By Quentin Fottrell
'I am 66 years old and have been retired for about a year and a half'
&#34;My hesitation about having my money professionally managed is the 1% annual fee, which seems rather high.&#34; (Photo subject is a model.)
Dear Quentin,
I am 66 years old and have been retired for about a year and a half. My retirement savings are still primarily in my previous employer's 401(k), with a smaller amount in IRAs at Vanguard. I know that I need financial advice, but I am unsure whether I should seek one-time guidance and self-manage my retirement funds, or pay an adviser an ongoing management fee.
My hesitation about having my money professionally managed is the 1% annual fee, which seems rather high-especially considering that it may not result in higher returns and is charged whether the funds gain or lose value. However, my biggest concern with having an adviser manage my money is the risk of fraud. I have read many stories of financial advisers stealing their clients' money and leaving them with nothing.
In particular, a financial fraud case in my area has really stood out to me. An accountant and financial adviser died suddenly, and clients later discovered that their money was missing. These clients swore they believed this adviser to be a decent and honest man, and he lived very modestly.
There is currently a lawsuit in progress, but the money is still missing. I realize that if I chose a firm like Vanguard or Fidelity, this type of fraud would likely not be an issue, but I do not think I want a mutual fund company managing my money. How can this type of financial fraud be prevented when working with money managers?
Advice from my credit union
I also belong to a credit union that offers free financial advice. I was told that the advisers are paid a salary by the credit union. Is this true? I am doubtful that there is no other fee involved. What are your thoughts on having retirement money managed by a credit union?
In addition to investment management, I need financial advice related to tax planning, as I have enough invested for this to be a significant concern. Most of my retirement savings are pretax, and I realized too late that this was a big mistake. I need guidance on strategies to minimize taxes and IRMAA charges, and on whether Roth conversions make sense for me.
If I pursue Roth conversions, I would need to pay the taxes using my retirement funds. Does a Roth conversion still make sense if you must use pretax retirement money to cover the tax liability?
Trying to Avoid Fraud
Don't miss: 'You need a third job or a rich husband': I fell victim to Allen Stanford's multibillion-dollar Ponzi scheme and survived
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com. The Moneyist regrets he cannot reply to questions individually.
One big red flag: advisers who promise you a guaranteed return on your investments.
Dear Avoiding,
Making decisions out of fear is generally not a good idea, especially when it comes to your finances. So don't feel that you need to completely eschew financial advice because you're afraid your accountant and/or financial adviser will steal your money, but nor should you feel obliged to sign over control of your hard-earned retirement fund to a third party.
There is one way to manage your capital and withdrawals without handing over the keys to the kingdom. You can do that, as you suggest, by using a third-party custodian such as Fidelity, Morgan Stanley (MS), or Charles Schwab. (To be clear, these are examples, not recommendations.) A 1% fee is generally standard, but this is negotiable, and you can avoid it altogether by paying a flat fee or an hourly rate.
There are other warning signs that can help you avoid bad actors. One red flag is advisers who promise guaranteed returns on your investments. Stephen Romney Swensen, who died in 2022, may or may not be the case to which you are referring. After he passed away, the Securities and Exchange Commission brought a case against his estate, alleging that he misappropriated client funds.
A red flag: advisers who promise you a guaranteed return.
Swensen promised investors that they would earn at least 5% in annual returns from his chosen investments, the SEC said. While that might be inline with global average market returns after inflation, guaranteeing returns suggests something is not right. Swensen allegedly misappropriated investor funds to make Ponzi-like payments to other investors in order to support his lifestyle, the SEC said. It reached a settlement with his estate.
Other easy ways to prevent fraud: Make sure your assets are held by a custodian (a separate financial institution to hold your money and investments and keep records of them); do not give your chosen adviser withdrawal authority and read everything they give you to sign carefully; receive your investment statements directly; and have your accounts reviewed annually by a CPA to ensure everything is as it should be.
Some credit unions (and banks) do provide financial advice to customers. They are paid by their employer, so it's technically not free advice, and you should be careful that they don't sell you unnecessary insurance and/or annuities. If you seek out an independent adviser, remember that not all money managers are fiduciaries, professionals who have to act in their client's best interest under the Investment Advisers Act of 1940.
Fee-only advisers
Many fee-only fiduciary advisers, who are held to a fiduciary standard, operate as registered investment advisers (RIAs) or investment adviser representatives (IARs). As such, they are primarily regulated by the Securities and Exchange Commission if they belong to larger firms, or by state securities regulators if they belong to smaller firms.
If you were born in 1959, your required minimum distribution (RMD) starts at age 73 (age 75 if you were born in 1960 or later). The Internal Revenue Service calculates RMDs by taking the balances of your tax-deferred retirement accounts at the end of the prior 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, meaning you must withdraw approximately 3.77% of your account balance.
Depending on how much money you have in retirement savings, you will likely pay significant income tax on your RMDs if you have several million dollars invested. Your options include performing Roth IRA conversions and making qualified charitable distributions (QCDs), while strategically managing your withdrawals with the guidance of an accountant who specializes in RMDs.
The basic idea is to pay tax when you're in a lower tax bracket.
Something to think about: With a QCD, people aged 701/2 or older can send up to approximately $108,000 (in 2025) from an IRA directly to charity, which counts toward their RMD. QCD limits are subject to annual inflation adjustments. In theory, this can help lower your taxes and Medicare costs. However, QCDs are not applicable to 401(k) s or 457(b) s, so you may wish to consider rolling those accounts into an IRA.
Roth conversions, as you say, are another option. A Roth conversion can still be worthwhile even if you pay the taxes using retirement funds. It can make sense if you expect higher future tax rates, although for obvious reasons, paying the tax with non-retirement cash is typically the best strategy. Sometimes, due to financial circumstances, this cannot be avoided.
You need to keep a close eye on your marginal tax brackets. An IRMAA (Income-Related Monthly Adjustment Amount) cliff could indeed lead to a sudden and significant jump in your Medicare Part B and Part D premiums if you cross that threshold, as well as trigger the 3.8% net investment income tax. There is no penalty for withdrawing funds to pay conversion taxes after age 591/2; however, one of your biggest concerns is the loss of future tax-free growth.
Timing your Roth conversions
The basic idea is to pay tax when you're in a lower tax bracket. Income taxes are applied progressively, with rates ranging from 0% to 37%. The blended result of these brackets is your effective tax rate. As your taxable income increases, each portion is taxed at a higher rate-for example, after deductions, the first $11,925 is taxed at 10%, the next slice up to $48,475 at 12%, and so on.
My colleague Beth Pinsker has written extensively about Roth conversions. &#34;Tax law is not the only consideration,&#34; she wrote recently. &#34;Market conditions matter, as a rising market is less advantageous for conversions than a down market because you convert fewer shares. Your personal finances matter, too-such as your available cash to pay the taxes on the distribution.&#34;
&#34;Your age in relation to when your income will start being evaluated for possible Medicare income-related monthly adjustment amounts (IRMAA, at age 63), or when you have to start taking required minimum distributions (RMDs, at age 73), also matters,&#34; she adds. &#34;Those with high itemized expenses in 2025 may have an opportunity to use tax savings to fund more Roth conversions.&#34;
Every profession has bad actors, and financial services is no exception.
A word of advice from Charles Schwab (SCHW): &#34;A Roth IRA conversion can be especially advantageous during your initial years of retirement, when RMDs haven't yet kicked in and you're most likely to be in a lower tax bracket compared with your working years. But if you're already receiving retirement benefits, converted funds could increase your taxable income.&#34;
As to your original question, the idea is for your adviser to protect you against scams, not steal your money. But every profession has bad actors, and financial services is no exception. It's also worth asking whether your prospective adviser receives any commissions based on the products they offer you, according to Taubman Law, a Cleveland-based law firm.
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<p>A 66-year-old retiree is hesitant about hiring a financial adviser due to concerns over high fees and potential fraud. Despite needing financial guidance for retirement savings and tax planning, the individual fears stories of advisers stealing clients' money. They consider using a credit union for free advice but question the absence of hidden fees. The response advises against making decisions out of fear and suggests using a third-party custodian to manage funds while avoiding bad actors by recognizing red flags, such as promises of guaranteed returns.</p>

I'm afraid my financial adviser will steal my money. I've read too many cautionary tales. How can I be sure?