Leave TSP for High Yield Dividend Growth ETFs

[twinkc]

I'm considering transferring my TSP balance into privately managed high yield dividend growth specific stocks and deferred fixed index annuities. My husband and I are both retired; and I am weary of trying to manage my TSP money and seeing losses because of ill-timed ITFs. I know it could be better managed by someone else. I'm considering Retirement Protection Solutions, managed by Larry Spoth and his team based in Vienna VA.
Briefly, Larry is using MarketGuard methodology to select the top 10% of stocks that show high opportunity (high dividends, rate of return, company financials, etc). In addition to being free of constant worry during volatile market swings (if I were to continue managing my TSP), another goal is to not only see my money increase but also receive dividend returns that can offset RMDs without having to dip into my principle assets. More details are on his website: https://retirementprotectionsolutions.c ... planning/
Between my husband and I, our monthly income (social security and pension) is sufficient to cover monthly expenses and still leave us with a comfortable discretionary cash balance each month. In other words we don't need to rely on retirement investments for income. So we can take on risk through the MarketGuard opportunity portfolio methods; but we would also place about $200K in fixed index annuities for safer growth--and still be available to my kids after we die.
I am comfortable with the overall strategy, but I am concerned about the 2.5% advisory/administrative fee that Larry and his team takes. That is if I were to receive (hypothetically) an 8.5% dividend rate on ETFs, he and his team would get 2.5% of it, reducing my dividend rate to 6%. In my research and in discussions with family members with high dollar investments, I understand that based on the size of one's portfolio (dollar value) and the intensive analysis used to manage retirement portfolios, advisory fees would generally run between 1.5% to 2%.
Would appreciate hearing advice and if you've made similar decisions in moving money out of TSP. Thanks, TwinKC

[pjwaite]

Once you move it out, you can't move it back in once the market eventually swings the other way. Low cost funds have been shown to outperform over longer periods of time. I'm waiting it out in the low risk, low cost G-fund at 3.52% and will slowly move back into stocks.

[TopNotch]

I'm not a financial advisor or retired. That advisor fee seems high to me.

For conservative investment, check into brokered CDs offered through your brokerage account. Currently, the Vanguard 12 month rate, for example, is about 5.1% Be sure to read about the downsides and risks with brokered CDs.

I also own the high yield ETF JEPI. That pays monthly dividends and the current yield is about 11%. It uses call options to generate high yield.

https://www.marketwatch.com/articles/in ... quote_news

As always, do your due diligence.

[Scarfinger]

Firm Maximum Fee Annual Fee on $500,000 Annual Fee on $1 million Annual Fee on $2 million Always Fiduciary
Ameriprise (Managed Accounts) 2.17% NS NS NS NO
Apella Wealth 1.00% 1.00% 1.00% 0.75% YES
Edward Jones (Advisory Solutions) 1.44% 1.42% 1.37% 1.22% NO
Equitable Advisors (AXA Advisors) 2.50% NS NS NS NO
Financial Engines (Wrap Fee Program 1.75% 1.65% 1.39% 1.07% YES
Fisher Investments (Private Client) 1.25% 1.25% 1.25% 1.187% YES
JP Morgan (Wrap Fee Program) 1.45% 1.375% 1.125% 1.0625% NO
LPL Financial (Guided Wealth) 1.35% NS NS NS NO
Merrill Lynch (Managed Account) 1.80% 1.80% 1.80% 1.575% NO
Morgan Stanley (Wrap Fee Program) 2.00% NS NS NS NO
Raymond James (Various Wrap Fee Programs) 2.75% 2.75% 2.75% 2.625% NO
Voya Financial Advisors (Wrap Fee Program) 2.75% 2.75% 2.625% 2.425% NO
Well Fargo (Wrap Fee Programs) 2.50% NS NS NS NO
----------------------------------------------------------------
There are only 3 true Fiduciary companies on this list and they are all below 2% fees. Sounds to me like you are getting sold on things that make them more money but give you the "feel good" feeling. Sounds to me like they are market timing which has been proven to have lower returns than boring index investing over the long term.

I would look/shop around. The main way to save money is to lower your fees.

[Jimmyk65]

Most important is to make sure your advisor is a fiduciary. Without that they are not looking out for your interests but theirs. Second, I suggest looking at a book by David bahnsen (fiduciary) called the case for dividend growth.
https://www.amazon.com/Case-Dividend-Gr ... 1642930458
Lays out dividend stocks and their use for accumulation and income phases of life.
I am not highly familiar with high yield dividends. They can be close end funds (less liquid) and etfs like jepi and qyld (these use option and covered call strategies to boost yield).
Typically high yields mean lower growth (dividend yield growth and stock price appreciation). Hard to get both in my opinion.

[Scarfinger]

This company is suppose to be a fiduciary company but it gets a little confusing. I looked at the ADV-2A form I by no means am an expert at decoding these but from what I gathered.

Retirement protection services is owned by MarketGuard and they use charles schwab as the custodian. MarketGuard states that they are a Fiduciary. They also state that that there are conflicts of interest mainly because advisors can also be insurance agents.

Some of Market Guard®’s Investment Advisor Representatives (IAR) are also licensed insurance agents. When warranted, they will offer Client’s advice or products from those activities. Clients should be aware that these services pay a commission and involve a conflict of interest, as commissionable products can conflict with the fiduciary duties of a registered investment adviser. IARs are required to always acts in the best interest of the Client, including the sale of commissionable products to advisory Clients. Clients are in no way required to implement an insurance strategy, even if it is recommended by a IAR of Market Guard® in their capacity as an insurance agent. The relationship with IPW creates a conflict of interest to the extent that a Market Guard® control person receives compensation as an equity share based on non-controlling ownership in IPW.

I don't understand that if you don't need the money, why purchase an annuity? I am curious if your advisor brought up the subject of annuities or was it your idea.

But lets assume everything is in your best interest. It all comes down to the fees. MarketGuard charges 1.5% flat fee for the "private wealth division" and then the Advisor which is "retirement protection services" fee is 1% for your stated 2.5% total fee.

You could get the fees down by using only the "ETF Model Platform" which has breakdown charges for total amount invested as low as 0.5% for 2 million+ invested. I am guessing with the addition of the advisor fee your total would be 1.5% in fees of assets under management.

You could also just leave 200,000 in G and F fund (for the kids) and put the rest in a target date fund in your TSP and I think the fee would be around .06% total. From .06% fee to 2.5% fee is a 4066% increase in fees. hehe sounds high when you put it that way.

[Midway]

Also check if moving from the TSP into an IRA could affect your state taxes on withdrawals. It would for me in Oregon.

[jimcasada]

Also check if moving from the TSP into an IRA could affect your state taxes on withdrawals. It would for me in Oregon.

I can't find any States that treat IRA's & TSP's differently. Which States are you referring to besides Oregon?

https://www.forbes.com/advisor/retireme ... ent-taxes/

[twinkc]

This company is suppose to be a fiduciary company but it gets a little confusing. I looked at the ADV-2A form I by no means am an expert at decoding these but from what I gathered.

Retirement protection services is owned by MarketGuard and they use charles schwab as the custodian. MarketGuard states that they are a Fiduciary. They also state that that there are conflicts of interest mainly because advisors can also be insurance agents.

Some of Market Guard®’s Investment Advisor Representatives (IAR) are also licensed insurance agents. When warranted, they will offer Client’s advice or products from those activities. Clients should be aware that these services pay a commission and involve a conflict of interest, as commissionable products can conflict with the fiduciary duties of a registered investment adviser. IARs are required to always acts in the best interest of the Client, including the sale of commissionable products to advisory Clients. Clients are in no way required to implement an insurance strategy, even if it is recommended by a IAR of Market Guard® in their capacity as an insurance agent. The relationship with IPW creates a conflict of interest to the extent that a Market Guard® control person receives compensation as an equity share based on non-controlling ownership in IPW.

I don't understand that if you don't need the money, why purchase an annuity? I am curious if your advisor brought up the subject of annuities or was it your idea.

But lets assume everything is in your best interest. It all comes down to the fees. MarketGuard charges 1.5% flat fee for the "private wealth division" and then the Advisor which is "retirement protection services" fee is 1% for your stated 2.5% total fee.

You could get the fees down by using only the "ETF Model Platform" which has breakdown charges for total amount invested as low as 0.5% for 2 million+ invested. I am guessing with the addition of the advisor fee your total would be 1.5% in fees of assets under management.

You could also just leave 200,000 in G and F fund (for the kids) and put the rest in a target date fund in your TSP and I think the fee would be around .06% total. From .06% fee to 2.5% fee is a 4066% increase in fees. hehe sounds high when you put it that way.

Thank you Pj, JimmyK, Midway, Jim, Topnotch and Scarfinger. I appreciate the input and advice. To clarify, the fixed index annuity is a strategic growth annuity issued by Security Benefit Life Insurance. I'm not buying their life insurance but actual one and two-year credit options tied to indices (e.g., S&P 500 Annual Point to Point Index). It allows readjustment on the 1- and 2-year anniversaries. Value either increases, or it remains the same if the index is negative. Returns are higher than the G- or F-funds in the TSP. Any gains would just be reinvested. Also, my beneficiaries receive 100% of my account value if I die. I would not be paying an advisor fee for this account. As Scarfinger rightly noted, MarketGuard charges 1.5% for its Opportunity Dividend portfolio; and the advisory team (Larry Spoth team) would get 1% for running the daily analytics on individual stocks; thus the 2.5% total fee. However, anytime I choose to place my funds in "cash," I would only pay. 0.6% fee to MarketGuard and no advisory fee. What attracts me to MarketGuard portfolio is the algorithm methodology that looks at individual stocks/companies to identify the high growth performers and high dividend yields. The portfolio may be reconfigured monthly and/or quarterly depending upon what's happening in the market. I am confident MarketGuard would do a much better job than me. In 2022, they did 27.5%. I was negative with my TSP. I am also attracted to the idea of dividends covering my RMDs rather than having to take RMDs directly from my principle account balance as TSP requires.
Being retired, I no longer want to carry the stress or anxiety of having to manage my retirement funds, especially since it's proven that I haven't really been doing a very good job at it. But seeing my money grow, offsetting RMDs, and passing my wealth on to my kids is my ultimate game plan. Thanks again everyone. I really value this forum and all the knowledge, time and research you offer.

[crondanet5]

Have you looked at ETF QYLD? Pays a monthly dividend and has an annual dividend of 12%. I am using it in a 401k program outside of TSP.

[Bubba]

I'm not retired, but I would echo our colleagues here. It sounds to me that you are not interested in managing your money, post retirement. That makes sense, it's time to relax on things.

I would suggest, as the others to look at ETFs like JEPI, QYLD and mutual funds like PSLDX. Alternatively, if you want true safety, then I would look at CDs. Those rates are amazing and won't last forever.

Also, I would suggest you review what's available at seekingalpha. There are many services there, however, you would need to make the moves yourself (which you might not want to do). If you truly do not want to do anything, then I would suggest to backtest a strategy and let it sit and grow. You can backtest using portfoliovisualizer (my favorite tool) or portfolio123. Naturally there are issues with backtesting, but so far, my strats (outside of the TSP) have held up really well...maybe too well?

Good luck!

[Midway]

Also check if moving from the TSP into an IRA could affect your state taxes on withdrawals. It would for me in Oregon.

I can't find any States that treat IRA's & TSP's differently. Which States are you referring to besides Oregon?

https://www.forbes.com/advisor/retireme ... ent-taxes/

Oregon does not tax Federal pension income earned outside of Oregon before 1991. This includes any distributions from the TSP. If the funds are moved to an IRA they are no longer considered Federal pension income and are taxed fully. https://www.oregon.gov/dor/forms/FormsP ... 1_2022.pdf
I do not know if any other states treat TSP and IRA differently.

[Bubba]

Also check if moving from the TSP into an IRA could affect your state taxes on withdrawals. It would for me in Oregon.

I can't find any States that treat IRA's & TSP's differently. Which States are you referring to besides Oregon?

https://www.forbes.com/advisor/retireme ... ent-taxes/

Oregon does not tax Federal pension income earned outside of Oregon before 1991. This includes any distributions from the TSP. If the funds are moved to an IRA they are no longer considered Federal pension income and are taxed fully. https://www.oregon.gov/dor/forms/FormsP ... 1_2022.pdf
I do not know if any other states treat TSP and IRA differently.

This is true for most states that have an income tax. Those that are without income taxes are even more interesting. A quick Google will show which is which. Oregon is really beautiful!

[Midway]

I can't find any States that treat IRA's & TSP's differently. Which States are you referring to besides Oregon?

https://www.forbes.com/advisor/retireme ... ent-taxes/

Oregon does not tax Federal pension income earned outside of Oregon before 1991. This includes any distributions from the TSP. If the funds are moved to an IRA they are no longer considered Federal pension income and are taxed fully. https://www.oregon.gov/dor/forms/FormsP ... 1_2022.pdf
I do not know if any other states treat TSP and IRA differently.

This is true for most states that have an income tax. Those that are without income taxes are even more interesting. A quick Google will show which is which. Oregon is really beautiful!

What do you mean by "interesting"?

[Blue_Radio]

A 2.5% advisory fee seems high, even if that figure includes mutual fund fees, if such equities are included in the portfolio Retirement Protection Solutions proposes for you. (Aside: Why is it so fashionable to put "Solutions" in company names these days?)

Lower rates are out there for managed accounts. Major companies (Fidelity, Schwab, etc.) have advisory fees that start somewhere around 1.5% for modest portfolios (far less than $1M) and decrease as the value of the portfolio increases, perhaps around 1.0% for a $1.5M portfolio.

Regardless of who you go with, be it a well-known company (Schwab) or someone hanging his shingle in the DC area (Larry), you should be provided a detailed explanation of how the fee is calculated and how and when you'll pay it. It can be complicated, so read through it carefully. Don't be shy about asking follow-up questions if something isn't clear. The idea here is to determine if the fee is likely to provide value added.