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How do you know your money is protected?

Old 10-05-2016, 08:04 PM
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Default How do you know your money is protected?

Please don't blast me for this being a stupid question......

I posted awhile back about being offered a buyout for my pension and it's a significant amount of money >$200K. I met with a financial guy and he recommended taking the money now and putting it into an IRA so that is what I'm going to do. We are looking @ Vanguard which I already have an account with and Edleman Financial that we met with a couple years ago. I am leaning more towards Edleman because I don't want to put all of my retirement in one company, my wife is the opposite and she wants to put it all with Vanguard.

My question is would you guys split the money between different companies? How do I know my money is protected no matter what company I put it with?
Old 10-05-2016, 08:25 PM
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Your money should be placed in your account at the brokerage company not in their general account. Any company not running a pyramid scheme does this.

I have not heard of the other company(regional?) but if some how you loose your money with Vanguard for any reason besides poor asset allocation performance, that 200k is the least of your worries.
Old 10-06-2016, 01:40 AM
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I would put it all with Vanguard. I like your wife's opinion.
Old 10-06-2016, 03:10 AM
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Protected from what?
Old 10-06-2016, 06:49 AM
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If the "financial guy" is the one managing your money and collecting fees,you need to get another opinion in addition to checking his track record.I'd let that cash sit in CD's before handing control over to some schmuck off the street.
Old 10-06-2016, 06:55 AM
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So if you're invested in mutual funds, do you mean protected from market downturn? If you mean what happens to your money if Vanguard goes out of business then there is no way to protect from that, and your money will still technically be in the underlying investments so access would be the issue. Banks are FDIC insured but investments are not. Look on the bottom of any document,form, brochure and it will say Not FDIC Insured, May Lose Money, No Guarantee. If you haven't seen that or your "Financial Guy" can't answer this question in a way that makes you confident, find someone else. This is money management 101 for an advisor.
Old 10-06-2016, 06:56 AM
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Originally Posted by Esuomm1 View Post
Protected from what?
Wondered the same thing. I'm assuming if its if Vanguard goes belly up instead of the market dumping.

From Vanguard:

Securities in your brokerage account are held in custody by Vanguard Brokerage Services, a division of Vanguard Marketing Corporation. Vanguard Marketing Corporation is a member of the Securities Investor Protection Corporation (SIPC), which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash). Explanatory brochure available upon request or at sipc.org External site.

To offer greater protection and security, Vanguard Marketing Corporation has secured additional coverage from certain insurers at Lloyd's of London and London Company Insurers for eligible customers with an aggregate limit of $250 million, incorporating a customer limit of $49.5 million for securities and $1.75 million for cash. Coverage provided by SIPC and certain Lloyd's of London and London Company Insurers does not protect against loss of market value of securities. The policy provided by certain Lloyd's of London and London Company Insurers is subject to its own terms and conditions.
Old 10-06-2016, 07:17 AM
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Protected from someone like Bernie basically. Not protected against market downturns.


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Old 10-06-2016, 07:18 AM
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Don't take the Lump Sum, take the pension, the vast, vast majority of pensions offer much higher rates than what you can get "On The Street". Every person that is retired should have a portion of their assets in safer investments such as bonds, you will not find a bond that is as safe as your pension that will pay you near what you will get in the pension. As long as your pension is below the PBGC amount take the payments and not the Lump sum.

If you are a highly experienced investor and you know that you will not need very much from your lump sum and you can invest your own funds then take the lump sum. The sequence of returns when retired is the single largest risk everyone faces if you need around 4% out of that account per year you could rip it apart in a down market and the only way you are going to beat the guaranteed rate is to invest in the market so this is a double edged sword.

In real life I have seen about 200 people take the LS out of that 200 thirty did not need very much in payments the other 170 did and 150 of the 170 blew themselves up. Don't talk to me about hypotheticals unless you know the facts, I've been at this game for 25 years, I know all the math and all the facts, taking a LS at the all time high after a 7 year bull run with negative interest rates is a high probability of a bad outcome. Also remember the adviser can't manage your pension they (Vanguard or Edelman) only make money if you cash out.

If you don't have the: Will, Skill or Time to invest your funds there is nothing wrong with having a professional help you. I would not worry about keeping my funds in Fidelity or Vanguard as they are not banks.
Old 10-06-2016, 07:26 AM
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It happens. I got screwed from First Jersey Securities back in the 80's. This outfit advertised on TV like non stop. Even advertised on Super Bowel Sunday. That is why it is good to diversify and when possible do your own investing. Oh on the a class action lawsuit, I received $50.
Old 10-06-2016, 07:34 AM
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If you have run the numbers and it makes financial sense to take the lump sum, I would definitely go with Vanguard. They have lots of different options (more than you need) and will cost you a lot less than Edelmen. Remember the commissions that you pay eat up your return.

Maybe Sprockets will chime in with some good advice. He's a wealth of information. If I were you I'd send him a PM.
Old 10-06-2016, 07:38 AM
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I too am a big fan of Vanguard. Especially their Index Funds. If taking the lump sum put it all in the bank or one of their money market accounts and then buy whatever fund(s) over at least a year to take advantage of dollar cost averaging.
Old 10-06-2016, 07:54 AM
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Originally Posted by RussH View Post
Protected from someone like Bernie basically. Not protected against market downturns.


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There are only 2 ways to protect your assets from "someone like Bernie"...the ballot box and revolution.
Old 10-06-2016, 07:55 AM
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Originally Posted by yarcraft91 View Post
There are only 2 ways to protect your assets from "someone like Bernie"...the ballot box and revolution.
I think he may have meant another Bernie
Old 10-06-2016, 07:55 AM
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Originally Posted by RussH View Post
Protected from someone like Bernie basically. Not protected against market downturns.


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http://www.sipc.org/for-investors/what-sipc-protects


SIPC protection is what you seek.
Old 10-06-2016, 07:59 AM
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Originally Posted by David B. View Post
I think he may have meant another Bernie
I have been exposed to too many political ads.
Old 10-06-2016, 08:07 AM
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the general advice my employer's counselors have advised over the years is to use at least one mutual fund. I use a domestic fund, an european fund and an asian fund. The last 2 have a mix of provens and likely new comers.

after 60-ish, when the market is up, put some into treasury funds for safety.

Nothing! Is a sure thing.
Old 10-06-2016, 08:12 AM
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Originally Posted by muskamoot View Post
If the "financial guy" is the one managing your money and collecting fees,you need to get another opinion in addition to checking his track record.I'd let that cash sit in CD's before handing control over to some schmuck off the street.

agree. are you surprised his recommendation is "give the money to me"
Old 10-06-2016, 09:53 AM
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To answer your question about being safe from Bernie... The reason people got taken by him and people like him is because Bernie acted as "custodian". His firm was responsible for the safe keeping of the money AND the reporting of account values. He was able to produce fake client account statements showing inflated values and returns while he was actually using the money for his own benefit. There was no independent verification.. a classic ponzi scheme.

If your advisor is using Vanguard then Vanguard (a reputable and insured company) is responsible for the safe keeping of your money. Further, they will send you account statement independent of your advisor which will allow you to confirm your account values. That way, whatever the advisor says about your account should match with the independent statements sent by your custodian. Typically you would grant the advisor limited power of attorney to make trades in your account and possibly distribute funds ... but only to you, not to any other 3rd parties. But even if he did, the statements from the custodian would give it away pretty quick.

Hope this helps. What you're describing is a pretty typical scenario and there is no safety to be gained from using multiple custodians.
Old 10-06-2016, 10:16 AM
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Originally Posted by RussH View Post
Protected from someone like Bernie basically. Not protected against market downturns.


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Yeah, bigger the shop, the less likely you'll run into a Bernie.

Any big name and some diversification within that big name will keep you away from Bernie.

Good luck

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