Chicago, IL – Marty Phelan is an investment adviser representative and retirement planner. Phelan helps anyone approaching retirement to make the most out of their savings and investments, including pensions and Social Security payments, so that they can maximize the quality of life during retirement and how much they can leave behind to their families.
He spoke with Mark Imperial about the issues that Baby Boomers are facing as they plan for retirement, and how to make sure that they are on track.
“Getting to retirement is a challenge for many investors, but one of the most common roadblocks to getting there can be the undisclosed fees that may be charged by a non-fiduciary adviser. If an adviser is not a fiduciary, their business model and investments they recommend may include various fees that only serve as commissions or kick-backs to the adviser. These end up coming out of the investor’s pocket,” said Phelan.
“I consider that to be deceptive, as many investors are told only about the management fee charged by the adviser, and the rest are not readily and transparently disclosed. Over time, those fees can grow on a compounded basis and can eat away a huge portion of a nest-egg.”
Phelan continued, “I am a fiduciary, and I am required by law to put my clients’ best interests first. Other advisers can operate under a standard of “suitability,” which is a less-stringent standard than the fiduciary standard to which I’m held. I just think that’s how good business is done, by being honest & upfront with people.”
Phelan discussed how people can take greater control of their retirement plans, even while they are still working.
“Most people are unaware that they can rollover their existing 401(k) to an IRA, and not only keep their tax-deferred status, but gain access to potentially better investment options than their 401(k) provides,” explained Phelan.
He continues, “For example, they may be able to find investments with similar risk exposure and asset class, but with significantly lower fees that can eat-away at the balance. Most people will have to be 59 ½ years old to do this, but it’s sometimes possible for younger investors.”
Typically, Phelan’s clients are 50 or older. And while Phelan does not have a minimum requirement, he finds that most of his clients have at least $250,000 in assets to invest.
Phelan commented on a few of the mistakes that investors commonly make in managing their finances.
“I’ve seen people put more effort and research into buying a car, going on a trip, or putting together a grocery list than they do for their retirement plan. I think it’s dangerous to assume that your 401(k) or Social Security will be enough to make retirement enjoyable. It’s an uncomfortable conversation for anyone to have with themselves, but it’s certainly better to face that reality now rather than later.”
“I know that there are people out there who deep-down-inside are afraid that they can’t retire, that they haven’t saved enough,” Phelan says. “You might be very surprised at what we can do through simple steps to grow your savings and get you closer to the retirement you want.”
But timing is critical, Phelan warns. “The fees that most investors are paying are just brutal. Without addressing them, much of an investor’s money may fund their broker’s retirement instead of their own. I’ve seen clients have their fee-burden reduced by as much as 75% by making recommended changes.” Uncovering the fees and expenses in a client’s investment portfolio is a free service that Phelan provides for folks that meet with him.
Phelan also offers estate planning and insurance solutions, stating that they are often overlooked. “There are many ways that the taxman will rear his unfriendly head when planning for retirement, if one is not careful. Without proper planning, a huge portion of your retirement funds or legacy to family can be taxed away.”
Phelan cites the death of rock star Prince as a prime example. “When Prince died, he had no plan in place for his estate, and because of this the government is expected to take about $300-million in taxes. Much of that tax burden could have been reduced or eliminated with proper estate planning and life insurance.”
High estate & death taxes are an even bigger burden, however, for the average American family, Phelan says, “If the government takes half of $600-million, and your family gets $300-million, they’ll be OK. But if your estate is smaller, every dollar counts more and more – for you and your family.”
Taxes aren’t a challenge that only apply to one’s family upon death, they can be a huge problem when entering retirement, according to Phelan.
“When investing in an IRA or 401(k), you’re deferring your taxes – but the tax will be paid. The idea is that you’ll be in a lower-tax-bracket upon retirement, but that’s not guaranteed. Many investors find out that their tax bracket hasn’t changed when they enter retirement due to income payments from required minimum distributions (RMD’s), Social Security, pensions, etc. That is a harsh realization for the new retiree, but it doesn’t have to be that way.”
Phelan practices a holistic approach to financial planning, looking at a client’s entire financial situation before making any recommendations. “Each of these areas of a financial plan affects the others, so without a comprehensive plan that addresses all of them an investor may be facing risk that is entirely avoidable.”
When it comes to planning, Phelan is unique in that he does not charge a planning fee. “I don’t see that charging a fee is the best way to help people who are looking to get ahead. Some advisers charge as much as $2,000, and then don’t help clients actually take action – and nothing changes for the investor except now they are $2,000 poorer.”
Phelan says that plans should evolve as the investor gets closer to retirement, as well. “Sometimes I’ve found that a client may also have less-than-ideal asset allocations in their retirement portfolio – usually on the side of too-much-risk/not-enough-safety. Given the interest rates today, it makes sense that bonds are not exciting to most people.”
“But there are other safe-money alternatives that many are unaware of that can provide both growth and real security against a market crash,” Phelan says.
Ultimately, what drives Phelan and his business is the ability to help people improve their quality of life through their finances. “I firmly believe that the lack of financial security is the lead reason for much of people’s unhappiness these days. It can put an incredible amount of stress on individuals, but especially on families. If I can help someone do better in the area of finance, I know that will have a positive impact on the rest of their life.”
At the end of the interview, Phelan offered listeners a complimentary investment analysis.
“If someone isn’t absolutely certain what they’re paying in fees to their adviser, I can have my analyst create a report for them that uncovers all of fees and expenses, like expense loads and 12(b)-1 fees. It’s really easy on your end – just show me your investment statements. Most people are shocked to see what they’re actually paying. And those fees, again, grow significantly over time – so it’s incredibly valuable get a handle on those fees as soon as possible for any investor.”
Phelan also offers Social Security timing reports, pension election strategy planning, and more.
“Because of my licensing and status as a fiduciary, I can offer multiple products and strategies, but I will always explain to each client the pros and cons of each option, with complete transparency of fees or conflicts-of-interest, so they can make fully-informed decisions. That’s why working with a fiduciary is so critical,” he said.
To reach Marty Phelan for a complimentary investment analysis, his contact information can be found at: www.PhelanFinancialSolutions.com.