Help with Mom's portfolio

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Topic Author
TP81
Posts: 32
Joined: Wed Sep 24, 2014 5:39 pm
Location: Delaware

Help with Mom's portfolio

Post by TP81 »

I have been lurking around this forum for about a year, and I have been very happy with my portfolio performance since following the Boglehead approach. My wife and I are just starting out as far as retirement planning (getting a late start) so our portfolio is not very exciting at this point. We are in index funds except for 1 stock I bought when I had a little cash, and before finding this place, it is since down about 15% so I learned a lesson really quick on that. I will post our portfolio once I get this one squared away. I’m sure I will learn quite a bit from this one! I am posting this in hopes of getting some direction for my mom’s investments. As you can see she is all over the place. She has a hard time taking action when it comes to investing, that’s why a large chunk of money has been sitting in her bank account for over 2 years. She has somewhat made me her financial advisor even though I have sent her here to read. So I am trying to get a solid direction as to how to proceed. My main goal is to allow her to have a comfortable retirement. I also want to simplify this mess.
Also, she has a sister that is entitled to half of the stocks and half of my grandparent’s home. The amounts of the stocks and inherited home reflect only my mom’s portion.

Emergency funds: 6+ months
Debt: $113,000 Mortgage @ 4.95%, I am working on getting her to pay this off. She has had the cash sitting in her bank account for over 2 years.
Tax Filing Status: Single, will be getting married October 2015
Tax Rate: 25% Federal, 5.55% State
State of Residence: DE
Age: 58
Desired Asset allocation: 60% stocks / 40% bonds, this is what I am thinking for her. This could be different depending on advice. She has more of a preservation personality. This is the percentage I have discussed with her and she seems to be ok with it.
Desired International allocation: Unsure, maybe 10-20%


Portfolio size: Mid 6 figures

This is for my mom only. Her and her fiancé will be keeping things separate after marriage.
Current retirement assets

Taxable
20% $125,000 cash in a checking account
Stocks: 15.5% of portfolio, These were all inherited in August 2011 after the death of my grandmother, this is in an irrevocable trust. I had her stop all DRIP about a year ago so I’m not sure how much cash is in this account.
50% M&T Bank (MTB)
20% DirectTV (DTV)
14%Raytheon (RTN)
8% Kimberly Clark Group (KMB)
2.4% AT&T (T)
1.8% Fox (FOXA)
1% DuPont (DD)
1% Verizon (VZ)
0.5% Comcast (CMCSA)
0.3% Viad Corp. (VVI)
0.1% News Corp. (NWSA)
0.1% Vodafone Group (VOD)
0.1% Pacific Gas & Electric (PCG:PA)
0.05% Money Gram Int. (MGI)
0.05% Century Link (CTL)
0.002% Frontier Communication Corp. (FTR)
0.001% Alcatel-Lucent (ALU)

Inherited IRA: 4.5% of portfolio, this is currently with an advisor and is held at Schwab, I am trying to get her to move this to Vanguard. This has already been split between my mom and aunt. She is currently taking RMDs from here.
5% Money Market
11% New Albertsons, some type of bond, there are a bunch of numbers on the statement and I’m not really sure what would be beneficial to you, sorry
8% SLM, again, another bond
30% Artisan Mid-Cap Value Fund, Inv, ARTQX
24% Buffalo Flexible Income Fund, BUFBX
22% Oakmark Equity & Income Fund, OAKBX

Her 401k at Principal, 3.5% of portfolio, current employer plan
100% Principal Trust Target Fund 2020 () (1.16%)

Her 401k at previous employer, 8% of portfolio
19% Goldman Sachs Growth Opportunities Fund (GGOAX) (1.36%)
22% Vanguard Short Term Bond Index (VBSSX) (.10%)
23% MFS Value Fund (MEIAX) (.68%)
8% MFS Research International Fund (MRSAX) (.93%)
22% T. Rowe Price Growth Stock Fund (PRGFX) (.69%)
6% Fulton Financial Corp., stock, (FULT)

Her 401k at previous employer, 2% of portfolio
100% YMCA Retirement Fund, this looks like some type of annuity to me, I could be totally wrong. I have
looked through the info I could find online. The statement is not very descriptive.

Her Traditional IRA at local bank 2.3% of portfolio
100% CD, yield about 4% this comes due in April 2015. She will be moving this to Vanguard.


Real Estate
Home inherited from her parents: 31% of portfolio
A good possibility this will be sold in the next year. I have tried to talk her in to renting it but I dont think she is up or it.


Contributions

New annual Contributions
2300 to her 401k (2% match at companies discretion in March)
$6000 to her IRA
These are planned contributions, I am pretty sure I can get her to contribute more.


Available funds

Funds available in her 401(k)
Lord Abbett Short Duration Income (LDLRX) (.88%)
Franklin High Income (FHIRX) (1.13%)
Mellon Capital Mgmt Bond Market Index (PBOIX) (.83%)
PIMCO Total Return (PTRRX) (1.10%)
Principal Trust Target 2005 (1.13%)
Principal Trust Target 2010 (1.13%0
Principal Trust Target 2015 (1.13%)
Principal Trust Target 2020 (1.16%)
Principal Trust Target 2025 (1.17%)
Principal Trust Target 2030 (1.18%)
Principal Trust Target 2035 (1.19%)
Principal Trust Target 2040 (1.19%)
Principal Trust Target 2045 (1.20%)
Principal Trust Target 2050 (1.20%)
Principal Trust Target 2055 (1.20%)
Principal Trust Target 2060(1.21%)
Edge Asset Mgmt. Equity Income (PEIOX) (1.08%)
MFS Growth Fund (MEGRX) (1.28%)
Principal LargeCap S&P 500 (PLFMX) (.72%)
American Century Mid-Cap Value Fund (AMVRX) (1.51%)
American Century Heritage Fund (ATHWX) (1.50%)
Delaware SmallCap Value Fund (DVLRX) (1.50%)
Eagle SmallCap Growth Fund (HSRRX) (1.37%)
Principal Mid-Cap S&P 400 Index Fund (PMFMX) (.74%)
Principal SmallCap S&P 600 Index Fund (PSSMX) (.78%)
Invesco International Growth Fund (AIERX) (1.60%)
MFS International Value Fund (MINFX) (1.39%)

Funds available in her 401k (previous employer)
Goldman Sachs FS Government Fund (FGTTX) (0.23%)
Federated Total Return Bond fund (FTRBX)(.47%)
Goldman Sachs Mid Cap Value fund (GSMCX) (.74%)
T. Rowe Price Growth Stock Fund (PRGFX)(.69%)
T. Rowe Price Retirement 2010 fund (TRRAX)(.60%)
T. Rowe Price Retirement 2020 Fund (TRRBX)(.69%)
T. Rowe Price Retirement 2030 Fund (TRRCX)(.75%)
T. Rowe Price Retirement 2040 Fund (TRRDX)(.78%)
T. Rowe Price Retirement 2050 Fund ((TRRMX).78%)
Vanguard STAR Fund (lnv) (VGSTX)(.34%)
Fulton financial Corp. Common Stock
loomis Sayles Small Cap Value Fund (LSSCX) (1.09%)
T. Rowe Price New Income Fund (PRCIX)(.62%)
MFS Value Fund (MEIAX)(.68%)
MFS Research International Fund (MRSAX) (.93%)
American Century Heritage Fund (TWHIX)(.80%)
Vanguard Short-Term Bond Index Fund (VBISX)(.10%)
Vanguard Institutional Index Fund (VINIX) (.04%)
Vanguard Mid-Cap Index fund (VIMSX)(.08%)
Vanguard Small-Cap Growth Index Fund (VISGX)(.08%)
Vanguard Small-Cap Value Index Fund (VISVX).08%)
Fidelity Advisor Diversified Inti. Fund (FDVIX) (.99%)
Goldman Sachs Core fixed Income Fund (GSNSX)(.47%)
PIMCO Real Return Fund (PRRIX)(.88%)
Vanguard Short-Term Bond Index Fund (Adm) (VBIRX)(.10%)

Questions:
1. What to do?!

I think I have covered everything. If you have made it this far, Thank you for reading!
Last edited by TP81 on Fri Nov 21, 2014 7:26 pm, edited 2 times in total.
ieee488
Posts: 1989
Joined: Thu Dec 10, 2009 7:57 am

Re: Help with Mom's portfolio

Post by ieee488 »

You didn't post the ticker symbols for

Code: Select all

Vanguard Institutional Index Fund (.04%)
Vanguard Mid-Cap Index fund (.08%)
Vanguard Small-Cap Growth Index Fund (.08%)
Vanguard Small-Cap Value Index Fund (.08%)
but some combination of them will duplicate the Total Stock Market Index
Those in combination with the Vanguard Short-Term Bond Index
would be what I would choose for her current 401K.

Roll over her 401Ks from former employers.
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Novine
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Joined: Mon Nov 17, 2008 8:07 pm

Re: Help with Mom's portfolio

Post by Novine »

If you're looking for advice on the investments for retirement, most people don't include homes as part of the portfolio. Your Mom has to live somewhere and unless she has plans to sell either home in the next year and invest those proceeds for retirement or pay down debt, including those in the portfolio isn't helpful. I would remove those from the total and recalculate the percentages.
Topic Author
TP81
Posts: 32
Joined: Wed Sep 24, 2014 5:39 pm
Location: Delaware

Re: Help with Mom's portfolio

Post by TP81 »

Thank you for the reply. I have added ticker symbols. Since my grandparents house will likely be sold in the near future I left that in as an asset and removed her primary house. Percentages have been adjusted.
ieee488
Posts: 1989
Joined: Thu Dec 10, 2009 7:57 am

Re: Help with Mom's portfolio

Post by ieee488 »

http://www.bogleheads.org/wiki/Approxim ... ock_market explains about approximating total stock market index

I agree with your mom about not becoming a landlord.
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Minot
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Joined: Sat Jan 29, 2011 1:35 pm

Re: Help with Mom's portfolio

Post by Minot »

ieee488 wrote:You didn't post the ticker symbols for

Code: Select all

Vanguard Institutional Index Fund (.04%)
Vanguard Mid-Cap Index fund (.08%)
Vanguard Small-Cap Growth Index Fund (.08%)
Vanguard Small-Cap Value Index Fund (.08%)
but some combination of them will duplicate the Total Stock Market Index
Those in combination with the Vanguard Short-Term Bond Index
would be what I would choose for her current 401K.
I would too--IF they were offered in her current 401K, but they are not; they're in her old 401K. Unfortunately, the current 401k doesn't nearly as nice options.
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BL
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Re: Help with Mom's portfolio

Post by BL »

Minot wrote:
ieee488 wrote:You didn't post the ticker symbols for

Code: Select all

Vanguard Institutional Index Fund (.04%)
Vanguard Mid-Cap Index fund (.08%)
Vanguard Small-Cap Growth Index Fund (.08%)
Vanguard Small-Cap Value Index Fund (.08%)
but some combination of them will duplicate the Total Stock Market Index
Those in combination with the Vanguard Short-Term Bond Index
would be what I would choose for her current 401K.
I would too--IF they were offered in her current 401K, but they are not; they're in her old 401K. Unfortunately, the current 401k doesn't nearly as nice options.
As mentioned above:
Vanguard Short Term Bond Index (VBSSX) (.10%)
The old 401k could also be transferred to a Vanguard IRA. They would probably convert it to cash and send a check to Vanguard via you. Ask Vanguard to handle it, if you decide to do this.

I agree there aren't great ones in current 401k. This one isn't so bad, except by comparison to above:
Principal LargeCap S&P 500 (PLFMX) (.72%)

$6500 to IRA.

Find out the capital gains on all the stocks in taxable, in order to determine if they can be sold without too much taxes.

Consider consolidating everything at Vanguard (or similar). See if they can be transferred "in kind" (ask Vanguard how to go about it). They will do it after you get the paperwork done. Have a list of every stock and fund to be transferred so you they can tell you whether it can be transferred. I think I would mention everything but probably work on one at a time.

There should be no tax cost in selling stocks & funds in Inherited IRA.

Consider the 3-fund portfolio as a guide for funds after she has decided the stock/bond ratio.
http://www.bogleheads.org/wiki/3-fund_portfolio
Age in bonds could be a starting point. Don't expect her to be as aggressive as you may be, as she doesn't have the time or earnings to make it up if stocks fall a lot as they did a few years ago. Bonds could be CDs, I-Bonds, savings accounts, bonds and tax-exempt bonds (for taxable bond portion).

If she is a widow she should at least consider waiting until age 60 to marry if she would choose to get widows benefits. I don't think divorced spouses can collect off divorced spouse's record if remarried. It is no fun learning of these things too late if they apply to her. The SS website is the authority on these things. Here is one link for widows:
http://www.socialsecurity.gov/survivorp ... urown2.htm
Topic Author
TP81
Posts: 32
Joined: Wed Sep 24, 2014 5:39 pm
Location: Delaware

Re: Help with Mom's portfolio

Post by TP81 »

Thanks for the link ieee488, that will be useful for me.

I do want her to transfer as much as she can to Vanguard. The trading fee for the current brokerage where the stocks are held is $35 per trade, yikes!, so Im not touching those until they are moved to a brokerage with less fees. At that point I plan to sell slowly to avoid her getting into the next tax bracket, my thought is to fund her IRA with the sales of stocks. Is this a good thought?
In this situation (held in an irrevocable trust, in my grandmothers name, my mom is trustee) are the stocks valued on a stepped-up basis based on date of death?

Since her current 401k is expensive I told her to only contribute enough for the match and fully fund her IRA. Then add more to her 401k if she needs to.

BL
I did not know that about an inherited IRA, I will look into that. I have been telling her to pull it from the advisor but she has yet to make that move. If that can be liquidated without tax consequence it will be helpful for sure.

She is divorced so the widow benefits won't apply.

Thanks again for you help on this.
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BL
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Re: Help with Mom's portfolio

Post by BL »

BL
I did not know that about an inherited IRA, I will look into that. I have been telling her to pull it from the advisor but she has yet to make that move. If that can be liquidated without tax consequence it will be helpful for sure.
Just to clarify, there is tax if it is pulled out of the inherited IRA, but she can do any buying or selling (exchanging) within without tax consequences, or the account can be moved to another location as long as the title is not changed. It would probably be cheaper to change things within after moving it to Vanguard or other recommended discount broker. Have the receiving organization pull it from the current (losing) organization as they have the incentive to get it done.
Topic Author
TP81
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Joined: Wed Sep 24, 2014 5:39 pm
Location: Delaware

Re: Help with Mom's portfolio

Post by TP81 »

BL wrote: Just to clarify, there is tax if it is pulled out of the inherited IRA, but she can do any buying or selling (exchanging) within without tax consequences, or the account can be moved to another location as long as the title is not changed. It would probably be cheaper to change things within after moving it to Vanguard or other recommended discount broker. Have the receiving organization pull it from the current (losing) organization as they have the incentive to get it done.
Ok. So The Inherited IRA needs to be transferred "in-kind", then allocation for that can be set.

Should I have her roll-over her 401k from previous employers to her TIRA? Since her current 401k doesn't have any low ER options... not many good options at all really.
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BL
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Re: Help with Mom's portfolio

Post by BL »

TP81 wrote:
BL wrote: Just to clarify, there is tax if it is pulled out of the inherited IRA, but she can do any buying or selling (exchanging) within without tax consequences, or the account can be moved to another location as long as the title is not changed. It would probably be cheaper to change things within after moving it to Vanguard or other recommended discount broker. Have the receiving organization pull it from the current (losing) organization as they have the incentive to get it done.
Ok. So The Inherited IRA needs to be transferred "in-kind", then allocation for that can be set.

Should I have her roll-over her 401k from previous employers to her TIRA? Since her current 401k doesn't have any low ER options... not many good options at all really.
I believe it would make sense to move it to the tIRA. That would make things simpler and Vanguard has good cheap funds. They might keep in in a separate "Rollover IRA" but that is just fine. You can think of your accounts as one portfolio, choose the best fund available in the "bad" 401k, and built the rest around that.

I would suggest at least 50% bonds, maybe 60%. Pay off mortgage, sell off excess property, simplify her life now. Where will she live? Get wills and other legal decisions made and done with before marriage if feasible.
Topic Author
TP81
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Location: Delaware

Re: Help with Mom's portfolio

Post by TP81 »

Thanks BL!

I have had the discussion about simplifying everything with her. I think it will help with her lack of action. I am going to write out a step by step plan.
It is definitely feasible to have her get all legal issues in order, I will just have to keep her on track. I imagine she will live in her current home, for the foreseeable future anyway.

As far as bonds go, should her allocation be in short and intermediate term funds, 50/50? I have a lot to learn when it comes to bonds, from my interpretation of what I have read it seems this would be best given the chance of rising interest rates. Let me know if I am totally off-base with my thinking.
supersharpie
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Re: Help with Mom's portfolio

Post by supersharpie »

TP81 wrote:She is divorced so the widow benefits won't apply.

Thanks again for you help on this.
No, that is incorrect. As long as she was married to her ex, who I am assuming is/was your father, for at least 10 full years before their divorce was finalized AND she waits until her 60th birthday to get remarried she will be eligible for widow's benefits on your her ex's record. That is HUGE as it allows her to collect 25 months early AND delay taking her own retirement benefits until she turns 70. The guy who earlier stated he thought remarriage terminated entitlement to widow's benefits was confusing the rules with receiving spousal benefits off a living ex-spouse (where remarriage does terminate entitlement) and receiving widow's benefits off a deceased ex-spouse (where remarriage DOES NOT terminate entitlement.)

SSA spells this out very clearly:

http://www.socialsecurity.gov/survivorp ... urown3.htm

It should be a no brainer for your mom to delay the wedding by a few months to take advantage of those rules. :moneybag :moneybag :moneybag
lululu
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Re: Help with Mom's portfolio

Post by lululu »

I am not familiar with the details, but a divorced person may have some right to Social Security benefits even if she remarried, when the subsequent marriage ends due to death or divorce, or something like that. Something for you Mom to keep in mind. My Mom lost significant benefits because she was not up to date knowing about Social Security, and Social Security was unmovable about retroactive benefits.

I agree with your Mom about selling the house, not renting it. Being a landlady can be a tremendous strain. One bad tenant and the stress level and bad financial impact go through the roof. No one needs that, particularly not an older person.

I see that your Mom plans to keep her financial situation separate from her future husbands. That's certainly what I would do. I would take a look at things like healthcare powers of attorney and her will and trust in terms of does marriage affect those in surprising ways. If things are not spelled out in legal documents, and even if they are, the state conveys certain rights to a spouse.

I wish you Mom much happiness in her marriage.

Update: I see Supersharpie has addressed the Social Security situation in far more detail than I could. I find the posts on this quite confusing, so I urge you to read up and perhaps talk to Social Security yourself.
supersharpie
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Re: Help with Mom's portfolio

Post by supersharpie »

lululu wrote:I am not familiar with the details, but a divorced person may have some right to Social Security benefits even if she remarried, when the subsequent marriage ends due to death or divorce, or something like that. Something for you Mom to keep in mind. My Mom lost significant benefits because she was not up to date knowing about Social Security, and Social Security was unmovable about retroactive benefits.

I agree with your Mom about selling the house, not renting it. Being a landlady can be a tremendous strain. One bad tenant and the stress level and bad financial impact go through the roof. No one needs that, particularly not an older person.

I see that your Mom plans to keep her financial situation separate from her future husbands. That's certainly what I would do. I would take a look at things like healthcare powers of attorney and her will and trust in terms of does marriage affect those in surprising ways. If things are not spelled out in legal documents, and even if they are, the state conveys certain rights to a spouse.

I wish you Mom much happiness in her marriage.

Update: I see Supersharpie has addressed the Social Security situation in far more detail than I could. I find the posts on this quite confusing, so I urge you to read up and perhaps talk to Social Security yourself.
Summary:

As long as you were married to your deceased ex-spouse for 10 years AND waited until you turned 60 to remarry then you are free to collect survivor benefits on your ex's record.

OP - is your mother's ex deceased?
Topic Author
TP81
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Location: Delaware

Re: Help with Mom's portfolio

Post by TP81 »

Yes, my dad is deceased. He and my mom were married for over 20 years. However, my dad did remarry before he passed and was remarried for about right around 10 years. Does this change the situation?

Also, my moms finance is a widower so it sounds like this would apply to him.
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Steelersfan
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Re: Help with Mom's portfolio

Post by Steelersfan »

TP81 wrote:Yes, my dad is deceased. He and my mom were married for over 20 years. However, my dad did remarry before he passed and was remarried for about right around 10 years. Does this change the situation?
No. Every person he was married to for 10 years can independently collect on his record.
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BL
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Re: Help with Mom's portfolio

Post by BL »

OK, she is a widowed ex-spouse, that makes a huge difference. Thanks to the person above for clarifying that. In other words, you can't assume anything, or depend on anonymous persons on the internet to give you exact information. The SS link above is quite clear on this:
If you have a surviving divorced spouse, he or she could get the same benefits as your widow or widower provided that your marriage lasted 10 years or more.
Waiting just a bit more until age 60 could make a huge difference. It is not like she is planning to get married next week. How much longer than the date she planned will she be 60 ? At least gather and verify the facts (social security website, and their office, but you need to ask the right questions). Just like so many financial decisions, I believe in gathering the facts and then making a decision knowing the choices.
lululu
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Re: Help with Mom's portfolio

Post by lululu »

Her fiance should not object to postponing the marriage if he is a good guy (or gal). The financial well-being of his partner should be important to him. They can always live together in the meantime, if they aren't already.
Topic Author
TP81
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Location: Delaware

Re: Help with Mom's portfolio

Post by TP81 »

This is some great information. Their tentative wedding date is in October, her 60th birthday is March the following year. After I pass this along to them Im sure they will reconsider.

I will read the SS link, thanks for that.
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