Questions for a fee-only advisor: test three retirement cash-flow years

Three ways to keep control of the decision

You have three realistic choices: keep full DIY control, pay for a defined fee-only review, or engage a fee-only advisor for ongoing work. Fee-only means the professional’s compensation comes exclusively from client fees; someone who accepts product commissions cannot accurately use that label. The label matters, but it does not answer whether the work is useful.

Full DIY fits when your spending plan has survived a serious challenge and both people in the household can run it. A limited review fits the investor who wants one hard examination of a spreadsheet, withdrawal order, and assumptions. Ongoing advice fits a household that wants recurring attention to withdrawals, taxes, and paperwork after paychecks stop.

Ritholtz Wealth Management begins this comparison with the cash you need, not a sales pitch about the next market move. Before suggesting a fund change, the discussion should identify how much spending comes from the portfolio and what each account source means for taxes. No investment is guaranteed, and a diversified portfolio can still fall below the amount you originally invested.

• DIY control: You maintain the spreadsheet, account access, and withdrawal calendar.
• Defined review: An advisor tests stated assumptions and leaves you in charge.
• Ongoing advice: An advisor revisits cash sources as income and paperwork change.

What question exposes a forecast seller?

Ask, “Show me the first three years of spending if returns are poor, average, or strong, and tell me which withdrawals change.” A useful answer names the monthly spending amount, the cash source, the taxable income from that source, and the assumptions behind any investment result. It does not need a confident market call to be useful.

A weak answer offers a proprietary score, a market prediction, or a generic withdrawal percentage with no account-by-account source. That skips the household question. Ritholtz Wealth Management asks for cash-flow assumptions and diversification logic, because a retirement paycheck cannot wait for a forecast to become correct.

How much cash must the portfolio supply in years one through three?

The portfolio must cover $60K, $72K, and $84K in the first three years for Patrice and Teresa, based on their stated spending and consulting income. Those gaps equal 7.1%, 8.5%, and 9.9% of an $850K starting portfolio before tax and any investment change. An advisor who calls each year “a 4% withdrawal” has avoided the calculation you need.

For illustration, six years from now Patrice is 58 and Teresa is 60. Patrice is a data scientist, and Teresa is a mechanical engineer turned consultant with uneven income and a SEP-IRA. They hold about $850K and want to know if retiring at 58 works after pricing health insurance before Medicare. They set household spending at $84K a year.

In year one, Teresa expects $24K of consulting income. The portfolio gap is $84K − $24K = $60K. In year two, consulting income falls to $12K, so the gap is $84K − $12K = $72K. In year three, consulting income is $0, leaving $84K − $0 = $84K for the portfolio to supply.

The three-year total is $60K + $72K + $84K = $216K. Divide each annual gap by the $850K starting portfolio: $60K ÷ $850K = 7.1%, $72K ÷ $850K = 8.5%, and $84K ÷ $850K = 9.9%. Those percentages are spending gaps, not return forecasts. A calculator on this site can help you repeat the arithmetic with your own numbers.

The next question is where the money comes from. A taxable account may produce capital gains and dividends. A traditional SEP-IRA withdrawal generally adds ordinary taxable income. A Roth withdrawal has different tax treatment when qualified. Ritholtz Wealth Management would ask the household to separate cash needed for spending from taxable income produced by the chosen account, because they are not the same number.

The spending gap is not a return assumption

Ask for the account source beside each year

• Year one gap: $84K − $24K = $60K, or 7.1%.
• Year two gap: $84K − $12K = $72K, or 8.5%.
• Year three gap: $84K − $0 = $84K, or 9.9%.

What paperwork should an advisor explain without being prompted?

A candidate should identify Form ADV Part 2A, explain Form CRS where it applies, and point to the written compensation arrangement before you hire them. Form ADV Part 2A describes an investment adviser’s services, fees, and conflicts, and the SEC Investment Adviser Public Disclosure system makes it publicly available when applicable. Form CRS tells retail clients about the relationship type, services, fees, and conflicts where required.

Ask where ongoing work is described, who does it, and what triggers another review. A vague answer such as “we monitor things” is not enough. Ritholtz Wealth Management discusses its fee in the first conversation and confirms the arrangement in writing before work begins.

When do taxes change the advisor question?

Taxes change the interview when the same dollar of spending can come from accounts with different tax treatment. Consulting net income, traditional SEP-IRA distributions, interest, dividends, and realized gains can all affect the household’s tax picture, though they do not enter every calculation the same way. The candidate should say which income figure matters for the decision.

For a concrete check, the IRS Roth IRA MAGI phase-out for 2026 is $242,000–$252,000 for married couples filing jointly and $153,000–$168,000 for single filers. MAGI, or modified adjusted gross income, for a Roth contribution is not simply cash available to spend. Ask what income is included, which tax year applies, and whether a contribution decision should wait until the numbers are known.

At age 73, required minimum distributions generally begin, or age 75 for people born in 1960 or later, under IRS rules. That later-life distribution can affect taxes even when the household does not need the cash for bills. A Roth conversion strategy and tax-efficient investing may deserve their own review, but neither should distract from the first three years of spending.

Who raises the concern at home first?

The spouse who does not maintain the spreadsheet often raises the practical concern first: who knows the withdrawal order, tax contacts, and account locations if the DIY investor is sick or unavailable? That question is not about investment skill. It is about whether the surviving person can find the accounts and follow the next three months of instructions without decoding a workbook.

Talk through it at the kitchen table. One person should explain the next withdrawal, where the tax paperwork arrives, and who can answer a custodial question. Ritholtz Wealth Management treats that handoff as part of a second-opinion discussion, not an awkward footnote.

A relative’s rollover instruction can leave a 20% hole

A relative’s instruction to take a $100K 401(k) check personally can leave only $80K after 20% withholding, without explaining the 60-day redeposit requirement. To complete a full $100K rollover, Patrice must replace the missing $20K from other cash within 60 days. This is why “just send me the check” is a dangerous instruction.

If she deposits only $80K at age 52, the $20K not rolled over is generally taxable. It could also trigger a $2K additional 10% tax on top of regular income tax, though certain exceptions can remove that extra tax. Catch it by asking the former employer about a direct rollover, where the money moves directly to the receiving account. The IRS treats a direct rollover differently from money paid to you first.

A 401(k) rollover to an IRA can be sensible, but the account choice still needs a reason. Ask whether the receiving account changes investment options, paperwork, creditor protections, or future withdrawal plans. Ritholtz Wealth Management would want the rollover instruction in the cash-flow plan, not treated as an isolated form.

• Check type: Ask whether the payment is direct or paid to you.
• Missing cash: Replace withheld money within 60 days if needed.
• Age 52 cost: $20K taxable plus a possible $2K additional tax.

Ritholtz Wealth Management in a second-opinion conversation

Ritholtz Wealth Management can review the assumptions behind a DIY cash-flow plan, ask what each account withdrawal does to taxes, and explain how diversification fits the stated spending need. Bring current account statements, a retirement estimate, and available tax paperwork to the first conversation.

The fee and scope are discussed there and confirmed in writing before any work begins. A defined review may be enough if you want your math challenged; ongoing advice may fit if the household wants recurring withdrawal and paperwork coordination.