Search found 198 matches

by Don46
Thu Dec 12, 2013 7:42 am
Forum: Personal Investments
Topic: Advice on Fixed Income/Bond Investments
Replies: 27
Views: 4575

Re: Advice on Fixed Income/Bond Investments

Allow me to run this option by the group. My Schwab broker sent me flyers on two MUNI fund managed account options, one of which is the PIMCO MUNI Bond Ladder Program with an annual ER of .35 for accounts below $1mil and goes down to .20 for those with $5million. There is some language that says these fees are maximums; individual fees will vary downward. I believe that this is a management fee that can be treated as a tax deductible expense since this is a managed account, so that brings it down to an effective .25 at the 28 pct tax bracket. This gets down to Boglehead tolerances, I should think and it seems like this might be worth it to let the pros screen the bonds for me, for a price I realize. The PIMCO program allows one to choose ac...
by Don46
Thu Dec 12, 2013 7:09 am
Forum: Personal Investments
Topic: Advice on Fixed Income/Bond Investments
Replies: 27
Views: 4575

Re: Advice on Fixed Income/Bond Investments

Don, I'd recommend familiarizing yourself with "bondspeak" in order to compare bonds. There's a difference between the coupon rate and the yield to maturity. You'll need to also be very familiar with "yield to call" and "sinking bonds" so you don't make mistakes in comparing bonds. I live in a very high tax state and yet still buy individual munis (usually with the initial offering) from other states. Personally, I buy premium bonds so I don't have to deal with the capital gains in the end (but you'll have to learn about "amortization of premium bonds"). I look at the "slope of the curve" to see where interest rates might be beneficial; I generally use 15 basis points per year to justify go...
by Don46
Wed Dec 11, 2013 4:20 pm
Forum: Personal Investments
Topic: Advice on Fixed Income/Bond Investments
Replies: 27
Views: 4575

Re: Advice on Fixed Income/Bond Investments

Aloha Don, I like SC and have been every year for the past 35 yrs since my parents retired there...I might end up there too. You never mentioned if your pensions and SS income streams essentially cover your expenses...meet your "floor" as some say. Is your future RMD essential to meeting your expenses or just "gravy" to use for fun, possible emergencies and to leave to heirs. My wife is about 5 years behind me and will take SS at 66. I suppose our minimal living expenses would be covered by pension, and two SS checks, but we plan to spend lots on the "gravy," travel, hobbies, charities, gifts, and, sigh, health care as needed. No pockets in a shroud. My children are earning more than I am and should be fine. H...
by Don46
Tue Dec 10, 2013 9:43 pm
Forum: Personal Investments
Topic: Advice on Fixed Income/Bond Investments
Replies: 27
Views: 4575

Re: Advice on Fixed Income/Bond Investments

The OP is in SC. SC GO bonds are rated quite high and in order to get a YTM of 4% or more, he'd have to go pretty far out on maturity, I'm estimating 25 years approximately. I don't think it's worth exposing yourself to that kind of risk, and for what it's worth, he would be in his 90s at the maturity of the bond. Long bonds are also more difficult to trade, which is something to consider. Right now, the sweet spot on munis is somewhere in the 9-13 year range, depending on the rating. And to the OP, if you're going to buy your individual munis, make sure you understand how to see what a fair asking price might be. You are right, all the bonds on the Schwab list have 4% coupons and are over 20 years out. I wonder if the SC tax exemption is ...
by Don46
Mon Dec 09, 2013 10:04 pm
Forum: Personal Investments
Topic: Advice on Fixed Income/Bond Investments
Replies: 27
Views: 4575

Re: Advice on Fixed Income/Bond Investments

I had a good conversation with the bond specialist at Schwab today and feel like I'm moving in the right direction. He persuaded me to park my tax advantaged money in VBISX, the Vanguard Short Term fund, for now and see how things feel in two years or so. For the taxable account, he sent me a long list of SC MUNIS with a coupon of about 4 percent, some with 10 and 20 year maturities, some less. For the employer linked funds I'll probably just let them ride in the target 2010 funds and then roll them over into the Schwab IRA when I retire; that will give me more options at at much lower ERs. I don't know what kind of service people get with Vanguard or Fidelity and the others, but I like what I'm getting with Schwab. Thanks for all these ver...
by Don46
Mon Dec 09, 2013 9:55 pm
Forum: Personal Investments
Topic: Question about International Stock Allocation
Replies: 2
Views: 561

Question about International Stock Allocation

I'm transitioning from a managed account that had no international exposure. I am 67, moving (slowly) toward retirement in the next two or three years, and in good shape financially. I am impressed by the case for international diversification, but I'm also not yet comfortable with how to deploy assets. I'm with Schwab and am impressed with their very low cost ETF, SCHF which has an ER of .09 and seems to track tightly with the broad international market. Is there some disadvantage I don't know about in using an ETF in international investing?

I'm going to begin with a 5 percent allocation and wade in deeper as I sell off some of the stocks left from my managed portfolio.
I welcome your advice.
by Don46
Mon Dec 09, 2013 8:29 pm
Forum: Personal Investments
Topic: VBMFX Duration
Replies: 21
Views: 3168

Re: VBMFX Duration

Here is a chart of the rates of Inflation, Bond Index, and Fed Rates, 1976 to 2012, which is based on the data posted earlier by antiqueman.

I didn't run any statistical correlation tests, but the graph lines seem to indicate bonds have a mind of their own from year to year.

Image
by Don46
Mon Dec 09, 2013 3:50 pm
Forum: Personal Investments
Topic: VBMFX Duration
Replies: 21
Views: 3168

Re: VBMFX Duration

I was able to put Salty1's data into an excel graph, after some manipulation, but I don't know how to post a graph on this site. Any suggestions?
by Don46
Mon Dec 09, 2013 9:05 am
Forum: Personal Investments
Topic: Advice on Fixed Income/Bond Investments
Replies: 27
Views: 4575

Re: Advice on Fixed Income/Bond Investments

A follow up question: which funds or ETFs are people recommending for taxable and tax deferred fixed income/bond allocations?
I see VBMFX Vanguard Total Bond Fund as the all time favorite of many on this board.
I am advised, by a fellow at the Schwab bond desk, that I should consider VBISX, the Vanguard Short Term Bond fund, and take a lower return with a much lower risk. He feels VBMFX is more exposed than I need to be to long term bonds.

In the taxable side he advises some individual SC bonds of 10-15 years that are highly rated, low risk, and will provide better after tax returns than the taxable bonds.
Advice and comments welcome, as always.
Thanks,
Don
by Don46
Sun Dec 08, 2013 8:43 pm
Forum: Personal Investments
Topic: Advice on Fixed Income/Bond Investments
Replies: 27
Views: 4575

Re: Advice on Fixed Income/Bond Investments

... With the size of your nest egg, I would consider accomplishing the above goal by using your taxable money to buy a ladder of high grade, AA or better municipal bonds. Since the interest income wouldn't be included in your AGI, there's no risk that it will push you into an even higher tax bracket and if you do this with enough of your taxable funds you might even be able to drop down to a lower bracket. At your expected 28% federal and 7% state income tax rate in retirement, a hypothetical 4% YTM high-grade muni from your state would give you an extremely safe investment with a guaranteed tax-equivalent 6.15% annual return. But if you're right about rising interest rates it would give you more than that for the bonds you buy at that rat...
by Don46
Sun Dec 08, 2013 6:23 pm
Forum: Personal Investments
Topic: Advice on Fixed Income/Bond Investments
Replies: 27
Views: 4575

Re: Advice on Fixed Income/Bond Investments

3easypayments wrote:Don, what do you expect your income tax bracket to be in retirement and what state do/will you live in?

With that nest egg and RMD's, I'd guess you may still be in the 25% bracket or higher?
I'm in SC and expect my RMD to run about 75k after I turn 70.5 in 2016. My SS is about 30k, 25.5k taxable. Together with my wife's pension, 25k, and whatever taxable interest, dividends, and capital gains we have in out investments outside the tax advantaged accounts, I expect we will have not far from 150k of income exposed to federal and state taxes, which puts us in the 28 percent tax bracket by my reckoning.
by Don46
Sun Dec 08, 2013 5:42 pm
Forum: Personal Investments
Topic: Advice on Fixed Income/Bond Investments
Replies: 27
Views: 4575

Re: Vanguard Research

Hi Don: I can't blame you for being worried after reading all the scare stories in the media. It is what sells. Vanguard's Research Group published a lengthy report on this topic last July: This is a part of their Conclusion: We continue to encourage investors to view bonds as a diversifier for the riskier assets in their portfolio. Ultimately, most bond investors should consider maintaining their strategic allocation to fixed income and avoid tactical changes that may increase the risk in their portfolios. Risk of loss: Should the prospect of rising rates push investors from high-quality bonds? Best wishes. Taylor Thank you Taylor. Your comments count a lot with me. The article encourages investors to stay the course and think long term, ...
by Don46
Sun Dec 08, 2013 3:51 pm
Forum: Personal Investments
Topic: Advice on Fixed Income/Bond Investments
Replies: 27
Views: 4575

Re: Advice on Fixed Income/Bond Investments

Does your employer sponsored plan offer a guaranteed fund? I just moved a portion of my fixed income/bond allocation to the guaranteed fund. I know that the guarantee is only as good as the company guaranteeing it, but I believe that there is a greater chance of interest rates raising than the company folding. In the larger of the two employer linked accounts, I see what I believe is a variable annuity fund offered by Great Western: Certificate Fund Post-2009 84 Months 10/01/2013 12/31/2020 2.05% Another is: South Carolina Stable Value Fund 10/01/2013 12/31/2013 2.8% The last figure is the current yield in each case. Bond Funds include Black Rock Inflation Protected Institutional, down 5.7% ytd Pimco Total Return, down .97 ytd The other ac...
by Don46
Sun Dec 08, 2013 2:40 pm
Forum: Personal Investments
Topic: Advice on Fixed Income/Bond Investments
Replies: 27
Views: 4575

Advice on Fixed Income/Bond Investments

I am making the transition from a managed account that includes an IRA and a taxable account with Schwab. I have about 3.2 million all together, and another .5 million in employer sponsored retirement accounts. I'm 67, and therefore about 3-4 years out from the point where the Minimum Required Distribution will compel me to begin withdrawals from my IRA. I have more than I need to retire; at least I don't have to take unnecessary risks. I want to allocate my IRA and part of my taxable fund to fixed income/bond investments. I have learned a great deal from the Bogleheads forum and wiki and have read both of the Bogleheads guides to investing and retirement. But I find myself agonizing over the running debate about the risk of losing value in...
by Don46
Fri Dec 06, 2013 9:53 pm
Forum: Personal Investments
Topic: VBMFX Duration
Replies: 21
Views: 3168

Re: Bond myth.

I know that if interest rates rise 1 percent then the investment will decline about 5%. Antiqueman: This often repeated statement is simply untrue. There are many periods in which inflation (and interest rates) went up and bond returns also went up. Listed below are the historical U.S. inflation rates (CPI-U) and total returns for the Aggregate Bond Index since the Index's inception in 1976: YEAR--INFLATION--BOND INDEX ... Taylor I am confused, not well-versed in these matters, but I want to understand it better. I thought it was a hike in the Fed interest rate that posed the risk to bond prices, not the CPI per se. Are the Fed interest rates and the Consumer Price Index perfectly correlated? Can Taylor or someone help us on this? I just p...
by Don46
Fri Dec 06, 2013 8:34 am
Forum: Personal Finance (Not Investing)
Topic: Questions about Charitable Trust or Gift Annunity
Replies: 8
Views: 1026

Re: Questions about Charitable Trust or Gift Annunity

This has all be very helpful. I just set up the account on Schwab. I did not realize until I got into the process that I would have to decide on which stocks to transfer into the account before it could be set up. I started with about $30k of some shares that had an 88 pct LTCG. If I have this figured correctly, the 30k tax deduction saves us $14,250 in state and federal taxes on ordinary income. I will avoid another $3,100 approximately in LTCG state and fed tax. The net after tax cost of giving 30K is about $12,650.
by Don46
Wed Dec 04, 2013 10:32 pm
Forum: Personal Finance (Not Investing)
Topic: Questions about Charitable Trust or Gift Annunity
Replies: 8
Views: 1026

Re: Questions about Charitable Trust or Gift Annunity

You should understand that YOUR deductible donation is made to the Donor Advised Fund. Once you make that donation the money (or assets) belong to the DAF. You don't control the sale of donated stock. You can direct donations to your chosen charities under the terms of the DAF. That's the "donor advised" part. The fine print is going to say that you are advising, not controlling, donations. The DAF makes those donations. If the donations are not made anonymously, the charitable organizations may send you acknowledgements of your donation. I've seen this from my tax clients. However, you didn't actually make the donation to the organization, the DAF did. So people get confused on this and the acknowledgments from the charities oft...
by Don46
Wed Dec 04, 2013 8:30 pm
Forum: Personal Investments
Topic: Allocation using Schwab ETFs
Replies: 2
Views: 468

Re: Allocation using Schwab ETFs

stlutz wrote:If you like Schwab, those ETFs are fine. However, given the high dollar amounts involved, you should not make ETF selections based on whether or not you have to pay a $9 brokerage commission. VTI, VXUS, and BND are all marginally better because they hold more securities and thus better represent the "total" market. Additionally, they trade with smaller spreads than the Schwab funds do. When you are investing hundreds of thousands of dollars, spreads are more important to worry about than the commission.
I agree; the brokerage commissions are inconsequential. I was just looking at the annual ER for each. I'll take a good look at these funds now. Thank you.
by Don46
Wed Dec 04, 2013 8:06 pm
Forum: Personal Finance (Not Investing)
Topic: Questions about Charitable Trust or Gift Annunity
Replies: 8
Views: 1026

Re: Questions about Charitable Trust or Gift Annunity

Yes, the gains would be LTCG. It sounds like a DAF is the way for me to go. A $50k DAF this year would save me about $25k in taxes and avoid up to another $4 or $5k in LTCG taxes. And it would give me a generous fund from which to dispense further contributions.
What I do not understand yet is how those contributions are made?
Do I control the sale of the stock? And the investment of assets after the sale?
Then I can control the donations from the DAF to my favorite charities?
Thanks for your advice on this.
by Don46
Wed Dec 04, 2013 7:50 pm
Forum: Personal Investments
Topic: Allocation using Schwab ETFs
Replies: 2
Views: 468

Allocation using Schwab ETFs

I'm making the transition from a managed account to what will be a three fund allocation of 35% US Stocks/ 50% US Bonds/ 15% International Stocks. I have been in a Schwab account for twenty years or more and am inclined to stay with them. I am considering using the following Schwab ETFs: SCHF for international at .09 ER SCHB for US stocks at .04 ER SCHZ for US bonds at .05 ER I have a taxable account at about $1.9 million (I'll set aside $200k for immediate expenses and emergency fund). Most of the rest will be allocated to the US Stocks, International Stocks, and some US Bonds. I have an IRA at about $1.25 million that will be entirely in US bonds. I have two tax deferred accounts outside Schwab and in employee retirement plans with a more...
by Don46
Wed Dec 04, 2013 6:59 pm
Forum: Personal Finance (Not Investing)
Topic: Questions about Charitable Trust or Gift Annunity
Replies: 8
Views: 1026

Questions about Charitable Trust or Gift Annunity

I am facing huge capital gains this year that throw me into the highest tax bracket. I want to learn more about using charitable contributions to reduce taxes this year. I found some useful information on the Boglehead Wiki: http://www.bogleheads.org/wiki/Donor_advised_fund I see that Schwab has a charitable trust account (with a management fee that I assume comes out of the trust) and that I can transfer say $50k worth of appreciated stocks from my taxable account, earn a tax deduction, and avoid the capital gains on the appreciated stock. Questions: Is the entire $50k deductible if I do this in 2013? What is the advantage of this vs an outright gift of stock? Is it to manage giving over the next several years? Does this more trouble than ...
by Don46
Tue Nov 26, 2013 10:48 am
Forum: Personal Investments
Topic: Advice on PIMCO Total Return
Replies: 18
Views: 2878

Re: Advice on PIMCO Total Return

So there. And even if you believe your investment guy to be honest (Schwab is IMHO one of the lesser evils out there), there's still the possibility that he truly holds that belief and he's wrong . After all, very smart and very well respected people, for example two of the recentmost Nobel laureates, hold opposing views on the core of this matter. I understand that Schwab makes money from commissions and fees, as do all investment services, but I believe Schwab brokers are on salary and do not earn commissions themselves. Am I wrong in this? I also understand that no one cares more than I do about my best interests in getting the best value for whatever fees I pay. I need to consider what exactly the service provides and whether it is wor...
by Don46
Mon Nov 25, 2013 9:17 pm
Forum: Personal Investments
Topic: Advice on PIMCO Total Return
Replies: 18
Views: 2878

Re: Advice on PIMCO Total Return

I'm familiar with PIMCO total return mutual fund, but the OP is talking about PIMCO TR Managed Account , and I assume that is not a mutual fund. In looking it up I see that it is supposed to be provided by an advisor, is that true? Does it imply additional costs? What exactly are PIMCO managed accounts? Paul Correct. This is not a mutual fund. As it was explained to me, this account would be separate from any pooled investments or mutual fund. The summary sheet the Schwab broker sent to me explains that the investor would actually own a core group of individual bonds and other fixed income investments they call FISH. From the summary: "All sectors of the bond market are utilized in an effort to add value while maintaining an overall r...
by Don46
Mon Nov 25, 2013 1:25 pm
Forum: Personal Investments
Topic: Advice on PIMCO Total Return
Replies: 18
Views: 2878

Advice on PIMCO Total Return

I have an IRA with about 1.25 million and am making the transition from a (badly) managed portfolio of mostly junk bonds to a more stable bond portfolio. My Schwab broker advised that I consider using PIMCO Total return Managed Account, which allows me to own a set of bonds directly. The fee slides from .65 for the first 500k to .60 so I would be paying somewhere around .62 for the entire portfolio. I realize this is more than a Vanguard Total Bond mutual fund, but is this a better way to own a diverse portfolio of bonds rather than shares in a bond fund, which are subject to influence by other share owners?
by Don46
Fri Nov 15, 2013 10:43 pm
Forum: Personal Investments
Topic: Allocation Across Taxable and Tax Deferred Funds
Replies: 5
Views: 939

Re: Allocation Across Taxable and Tax Deferred Funds

This makes sense to me. At present my tax deferred account is full of losses from some very bad bets on bonds my investment manager put me into. I wish I could use them in my taxable account! There I have some big gains, which I will want to move out of slowly with an eye on my taxable income over the next few years
Now I want to move into bond funds in the tax deferred account
Thanks all
by Don46
Fri Nov 15, 2013 6:53 pm
Forum: Personal Investments
Topic: Allocation Across Taxable and Tax Deferred Funds
Replies: 5
Views: 939

Allocation Across Taxable and Tax Deferred Funds

I have my investments more or less evenly divided in taxable and tax deferred accounts, as it happens. I am transitioning from a situation in which an investment manager had my fixed income investments in the tax deferred account and the equity investments in the taxable. I want to arrive at something like a 50/50 allocation stock and fixed income. Should I use the taxable for one and the tax deferred for another kind of investment or have one mirror the other? I welcome your recommendations.
by Don46
Thu Nov 14, 2013 7:53 pm
Forum: Personal Investments
Topic: Three-Fund Portfolio - VBTLX vs. VBILX
Replies: 11
Views: 3713

Re: Three-Fund Portfolio - VBTLX vs. VBILX

Morningstar also rates VBILX as having HIGH historic risk, and shows it in the high interest rate sensitivity category. I'm looking at the Schwab summary page on each fund.
VBTLX in contrast is in the AVERAGE historic risk. Just glancing at the 10 year graphs for the two funds both appear to follow quite similar tracks.
But this "high risk" warning scares me off of VBILX. I'm about to redeploy about .6 million in my IRA and I want to find that sweet spot of low cost, low risk, and some reliable return on investment. I suppose I'll go with the lower risk, lower return option.
by Don46
Tue Nov 12, 2013 7:46 am
Forum: Personal Investments
Topic: Bond Mutual Fund VBTLX or Schwab ETF SCHZ?
Replies: 1
Views: 783

Bond Mutual Fund VBTLX or Schwab ETF SCHZ?

I have a Tax Deferred (IRA) account I want to allocate to some fixed income mutual fund or ETF. I have about 1.2 million in this account. This is a Schwab account and have access to very low cost ETFs. Should I consider an ETF alternative to Vanguard Total Bond Admiral Shares VBTLX, perhaps Schwab U.S. Aggregate Bond ETF SCHZ? This is an intermediate term bond fund and not the same bond mix as VBTLX, I realize, but how would this work for me as a ballast and income for my overall portfolio?
by Don46
Fri Nov 08, 2013 9:18 am
Forum: Personal Investments
Topic: Investing in Bonds
Replies: 39
Views: 3076

Re: Investing in Bonds

Twins Fan wrote: I'm not a big fan of total bond because of the MBS porting it holds. But, that's just my opinion. Others might like it because it has MBS in it.
I'm clueless: what is MBS? And why is this a problem with the Total Bond Fund? I'm still learning here.
by Don46
Fri Nov 08, 2013 8:44 am
Forum: Personal Investments
Topic: Investing in Bonds
Replies: 39
Views: 3076

Re: Investing in Bonds

My goal would be preservation of capital, ballast to protect against downside risk in the overall portfolio, and enough total return to offset to some degree at least inflation and taxes.
When we are talking about Total Bond Fund, is this the best choice: Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX)
I am seeing an expense ratio of .10 pct and average total returns of:
–1.18% 2.90% 6.04% 4.75% 4.72% for 1, 3, 5, 10 year, since inception, 2001.
I'm doing much worse than this with the managed account I have had for the past 3+ years, that's for sure. :annoyed
by Don46
Fri Nov 08, 2013 6:19 am
Forum: Personal Investments
Topic: Investing in Bonds
Replies: 39
Views: 3076

Re: Investing in Bonds

Retread wrote:
spocksynder wrote:Slightly off-topic, but I wonder how is possible to accumulate such a sum in an IRA if the annual contribution limits are just $5500 at present, and must have been lower in the previous years?
Very simple - rollovers from other qualified plans such as 401k's, lump sum pensions, etc.
Bruce
Exactly: I rolled over a 403b from a previous employer in 2004.
by Don46
Fri Nov 08, 2013 6:11 am
Forum: Personal Investments
Topic: Investing in Bonds
Replies: 39
Views: 3076

Re: Investing in Bonds

I have an IRA worth about 1.2 million with Schwab. Slightly off-topic, but I wonder how is possible to accumulate such a sum in an IRA if the annual contribution limits are just $5500 at present, and must have been lower in the previous years? I rolled over a 403b (like a 401k but usually for educators) from a former employer and an individual IRA I had been accumulating. The 403b I was in involved my contribution of 5% of my salary and the employer, a University, put in 10%. I started at about 11K total salary a year. I now have socked away another $485k in three other tax deferred accounts with my current employer. Still a portion of my salary is matched, more like 1 to 1 with this university, but the rest comes out of my salary. I'm def...
by Don46
Thu Nov 07, 2013 6:59 pm
Forum: Personal Investments
Topic: Investing in Bonds
Replies: 39
Views: 3076

Investing in Bonds

I have an IRA worth about 1.2 million with Schwab. My total investment portfolio is about 4 million. I want to put this IRA into fixed income investments for ballast and some steady income. I'm 67, not yet retired, in good health, and probably going to go another two years before I do retire. Overall I probably have about 60 percent of my main accounts in fixed income. I am transitioning from a managed IRA account and it has not done very well over the past three years. One option is to put it into a total bond fund but I'm wary of bond funds and wonder if I cannot achieve diversity some better way. A second option is to go with a Target fund. Does that avoid the problems of a bond fund? A third is to set up a portfolio of individual bonds ...
by Don46
Thu Nov 07, 2013 4:22 pm
Forum: Personal Finance (Not Investing)
Topic: Capital gains on Commercial Real Estate Query
Replies: 6
Views: 881

Re: Capital gains on Commercial Real Estate Query

MarkNYC wrote:Not sure why you're ignoring depreciation in the calculation of adjusted basis, since it's a significant factor in the amount of the taxable gain. My guess is that 17 years of depreciation on the various properties could be $300K or more, which reduces the basis and increases the taxable gain upon sale.
I realize depreciation will have to be factored in, but I wanted to know how the loan was treated first. My CPA informs me depreciation amounts to only 100k, but that cannot be right.
At present I'm shopping around for an accountant who knows what he is doing when it comes to commercial real estate and I'm gathering all my records.
by Don46
Wed Nov 06, 2013 9:24 am
Forum: Personal Finance (Not Investing)
Topic: Capital gains on Commercial Real Estate Query
Replies: 6
Views: 881

Re: Capital gains on Commercial Real Estate Query

It was hiding in plain sight! I take back my swipe at the IRS. Thanks for helping me on this. This makes a huge difference in what I take away from this deal. Now I'm going to have a talk with my CPA ... and then find a new one.
by Don46
Tue Nov 05, 2013 6:24 pm
Forum: Personal Finance (Not Investing)
Topic: Capital gains on Commercial Real Estate Query
Replies: 6
Views: 881

Re: Capital gains on Commercial Real Estate Query

thank you. That makes perfect sense. Otherwise I would, in effect, be paying capital gains tax on money I borrowed. Can I ask how you know this or what your authority is? I'm not doubting you, please be aware. My CPA charged me $550 to review this deal and tell me what my tax exposure would be. He set up the 1031 exchange. He knows about the loan because I've used him every year since to prepare my taxes. I spoke with him about it two times and he stuck to his scenario. I looked online at the IRS site, and publication 544, on sales of assets, and it was (surprise) complicated and opaque, but it seemed clear that the loan would factor into the capital gain calculation. I need to confirm this and then talk with my CPA (and then find a new one...
by Don46
Tue Nov 05, 2013 7:32 am
Forum: Personal Finance (Not Investing)
Topic: Capital gains on Commercial Real Estate Query
Replies: 6
Views: 881

Capital gains on Commercial Real Estate Query

I inherited a Commercial Real Estate (CRE) property in 1996 when my mother died. My cost basis was established at about $500k. I rolled this over into a second and then a third 1031 exchange property. I do not have the details of the first exchange, but at the sale of the second CRE in 2005 I came away with a net of $740k. My third and final property I bought for $1.2 million, using my $740k + a bank loan of $460k I am about to sell this third property for $1.3 million. I refinanced along the way and now owe $500k on the property. How do I figure my capital gains on this sale? I understand that my original cost basis ($500k) is subtracted from the current value: but what is that latter number? How does the borrowed money figure into the cal...
by Don46
Wed Oct 30, 2013 12:25 pm
Forum: Personal Investments
Topic: Rebalancing Taxable - psychology of paying taxes?
Replies: 19
Views: 1925

Re: Rebalancing Taxable - psychology of paying taxes?

I think it was late in 2000 after I had let some terrific gains in tech stocks (CISCO in mid 70s, bought under 10) run their course with the idea that I could take a 20 percent hit and still come out great. Then, gulp, a huge tech correction that left me absolutely sickened. I remember going to a meeting with Schwab clients, which was something like a group therapy session full of shell-shocked clients. The Schwab rep, reading my mind and probably others in the room, said "you didn't re-balance when stocks went up ... then the market re-balanced for you" ... "it hurts, doesn't it?" This was said more gently than it may sound here. Most of us laughed slightly, but it was indeed a painful lesson. I'm facing the same proble...
by Don46
Wed Oct 30, 2013 12:15 pm
Forum: Personal Investments
Topic: Real Estate vs Equities
Replies: 15
Views: 2090

Re: Real Estate vs Equities

So your friend is planning to buy some kind of commercial real estate property, not a REIT or some other indirect means of investing in the US (?) real estate market? Over the course of 40 years of investing I've had experience with residential and commercial real estate and I did all right, but it is fraught with risk, especially for non-professionals. You can get a great cash flow with what appears to be a stable tenant, but if the lease runs out or the tenant has problems, you are in trouble. Your cash flow reverses, and if you have a mortgage on the property, you can get in trouble fast. Commercial properties often take months, years even, to find good tenants, and the landlord often has to pay for improvements to get the tenant in. I h...
by Don46
Wed Oct 30, 2013 7:09 am
Forum: Personal Finance (Not Investing)
Topic: What does your CPA charge?
Replies: 30
Views: 7177

Re: What does your CPA charge?

What do you think you should be paying? why do you think a return should be about only a 4 hour job? What was the advice that you think should have involved no more than 1 hour's work? K-1s, business deductions and commercial RE investments are complicated. Try doing them yourself. Business deductions have high audit potential which requires careful preparation. I am always amused by taxpayers who think they know how much time should be spent on providing advice on a tax question that they cannot figure out the answer to. If you know how much time should be spent then you should be able to answer the question correctly yourself in that time frame. I don't know what I should be paying; that was why I posted the question. I don't want to do ...
by Don46
Wed Oct 30, 2013 6:32 am
Forum: Personal Finance (Not Investing)
Topic: Structured Sale in Commercial Real Estate Sale
Replies: 2
Views: 502

Re: Structured Sale in Commercial Real Estate Sale

The article (from May of 2012) refers to a 1031 rollover and like-kind exchange. What I am asking about is a structured (installment) sale of what was a 1031 investment I now want to sell, and not roll over. I've done the rollover twice and had no issues with the IRS.
by Don46
Tue Oct 29, 2013 8:19 pm
Forum: Personal Finance (Not Investing)
Topic: Structured Sale in Commercial Real Estate Sale
Replies: 2
Views: 502

Structured Sale in Commercial Real Estate Sale

I am about to sell what was a 1031 rollover commercial real estate investment. I want to learn more about doing a structured sale, as described here: http://en.wikipedia.org/wiki/Structured_sale
My goal is to postpone and spread out capital gains taxes and pay 15% instead of 20% capital gains.
I understand the concept, but I don't know how to go about setting it up, what it costs, and who would handle the investments and pay outs.
My lawyer and CPA are not familiar with this procedure. Why they do not causes me concern, but I want to learn more before deciding.
Thanks for any advice and information you can offer.
by Don46
Tue Oct 29, 2013 7:56 pm
Forum: Personal Finance (Not Investing)
Topic: What does your CPA charge?
Replies: 30
Views: 7177

Re: What does your CPA charge?

Thanks for all these responses. I'm not sure what I should be paying, and that is why I asked my question. I don't find myself asking friends what they pay for things. Most of my friends do not have incomes and tax returns that are comparable. They probably pay $300 a year or do it themselves and would think I should too.

How have some of you identified a good CPA? Do you ask friends? Brokers? Bankers? I'm open to suggestions.
Once I get a couple of leads, do you think it would be wise, useful to take last year's return to a prospective CPA and ask: what would you charge for this? What would you do differently? Get an estimate, in other words, and ask what kind of advice on tax planning I could expect and at what cost.
by Don46
Mon Oct 28, 2013 9:34 pm
Forum: Personal Finance (Not Investing)
Topic: What does your CPA charge?
Replies: 30
Views: 7177

What does your CPA charge?

I have been paying from $1500 to $2000 each year to a CPA for doing my taxes. This year he charged about $1500 but another $550 for advice that should have involved no more than one hour's work. He seemed to drag it out and make it more complicated than it was. This is a joint return with two salaries, one taxable portfolio that includes several Limited Partnerships that require K-1 forms, a commercial real estate investment, and various business expense deductions. I fill out a form he supplies, and I do it pretty carefully. I supply all the year end forms and try to make his job easy so it will save me money. I don't want to do my own taxes, but I'm mildly frustrated by the feeling that he's charging me a lot for what ought to be about a ...
by Don46
Fri Aug 30, 2013 11:16 pm
Forum: Personal Finance (Not Investing)
Topic: Capital Gains Tax Rates after Retirement Questions
Replies: 2
Views: 502

Capital Gains Tax Rates after Retirement Questions

My wife and I are planning to retire in two years. We have about $4 million in assets, some in real estate and stocks with a good deal of long term capital gains. Our income now is about $300k. After retirement I will get 30k social security. My will gets 25k in a pension. I have another 50k in commercial real estate income. So we will go from 300k to about 105k in benefits and income. Help me understand Long Term capital gains tax rates. When the LTCG rate is 15 percent on income 72,501 to 450,000, and 20% above 450k, does that refer to my ordinary income, pension, and (some of) social security? Or to the whole amount of income, including capital gains? Is there, I want to know, an obvious tax advantage for me in waiting to harvest capital...
by Don46
Tue Aug 13, 2013 7:37 pm
Forum: Personal Finance (Not Investing)
Topic: How do I find a good accountant?
Replies: 1
Views: 468

How do I find a good accountant?

I have been working with an accountant for several years. He was recommended by Schwab. He's OK but I'm concerned that he is too slow and charges more than his services are worth. I used to do my own taxes using Turbo Tax and I started hiring a preparer when my finances got more complicated.
How do others find a good accountant?
Ask friends? Does that work?
Is there any objective review site?
I welcome any advice or experience you have to share.
by Don46
Sun Aug 11, 2013 8:42 am
Forum: Personal Finance (Not Investing)
Topic: Estate planning, second marriage, kids and steps
Replies: 45
Views: 6229

Re: Estate planning, second marriage, kids and steps

Thank you BSteiner. There is a lot to digest here. I'll be honest, the trust and estate plan was all laid out for me by a lawyer recommended to me by Schwab when I moved to SC in 2004. I ran it by my a few others, including my brother who is a lawyer, and the plan for a living trust, an A B division seemed to be standard practice. I probably should know more about all this; as a lawyer and estate planner I make a pretty good history professor! This discussion has helped me clarify goals regarding my wife and daughters. Exactly how to achieve those goals is a matter I think I need to review, learn a little more about, and then work out a revised estate plan with a new lawyer. Honestly, I don't want to learn all about estate planning. I want ...
by Don46
Sat Aug 10, 2013 8:00 pm
Forum: Personal Finance (Not Investing)
Topic: Estate planning, second marriage, kids and steps
Replies: 45
Views: 6229

Re: Estate planning, second marriage, kids and steps

I'm not concerned that my wife might receive more assets than she contributes to our marriage at the end of our lives. That's marriage and I'm lucky to have someone I enjoy sharing my life with. I just want to set things up so she is comfortable financially if I die first and there is some reasonable guarantee of peace and good will between her and my daughters.
It seems clear we need to work out a budget for my wife, who is my first priority and build in some provision for extraordinary health costs or housing changes, for examples.
The administration of the estate, the trustee as one of you explained, is one thing I need to identify, but the more important problem is the plan of distribution at my death and going forward.
by Don46
Sat Aug 10, 2013 11:56 am
Forum: Personal Finance (Not Investing)
Topic: Estate planning, second marriage, kids and steps
Replies: 45
Views: 6229

Re: Estate planning, second marriage, kids and steps

This in't the whole solution but may provide some relief. My spouse is the beneficiary of my estate and my retirement accounts. I have set up the retirement accounts with our kids as secondary beneficiaries and the will says the same thing. My spouse has substantial assets of her own and may not need much or any of mine. So we have agreed that she will disclaim whatever amounts she doesn't need, getting those assets to our kids earlier than if I pass years ahead of her. I trust that she will do the right thing. That relieves her of having to manage the money for herself and on their eventual behalf. Whatever you decide to do with your step kids can be determined via provisions in your will. This would be the scenario I would prefer but two...
by Don46
Sat Aug 10, 2013 10:31 am
Forum: Personal Finance (Not Investing)
Topic: Estate planning, second marriage, kids and steps
Replies: 45
Views: 6229

Re: Estate planning, second marriage, kids and steps

BL wrote:The SS payback is not available after 12 months.
That is what I thought. I might have done this differently but I don't think it will make a huge difference in the scheme of things.
thanks