Expert: liznarr - 5/31/2011

Question
I was reading the information below as an option for retirees that may help in being more financailly free, but I didn't understand what they meant.  If you could help me understand what was meant I would greatly appreciate it.

Thanks in advance.

Some friends sold a house and decided to rent a two-bedroom apartment.  A fee-only investment adviser manage the proceeds of their house sale.  THIS IS THE PART I DON'T UNDERSTAND They take their allotted 4 percent of total asssets per yer (plus an annual inflation adjustment) for spendng money.

Answer
Hi Sallie,

Without having more information, I’m not sure I understand what “they” meant, either.

If the friends sold their house and rented a two bedroom apartment, it does not make sense to me why the friends would pay someone four percent of their total assets per year to manage the money from the proceeds of the house sale.

Again, I would need more information on what the “investment adviser” was doing to earn his four percent, but something just does not sound right.  I’m sure there must be some other details that I am missing.

Retirees who are not savvy in the area of investments need to be ESPECIALLY wary of any investment advisor making claims they do not understand and who want fees for performing activities which are not CLEARLY understood.

Suze Orman is a nationally-known personal finance expert who has a web site and TV program, covering all areas of money management.  Check out her site at http://www.suzeorman.com/ and watch her program sometime.  You are sure to learn a lot.  

Were the proceeds from the house sale being invested AND also managed, generating income for the friends?

If you can find out more details and write again later, I’ll be glad to offer any expertise I might have in the real estate area that might apply.  

Your question may need to be directed to someone who has a securities license, such as a stock broker, to get the answer you are really looking for.

Good luck to you, and please feel free to write again if you have additional questions I might can answer as they relate to the purchase and sale of real estate.

Regards,
Elizabeth