Seeking advice, review of portfolio

Have a question about your personal investments? No matter how simple or complex, you can ask it here.

Seeking advice, review of portfolio

Postby canderson » Wed Dec 26, 2012 10:17 pm

Greetings! First I should say I've long been a Boglehead, but for the last few years due to job issues, health issues and various other things I haven't (unfortunately) paid as much attention to my retirement accounts as I definitely should. Hence, finally registering here for the guidance of fellow Bogleheads!

What I'm seeking is general advice on my current fund distribution and feedback on the best way to simplify these accounts. I am married, we are both 32, hope to retire by 55-60 and will in 2013 be making likely a combined income of a bit north of $100,000. My wife was graciously given a large sum for UTMA's and Roth contributions for many, many years and I am now "in charge" of these accounts. For this, I have separated mine and hers.

Emergency funds: Yes, several months - probably too much actually. :)
Debt: Only house, 3.29 percent. Will have new car note in mid 2013, estimating a low rate as well.
Tax Filing Status: Single, Married Filing Jointly
Tax Rate: 8.15% federal (this will be going up, making $25,000 more annually this year), 3.01% State
State of Residence: Pennsylvania
Age: 31
Desired Asset allocation: Unknown, but higher on stocks
Desired International allocation: Unknown, but higher on stocks


Current retirement assets

HIS ACCOUNTS
ROTH IRA - Mid $30,000s
8% Strategic Equity Fund (VSEQX)
92% Target Retirement 2045 Fund (VTIVX)

HER ACCOUNTS
Combined, her Roth and UTMA equals Upper $200,000s.
ROTH IRA
0.30% Growth Equity Fund (VGEQX)
15.20% Health Care Fund Investor Shares (VGHCX)
7.40% International Growth Fund Investor Shares (VWIGX)
0.80% REIT Index Fund Investor Shares (VGSIX)
10.20% Strategic Equity Fund (VSEQX)

UTMA
53.30% Health Care Fund Admiral Shares
11.10% 1.70% Pennsylvania Long-Term Tax-Exempt Fund Investor Shares

401k - mid $20,000s
100% Fidelty Target Retirement Fund 2055

All Vanguard funds available to both; her account has access to Admiral and Investor shares.

QUESTIONS
1) I have yet to make our annual Roth contributions and thought now would be a good time for feedback. I am seeking advice on current allocations and if my current road is "acceptable" for someone who is OK with mostly stocks at this time (again, we are 31).

2) The UTMA accounts can't be exchanged without capital gain taxes of course, so I'm unsure (as we all are) if I should transfer these into the Roth prior to the Cliff or not. This isn't a question as much as a known issue I'll be facing like so many others.

3) Our asset allocation is clearly not the "four fund" approach - is it even possible / feasible to move in this route at this time?

Thank you all for your expertise. I am finally excited to be able to start thinking of the future again. Happy holidays to everyone!
canderson
 
Posts: 16
Joined: Wed Dec 26, 2012 9:12 pm

Re: Seeking advice, review of portfolio

Postby JW Nearly Retired » Wed Dec 26, 2012 11:37 pm

canderson wrote: The UTMA accounts can't be exchanged without capital gain taxes of course, so I'm unsure (as we all are) if I should transfer these into the Roth prior to the Cliff or not. This isn't a question as much as a known issue I'll be facing like so many others.

Sorry, but I'm pretty certain you can't transfer money from a taxable account into a Roth account in excess of the $5000/year Roth contribution limit, or in excess of her earnings this year, whichever is smaller. There is no process to "convert" taxable account money to tax advantaged money except by using it for the limited annual contribution amounts. If this was an IRA account (instead of a UTMA) you could convert the IRA money to Roth account money by paying the taxes due at her marginal tax bracket.
JW
Retired Summer 2013
JW Nearly Retired
 
Posts: 4109
Joined: Sun Dec 16, 2007 12:25 pm

Re: Seeking advice, review of portfolio

Postby canderson » Wed Dec 26, 2012 11:42 pm

JW, thank you for the reply.

I should have stated that more clearly - I'd only max out the Roth yearly contribution, not clean out the UTMA altogether. The UTMA has a substantial amount of money in those closed admiral shares at a low (iirc .30) cost.
canderson
 
Posts: 16
Joined: Wed Dec 26, 2012 9:12 pm

Re: Seeking advice, review of portfolio

Postby JW Nearly Retired » Wed Dec 26, 2012 11:57 pm

canderson wrote:JW, thank you for the reply.

I should have stated that more clearly - I'd only max out the Roth yearly contribution, not clean out the UTMA altogether. The UTMA has a substantial amount of money in those closed admiral shares at a low (iirc .30) cost.

I guess I read too much into your post.

If you are in the 15% marginal bracket, (8% effective I'm guessing is) then Roth contributions would be a reasonable choice. You could also max out the 401k contributions and use the UTMA money to make up for loss of take home pay. In that way you can in effect transfer more UTMA money to tax advantage accounts.
JW
Retired Summer 2013
JW Nearly Retired
 
Posts: 4109
Joined: Sun Dec 16, 2007 12:25 pm

Re: Seeking advice, review of portfolio

Postby canderson » Thu Dec 27, 2012 2:20 pm

JW Nearly Retired wrote:
canderson wrote:JW, thank you for the reply.

I should have stated that more clearly - I'd only max out the Roth yearly contribution, not clean out the UTMA altogether. The UTMA has a substantial amount of money in those closed admiral shares at a low (iirc .30) cost.

I guess I read too much into your post.

If you are in the 15% marginal bracket, (8% effective I'm guessing is) then Roth contributions would be a reasonable choice. You could also max out the 401k contributions and use the UTMA money to make up for loss of take home pay. In that way you can in effect transfer more UTMA money to tax advantage accounts.
JW

This is a great idea, thank you.

I'm not really clear on UTMAs as I hadn't heard of it before we became married. I need to examine the tax implications of withdrawing money from that account.

Concerning where our money is, do you believe it's a fairly solid plan or should I look into reshaping the portfolio?
canderson
 
Posts: 16
Joined: Wed Dec 26, 2012 9:12 pm

Re: Seeking advice, review of portfolio

Postby dbr » Thu Dec 27, 2012 2:38 pm

canderson wrote:
I'm not really clear on UTMAs as I hadn't heard of it before we became married. I need to examine the tax implications of withdrawing money from that account.



The UTMA should have been transferred to the custody of your wife long ago and would now be no different from any other taxable account. In short, it is no longer a UTMA unless the original custodian didn't do what they were supposed to. If that is the case, the situation should be fixed.
dbr
 
Posts: 14728
Joined: Sun Mar 04, 2007 9:50 am

Re: Seeking advice, review of portfolio

Postby canderson » Thu Dec 27, 2012 4:40 pm

dbr wrote:
canderson wrote:
I'm not really clear on UTMAs as I hadn't heard of it before we became married. I need to examine the tax implications of withdrawing money from that account.



The UTMA should have been transferred to the custody of your wife long ago and would now be no different from any other taxable account. In short, it is no longer a UTMA unless the original custodian didn't do what they were supposed to. If that is the case, the situation should be fixed.

We have access to it, but we should (you're right) move it from the UTMA grouping. I will contact Vanguard and my FIL on this soon for the proper paperwork. One reason it's still there is so it's linked to the family's Vanguard account and we have Admiral access.

Do you by chance have thoughts on our asset allocation? Not the funds themselves but the diversification and tax liabilities? Tax liability is my big, big weakness; I'm far from a numbers guy and frankly and honestly can't begin to wrap my head around tax policies and loopholes.
canderson
 
Posts: 16
Joined: Wed Dec 26, 2012 9:12 pm

Re: Seeking advice, review of portfolio

Postby JW Nearly Retired » Thu Dec 27, 2012 7:18 pm

canderson,
When you sell an appreciated asset you pay capital gains tax on your sale price less what you paid for it and sales expense. The rate you pay depends on your tax bracket. It's lower than the rate you pay on wages. What was paid for the asset is sometimes hard to determine if you don't have good records. Since this was originally one or more "gifts" from FIL, the original cost basis is what he paid for the asset(s). He hopefully has records. (it would be easier to talk about this if you would tell us what it is..... stocks, mutual funds, bonds, CD, what?). Usually if it was some kind of mutual fund account and distributions were reinvested (I'm guessing that's likely) then there would be periodic investments of distributions that would add to this original cost basis. You may need to have records and add the distributions and original cost all up to get the current cost basis. Or, if you are more fortunate, the original fund company is still holding this account and should be able to tell you the total cost basis. Possibly it is listed on the account web site or annual statements.

For starters:
see http://www.bogleheads.org/wiki/Capital_ ... stribution
and http://www.bogleheads.org/wiki/Cost_basis_methods
JW
Retired Summer 2013
JW Nearly Retired
 
Posts: 4109
Joined: Sun Dec 16, 2007 12:25 pm

Re: Seeking advice, review of portfolio

Postby canderson » Thu Dec 27, 2012 8:07 pm

JW Nearly Retired wrote:canderson,
When you sell an appreciated asset you pay capital gains tax on your sale price less what you paid for it and sales expense. The rate you pay depends on your tax bracket. It's lower than the rate you pay on wages. What was paid for the asset is sometimes hard to determine if you don't have good records. Since this was originally one or more "gifts" from FIL, the original cost basis is what he paid for the asset(s). He hopefully has records. (it would be easier to talk about this if you would tell us what it is..... stocks, mutual funds, bonds, CD, what?). Usually if it was some kind of mutual fund account and distributions were reinvested (I'm guessing that's likely) then there would be periodic investments of distributions that would add to this original cost basis. You may need to have records and add the distributions and original cost all up to get the current cost basis. Or, if you are more fortunate, the original fund company is still holding this account and should be able to tell you the total cost basis. Possibly it is listed on the account web site or annual statements.

For starters:
see http://www.bogleheads.org/wiki/Capital_ ... stribution
and http://www.bogleheads.org/wiki/Cost_basis_methods
JW


JW, the UTMA accounts are both w/ Vanguard

Health Care Fund Admiral Shares
Pennsylvania Long-Term Tax-Exempt Fund Investor Shares

In total these amount to something like $185,000. They have always been held by Vanguard and never exchanged, and dividends/gains paid back into the account. I'm certain we can find the cost through Vanguard. I like the money gains these funds have seen, and would like to keep them status-quo for the most part. Looking at then led to my post actually, because when they become traditional IRAs I was studying whether to move funds around. ;)

Thank you for those links, I will read them this evening most certainly!
canderson
 
Posts: 16
Joined: Wed Dec 26, 2012 9:12 pm


Return to Investing - Help with Personal Investments

Who is online

Users browsing this forum: fposte, hank10, NOVACPA, papiper, Rob Bertram, ruralavalon, SefuLaBani, tigermilk, vested1, whoever, Yahoo [Bot] and 70 guests