Retired Newbie Looking for Portfolio Help

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Retired Newbie Looking for Portfolio Help

Postby Woodhead » Wed Mar 20, 2013 1:07 am

Thanks in advance to anyone who takes the time to look over this. I've tried my best to organize it as requested. It would be best to review the post at the following link as it pretty well chronicles where I'm at at this point. My hope is that I'll get the advice and encouragement I need to complete this transition with my portfolio. Moving it entirely to Vanguard and out of my currently managed accounts at Wells Fargo Advisers. I am willing to candidly answer questions and I can probably set up a link making it possible to share a more detailed look at our portfolio including ticker symbols etc through private messaging.

Because there is so much information to look over it seems that it's going unnoticed in my previous post (see link below) that we currently have income from outside our portfolio and expect too for a number of years. For this reason we are not making regular withdrawals (we have pulled about 32K over the past 3 years for some unforeseen expenses, mostly bad money management, but we've hopefully corrected or management/spending problems). We also maintain a Sub-S corporation, which is how we continue to make IRA contributions (now Roth) and avoid pulling form our portfolio).

Thanks, Pete

http://www.bogleheads.org/forum/viewtopic.php?f=10&t=112482&p=1643697#p1643697

Relevant reading done to date
Live More, Work Less, Bob Clyatt
Coffeehouse Investor, Bill Schultheis
On the Bogleheads.org Wiki
Getting Started, and more
On Investopedia.com
Bond Basics and Stock Basics
I'm currently pushing through "Asset Allocations, 2nd Edition", Rick Ferris, but most of the graphs make no sense to me so it's slow going.


Emergency funds: 6 months of expenses (not included below)

His HSA Account (not included below)
$5,155 (VWENX)

Her HSA Account (not included below)
Similar Amt (VWENX)

Debt: None

Tax Filing Status: Married Filing Jointly

Tax Rate: xx% Federal, xx% State (waiting of this from my accountant but I know it's either 10 or 15% Federal and I'm not sure of the State, but I'll add it within a day or two.

State of Residence: Virginia (currently)

Age: His, 61 (Bday Feb.) Her, 58 (BDay May)

Desired Asset allocation: 60% stocks / 40% bonds

Desired International allocation: 30% of stocks (Looking for opinions on this,
I’m also not sure of the bond mix I should have.

Portfolio Size: High 6 figures

Current retirement assets
The Wells Fargo accounts each contain approximately 60 different Stock, ETF and MF. They are often replicated in each account which is why I am not listing them individually. Instead, I am providing the Wells Fargo breakdown per account.

Joint Taxable Account Wells Fargo (37.1% 0f total portfolio)
68.5% Equity
25.2% Fixed Income (Bond Funds)
04.0% Alternative Investments
02.3% Cash/Cash Alternatives
00.1% Other

His SEP IRA Well Fargo Wells Fargo (31.6%)
71.7% Equity
15.6% Fixed Income (Bond Funds)
01.0% Alternative Investments
11.7% Cash/Cash Alternatives
00.0% Other

Her SEP IRA at Wells Fargo Wells Fargo (28.1%)
62.5% Equity
22.7% Fixed Income (Bond Funds)
00.9% Alternative Investments
13.9% Cash/Cash Alternatives
00.1% Other

Joint Taxable Account, Vanguard (02.0%)

His Roth IRA, Vanguard (00.6%)
(Just opened His and Her Roth accounts, using money market until decision on asset Allocation and funds are decided)
(WMMXX) Funded for 2012

Her Roth IRA, Vanguard (00.6%)
(WMMXX) Funded for 2012
Last edited by Woodhead on Wed Mar 20, 2013 11:03 am, edited 3 times in total.
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Re: Retired Newbie Looking for Portfolio Help

Postby BillyG » Wed Mar 20, 2013 7:09 am

I see you were up late last night working on this...

The SEP IRAs should be pretty straightforward to rollover to Vanguard without tax issues.

The Roth IRAs could be invested in Vanguard Total Stock Market Index. Other may offer different advice. See this Wiki article on tax efficient fund placement:
http://www.bogleheads.org/wiki/Principl ... tock_funds

The taxable account is more tricky because you will take a tax hit if you sell, assuming you have gains. I see you are waiting to get your tax rate information, and this will be helpful. A couple of questions are in order.

What are the long/short term gains for each of the WF taxable accounts? (It may make sense to sell some but not all of them, or maybe you can offset some gains with losses.)

You say Virginia is your "current" residence. Does this mean you are contemplating moving? Would you be moving to a state with lower tax rates?

Of course it's no problem to move the WF cash to Vanguard.

Billy
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Re: Retired Newbie Looking for Portfolio Help

Postby Woodhead » Wed Mar 20, 2013 8:52 am

BillyG wrote:I see you were up late last night working on this...

The SEP IRAs should be pretty straightforward to rollover to Vanguard without tax issues.

The Roth IRAs could be invested in Vanguard Total Stock Market Index. Other may offer different advice. See this Wiki article on tax efficient fund placement:
http://www.bogleheads.org/wiki/Principl ... tock_funds

The taxable account is more tricky because you will take a tax hit if you sell, assuming you have gains. I see you are waiting to get your tax rate information, and this will be helpful. A couple of questions are in order.

What are the long/short term gains for each of the WF taxable accounts? (It may make sense to sell some but not all of them, or maybe you can offset some gains with losses.)

You say Virginia is your "current" residence. Does this mean you are contemplating moving? Would you be moving to a state with lower tax rates?

Of course it's no problem to move the WF cash to Vanguard.

Billy


Hi BillyG,

Yeah, last night was a late one, but I have an urgency to get this done. The wife and I are preparing for an approximate 4 month RVing trip with our Airstream beginning April 26th. My goal is to have moved my portfolio over to Vanguard before we leave and have my IRAs properly invested.

Until further notice I'll be speaking entirely about the taxable account. Addressing short term gains first. The last buying and selling activity was on April 26, 2012 (Ironic since that is the first day of our upcoming trip). Anyway my broker never had a habit of selling anything that was up so, I'm pretty sure everything he sold had lost money at that point. Using some of that money (about 16K) he bought 2 new bond funds or ETFs (PIMAX, CSJ) I'm not sure which. Unless reinvesting dividends counts as short term, everything else is long term. I'm going to make an unqualified guess that there are minimal short term gains if any. On the long term side I'm not even sure how to figure it exactly, it looks like a lot of work, although it probably seems more so to me than it is. Any advice on doing this would be appreciated.

As far as moving goes, our plan is to kill 2 birds with one stone, relocate our residency to a state that is kinder on income and property taxes, and rent out our current home which is a lovely place on a nice lake, but just to large for our needs. We've come to realize that while beautiful it no longer makes financial sense to live here. We actually have already rented it out (furnished) for about 1-1/2 months while we'll be traveling. Anyway we're looking into changing residency, but we haven't chosen a place yet. I hope I've answered your questions. I've glanced over the link you provided and I'm going to read it next, after which I'll post again with questions, etc.

Pete
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Re: Retired Newbie Looking for Portfolio Help

Postby pkcrafter » Wed Mar 20, 2013 9:44 am

Woodhead, what % of total assets, (including emergency fund) are you withdrawing for annual expenses? If you are retired, you cannot contribute to a Roth, was this a conversion?

Paul
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Re: Retired Newbie Looking for Portfolio Help

Postby YDNAL » Wed Mar 20, 2013 10:42 am

Woodhead wrote:Thanks in advance to anyone who takes the time to look over this. I've tried my best to organize it as requested. It would be best to review the post at the following link as it pretty well chronicles where I'm at at this point. My hope is that I'll get the advice and encouragement I need to complete this transition with my portfolio. Moving it entirely to Vanguard and out of my currently managed accounts at Wells Fargo Advisers. I am willing to candidly answer questions and I can probably set up a link making it possible to share a more detailed look at our portfolio including ticker symbols etc through private messaging.

Thanks, Pete

Pete, a belated welcome (8 posts) to the Forum!

I have mostly questions:
  1. High 6-figure portfolio is fine, so long as you don't consume 10% of it annually (just some number to throw out there), since you are a "retired newbie" as per the subject in this post. How much do you anticipate consuming before you begin taking SS benefits ?
    Portfolio Size: High 6 figures

    Current retirement assets
    The Wells Fargo accounts each contain approximately 60 different Stock, ETF and MF. They are often replicated in each account which is why I am not listing them individually. Instead, I am providing the Wells Fargo breakdown per account.
  2. When you say "Wells Fargo accounts," are we to assume that SEP IRAs also include 60 different Stock, ETF and MF each? IF that were the case, I would start by selling everything these SEP IRAs.
  3. Regarding the Taxable account, any income/capital gain you realize can put you in a higher bracket. Despite you saying that you are in the 10-15% tax bracket (very important to confirm), it is highly important to determine the tax consequence of ANY move you make.
Landy | Be yourself, everyone else is already taken -- Oscar Wilde
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Re: Retired Newbie Looking for Portfolio Help

Postby Woodhead » Wed Mar 20, 2013 10:49 am

pkcrafter wrote:Woodhead, what % of total assets, (including emergency fund) are you withdrawing for annual expenses? If you are retired, you cannot contribute to a Roth, was this a conversion?

Paul


Sorry for the confusion Paul.

In the post on a previous thread which I linked to in the beginning of my opening post on this thread I mentioned that we currently have income. Some from our prior business and some from rental property we own. We still maintain a sub-S Corporation which we've had for about 30 years. I plan to keep the rental property for as long as it makes sense and and I plan on renting out our current home full time just as soon as we can make that work. So, that is how we are able to continue making IRA contributions. It is also why we are not withdrawing anything from our portfolio. Having said that, I will admit that in the past 3 years we did pull out about 32K for some unusual expenses.

Now that we are in a very low tax bracket it seems to makes sense to make those contributions utilizing Roth IRAs. After we complete our portfolio transition it looks to me like it will also make sense to begin rollovers (a little at a time) of our current SEP IRAs into our Roths. At least that's part of the Master Plan. Haha :wink:

Pete
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Re: Retired Newbie Looking for Portfolio Help

Postby Woodhead » Wed Mar 20, 2013 11:34 am

YDNAL wrote:Pete, a belated welcome (8 posts) to the Forum!

I have mostly questions:
  1. High 6-figure portfolio is fine, so long as you don't consume 10% of it annually (just some number to throw out there), since you are a "retired newbie" as per the subject in this post. How much do you anticipate consuming before you begin taking SS benefits ?
    Portfolio Size: High 6 figures

    Current retirement assets
    The Wells Fargo accounts each contain approximately 60 different Stock, ETF and MF. They are often replicated in each account which is why I am not listing them individually. Instead, I am providing the Wells Fargo breakdown per account.
  2. When you say "Wells Fargo accounts," are we to assume that SEP IRAs also include 60 different Stock, ETF and MF each? IF that were the case, I would start by selling everything these SEP IRAs.
  3. Regarding the Taxable account, any income/capital gain you realize can put you in a higher bracket. Despite you saying that you are in the 10-15% tax bracket (very important to confirm), it is highly important to determine the tax consequence of ANY move you make.


Thanks for your welcome YDNAL, I'm already feeling right at home.

I've gone ahead and modified the opening post to explain the following. I think it will answer a few of your questions.
Because there is so much information to look over it seems that it's going unnoticed in my previous post (see link below) that we currently have income from outside our portfolio and expect too for a number of years. For this reason we are not making regular withdrawals (we have pulled about 32K over the past 3 years for some unforeseen expenses, mostly bad money management, but we've hopefully corrected or management/spending problems). We also maintain a Sub-S corporation, which is how we continue to make IRA contributions (now Roth) and avoid pulling form our portfolio).
http://www.bogleheads.org/forum/viewtopic.php?f=10&t=112482&p=1643697#p1643697


When we do begin making scheduled yearly withdraws form our portfolio I'm imagining it will be in the 4% area maybe a bit higher, but I doubt it will be anywhere near 10% (but, never say never I guess). SS is still 5 years away for me if I decide to begin at 66 when I'm eligible and my wife is still 7+ years away (I like em young, haha).

To address your other question, yes there are 60 different Stock, ETF and MF in each account, our joint account, her Sep account and My Sep account. I'm trying to come up with a way of showing the spread including ticker symbols and percentages without showing the Full Montey, if you know what i mean. :happy

I guess my broker/manager just found it easier to triplicate everything he did. Now that's what I call a truly "Lazy Portfolio". Gotta laugh right. Honey, where's my gun?

So, as you pointed out one of my biggest problems is how to make the transition with the least amount of taxable exposure, raising my tax bracket, etc. BUT, where I need to go first is allocation and then I'll worry about the rest. I need to settle on some funds that make sense and work out from there. I'm thinking maybe I'll pick one of the boglehead lazy portfolio's just to have a starting point and move on from there as needed, if needed.

I will post my tax bracket up top just as soon as I have it.

Pete
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Re: Retired Newbie Looking for Portfolio Help

Postby YDNAL » Wed Mar 20, 2013 12:17 pm

Woodhead wrote:Thanks for your welcome YDNAL, I'm already feeling right at home.

I've gone ahead and modified the opening post to explain the following. I think it will answer a few of your questions.
Because there is so much information to look over it seems that it's going unnoticed in my previous post (see link below) that we currently have income from outside our portfolio and expect too for a number of years. For this reason we are not making regular withdrawals (we have pulled about 32K over the past 3 years for some unforeseen expenses, mostly bad money management, but we've hopefully corrected or management/spending problems). We also maintain a Sub-S corporation, which is how we continue to make IRA contributions (now Roth) and avoid pulling form our portfolio).
http://www.bogleheads.org/forum/viewtopic.php?f=10&t=112482&p=1643697#p1643697


When we do begin making scheduled yearly withdraws form our portfolio I'm imagining it will be in the 4% area maybe a bit higher, but I doubt it will be anywhere near 10% (but, never say never I guess). SS is still 5 years away for me if I decide to begin at 66 when I'm eligible and my wife is still 7+ years away (I like em young, haha).

To address your other question, yes there are 60 different Stock, ETF and MF in each account, our joint account, her Sep account and My Sep account. I'm trying to come up with a way of showing the spread including ticker symbols and percentages without showing the Full Montey, if you know what i mean. :happy

I guess my broker/manager just found it easier to triplicate everything he did. Now that's what I call a truly "Lazy Portfolio". Gotta laugh right. Honey, where's my gun?

So, as you pointed out one of my biggest problems is how to make the transition with the least amount of taxable exposure, raising my tax bracket, etc. BUT, where I need to go first is allocation and then I'll worry about the rest. I need to settle on some funds that make sense and work out from there. I'm thinking maybe I'll pick one of the boglehead lazy portfolio's just to have a starting point and move on from there as needed, if needed.

I will post my tax bracket up top just as soon as I have it.

Pete

Pete,

Your broker knows exactly what (s)he is doing... the more junk, the more it seems that you need the services to invest/manage a portfolio. Of course, this can't be further from the truth.

1. I don't need to see how these Wells Fargo accounts (60 holdings each) are invested. Sell everything in the SEP IRAs (no tax consideration here).
a) You don't need undiversified individual Stock risk.
b) You don't need but very few well diversified, low cost Index Funds.

2. Sell everything in the Taxable account with a loss. Anything with a gain needs a bit further review.

3. Since you want 60/40 Equity/Fixed, and since Taxable is 37% of the portfolio where you should hold tax-efficient Equities (Stocks), you can build a simple and diversified portfolio with initial focus on SEP IRAs at Vanguard:
His SEP IRA Well Fargo Wells Fargo (31.6%)
71.7% Equity
15.6% Fixed Income (Bond Funds)
01.0% Alternative Investments
11.7% Cash/Cash Alternatives
00.0% Other

20% Vanguard Intermediate-Term Bond Index Fund Admiral Shares (VBILX)
https://personal.vanguard.com/us/funds/ ... =INT#tab=2
11.6% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)
https://personal.vanguard.com/us/funds/ ... =INT#tab=2

Her SEP IRA at Wells Fargo Wells Fargo (28.1%)
62.5% Equity
22.7% Fixed Income (Bond Funds)
00.9% Alternative Investments
13.9% Cash/Cash Alternatives
00.1% Other

20% Vanguard Intermediate-Term Bond Index Fund Admiral Shares (VBILX)
8.1% Vanguard Total International Stock Index Fund Admiral Shares (VTIAX)
https://personal.vanguard.com/us/funds/ ... =INT#tab=2

Joint Taxable Account, Vanguard (02.0%)

His Roth IRA, Vanguard (00.6%)
(Just opened His and Her Roth accounts, using money market until decision on asset Allocation and funds are decided)
(WMMXX) Funded for 2012

Her Roth IRA, Vanguard (00.6%)
(WMMXX) Funded for 2012

4. There, 60% of your money in 3 Index Funds!
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Re: Retired Newbie Looking for Portfolio Help

Postby Default User BR » Wed Mar 20, 2013 2:28 pm

Before anything else, I'd get those accounts converted to WellsTrade self-directed brokerage accounts. Then open a PMA and link it to all of them. Do it before 4/1 to guarantee 100 free transactions in each account. Even if the ultimate plan is to move to Vanguard (I wouldn't, but you might want that) this would allow you to clean up things inexpensively. You will still owe a transfer fee if you leave, but you probably will anyway.


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Re: Retired Newbie Looking for Portfolio Help

Postby Woodhead » Wed Mar 20, 2013 3:19 pm

YDNAL wrote:Pete,

Your broker knows exactly what (s)he is doing... the more junk, the more it seems that you need the services to invest/manage a portfolio. Of course, this can't be further from the truth.

1. I don't need to see how these Wells Fargo accounts (60 holdings each) are invested. Sell everything in the SEP IRAs (no tax consideration here).
a) You don't need undiversified individual Stock risk.
b) You don't need but very few well diversified, low cost Index Funds.

2. Sell everything in the Taxable account with a loss. Anything with a gain needs a bit further review.

3. Since you want 60/40 Equity/Fixed, and since Taxable is 37% of the portfolio where you should hold tax-efficient Equities (Stocks), you can build a simple and diversified portfolio with initial focus on SEP IRAs at Vanguard:
His SEP IRA (31.6%)
20% Vanguard Intermediate-Term Bond Index Fund Admiral Shares (VBILX)
https://personal.vanguard.com/us/funds/ ... =INT#tab=2
11.6% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)
https://personal.vanguard.com/us/funds/ ... =INT#tab=2

Her SEP IRA (28.1%)
20% Vanguard Intermediate-Term Bond Index Fund Admiral Shares (VBILX)
8.1% Vanguard Total International Stock Index Fund Admiral Shares (VTIAX)
https://personal.vanguard.com/us/funds/ ... =INT#tab=2

Joint Taxable Account, Vanguard (02.0%)

His Roth IRA, Vanguard (00.6%)

Her Roth IRA, Vanguard (00.6%)

4. There, 60% of your money in 3 Index Funds!


Landy,

Thanks for your advice. Pretty slick.

I have a few questions.
    Why not split the Equity funds a bit finer? On the US side include some Full Market or S&P Index and some large and small value funds. On the International side divide it into Europe, Pacific Rim and Emerging markets. I've read this extra diversification provides a bit better return.
    When it comes to bonds I've also read that similarly its' often better to split them up as well. Admittedly I'm less familiar with bond classes at this point.
    What about all of the bonds that are left in the taxable portion by ignoring them it seems that I'll be a bit lopsided until such time as I can get the taxable portion changed over. While I value the benefit of the bonds it wouldn't this also cost me some performance?
    Lasly although a small part at this juncture, I wonder where the Roths fit into the scheme of things as you have suggested them?

Pete
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Re: Retired Newbie Looking for Portfolio Help

Postby Woodhead » Wed Mar 20, 2013 3:22 pm

Default User BR wrote:Before anything else, I'd get those accounts converted to WellsTrade self-directed brokerage accounts. Then open a PMA and link it to all of them. Do it before 4/1 to guarantee 100 free transactions in each account. Even if the ultimate plan is to move to Vanguard (I wouldn't, but you might want that) this would allow you to clean up things inexpensively. You will still owe a transfer fee if you leave, but you probably will anyway.

Brian


HI Brian,

Are you suggesting that I do this to end the management fees? Also you seem to suggest that you don't agree with my plan to move everything to Vanguard. Is that correct?

Pete
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Re: Retired Newbie Looking for Portfolio Help

Postby Default User BR » Wed Mar 20, 2013 3:31 pm

Woodhead wrote:
Default User BR wrote:Before anything else, I'd get those accounts converted to WellsTrade self-directed brokerage accounts. Then open a PMA and link it to all of them. Do it before 4/1 to guarantee 100 free transactions in each account. Even if the ultimate plan is to move to Vanguard (I wouldn't, but you might want that) this would allow you to clean up things inexpensively. You will still owe a transfer fee if you leave, but you probably will anyway.

Are you suggesting that I do this to end the management fees? Also you seem to suggest that you don't agree with my plan to move everything to Vanguard. Is that correct?

Besides the management fees, you will receive 100 free transactions to sell and buy stocks, ETFs, or mutual funds. Presumably your plan is to clean up a lot of what's in there currently and head for an index approach. To avoid transaction fees and commissions, the PMA deal is a good one, but it is ending for new customers soon. I don't know the details, but I would guess that you need it all set up to be grandfathered in.

While significant portion of my portfolio (practically the entire non-401(k) amount) is comprised of Vanguard products, I don't use them as a custodian. I use mainly ETFs and hold them at various discount brokerages. Several are offering bonuses for moving assets to them. But if you'd like to move to Vanguard, I don't think it's a bad idea, just not what I would do.


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Re: Retired Newbie Looking for Portfolio Help

Postby YDNAL » Wed Mar 20, 2013 3:39 pm

Woodhead wrote:Landy,

Thanks for your advice. Pretty slick.

I have a few questions.
    Why not split the Equity funds a bit finer? On the US side include some Full Market or S&P Index and some large and small value funds. On the International side divide it into Europe, Pacific Rim and Emerging markets. I've read this extra diversification provides a bit better return.
    When it comes to bonds I've also read that similarly its' often better to split them up as well. Admittedly I'm less familiar with bond classes at this point.
    What about all of the bonds that are left in the taxable portion by ignoring them it seems that I'll be a bit lopsided until such time as I can get the taxable portion changed over. While I value the benefit of the bonds it wouldn't this also cost me some performance?
    Lasly although a small part at this juncture, I wonder where the Roths fit into the scheme of things as you have suggested them?

Pete

Pete,

I don't suggest anything other than Total Market investing unless the person explicitly wants something different.

From what you write,
1. There is no reason for Total Maket or S&P 500 Fund plus some large caps. This eliminates that issue. With regards to Small Caps, many people like to believe that there is added risk for which there is added expected return. The problem is that this expectation may take years and years that many people don't have or don't care to wait.

2. With regards to Europe/Pacific/Emerging the same as above applies. You could overweight a Region based on some expectation which may (may not) materialize for you.

3. I don't worry about the Roth because these are immaterial and IF you decide to make conversions what applies to SEP IRAs would apply to Roth IRAs.

4. You shouldn't have Bonds in Taxable - why?... because you don't need to. Get rid of them!
a) That said, if you wanted some Municipals, for instance, even though we still don't have confirmation on your tax bracket, you can reduce Bonds in SEP IRAs and increase Stocks in SEP IRAs. See, these things should move in unisome... a unified portfolio.

I hope that helps. Gotta run!
Landy | Be yourself, everyone else is already taken -- Oscar Wilde
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Re: Retired Newbie Looking for Portfolio Help

Postby Woodhead » Wed Mar 20, 2013 5:12 pm

Default User BR wrote:Besides the management fees, you will receive 100 free transactions to sell and buy stocks, ETFs, or mutual funds. Presumably your plan is to clean up a lot of what's in there currently and head for an index approach. To avoid transaction fees and commissions, the PMA deal is a good one, but it is ending for new customers soon. I don't know the details, but I would guess that you need it all set up to be grandfathered in.

While significant portion of my portfolio (practically the entire non-401(k) amount) is comprised of Vanguard products, I don't use them as a custodian. I use mainly ETFs and hold them at various discount brokerages. Several are offering bonuses for moving assets to them. But if you'd like to move to Vanguard, I don't think it's a bad idea, just not what I would do.

Brian


Brian,
I intend to look into the PMA deal tomorrow. It really seems to make sense, eliminate the management account fees, but get free trades to get done what I need to. Thank you for being so sharp and for bringing it to my attention.

As for my reasons on moving everything to Vanguard, I'm trying to simplify my life. Learning all that I'm having to learn is already more involvement that I want, but I know it's necessary. Moving from brokerage to brokerage adds yet another layer I'm sure I don't want. You're a better man than I. :beer
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Re: Retired Newbie Looking for Portfolio Help

Postby Woodhead » Wed Mar 20, 2013 5:33 pm

YDNAL wrote:Pete,

I don't suggest anything other than Total Market investing unless the person explicitly wants something different.

From what you write,
1. There is no reason for Total Maket or S&P 500 Fund plus some large caps. This eliminates that issue. With regards to Small Caps, many people like to believe that there is added risk for which there is added expected return. The problem is that this expectation may take years and years that many people don't have or don't care to wait.

2. With regards to Europe/Pacific/Emerging the same as above applies. You could overweight a Region based on some expectation which may (may not) materialize for you.

3. I don't worry about the Roth because these are immaterial and IF you decide to make conversions what applies to SEP IRAs would apply to Roth IRAs.

4. You shouldn't have Bonds in Taxable - why?... because you don't need to. Get rid of them!
a) That said, if you wanted some Municipals, for instance, even though we still don't have confirmation on your tax bracket, you can reduce Bonds in SEP IRAs and increase Stocks in SEP IRAs. See, these things should move in unisome... a unified portfolio.

I hope that helps. Gotta run!


Landy,

Thanks, it's good to get another take.

Regarding points 1 & 2, I don't wish to belabor this question, but I guess I am going to anyway. I hope this does not come across as contentious because I certainly do not mean it to, I'm simply wondering if this is the investment strategy you use personally? If so, you obviously have found it satisfactory. I just don't have the deep understanding or experience to back up my decisions in this area as you seem to. It's also because what I've read so far seems to run slightly counter to your suggestion. I sincerely hope I'm not offending you.

No. 3 & 4 I get. I wasn't suggesting that I keep the bonds in the taxable account, at this point I know that's kind of dumb. I mentioned it as a concern because I may not be able to dump them all at once due to the tax implications. Bonds total just over 95K in that account. I guess there will be tax implications either way though, huh.

I really appreciate your patience and advice in helping me noodle through this.

Pete
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Re: Retired Newbie Looking for Portfolio Help

Postby YDNAL » Wed Mar 20, 2013 6:00 pm

Woodhead wrote:
YDNAL wrote:Pete,

I don't suggest anything other than Total Market investing unless the person explicitly wants something different.

From what you write,
1. There is no reason for Total Maket or S&P 500 Fund plus some large caps. This eliminates that issue. With regards to Small Caps, many people like to believe that there is added risk for which there is added expected return. The problem is that this expectation may take years and years that many people don't have or don't care to wait.

2. With regards to Europe/Pacific/Emerging the same as above applies. You could overweight a Region based on some expectation which may (may not) materialize for you.

Landy,

Thanks, it's good to get another take. Regarding points 1 & 2, I don't wish to belabor this question, but I guess I am going to anyway. I hope this does not come across as contentious because I certainly do not mean it to, I'm simply wondering if this is the investment strategy you use personally? If so, you obviously have found it satisfactory. I just have no deep understanding or experience to back up my decisions in this area.

I believe that Total Market investing provides what MOST investors need as far as diversification and avoiding bets. Each individual should develop THEIR plan based on Ability & Need for risk, considering expected return/risk to meet goals and objectives. Personally, I don't own Foreign Large Caps - but that is really irrelevant since my personal circumstances may be (likely) nothing like the next person's personal circumstances.

Woodhead wrote:
YDNAL wrote:3. I don't worry about the Roth because these are immaterial and IF you decide to make conversions what applies to SEP IRAs would apply to Roth IRAs.

4. You shouldn't have Bonds in Taxable - why?... because you don't need to. Get rid of them!
a) That said, if you wanted some Municipals, for instance, even though we still don't have confirmation on your tax bracket, you can reduce Bonds in SEP IRAs and increase Stocks in SEP IRAs. See, these things should move in unisome... a unified portfolio.

I hope that helps. Gotta run!

No[w] 3 & 4 I get. I wasn't suggesting that I keep the bonds in the taxable account merely that I may not be able to dump them all at once due to the tax question. They total just over 95K in that account.

Yes, taxes are very important. Lastly, a shift/change in investing plan should not be done overnight and should take as long as it has to take - in other words, getting rid of Bonds in Taxable doesn't neet to happen tomorrow.
Landy | Be yourself, everyone else is already taken -- Oscar Wilde
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Re: Retired Newbie Looking for Portfolio Help

Postby Default User BR » Wed Mar 20, 2013 6:21 pm

Woodhead wrote:I intend to look into the PMA deal tomorrow. It really seems to make sense, eliminate the management account fees, but get free trades to get done what I need to.

I'd give the WellsTrade people a call, tell them what you have and what you want to do. They should be able to guide you:

WellsTrade: 1-800-TRADERS (872-3377)


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Re: Retired Newbie Looking for Portfolio Help

Postby Woodhead » Wed Mar 20, 2013 8:30 pm

Thanks landy and Brian, I'll follow up when I have something worthwhile to report.

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Re: Retired Newbie Looking for Portfolio Help

Postby BillyG » Wed Mar 20, 2013 8:37 pm

Pete,

Sorry I didn't get back to you earlier. I was busy today -- I'm 56 and still working hard!

I see you are getting some excellent advice.

During the past several months I really cleaned up my portfolio based on the advice I received here. I consolidated accounts as much as I could and have the following asset allocation:

60/40 Stocks/Bonds as follows:
• 40% U.S. Stock Index -- Total Stock Index
• 20% International Stock Index -- Total International Stock Index (or Fidelity International Index ex US)
• 30% U.S. Bond Index -- Total US Bond Index
• 10% TIPS -- Vanguard Short-Term or Intermediate Term TIPS

The funds I use are largely the Vanguard or equivalent FIdelity index funds (I have a large consolidated 401(k) at Fidelity).

Your portfolio may end up being different, but as Taylor Larimore likes to say, "There are many roads to Dublin." I just did my first rebalancing with some new money, and it would have been a real pain if I had slices of other funds such as small cap, REITS, etc.

Look at the WellsTrade expense ratios in the funds and compare them to Vanguard. If the Vanguard ones are lower, especially if they are significantly lower, I would move it all to Vanguard. No use throwing your money away on expenses for index funds.

Billy
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Re: Retired Newbie Looking for Portfolio Help

Postby Default User BR » Thu Mar 21, 2013 1:27 am

BillyG wrote:Look at the WellsTrade expense ratios in the funds and compare them to Vanguard. If the Vanguard ones are lower, especially if they are significantly lower, I would move it all to Vanguard. No use throwing your money away on expenses for index funds.

What are you talking about? The suggestion is to buy Vanguard funds at Wells Fargo. The expense ratios are the same. While like most brokerages Admiral shares of index funds aren't available, you can get Signal shares for many there. Or do what I did and buy ETFs for low expenses and maximum portability.


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Re: Retired Newbie Looking for Portfolio Help

Postby BillyG » Thu Mar 21, 2013 5:57 am

Default User BR wrote:What are you talking about? The suggestion is to buy Vanguard funds at Wells Fargo. The expense ratios are the same. While like most brokerages Admiral shares of index funds aren't available, you can get Signal shares for many there. Or do what I did and buy ETFs for low expenses and maximum portability.


Brian,

All I said is he should compare the ERs and move everything to Vanguard if the expenses are less. Like you said, the same Vanguard fund classes like Admiral may not be available at WellsTrade.

The ETF vs. Fund is a different issue; some people prefer one over the other (I prefer funds) but there's probably not a substantive difference... except maybe ERs when buying funds.

If the ERs end up being the same, I apologize for any confusion.

Billy
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Re: Retired Newbie Looking for Portfolio Help

Postby Woodhead » Sat Mar 23, 2013 2:37 pm

BillyG wrote:Pete,

Sorry I didn't get back to you earlier. I was busy today -- I'm 56 and still working hard!

I see you are getting some excellent advice.

During the past several months I really cleaned up my portfolio based on the advice I received here. I consolidated accounts as much as I could and have the following asset allocation:

60/40 Stocks/Bonds as follows:
• 40% U.S. Stock Index -- Total Stock Index
• 20% International Stock Index -- Total International Stock Index (or Fidelity International Index ex US)
• 30% U.S. Bond Index -- Total US Bond Index
• 10% TIPS -- Vanguard Short-Term or Intermediate Term TIPS

The funds I use are largely the Vanguard or equivalent FIdelity index funds (I have a large consolidated 401(k) at Fidelity).

Your portfolio may end up being different, but as Taylor Larimore likes to say, "There are many roads to Dublin." I just did my first rebalancing with some new money, and it would have been a real pain if I had slices of other funds such as small cap, REITS, etc.

Look at the WellsTrade expense ratios in the funds and compare them to Vanguard. If the Vanguard ones are lower, especially if they are significantly lower, I would move it all to Vanguard. No use throwing your money away on expenses for index funds.

Billy


Thanks for your input, As you can see your not the only one who goes AWOL every so often.

I've kind of got an excuse too. I've been reading The Bogleheads Guide to Investing. It's a very good book and easier for me to understand.

I did look into Brian's suggestion, it was good idea, but I decided to just pull the trigger and told my broker at WF Advisers to sell everything in my IRAs yesterday and to also sell what he could in my taxable account that didn't bring me past net zero tax wise. They probably won't get it all done until Monday. I realized I was mostly just experiencing nerves and knew the only cure was to take the leap. So I'll roll the IRAs and the taxable account over to Vanguard this coming week. Because of paperwork and WF it will probably be Wednesday or Thursday before I can start the transfer, but I already spoken with the account rep I'm working with at Vanguard.

My thinking right now is that I may just begin with something similar to Landy's suggestion. At least until I know ore about what I'm doing, but I like your bond allocation too. In the present climate I think it particuarly makes sense. Because of the amount of bond type stuff I have in my taxable account I may not put at much in bonds in my IRAs until I can sell some of the bonds in my taxable account. I need to get that fixed as quick as possible, but hopefully I'll be able to meet with my CPA in a week or two and get his advice re taxes.

I wish I had recorded some of my recent conversations with my "advisers" at WF. Briefly when my long time broker of 20 years (we'll call him Bob) realized I was serious about leaving and he could not convince me otherwise, he had another guy from his office (we'll call him Tom) reach out to me.

If you've ever watched a detective show on TV you've seen the good cop bad cop routine. Tom told me he had just recently merged firms with Bob, and he (Tom) could see why I was dissatisfied and he agreed that my portfolio was much to complicated and that he was could see that Bob had me sitting in to much cash and it was not the way he'd be doing things, and also unlike Bob he was a good listener, yadda, yadda. Tom reduced my fee from 1.25 to .8 and told me I would no longer be charged management fees for holding the nearly 82K in cash Bob had done nothing with for a year. I told him that was great and I let him do that. I told him that I was still pretty certain that I was going ahead with my plan to move to Vanguard. This was, I think a Wednesday. He said he'd call me back on Friday to see how I was doing.

So, that Friday he calls me and tells me he would look at some Vanguard low cost ETFs over the weekend and send me his portfolio suggestions for getting things simpler. He called me back on Thursday and asked what I thought. I told him he was on the right track, but unfortunately I now knew now that I could do the same thing at Vanguard for even less and with no extra management fees on top. To this his reply was, "well if you look at the discount I've already given you by lowering your management fees, those ETFs are so low cost you can afford to stay here and take advantage of my advice. I nearly laughed, but I didn't. Then he convinced me why I needed to get the hell out of there. He said just what BOB has been saying for years, my record shows that I beat the market every year. I didn't laugh, I just told him my mind was made up.

When I spoke to Bob yesterday it was cordial, and for once he didn't try and convince me of the huge mistake I was making. He did let me know that WF would be taking it's last pound of flesh (not his words of course), $95 per account for the transfer fees. Jeez. After the tens of thousands they've collect in management fees over the years, they still gotta take an extra nip on the way out the door. Good riddance. :annoyed

(To Everyone) Thanks for All of Your Help and Encouragement,
Pete
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Re: Retired Newbie Looking for Portfolio Help

Postby meebers » Sat Mar 23, 2013 4:27 pm

I had a similar experience and before leaving my broker, I converted everything to cash. He still charged me management fees for 2 months. (was in the "contract") and then $50 per account to close. That was 2 years ago now and last week, one of the client service representatives emails me to remind me that I had missed last months semi-annual review and wanted to schedule an appointment. Geeeez! I am a 3 fund'er and never looked back. :D
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Re: Retired Newbie Looking for Portfolio Help

Postby Woodhead » Sun Mar 24, 2013 9:05 am

meebers wrote:I had a similar experience and before leaving my broker, I converted everything to cash. He still charged me management fees for 2 months. (was in the "contract") and then $50 per account to close. That was 2 years ago now and last week, one of the client service representatives emails me to remind me that I had missed last months semi-annual review and wanted to schedule an appointment. Geeeez! I am a 3 fund'er and never looked back. :D


Thanks for sharing that meebers. I'm sure ours is a story that many here can relate to. I'm just curious, where are you in the retirement scheme? What 3 funds are you using? How often do you rebalance? I still have a few days to sit on the fence before I have to decide. :happy

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Re: Retired Newbie Looking for Portfolio Help

Postby livesoft » Sun Mar 24, 2013 9:25 am

It is amusing to me that the WF sales rep did not suggest the absolutely free WellsTrade account like Brian suggested earlier in the thread. That is, WellsTrade offers all the Vanguard investments for the same fees as Vanguard, but with better account statements, better 1099s, and better tax-lot tracking, or in short, better.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Retired Newbie Looking for Portfolio Help

Postby meebers » Sun Mar 24, 2013 11:39 am

Woodhead wrote:
meebers wrote:I had a similar experience and before leaving my broker, I converted everything to cash. He still charged me management fees for 2 months. (was in the "contract") and then $50 per account to close. That was 2 years ago now and last week, one of the client service representatives emails me to remind me that I had missed last months semi-annual review and wanted to schedule an appointment. Geeeez! I am a 3 fund'er and never looked back. :D


Thanks for sharing that meebers. I'm sure ours is a story that many here can relate to. I'm just curious, where are you in the retirement scheme? What 3 funds are you using? How often do you rebalance? I still have a few days to sit on the fence before I have to decide. :happy

Pete


I am in my ~10th year of retirement, 73 no w2's. I am in the Vanguard 3 fund portfolio with cash in the vanguard MM for emergency :happy I keep track of the balance % info about every month on a spreadsheet. The percentages have not changed that much since inception. I have not decided on how much deviation would cause me to re-balance. So far, between my SS and Pension, I have not had to "TAP" that Vanguard fund with the exception of RMD's. I chose the 3 fund because of low maintenance need on my part, sort of like cruse control, doesn't mean I don't pay attention going down the "road". In rough terms, my total balance has not changed, meaning the gains are being offset by the RMD withdrawls. I need some coaching on what to do with the withdrawls, 20% withholding about settles my tax returns.
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Re: Retired Newbie Looking for Portfolio Help

Postby Woodhead » Sun Mar 24, 2013 1:12 pm

meebers wrote:I am in my ~10th year of retirement, 73 no w2's. I am in the Vanguard 3 fund portfolio with cash in the vanguard MM for emergency :happy I keep track of the balance % info about every month on a spreadsheet. The percentages have not changed that much since inception. I have not decided on how much deviation would cause me to re-balance. So far, between my SS and Pension, I have not had to "TAP" that Vanguard fund with the exception of RMD's. I chose the 3 fund because of low maintenance need on my part, sort of like cruse control, doesn't mean I don't pay attention going down the "road". In rough terms, my total balance has not changed, meaning the gains are being offset by the RMD withdrawls. I need some coaching on what to do with the withdrawls, 20% withholding about settles my tax returns.


Sorry to be so dumb, but I am a newbie :) From what I'm understanding you are saying there is a ready made three fund portfolio, correct? What are RMDs? Is there a place to look up some of the acronyms and initials used on the forum?
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Re: Retired Newbie Looking for Portfolio Help

Postby hoppy08520 » Sun Mar 24, 2013 7:07 pm

Woodhead wrote:
meebers wrote:I am in my ~10th year of retirement, 73 no w2's. I am in the Vanguard 3 fund portfolio with cash in the vanguard MM for emergency :happy I keep track of the balance % info about every month on a spreadsheet. The percentages have not changed that much since inception. I have not decided on how much deviation would cause me to re-balance. So far, between my SS and Pension, I have not had to "TAP" that Vanguard fund with the exception of RMD's. I chose the 3 fund because of low maintenance need on my part, sort of like cruse control, doesn't mean I don't pay attention going down the "road". In rough terms, my total balance has not changed, meaning the gains are being offset by the RMD withdrawls. I need some coaching on what to do with the withdrawls, 20% withholding about settles my tax returns.

Sorry to be so dumb, but I am a newbie :) From what I'm understanding you are saying there is a ready made three fund portfolio, correct? What are RMDs? Is there a place to look up some of the acronyms and initials used on the forum?

Woodhead, whenever I see an unfamiliar abbreviation, and there are many on this site, you can just google it or search it on the wiki. The only abbreviation that I didn't find right off was RBD which I later learned is "really bad day", as in the stock market had a RBD and dropped 3%.

There actually is a ready made Three-fund portfolio: Vanguard's target date retirement and LifeStrategy funds. If you go to the linked page, you can read more about each. Or, you can just hold the funds separately (as shown in YDNAL's reply).

Given that you are a self-avowed newbie to investing, I'd recommend you start with a 3-Fund portfolio and live with it for a while and resist the urge to tweak too much until you have a better understanding of what you're doing.

Give it a year and a few books (see amazon reading list) and many hours of reading threads on this site before you do anything too drastic. With a 3-Fund portfolio, you can be assured that you won't be screwing up, even if in the back of your mind you might be feeling like you might be "missing out" on something a bit better. There might be something better at the same risk-level, but probably not much better than a 3-Fund portfolio, and you sure as heck can do a lot worse.

I'd put your focus on getting your portfolio, and in particular your taxable investments, into a 3-fund portfolio first (subject to constraints on your taxable holdings), and educate yourself as you go. Then you'll be in a better position to decide whether and how to adjust.
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Re: Retired Newbie Looking for Portfolio Help

Postby meebers » Sun Mar 24, 2013 8:12 pm

Woodhead wrote:
meebers wrote:I am in my ~10th year of retirement, 73 no w2's. I am in the Vanguard 3 fund portfolio with cash in the vanguard MM for emergency :happy I keep track of the balance % info about every month on a spreadsheet. The percentages have not changed that much since inception. I have not decided on how much deviation would cause me to re-balance. So far, between my SS and Pension, I have not had to "TAP" that Vanguard fund with the exception of RMD's. I chose the 3 fund because of low maintenance need on my part, sort of like cruse control, doesn't mean I don't pay attention going down the "road". In rough terms, my total balance has not changed, meaning the gains are being offset by the RMD withdrawls. I need some coaching on what to do with the withdrawls, 20% withholding about settles my tax returns.


Sorry to be so dumb, but I am a newbie :) From what I'm understanding you are saying there is a ready made three fund portfolio, correct? What are RMDs? Is there a place to look up some of the acronyms and initials used on the forum?


OOps, my bad Pete. The three fund portfolio is here viewforum.php?f=10 , there are over 417+ posts to that thread, it will take you a while to go thru it, but you will understand what the three fund portfolio is. MM is their Money Market fund, As far as the other abbreviation RMD, that stands for Required Minimum Distribution, It is a mandatory withdraw from your IRA, starting the year you turn 70 1/2. Google RMD and you can enjoy lots of reading about that.
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Re: Retired Newbie Looking for Portfolio Help

Postby Woodhead » Sun Mar 24, 2013 9:15 pm

meebers wrote:OOps, my bad Pete. The three fund portfolio is here viewforum.php?f=10 , there are over 417+ posts to that thread, it will take you a while to go thru it, but you will understand what the three fund portfolio is. MM is their Money Market fund, As far as the other abbreviation RMD, that stands for Required Minimum Distribution, It is a mandatory withdraw from your IRA, starting the year you turn 70 1/2. Google RMD and you can enjoy lots of reading about that.


Great more reading. Hahaha

Thanks,
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