Retirement planning takes many different forms, but to effectively manage your money in retirement it is important to know the types of investment accounts that are available. This is why I am hosting the Asset Allocation Ingredients series. 

Over the course of this series, we explore what goes into your investment mix. This episode focuses on separately managed accounts. You’ll learn what they are and their advantages and disadvantages. 

Make sure to stick around for the listener questions segment to hear answers to questions from listeners like you. 

What is transformation?

Transformation means a dramatic change in form or appearance. However, there are many transformations we can make in life that aren’t physical. Common life transformations occur when we leave school and enter the professional world, go from single to married life, and of course, from working to retired. 

A transformation can be triggered by a few different things. It could be triggered by a life event, or it could be a gradual change over time, or simply by you looking for a change in your life. Are you working towards any transformations in your life? 

What is a separately managed account?

A separately managed account is a portfolio managed by a third party. Essentially, you are assigning the management of funds to a money manager who is implementing the portfolio that you have hired them for. 

A separately managed account is different from an ETF or mutual fund in that you open an investment account at a firm and the account manager will build the portfolio based on the strategy you choose. It’s like a mutual fund that is completely unwrapped. You own each individual position in that account rather than in a bundle. 

What are the advantages and disadvantages of separately managed accounts?

Some advantages to SMAs are: 

• You have access to institutional managers that don’t manage mutual funds.
• You can customize your account by setting restrictions on what is allowed. 
• You maintain better control of the realization of gains and losses.

There are a few disadvantages:

• There are fewer options to choose from.
• The baseline to open an account is higher.
• Fees are generally higher than other types of accounts.
• They add more complexity to your portfolio.

Are separately managed accounts a part of your portfolio? What do you like about them?

What’s coming up next on Retirement Answer Man

Make sure to check out the next episode where we will explore UITs and structured notes. After this deep dive into the financial aspect of retirement, next month our focus will shift to the non-financial side of things. You won’t want to miss out on building your non-financial retirement plan.

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN WHAT DOES THAT MEAN?

• [2:10] What is transformation?

PRACTICAL PLANNING SEGMENT

• [5:49] The basics of a separately managed account
• [10:08] Disadvantages to this kind of structure for investments

Q&A SEGMENT

• [14:24] A thank you from Dennis
• [18:21] How to choose mutual funds
• [21:38] The tax deductibility of long-term care 
• [23:52] How did I calculate the discount rate in the Retirement Plan Live webinar
• [31:11] What do you do with tax liability on a net worth statement?

TODAY’S SMART SPRINT SEGMENT

• [34:05] Think about a transformation that you are working toward

Resources Mentioned In This Episode

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement  by Roger Whitney

Work with Roger

Roger’s Retirement Learning Center