Improvement needed

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bloom2708
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Improvement needed

Post by bloom2708 »

I am pretty new to Bogleheads. I am a firm believer that if you think you are doing things "right" you probably are in fact not.

Here is my situation:

43, married (wife 44), 3 girls (14,10,6)

Investments $490k (my previous 401k rolled into here ~$240k of it)
Wife's 401k: $310k
Cash/Emergency Fund: $80k
College 529s: $80k
House: $320k
Commercial investments (small ownership %): $60k

Totally debt free (thanks Dave Ramsey), no mortgage, cars paid for, no credit card debt. Seemingly doing fine. But I am continually trying to improve. Reading, researching.

So what is up you ask?

Well...the $490k investments are at Edward Jones (gasp). 2 Advisory (1 taxable, 1 tax sheltered (partial 401k rollover in advisory), 2 Roth, Mutual funds (taxable). (No American Funds, tiny win?)

I know and have known I've been paying fees. Yes. Plenty of fees on those Advisory. Reading from this blog I have underestimated the impact of these fees over the long term. As many seem to do.

So, admitting and seeing your problems is 1/2 of the battle. Background: My EJ advisor is a long time friend. I really trust him. Conservative, thoughtful. His advice has been very helpful. I am also in two commercial investments with him outside of EJ. Kids similar ages. Same schools. Oh the folly. So without him I would not be in as good of a position.

We talk about fees and he has often suggested ways to minimize them in the scope of EJ. Which is probably an oxy moron of some type. He and EJ are maximizing their wealth, which is in fact not maximizing mine. Anyone been in a similar situation? If I didn't have such a good friendship I would start moving money asap. As it is, I kind of feel stuck. Perplexed.

I've read similar posts out here. Any thoughts are appreciated.

Wade
ieee488
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Re: Improvement needed

Post by ieee488 »

You've read everything here about EJ, and you still don't know whether leaving them is the right thing to do?
Hmmmm.
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The Wizard
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Re: Improvement needed

Post by The Wizard »

Basically, you need to extricate your financial assets from EJ. That's the bottom line.
Probably better to just tell him right up front that you're doing this, to avoid him fawning over you ("Is something wrong??") when the first transfers happen.
It's bad to involve your financial health with personal friendships.
Anyhow, that's the advice you didn't want to hear...
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JW-Retired
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Re: Improvement needed

Post by JW-Retired »

bloom2708 wrote: So, admitting and seeing your problems is 1/2 of the battle. Background: My EJ advisor is a long time friend. I really trust him. Conservative, thoughtful. His advice has been very helpful. I am also in two commercial investments with him outside of EJ. Kids similar ages. Same schools. Oh the folly. So without him I would not be in as good of a position.

We talk about fees and he has often suggested ways to minimize them in the scope of EJ. Which is probably an oxy moron of some type. He and EJ are maximizing their wealth, which is in fact not maximizing mine. Anyone been in a similar situation? If I didn't have such a good friendship I would start moving money asap.
I think it's a good bet the friendship will fade if you escape from EJ. Can you give us a dollar figure for how much you are willing to pay to keep his good friendship? Then we could make some reasonable estimates of how much extra it will be costing you to stay, and compare it with your number.
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livesoft
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Re: Improvement needed

Post by livesoft »

In a situation like this, I always offer to manage the portfolio of the advisor. I'd put them all in low-expense ratio index funds. They will be my friend forever after that.
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Dale_G
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Re: Improvement needed

Post by Dale_G »

Your friend is probably a really good guy. But if the friendship depends on you contributing to his income each year, then it isn't much of a friendship. If your friend is truly a friend, he should be glad that you have learned enough about investing to do it yourself.

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Topic Author
bloom2708
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Re: Improvement needed

Post by bloom2708 »

Right on all accounts. It isn't that I don't know what the right thing to do is.

Sometimes you just have to hear it put bluntly.
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tainted-meat
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Re: Improvement needed

Post by tainted-meat »

It never ceases to amaze me how people who are getting the short end of the stick feel guilty about trying to get their fair share and do what is right for themselves.

Protecting and maintaining your self interest is not the same as being selfish.
kenner
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Re: Improvement needed

Post by kenner »

Maybe consider whether your friendship with the EJ advisor is more important than your family's long term financial well-being?

I'm quite sure you could construct a simple three-fund investment portfolio that will virtually guarantee outperforming a high cost portfolio over the long run.

Any true friend would understand and accept such a change, but it seems that only you can make the "global" assessment.
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bloom2708
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Re: Improvement needed

Post by bloom2708 »

tainted-meat wrote:It never ceases to amaze me how people who are getting the short end of the stick feel guilty about trying to get their fair share and do what is right for themselves.

Protecting and maintaining your self interest is not the same as being selfish.
True, but up to a month or so ago I didn't think by paying fees and accumulating savings at EJ that I was "getting the short end of the stick". Continual learning and finding new information won't stop. I don't want to dismiss or entertain ideas without looking at all sides.

We give $600 a month to our church. That is directly going against our financial self interest. It may be a poor example.

Thank you for the responses.
Grt2bOutdoors
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Re: Improvement needed

Post by Grt2bOutdoors »

bloom2708 wrote:
tainted-meat wrote:It never ceases to amaze me how people who are getting the short end of the stick feel guilty about trying to get their fair share and do what is right for themselves.

Protecting and maintaining your self interest is not the same as being selfish.
True, but up to a month or so ago I didn't think by paying fees and accumulating savings at EJ that I was "getting the short end of the stick". Continual learning and finding new information won't stop. I don't want to dismiss or entertain ideas without looking at all sides.

We give $600 a month to our church. That is directly going against our financial self interest. It may be a poor example.

Thank you for the responses.
There is a distinct difference between giving to charity doing god's work vs. an entity or organization of individuals who are in it to profit off of you. Generally speaking there is only a small subset of the general population that operate solely to generate money, a machine if you will. You can find that subset on Wall Street and in full-wash fleecing firms, I count EJ as being one of those fleecers. Let me give you an example - if you have 100K in assets, you pay an admittance fee to be placed in a porfolio of growth generating assets - that's your out of pocket cost. Now, each year you are being dinged a toll of 1.5% and the market returns 6% - isn't giving up 25% of your annual growth for which you already paid for upfront considered to be the short end of the stick? How about if you bought a home for $100K, paid the broker the commission, and then have them come back each year to hit you up for their cut of annual home price appreciation? Would you consider such a person to be a friend or a leech? That is why EJ likes you so much, because you are a sheep to be sheared, and they've been doing it to you with a smile. :greedy
Finally, in my mind I would view the situation like this - EJ is taking money from your kids to give it to the Financial Adviser's kids - not many folks I know would knowingly write a check and hand it over to their next door neighbor or golfing buddy to give to that person's children. Cut the cord and your family will benefit, or consider the fees that EJ charges you as the price of admittance to be a friend with the FA and his family.
Last edited by Grt2bOutdoors on Fri Apr 11, 2014 9:41 am, edited 1 time in total.
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JupiterJones
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Re: Improvement needed

Post by JupiterJones »

"My EJ advisor is a long time friend. [...] If I didn't have such a good friendship I would start moving money asap. As it is, I kind of feel stuck. Perplexed."


It is 100% absolutely not possible to lose a friendship over something like this.

It is possible that you'll discover that you never really had a "good friendship" in the first place. In which case, nothing is really lost except your belief in something that wasn't true.

But a real friendship will still be there, even if you're not they guy's client.
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Grt2bOutdoors
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Re: Improvement needed

Post by Grt2bOutdoors »

JupiterJones wrote:"My EJ advisor is a long time friend. [...] If I didn't have such a good friendship I would start moving money asap. As it is, I kind of feel stuck. Perplexed."


It is 100% absolutely not possible to lose a friendship over something like this.

It is possible that you'll discover that you never really had a "good friendship" in the first place. In which case, nothing is really lost except your belief in something that wasn't true.

But a real friendship will still be there, even if you're not they guy's client.
+1 Right, but the OP is likely going to find that over time the friendship dissapates into thin air, because unfortunately many people are in it for just one thing - themselves.
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Jack FFR1846
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Re: Improvement needed

Post by Jack FFR1846 »

Do a simple test...... I'll assume some numbers.

Your total EJ account...let's say $500k has a total fee+ER+fee+fee of 1.5%.

Your alternate is either Vanguard of Fidelity index funds. As I'm familiar with Fidelity, I'll put you into Spartan 500 advantage, spartan US bond and spartan international equally distributed. Overall, this is an ER of 0.09%.

Your cost at EJ is $7500

Your cost at Fidelity is $450

You can leave EJ and give your friend $7000 a year and still be ahead. The loads at EJ are likely already paid if they are buy in loads.
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Topic Author
bloom2708
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Re: Improvement needed

Post by bloom2708 »

The numbers don't lie. I am convinced. I am making plans.

Is starting with the tax sheltered (Rollover IRAs and Roth IRAs a good place to start?

Plan the work, work the plan.
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Re: Improvement needed

Post by Jack FFR1846 »

Others can tell you about Schwab and Vanguard.

I had several annuities and IRAs in other companies (probably not any better than EJ).

With Fidelity, I did the entire process online. I opened up an IRA to match. I then went to the "transfer funds from an outside...." and it goes through the process. Then, I got the last statement from the outside firm and pdf'd it. The Fidelity form is filled out online and you then print out 2 or 3 pages needing signatures. Scan those in to pdf and attach them. Hit complete and wait. You can watch as each step in the process is completed. I had MFS and Transamerica. MFS was done in a week and Transamerica in about 3 weeks. Most of the time, once your docs are in are waiting for the outside firm.

I never had to call Fidelity once. All online. I was very happy with this. Initially, I intended to open the accounts at Vanguard, but there was no way to completely do it online and I strongly prefer full online processes.


**note that you won't have to ask your friend for info or to be involved with any of the transfer. If you prefer Vanguard or Schwab, all have great options. I only give Fidelity as an example because that's where I am with my investments.
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pkcrafter
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Re: Improvement needed

Post by pkcrafter »

Sorry to hear you are in this situation, but you a fine example why we never recommend people invest with friends or family members. It's nice of you to help your friend grow his retirement, but if he's really a friend he will understand your doing this yourself.

Paul
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Re: Improvement needed

Post by placeholder »

When making custodian transfers I usually suggest that people review the available transfer bonuses available:
http://www.hustlermoneyblog.com/best-brokerage-bonuses/
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JupiterJones
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Re: Improvement needed

Post by JupiterJones »

Grt2bOutdoors wrote:+1 Right, but the OP is likely going to find that over time the friendship dissapates into thin air, because unfortunately many people are in it for just one thing - themselves.
Well, my point was that if the "friendship" does dissipate into thin air, it was--by definition--not actually a friendship to begin with.

It was a business relationship that one party falsely imagined to be a friendship, and such things are really better off dissipating.
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kenner
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Re: Improvement needed

Post by kenner »

bloom2708 wrote:
Is starting with the tax sheltered (Rollover IRAs and Roth IRAs a good place to start?
I believe so, because it seems that would avoid adverse tax consequences. But I am not a tax expert, so hopefully the real tax experts on this forum (there are many) will weigh in.
Topic Author
bloom2708
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Re: Improvement needed

Post by bloom2708 »

ieee488 wrote:You've read everything here about EJ, and you still don't know whether leaving them is the right thing to do?
Hmmmm.
Thanks to those with responses that don't make me feel like an idiot...
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pennstater2005
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Re: Improvement needed

Post by pennstater2005 »

I had an account with Raymond James. The adviser was someone my wife knew as well as my wife's father. Nice enough guy. I transferred the accounts out and into Vanguard and never heard from him again.

This might make you feel better......or not :happy

http://www.bogleheads.org/forum/viewtop ... &start=100
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ieee488
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Re: Improvement needed

Post by ieee488 »

bloom2708 wrote:
ieee488 wrote:You've read everything here about EJ, and you still don't know whether leaving them is the right thing to do?
Hmmmm.
Thanks to those with responses that don't make me feel like an idiot...
No one can change your mind unless YOU want to change it.

When someone has a preponderonce of information and refuses to act on it, I figure i am wasting my time, because that person's mind is made up.
It is folly to convince someone to do something when they don't want to do it. Your post sounded exactly like that person to me.

By the way, no one can make you feel like an idiot. You make yourself feel like an idiot.
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island
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Re: Improvement needed

Post by island »

Are you working, have access to a 401K or other tax deferred retirement plan at work and any good low cost funds in it?
YttriumNitrate
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Re: Improvement needed

Post by YttriumNitrate »

With a 6, 10, and 14 year old, college costs are going to be coming fast. Doing a quick back of the envelope calculation, it seems that you have about $300k in taxable accounts which will count against college financial aid for your girls.

If you don't have Roth IRAs set up for you and your wife, I'd suggest doing that this weekend to make a 2013 contribution before the deadline. Sheltering your emergency fund in a Roth could end up saving you a bunch.
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bloom2708
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Re: Improvement needed

Post by bloom2708 »

I left my job last fall and while looking I rolled my 401k to EJ.

My current job does have a 401k. I am putting 12% Roth. It doesn't have a match, but does offer "profit sharing" each year that avgs 3%.

Here is the breakdown of the money at EJ:

Taxable (Joint) - $132k
My Roth - $46k
Wife Roth - $28k
401k Rollover - $220k
Kid 1 Taxable - $24k (this is taxable "college" money that is not in 529 in case they choose not to go to college, each kid has a 529 as well)
Kid 2 Taxable - $19k
Kid 3 Taxable - $12k

We have been doing the "back door" Roth for the last several years.

I know I have much room for improvement.
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bloom2708
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Re: Improvement needed

Post by bloom2708 »

ieee488 wrote:
bloom2708 wrote:
ieee488 wrote:You've read everything here about EJ, and you still don't know whether leaving them is the right thing to do?
Hmmmm.
Thanks to those with responses that don't make me feel like an idiot...
No one can change your mind unless YOU want to change it.

When someone has a preponderonce of information and refuses to act on it, I figure i am wasting my time, because that person's mind is made up.
It is folly to convince someone to do something when they don't want to do it. Your post sounded exactly like that person to me.

By the way, no one can make you feel like an idiot. You make yourself feel like an idiot.
I guess my goal was to find others who had similar foibles (it seems there are many) and explore options. I just didn't expect such a mocking response. I have picked myself up and dusted off my pants. On a related note, I can/have read many things that contradict the "Boglehead" way. I'm trying to evolve my thinking and knowledge base. I readily admit when I'm wrong. This is one where I clearly underestimated the long term effect of fees. It just is going to take some work to untangle things.

I sent my EJ broker an email letting him know my direction going forward. His reply tells me it is going to be a bumpy road. I expected that.

I know people can't time the market, but with the markets sitting at "near record" highs, would that impact timing for any of you?
Chadnudj
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Re: Improvement needed

Post by Chadnudj »

There are middle ground options available here, too....but they are going to be "sub-optimal" from a pure-numbers investment perspective than just going full Boglehead ASAP.

For example, you could tell your friend that you value his friendship and also his financial advice, but you want your investments in lower cost funds. So to that end, you're moving to Fidelity/Vanguard, but you'd like to pay him for an annual "financial advisor" consultation to make sure you're on track for your goals. That way, he keeps some business (the "fee" for his annual financial advisor consultation), but you get into lower cost funds. (This may actually have some value to you -- it's nice to talk to a financial advisor for a set fee to keep yourself accountable, and to expose you to other areas that you need to think about, such as withdrawal of money in retirement, taxes, estate planning, insurance issues, etc.)

Or, tell him you've read a lot about lower cost investing, and you'd like to pursue that, but that you want to give him a fair shot to convince you that his way is better. Start splitting all your money in half -- half to him and EJ, half to your new account, and track the results each year, and for 5 (or even 10) years. After a certain point in time, your Boglehead portfolio will almost surely be outpacing his EJ funds, and he won't have much of an argument when you eventually decide to leave.

Both of these would be sub-optimal from a pure numbers perspective, but might allow you a slightly more graceful method to get into lower cost investments without damaging the friendship (if that has some value to you)
lloydbraun
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Re: Improvement needed

Post by lloydbraun »

I noted you said that you have read or can find many writings that contradict the boglehead way. We all can find them but, honestly, I'm an academia and so have access to multiple databases that contain hundreds of thousands of peer review articles and I would say that 95% of the articles on investing agree with Bogle on the efficiency and success of low-cost, passively managed index funds over actively managed funds. Furthermore, the academic literature also suggests that fees are the one thing that can be minimized. It's great to want to keep learning, I'm in the same boat. Oddly enough, the more I read and learn the more I'm convinced that a simple 3 fund portfolio constructed without overweighting any sector of the market is the way to go, at least for me. Good luck, it looks like you're doing a great job with your personal finances so with your investments in order you should be all set!
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bloom2708
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Re: Improvement needed

Post by bloom2708 »

lloydbraun wrote:I noted you said that you have read or can find many writings that contradict the boglehead way. We all can find them but, honestly, I'm an academia and so have access to multiple databases that contain hundreds of thousands of peer review articles and I would say that 95% of the articles on investing agree with Bogle on the efficiency and success of low-cost, passively managed index funds over actively managed funds. Furthermore, the academic literature also suggests that fees are the one thing that can be minimized. It's great to want to keep learning, I'm in the same boat. Oddly enough, the more I read and learn the more I'm convinced that a simple 3 fund portfolio constructed without overweighting any sector of the market is the way to go, at least for me. Good luck, it looks like you're doing a great job with your personal finances so with your investments in order you should be all set!
I agree with you. This is my finding as well. I found other "contrarian" posts (here and other), but I'll take 90 or 95% any day.

1. My research now is how to move things. Liquidate and lump sum in or something less abrupt.
2. 3 Fund vs 4 Fund (int bonds) vs 4 Fund (short TIPS) vs 4 Fund (REIT) vs other Lazy options.
3. It seems like the variances are more for personal flavor versus really changing the mix.
4. Do people use different allocation % in Taxable vs Roth vs Non-Roth? If my Roth money is "last to be used" should I be slightly more aggressive?

I am 43.
Topic Author
bloom2708
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Re: Improvement needed

Post by bloom2708 »

Chadnudj wrote:There are middle ground options available here, too....but they are going to be "sub-optimal" from a pure-numbers investment perspective than just going full Boglehead ASAP.

For example, you could tell your friend that you value his friendship and also his financial advice, but you want your investments in lower cost funds. So to that end, you're moving to Fidelity/Vanguard, but you'd like to pay him for an annual "financial advisor" consultation to make sure you're on track for your goals. That way, he keeps some business (the "fee" for his annual financial advisor consultation), but you get into lower cost funds. (This may actually have some value to you -- it's nice to talk to a financial advisor for a set fee to keep yourself accountable, and to expose you to other areas that you need to think about, such as withdrawal of money in retirement, taxes, estate planning, insurance issues, etc.)

Or, tell him you've read a lot about lower cost investing, and you'd like to pursue that, but that you want to give him a fair shot to convince you that his way is better. Start splitting all your money in half -- half to him and EJ, half to your new account, and track the results each year, and for 5 (or even 10) years. After a certain point in time, your Boglehead portfolio will almost surely be outpacing his EJ funds, and he won't have much of an argument when you eventually decide to leave.

Both of these would be sub-optimal from a pure numbers perspective, but might allow you a slightly more graceful method to get into lower cost investments without damaging the friendship (if that has some value to you)
I am not up for "sub-optimal". It seems like I'm already quite "sub-optimal".

I did think about a quarterly meeting with a fixed fee. I'm not sure if EJ supports that or if it would be a moonlighting sort of deal. That is probably not optimal either if I choose simplicity and leave it alone except for re-allocation.
niceguy7376
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Re: Improvement needed

Post by niceguy7376 »

On a side note, curious as to why you are doing a ROTH 401K with dual income situation.
Chadnudj
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Re: Improvement needed

Post by Chadnudj »

bloom2708 wrote: I did think about a quarterly meeting with a fixed fee. I'm not sure if EJ supports that or if it would be a moonlighting sort of deal. That is probably not optimal either if I choose simplicity and leave it alone except for re-allocation.
I wouldn't suggest quarterly (that's far too often, in my opinion). I'd suggest annually -- often enough for you/your spouse to see that you are making progress and to hold yourselves accountable, while also giving you an annual date to discuss big picture topics in your financial planning (stuff like estate planning, tax efficiency, legacy concerns, insurance, etc.) with a third party that can help guide you appropriately. That's what my spouse and I do, and it works pretty well....
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bloom2708
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Re: Improvement needed

Post by bloom2708 »

niceguy7376 wrote:On a side note, curious as to why you are doing a ROTH 401K with dual income situation.
Good question. My primary reason would be to build up our Roth dollars. We do $5,500/per person/per year via the back door.

I guess that is another topic I need to research more. I know people are very in to filling out Roth. Is Roth 401k a no-no?
Last edited by bloom2708 on Mon Apr 14, 2014 11:59 am, edited 1 time in total.
TFinator
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Re: Improvement needed

Post by TFinator »

ieee488 wrote:
bloom2708 wrote:
ieee488 wrote:You've read everything here about EJ, and you still don't know whether leaving them is the right thing to do?
Hmmmm.
Thanks to those with responses that don't make me feel like an idiot...
No one can change your mind unless YOU want to change it.

When someone has a preponderonce of information and refuses to act on it, I figure i am wasting my time, because that person's mind is made up.
It is folly to convince someone to do something when they don't want to do it. Your post sounded exactly like that person to me.

By the way, no one can make you feel like an idiot. You make yourself feel like an idiot.
This is an internet forum. It is meant for learning, discussion, and debate. We have a new forum member who has read what the Bogleheads have to say, is interested, has accepted it as the correct path, and now wants advice on how to do it.
I think this is exactly how any forum wants new members to conduct themselves. I am glad I was never met with responses such as the original, or I probably would have stopped reading the forum, as these comments do not offer any useful information whatsoever.
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meowcat
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Re: Improvement needed

Post by meowcat »

livesoft wrote:In a situation like this, I always offer to manage the portfolio of the advisor. I'd put them all in low-expense ratio index funds. They will be my friend forever after that.
If this adviser has any experience whatsoever, more than likely, he's already invested in low cost index funds, as most experienced advisers are. :happy
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bloom2708
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Re: Improvement needed

Post by bloom2708 »

My advisor basically said "my portfolio looks similar to yours". However I am guessing many of the front end loads, fees and other costs are waived or much lower for EJ employees. Just a guess.

Any comments on this allocation?

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lloydbraun
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Re: Improvement needed

Post by lloydbraun »

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lloydbraun
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Re: Improvement needed

Post by lloydbraun »

Sorry, I've never figured out how to use the "quotes". Having a Ph.D. doesn't make one intelligent! Anyway, yes I would use as efficient a fund in taxable as possible to avoid capital gains taxes. Others are much better at talking about this since they have taxable accounts whereas I got a late start because I spent my 20s in grad school and only have a tax advantaged 403B and a Roth IRA.

Your allocation looks good to me in general but I don't think you ever stated when you plan to retire. For example, I'm 35 but since I got a late start and since, hopefully, my earnings will be much higher in my 50s and 60s than they are today, I plan to work until 70-75, which will give me 40-45 years in the accumulation phase. So in my situation I'm 80/20, though I could probably be even more aggressive (I just like having some of my portfolio in bonds so I can sleep well at night and I'll probably stick with 80/20 for the next 20-25 years). I'm lucky that my employer gives me access to vanguard funds, though since we have the S&P 500 and Extended Market instead of Total Market along with Total International and Total Bond, I have to use four funds to make my three fund portfolio...my weightings are similar to yours, though with more exposure to equities than bonds, but I do not use a TIPS fund. Some here think it's a good idea and I basically made my 65 year old father roll his 401K over to a Vanguard Lifestrategy Fund that has exposure to them, but for people under 50 who hope to work for another 15-20 years I see no need for it. If I were you, and obviously you can take this with a grain of salt, I'd just use the simple three fund portfolio. If you're planning to work until you're 67 (full SS retirement benefits) then you have another 24 years and I'd just stick with something like, 50% Total U.S. Market, 25% Total Int'l, and 25% Total Bond, at least for the next 10 years. At that point you could add more exposure to Total Bond. Again, that's if it were me. If you're more conservative then you should go with what makes you comfortable, though I still think the lazy portfolio is the way to go.
Topic Author
bloom2708
Posts: 9855
Joined: Wed Apr 02, 2014 2:08 pm

Re: Improvement needed

Post by bloom2708 »

Thanks llyodbraun. Good information.

I am 43 (and a Seinfeld fan) and would like to work "full time" until 55. Unless I get some type of windfall from my parents. I hope they live to their 90s, then that won't really matter either. I can see myself working part time just to earn some money to not have to withdraw much until later.

I agree with not doing the TIPs at this point. It seems like many love the 3 Fund portfolio, but have 4, 6, 8, 10 funds.

50% VTSAX
15% VTIAX
35% VBTLX

I could go to 70 or 75 stocks if a strong case was made. 65 might allow me to sleep better during those steep downturns.
lloydbraun
Posts: 101
Joined: Mon May 30, 2011 9:14 pm

Re: Improvement needed

Post by lloydbraun »

That looks good. Obviously it's tough to predict the future but my hope with bonds is that they just slightly exceed the rate of inflation, on average going forward. I doubt we'll see returns in the bond market on par with what we saw from 1982-2013 just based on where yields are right now in a low interest rate environment. Just be prepared, with 35% in bonds, to see your real return (nominal return minus inflation) suppressed a bit as your stocks will likely do all of the heavy lifting. That would be the only argument in favor of more equity allocation but considering that both you and your wife have a good amount saved so far this shouldn't be a big deal, especially if you don't start drawing on your money until around 59.5 or 60. Obviously saving is the most important factor for a healthy retirement and it looks like you're way ahead of the game, and me, there.

My point regarding taxable accounts is that you want to have low turnover funds (Total Market or S&P 500 are great), and some people here also say to forego dividend reinvestment so you can better control your tax liability. Personally I haven't read up as much on that but I probably will when the time comes. Sorry to see that you caught some flak from some earlier posters. This is a great place for advice and even though I don't post a lot I read through it on a near daily basis. When people see certain buzzwords they tend to react quickly and negatively, though from their perspectives I'm sure they're just trying to be helpful.

If you haven't done so yet, you should consider reading Rick Ferri's books "All About Asset Allocation" and "All About Index Funds" (this one is probably better to start with). Bogle's "Common Sense on Mutual Funds" is also a great book, though he's a bit dismissive of int'l exposure (most people here, including me, believe that 20-40% of your equity exposure should be international). I read through all three books once a year just to refresh my own knowledge. One more thing, the more you read the more you'll encounter Vanguard's new Int'l Bond fund, which is low cost. Most people here don't seem to think it adds much diversification to the three fund portfolio and, like all int'l funds, it comes with currency risk (probably minimal since it invests in developed countries). Vanguard now includes this fund in its Target Retirement and Target Risk funds, but I don't think it's necessary. Maybe one day people will start talking about including it in a lazy 4 fund portfolio, but right now I don't think it helps or hurts that much.

Glad you got the Lloyd Braun reference! It was definitely my favorite show in high school though I find myself having more of an appreciation for the jokes in my 30s than I did when I was 15-18. Those of you who were already in your 20s, 30s, or 40s when it was on the air were very lucky.
lloydbraun
Posts: 101
Joined: Mon May 30, 2011 9:14 pm

Re: Improvement needed

Post by lloydbraun »

Oh, one more thing. If you do want to have a bond fund in a taxable account I would look at the tax exempt muni bond funds that Vanguard offers (haven't looked at other providers' funds). Again, search for past posts were people have discussed these options.
Topic Author
bloom2708
Posts: 9855
Joined: Wed Apr 02, 2014 2:08 pm

Re: Improvement needed

Post by bloom2708 »

I will look up those 3 books. I have read quite a few books lately (since I stopped working 60+ hours per week last fall). I read Bogleheads Guide to Retirement and Bogleheads Guide to Investing. Both were good, but there wasn't much about 3 Fund portfolio. The low cost concept is what I need to focus on.

I did see the International Bond Fund Index seems to be a popular 4th addition to the 3 Fund portfolio. I will check that out.

I might invest in 100 boxes of Chinese gum if I am not careful. Seinfeld is starting to look a bit dated, but the jokes are still spot on. I can still watch it and laugh.

I don't really mind the flak. Maybe something in my first post rubbed people the wrong way. I just thought it was funny that it was the first reply. Welcome to the real world. Ha ha.

Thanks again for all the good advice. Not having many posts is no success criteria in my book.
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