Sunday, January 21, 2024



How the fuck can anyone be  broke on over half a mill a  year ........i mean  what the fuck are they spending their loot/cash/dosh/green/dollars/folding stuff/pesos on ......i bet you it is  the  fucking wife  ....she is   driving a  benzo better  be  on half a  mill many kids  have they ....that is  a lot of  dosh to be  broke on ....i have no sympathy ......that is  totally fucking stupid as  fuck can he be  so smart  and   so  broke  as  fuck .......

Feeling broke on a $665K salary: This surgeon and his wife didn't realize their financial adviser may have been charging a high fee until Ramit Sethi set things straight

Jeff, 50, is a specialized surgeon. His wife Susan, 48, is a stay-at-home mom. Even though Jeff earns an enviable $665,000 a year, the couple — married 19 years — are still struggling to pay the bills.

Finance expert Ramit Sethi points out that people can have anxiety over money and bad spending habits whether they make $50,000 or $500,000 a year.

“If you feel bad about money at $50,000, you’re probably going to feel that way when you make 10 times your income,” he said during an episode of his podcast, “I Will Teach You To Be Rich.”

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Jeff’s salary is high (his take-home pay, after taxes, is $426,000 a year), but he only started earning that much around the age of 40. As his income grew, the family’s discretionary spending ballooned.

Sethi points to some of the psychological issues at play. For example, Susan grew up without a lot of money, and while she often deprives herself of small expenditures like pedicures, she also has a hard time saying no to her kids when it comes to big-ticket items.

But, according to Sethi, one of their biggest problems has to do with their financial adviser. He regularly recommends that people avoid working with an adviser who charges a percentage of assets or assets under management (AUM). In other words, the more assets you have with a financial adviser, the more money they bill you (other advisors charge flat or hourly fees).

Aside from a whole life policy and an annuity, Jeff has two brokerage accounts managed by an adviser charging a fee of 1.24%.

“I generally feel as though most people are good and they’re not trying to rip us off,” Susan said.

But when she asked their financial adviser about his fee, “he told me, oh, it’s roughly around 1%. I’ll never forget, he made this face like, oh, it’s not that much.”

Sethi says he knows that face.

“Most advisers make their money when your portfolio grows, which is why they love older people and wealthy people who specifically do not understand commission structures,” he said.

Read more: Retire richer — why people who work with a financial advisor retire with an extra $1.3 million

Understanding the math behind AUM

Jeff and Susan have $460,000 in two brokerage accounts. If they live to age 85 — for another 35 years — without making any further contributions to these accounts, and assuming a conservative 5% return, that 1.24% fee adds up to a whopping $863,170, according to Sethi.

That’s because fees grow as your portfolio grows.

Right now, the couple pays about $6,000 a year in fees — about $500 a month. But fast-forward 35 years — 420 months — and they won’t be paying just $500 a month. Rather, they’ll be paying 1.24% on a much larger portfolio, averaging about $2,054 a month, according to Sethi.

“This is what happens with a 1.24% fee on a modest $460,000 portfolio that’s not even being added to,” says Sethi. “That 1.24% fee seems modest in the early days, but it’s back-loaded.”

Instead, Jeff and Susan could invest their money in a low-cost ETF or index fund and get a similar return — but with that extra $800,000 in their pocket funding their retirement, says Sethi.

The good news: You can still get out

So what can you do if you’re working with a financial adviser who charges you a percentage of assets and you want out?

The fees Jeff and Susan have paid up until now are a sunk cost. But the biggest step in this process is realizing you need to make a switch, says Sethi. The rest are just details — though it could mean uncomfortable conversation, especially if you’ve been working with the same financial adviser for many years.

Sethi recommends explaining to your financial adviser — preferably over email — that you’ve decided to move your brokerage account because the fees you’re paying are not part of your financial goals. By transferring your brokerage account in-kind, which means moving them as-is from one account to another, “you’re not selling them and triggering a taxable event,” he said

However, you may want to continue using a financial adviser. If you do, “you want to pay a flat fee, never a percentage,” he said.

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  As i have  explained  before  ....but i am  too lazy too lok for the  blog on my style of  writing and  why i do it .......well as you not...