Portfolio advice

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Topic Author
F4mandolin
Posts: 29
Joined: Tue Dec 02, 2008 6:41 am
Location: Harrogate, England- Spokane

Portfolio advice

Post by F4mandolin »

Currently coming up on 2 years retirement in June. Living outside Spokane WA with my UK wife. Possibility of moving back to N Yorkshire in 5-10 years, but funds would be pretty limited for doing that. Total money at this time is approx. $800K. About $367K through Edward Jones + $420K TSP Govt. While I am not totally unhappy with Edward Jones, at some point I wouldn’t mind moving things to Vanguard. Still not sure what to do with my TSP, either leave it where it is or move to Vanguard although I would like to simplify things quite a bit. TSP is pretty simple, Edward Jones less so for me. I am getting a bit tired of Edward Jones trying to sell me things like Variable Annuities.

Money coming in
1. Pension from Govt, $962 a month after taxes, health insurance, spousal coverage taken out.
2. Approx $700 a month starting this summer from a Social Security Supplement from 56 to 62.
3. Will likely take Social Security at 62. Approx $1350 a month. Wife would get spousal 50% when she gets to 62.
4. Wife will get a UK pension of approx. $600-650 a month at 66.
5. Wife will get a small pension of approx. $1600 a year at 60.

Emergency funds:
1. $18,000 credit union checking
2. $17,300 (Unit Trusts) Invesco Investment Grade Income Trust 7+yr monthly cash

Debt: Indicate if you have any debt
1. No debt. House paid off worth approx. $230K
Tax Filing Status: Married Filing Jointly
Tax Rate: 15% Federal, 0% State
State of Residence: WA
Age: 55, wife 52…next birthdays coming within 3 months.
Desired Asset allocation: 60% stocks / 40% bonds (I yo-yo between 50-50+ 60-40)
Desired International allocation: Unsure…but am interested in more of a general fund like Total stocks/Total bonds…or even the Wellington/Wellesley combo’s.

Please provide a hint as to the size of your current total portfolio
1. Approx $800K not including house (about $230K)

Current retirement assets

Taxable
Through Edward Jones
Wachovia Mortgage Due Maturity Date=08/15/2013 CD rate=5.050% $18,233
Hewlett Packard CO Global Note -corporate- Maturity Date 03/01/2014 rate=6.125% $18,824
Citigroup Inc Senior Note Unsecured- corporate- Maturity Date 03/02/2015 rate=2.650 % $18,542

AMCAP Fund CL A AMCPX $48,400
American High Income Trust Cl A AHITX $20,900
Capital World Bond Fund Cl A CWBFX $11,900
Capital World Growth & Income Fund Cl A CWGIX $18,400
Europacific Growth Fund Cl A AEPGX $16,400
Fundamental Investors Fund Cl A ANCFX $33,700
Intermediate Bond Fund of America Cl A AIBAX $38,000
SmallCap World Fund Cl A AMCWX $17,000
Washington Mutual Investors Fund Cl A AWSHX $33,700

Non-taxable ROTH
Through Edward Jones
AMCAP Fund Cl A AMCPX $9,400
Bond Fund of America Cl A ABNDX $10,000
Capital World Growth & Income Cl A CWGIX $6,400
Europacific Growth Fund Cl A AEPGX $3,300
Fundamental Investors Fund Cl A ANCFX $5,100
Investment Company of America Fund Cl A AIVSX $2,500
New Economy Fund Cl A ANEFX $5,300
SmallCap World Fund Cl A SMCWX $5,200
Washington Mutual Investors Fund Cl A AWSHX $5,500

Non-Taxable
401- TSP Govt Fund Approx $420K .027% expense ratio in 2012
55% C fund Blue chip
15% S fund Small cap
30% F fund Fixed income

Questions:
1. Looking for the safest way to spend (today's equivalent) $4,000 a month and hopefully keep the principle increasing. Typical month for us is $2000 unless house needs some work, property taxes etc.

2. Looking to simplify things with the Edward Jones account. Either with something like the Vanguard Total Stock market/Total Bond market combo, or even a Wellington/Wellesley combo.

3. Should I keep the TSP money right where it is, or put that into something like the above Vanguard funds? TSP has always seemed like a good deal to me.
Johm221122
Posts: 6393
Joined: Fri May 13, 2011 6:27 pm

Re: Portfolio advice

Post by Johm221122 »

You are paying lots of fees and loads with your Edward Jones funds. These funds are not tax efficient
http://www.bogleheads.org/wiki/Principl ... _Placement
How much capital gains in taxable?
TSP is a good deal
4k a month should be easy with your pension/SS
Hope this bumps you up
john
JW-Retired
Posts: 7189
Joined: Sun Dec 16, 2007 11:25 am

Re: Portfolio advice

Post by JW-Retired »

F4manolin wrote:Looking to simplify things with the Edward Jones account. Either with something like the Vanguard Total Stock market/Total Bond market combo, or even a Wellington/Wellesley combo.
You have 100% front loaded funds with high expense ratios. You really can't simplify anything much without paying another 5.75% load on the money. I doubt EJ will sell you something they don't collect a fee on.

If the folly of high expense investing has not sunk in, just consider that the classical safe drawdown rate of a retirement portfolio is 4% per year (including investment expense). So if you are paying a yearly expense of 2%, which you likely are, you are paying fully half your safe withdrawel income amount out in fees. This doesn't even count the up front 6% haircut.
JW
Retired at Last
Topic Author
F4mandolin
Posts: 29
Joined: Tue Dec 02, 2008 6:41 am
Location: Harrogate, England- Spokane

Re: Portfolio advice

Post by F4mandolin »

Thanks for the reply's. I got into EJones knowing there were upfront loads...no complaint there, although only the beginning loads are 5.75%....goes steadily lower and goes away if you have 1 million(I don't). Just getting to find a few of the other costs that are hard to find. I have a few books (4 Pillers, couple of Bogel's book etc)....stuff just doesn't stick in my head very well. I can show you how to play classical music on a mandolin, I can play close to scratch golf at times, but this is harder for me for some reason. Just now trying to locate the 12b-1 info for the EJones stuff....still looking.... Guess what I really need is a simpler book that really spells out the investing (in retirement now) methods. Simply. Still think I might eventually move the EJones stuff over to Vanguard sooner or later if I can get confident enough. One of my questions was whether leaving the TSP money right where it is the best choice. EJones isn't getting it, but wonder if moving it to the Vanguard Total Stock/Bond type funds would be better. From the attached link to tax efficiency (thanks)....why are people using the Wellesley type funds when they don't seem to be as efficient as the Total Stock style fund? Wellesley has 2/3rds in bonds which I didn't think were as efficient (now I need to go back and read that link again to see if I have it right).
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steve roy
Posts: 1855
Joined: Thu May 13, 2010 5:16 pm

Re: Portfolio advice

Post by steve roy »

Me, I would exit the EJ accounts, but maybe that isn't doable for you.

Re Wellesley: You're right, it isn't tax efficient, but many place it in tax-sheltered accounts (I know I do.) While Wellesley is actively managed, it's a low-cost fund and so fits within many Bogleheads' parameters.

Personally, I think that investing is simple in concept, but trickier in execution. (People tend to freak out when they lose money, and make bad decisions.) 'Twere I you, I would have 60% in short and intermediate bonds, have the equities divvied up between large and small cap, international and domestic. I would have a large part of my stash in index funds ... and I would be using Vanguard (or Fidelity Spartain funds, whatever is accessible and cost-efficient.)

EJ is sticking it to you with fees, so you have to decide what you want to do there, but I would (again) get out if possible.
JW-Retired
Posts: 7189
Joined: Sun Dec 16, 2007 11:25 am

Re: Portfolio advice

Post by JW-Retired »

F4mandolin wrote:Thanks for the reply's. I got into EJones knowing there were upfront loads...no complaint there, although only the beginning loads are 5.75%....goes steadily lower and goes away if you have 1 million(I don't). Just getting to find a few of the other costs that are hard to find. I have a few books (4 Pillers, couple of Bogel's book etc)....stuff just doesn't stick in my head very well. I can show you how to play classical music on a mandolin, I can play close to scratch golf at times, but this is harder for me for some reason. Just now trying to locate the 12b-1 info for the EJones stuff....still looking.... Guess what I really need is a simpler book that really spells out the investing (in retirement now) methods. Simply. Still think I might eventually move the EJones stuff over to Vanguard sooner or later if I can get confident enough. One of my questions was whether leaving the TSP money right where it is the best choice. EJones isn't getting it, but wonder if moving it to the Vanguard Total Stock/Bond type funds would be better. From the attached link to tax efficiency (thanks)....why are people using the Wellesley type funds when they don't seem to be as efficient as the Total Stock style fund? Wellesley has 2/3rds in bonds which I didn't think were as efficient (now I need to go back and read that link again to see if I have it right).
The loads are sunk costs but the annual ER's sink you more every year. The first trouble with loads is they guarantee you will have 5.75% less when you retire then you would have had with a similar investment with no-load fund company, but that's already done. The 2nd trouble with loads is they prevent you from selling one thing and buying something to replace it for tax loss harvesting purposes or just rebalancing. Very necessary to do with a taxable account. That trouble is still at work.

You can find the ER's for any fund by goggling the trading symbol. Goggle AMCPX. Pick yahoo finance from one of the top items that comes up and click that. At yahoo, select the fund "profile" from the menu on the left side and click that. The page that comes up will show you fees and expenses...... the ER is 0.73%, which includes a 0.23% 12b-1 fee. It could be worse. Of course, the ER is 10x the ER that Vanguard would charge you for a $48,000 investment in a similar large growth index fund.
JW
Last edited by JW-Retired on Tue Apr 09, 2013 7:43 am, edited 1 time in total.
Retired at Last
Topic Author
F4mandolin
Posts: 29
Joined: Tue Dec 02, 2008 6:41 am
Location: Harrogate, England- Spokane

Re: Portfolio advice

Post by F4mandolin »

Thanks again. Other than the loads.....and the 12b-1....are there any other expenses built in? Or does anything else pop up just when the funds have activity/switches?
JW-Retired
Posts: 7189
Joined: Sun Dec 16, 2007 11:25 am

Re: Portfolio advice

Post by JW-Retired »

F4mandolin wrote:Thanks again. Other than the loads.....and the 12b-1....are there any other expenses built in? Or does anything else pop up just when the funds have activity/switches?
Funds have trading costs when they buy/sell which are not included in the ER. Check the annual turnover ratio of the fund (e.g. goggle AMCPX and choose morningstar which has it on their first page) Guessing if it's a fairly big number like 30% or more it's probably a significant expense. Some active funds have >100% turnover. Index funds have very low turnover so their trading costs are going to be pretty negligible. Not sure exactly what 30% turnover is equivalent to in terms of ER boost.
JW
ps: you may also be paying some sort of management fee directly to EJ. That would not happen at Vanguard, the ER is basically it. (exception: there is a $20 buck charge if your account is very small and you want paper statements mailed to you.)
Retired at Last
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