual fee, which seems pretty high.” (Photo subject is a model.) – Getty Images/iStockphoto
I am 66 years old and have been retired for a year and a half. My retirement savings are still primarily in a 401(k) account at my previous employer and a small amount in an IRA account at Vanguard. I know I need financial advice, but I’m not sure whether I should seek one-off guidance and self-manage my retirement fund, or pay an ongoing management fee to an adviser.
My hesitation about having my money professionally managed is the 1% annual fee, which seems quite high – especially considering it likely won’t lead to higher returns and the fee will be charged regardless of whether the fund appreciates or depreciates. However, my biggest concern about having an advisor manage my money is the risk of fraud. I’ve read many stories about financial advisors stealing clients’ money and leaving them with nothing.
One financial fraud case in my area stood out to me. An accountant and financial advisor died suddenly and clients later discovered their money was missing. These clients swore they believed the consultant was a decent and honest man who lived a very simple life.
Litigation is ongoing, but the money remains unaccounted for. I realize that this type of fraud probably wouldn’t be an issue if I chose a company like Vanguard or Fidelity, but I don’t think I would want a mutual fund company managing my money. How can you prevent this type of financial fraud when working with money managers?
I’m also a member of a credit union that provides free financial advice. I was told that the consultant’s salary is paid by the credit union. Is this true? I doubt there are other costs involved. What are your thoughts on having your retirement funds administered by a credit union?
In addition to investment management, I also need financial advice related to tax planning as I have enough invested that this becomes a significant issue. Most of my retirement savings were pre-tax, and by the time I realized what a big mistake it was, it was too late. I need guidance on strategies to minimize taxes and IRMAA fees, and whether a Roth conversion would make sense for me.
If I pursue a Roth conversion, I will need to pay the taxes out of my retirement funds. Does a Roth conversion still make sense if you have to use pre-tax retirement funds to pay your tax liability?
Try to avoid fraud
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Big red flag: The advisor promises you a guaranteed return on your investment. – MarketWatch Illustration
Making decisions out of fear is generally not a good idea, especially when it comes to your finances. So don’t feel like you need to avoid financial advice entirely because you’re worried that accountants and/or financial advisors will steal your money, but you also shouldn’t feel obligated to hand over control of your hard-earned retirement funds to a third party.
There is a way to manage your capital and withdrawals without handing over the keys to the kingdom. You can do this through a third-party escrow agency such as Fidelity, Morgan Stanley MS, or Charles Schwab, as recommended by you. (To be clear, these are examples, not recommendations.) A 1% fee is usually standard, but it’s negotiable, and you can avoid it entirely by paying a flat fee or an hourly rate.
There are other warning signs that can help you avoid bad behavior. A red flag is when an advisor promises a guaranteed return on your investment. Stephen Romney Swensen, who died in 2022, may or may not be the case you are referring to. After his death, the U.S. Securities and Exchange Commission filed a lawsuit against his estate, accusing him of misappropriating client funds.
The SEC said Svensson promised investors that they would earn at least a 5% annual return on investments he selected. While this may be consistent with average global market returns after inflation, a guaranteed return suggests something is not right. The SEC said Swenson allegedly misappropriated investor funds and made Ponzi-style payments to other investors to support his lifestyle. It comes to terms with his legacy.
Other simple ways to prevent fraud: Make sure your assets are held by a custodian (a separate financial institution that holds your money and investments and keeps records of them); do not grant withdrawal rights to your chosen advisor, and read everything they give you and sign carefully; receive your investment statements directly; have your accounts reviewed by a CPA every year to make sure everything is in order.
Some credit unions (and banks) do provide financial advice to customers. They are paid by the employer, so technically this is not free advice, and you should be careful that they do not sell you unnecessary insurance and/or annuities. If you seek an independent adviser, remember that not all money managers are fiduciaries and are required under the Investment Advisers Act of 1940 to act in the best interests of their clients.
Many fee-based fiduciary advisors who follow fiduciary standards operate as a registered investment adviser (RIA) or investment adviser representative (IAR). Therefore, they are primarily regulated by the Securities and Exchange Commission if they are part of a larger company, and by state securities regulators if they are part of a smaller company.
If you were born in 1959, your required minimum distributions (RMDs) begin at age 73 (age 75 if you were born in 1960 or later). The IRS calculates RMD by taking your tax-deferred retirement account balance at the end of the previous year and dividing that amount by a number based on your life expectancy. At age 73, your RMD is calculated using a life expectancy factor of 26.5, which means you must withdraw approximately 3.77% of your account balance.
Depending on the amount of your retirement savings, you may need to pay substantial income taxes on your RMDs if you invest millions of dollars. Your options include performing a Roth IRA conversion and making qualified charitable distributions (QCDs) while strategically managing your withdrawals with the guidance of an accountant who specializes in RMDs.
Something to consider: With a QCD, people age 70.5 or older can send up to about $108,000 (in 2025) directly from an IRA to charity, and the money counts toward their RMD. QCD limits are subject to annual inflation adjustments. In theory, this could help lower your taxes and health insurance costs. However, QCDs do not apply to 401(k)s or 457(b)s, so you may want to consider rolling those accounts into an IRA.
As you said, a Roth conversion is another option. Even if you pay taxes using retirement funds, a Roth conversion can still be worth it. This makes sense if you expect your tax rate to be higher in the future, although paying taxes with non-retirement cash is often the best strategy for obvious reasons. Sometimes this is unavoidable due to economic conditions.
You need to pay close attention to your marginal tax brackets. If you exceed that threshold, the IRMAA (Income-Related Monthly Adjustment Amount) cliff can indeed cause your Medicare Part B and Part D premiums to suddenly rise significantly and trigger a 3.8% net investment income tax. There is no penalty for withdrawing funds after age 59½ to pay the conversion tax; however, one of your biggest concerns is the loss of future tax-free growth.
The basic idea is to pay tax when you’re in a lower tax bracket. Income tax is levied progressively, with rates ranging from 0% to 37%. The blend of these brackets is your effective tax rate. As your taxable income increases, the tax rate increases on each portion, for example, the first $11,925 after deductions is taxed at 10%, the next portion up to $48,475 is taxed at 12%, and so on.
My colleague Beth Pinsker has written extensively about Roth conversions. “Tax laws are not the only consideration,” she wrote recently. “Market conditions matter because rising markets are less conducive to conversions than falling markets because you convert fewer shares. Your personal financial situation is also important, such as your available cash to pay taxes on distributions.”
“Your age is also important relative to when your income begins to assess monthly adjustment amounts that may be related to Medicare income (IRMAA, age 63) or when you must begin taking required minimum distributions (RMD, age 73),” she adds. “Those with higher itemized expenses in 2025 may have opportunities to take advantage of tax savings to fund larger Roth conversions.”
Schwab SCHW advises: “Roth IRA conversions can be particularly beneficial during your early years of retirement, when RMDs have not yet taken effect and you are most likely to be in a lower tax bracket compared to your working years. But if you are already collecting a pension, the converted funds may increase your taxable income.”
As for your original question, the idea is to have your advisor protect you from scams, not steal your money. But every industry has bad actors, and financial services is no exception. It’s also worth asking whether your prospective advisor will receive a commission based on the products they provide you, according to Cleveland law firm Taubman Law.
“Some financial advisors receive commissions when they influence clients to purchase investment products such as annuities and mutual funds,” the report said. “This is considered a conflict of interest and indicates that the financial advisor is not a fiduciary. In this case, the advisor may steer you toward purchasing products that are not suitable for your requirements, which could have a negative impact on your portfolio and long-term growth.”
If you feel pressured to sign, please do not do so. Enjoy your sweet time.
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