59 & 76 YO couple requesting alloc. & rebalancing input

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cjonblanchard
Posts: 78
Joined: Fri Jun 21, 2013 5:03 pm
Location: Chicago area

59 & 76 YO couple requesting alloc. & rebalancing input

Post by cjonblanchard »

Hi,
I’m a brand-new Boglehead looking for portfolio advice on how to split things up among our IRAs, Roths, Bank CDs, and work 401K accounts. The work IRA will get a new fund lineup this Monday…fund info appears below.

Like many, my husband and I went through a few investment advisors / investment newsletters over the years. I took over managing our portfolio about 1-1/2 yrs. ago. That time was spent guided by investment newsletters. A Gail MarksJarvis presentation in Chicago several months ago led me to read her book and others, including Bogleheads’ Guide to Investing, one of John Bogle’s books, and Swedroe’s Only Guide to a Winning Investment Strategy You'll Ever Need: I’m now ready to leave the past behind and move forward with indexing with a little help from the Bogleheads. Also may meet with a “by-the-hour” financial advisor.

We have a real conglomeration of funds, so unfortunately our list of investments is long. I have everything on an Excel spreadsheet, so let me know if it d help to set things out in a different manner. It’s easy to modify.

Our current status:
emergency fund: 6 mo
debt: $11,000 credit card debt (0% APR to be paid off when due on 10/1)
tax filing status: married
tax rate: 25% federal (usually approx. 12% after deductions), 5% state IL
my age: 59; husband: 76
desired allocation: not 100% sure: husband wants 25% equity and the rest bonds/cash. I’m thinking around 40% stocks and 60% bonds/cash as to my portion & taxable portion. But I now know that we should combine all our assets into one and divide them up from there allocation-wise, correct? (vs. 25/75 in his IRAs/Roths and 40/60 in my IRAS/Roths and our taxable portion).

current portfolio: very low 7 figures

Estate: We have a Family Trust which states that after the first of us dies, 12% of our estate will go to his kids and the remainder to me. When the second of us dies, it will be split up among his kids and my siblings.

Summary of total assets:
Taxable Accounts: 14.5%
My IRAs/Roth/401K: 50.0%
Husband’s IRAs/Roth: 35.5%

2.02% Miscellaneous utility stocks
0.26% AKREX Akre Focus Fund 1.40%
0.25% VDIGX Vanguard Dividend Growth-Inv 0.29%
1.48% VTSMX Vanguard Total Stock Market Idx Fd 0.17%
1.01% VWINX Vanguard Wellesley Income Fund 0.25%
0.22% VFWIX Vanguard FTSE All-World Ex-Us 0.30%
0.23% VWIGX Vanguard Intl Growth Portfolio 0.49%
0.23% DODIX Dodge & Cox Income Fund 0.43%
0.92% DLTNX Doubleline Total Return Bd 0.76%
0.23% SPHIX Fidelity High Income Fund Inc 0.76%
0.23% MWTRX Metropolitan West T/R Bond 0.62%
0.22% BIV Vanguard Bd Idx Interm Trm ETF 0.10%
0.91% VFIIX Vanguard GNMA fund 0.21%
0.46% VFSTX Vanguard Shrt Trm Invmnt Grd-Inv 0.20%
2.34% C.D. Bank C.D. @ 2% Mat. 10/20/16 -
3.45% Bonds U.S. Svgs. Bonds and three I-Bonds -

Her IRA:
0.24% AESpC Utility stocks
1.81% AKREX Akre Focus Fund 1.40%
1.76% VDIGX Vanguard Dividend Growth-Inv 0.29%
5.15% VTI Vanguard Total Stock Mkt ETF 0.05%
3.00% VWIAX Vanguard Wellesley Fund - Admiral 0.18%
1.57% VFWIX Vanguard FTSE All-World Ex-Us 0.30%
1.58% VWIGX Vanguard Intl Growth Portfolio 0.49%
0.90% VWESX Vanguard Long Term Invmt Grd 0.22%
3.27% VFSTX Vanguard Shrt Trm Invmnt Grd 0.20%
6.41% VFIIX Vanguard GNMA fund 0.21%
1.39% DODIX Dodge & Cox Income Fund 0.43%
6.55% DLTNX Doubleline Total Return Bd 0.76%
0.94% SPHIX Fidelity High Income Fund 0.76%
1.85% MWTRX Metropolitan West T/R Bond 0.62%
10.08% Cash Scottrade MM & Bk. CDs @ 2% Mat 2016 -

Her Roth:
1.16% VWINX Vanguard Wellesley Fund - Investor 0.25%
0.64% Cash Bank C.D. @ 2% Mat. 2016 -

Her 401K:
0.71% 785CF Navigator Capital Preservation 1.01%
0.04% GSFTX Columbia Dividend Income 0.83%
0.42% VDIGX Vanguard Dividend Growth 0.31%
0.06% VEXMX Vanguard Extended Mkt. Index 0.28%
0.06% VSISX Vanguard Small Cap Index 0.10%
0.16% OAKMX Oakmark I 1.03%

Her Pension: Work profit-sharing plan (firm invests conservatively) 0.38% of total assets

His IRAs:
0.11% AESpC AES Trust III 6.75% Trust Conv. Pfd. Sec.
0.83% AKREX Akre Focus Fund Retail 1.40%
0.80% VDIGX Vanguard Dividend Growth-Inv 0.29%
5.00% VTI Vanguard Total Stock Mkt ETF 0.05%
0.39% DVY Ishares Tr Dow Jones Sel Div 0.40%
0.72% VFWIX Vanguard FTSE All-World Ex-Us 0.30%
0.72% VWIGX Vanguard Intl Growth Portfolio 0.49%
2.48% VWINX Vanguard Wellesley Income Fund 0.25%
2.93% VFIIX Vanguard GNMA fund 0.21%
1.50% VFSTX Vanguard Shrt Trm Invmnt Grd 0.20%
2.31% VWESX Vanguard Long Term Invmt Grd 0.22%
2.42% DODIX Dodge & Cox Income Fund 0.43%
3.61% DLTNX Doubleline Total Return Bd 0.76%
2.41% MWTRX Metropolitan West T/R Bond 0.62%
2.45% SPHIX Fidelity High Income Fund 0.76%
5.91% Bank CDs @ 2.5% Mat. 2016 -

His Roths:
0.29% Bank CD @ 1.9% Mat. 2016 -
0.59% VWINX Vanguard Wellesley Fund - Investor 0.25%

Present budget: I plan to work at my PT job for another 2 to 3 years. It provides roughly 50% of our present income. We could live on 2% of our total equity/bond/cash assets with my present job, then probably 4% when I retire. I don’t plan to claim S.S. until 67 -- at the 1/2 spousal amount. At 70, I plan to switch to S.S. under my account. I’m very healthy and have long-livers in my family.

Our medical insurance costs $363/mo. via husband’s former employer; however, when husband passes, I’m on my own. We both have LTC policies.

We have WAY too many funds. I know we’re not invested properly for the distribution phase of retirement but want to get this right. Following are my questions:

1. Our brokerage accounts are at Scottrade and Vanguard. I'm considering merging them solely into Vanguard. We’d then be “Flagship Services” clients. It bothers me a bit to put most of my eggs into one brokerage basket and I don’t know how others handle this. Thoughts?

2. I now understand that equities should be held in taxable accounts and bonds/cash in tax-protected accounts. But we’re lop-sided on the tax-protected side. As to the taxable accounts, should I keep the savings and I bonds and invest the rest in equities? All CDs only have a 90-day penalty, which is why we went with 5 yr. mat. dates.

3. My husband is concerned that the market will collapse. He would prefer to be invested no more than 25% in equities (he’s 76)for his tax-protected accts. I’m thinking perhaps 40% equities/60% bonds & CDs for my tax-protected and our taxable accts. Given our ages, would this be a good allocation:
45% Vanguard Total Stock Mkt ETF … or would the M.F. version be better?
15% Vanguard FTSE All-World ex-US Index Fund Investor Shares (VFWIX)
30% Vanguard Total Bond Market Index Fund (VBTLX)
10% CDs/Bonds??

4. For our small Roth accounts and my small beneficial IRA, should we just make it easier and go with Vanguard Wellesley?

5. Rebalancing: Read a couple of articles and like the idea of rebalancing annually at beginning of year by withdrawing MRD and/or needed living expenses from the account(s) with the overage. Thoughts?

6. Please share your thoughts as to which funds/% I should go with in the new palette of funds my co. offers:
Fund Exp. %
GSFTX Columbia Dividend Income 0.83%
775CF Navigator Aggressive Growth 1.00%
785CF Navigator Capital Preservation 1.01%
725CF Navigator Fixed Income 1.05%
745CF Navigator Growth 1.00%
OAKMX Oakmark 1.03%
PTTRX PIMCO Total Return 0.46%
UMBMX Scout Mid Cap 1.06%
VIFSX Vanguard 500 Index 0.05%
VDIGX Vanguard Dividend Growth 0.31%
VEXMX Vanguard Extended Mkt. Index 0.28%
VIGSX Vanguard Growth Index 0.10%
VSISX Vanguard Small Cap Index 0.10%
VTSGX Vanguard Total Int'l Stock 0.16%

I’ve enjoyed poring through the threads: what a wealth of knowledgeable people! Thanks for your time in slogging through this post.

Thanks!
Last edited by cjonblanchard on Sat Jun 22, 2013 4:51 pm, edited 1 time in total.
User avatar
sometimesinvestor
Posts: 1271
Joined: Wed May 13, 2009 6:54 am

Re: 59 & 76 YO couple requesting alloc. & rebalancing input

Post by sometimesinvestor »

As you suggested the taxable account is the biggest problem possibly needing the biggest changes. In the tax defrred accounts changes are easier in that they have no tax consequences . Are you reinvesting dividends or spending them? Do you have large capital gains on any of the positions? What about losses? Without knowing its hard to make good suggestions.
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

Re: 59 & 76 YO couple requesting alloc. & rebalancing input

Post by dbr »

cjonblanchard wrote: 1. Our brokerage accounts are at Scottrade and Vanguard. I'm considering merging them solely into Vanguard. We’d then be “Flagship Services” clients. It bothers me a bit to put most of my eggs into one brokerage basket and I don’t know how others handle this. Thoughts?

I'm from the school that would just prefer not having all assets at the same custodian. In the end it seems that things just gravitated to two or three places anyway and significant manipulations would be required to consolidate everything. Vanguard is not among the companies that hold my assets.

2. I now understand that equities should be held in taxable accounts and bonds/cash in tax-protected accounts. But we’re lop-sided on the tax-protected side. As to the taxable accounts, should I keep the savings and I bonds and invest the rest in equities? All CDs only have a 90-day penalty, which is why we went with 5 yr. mat. dates.

Not quite. The issue is overall tax cost/tax efficiency. This is a good read on the subject: http://www.bogleheads.org/wiki/Principl ... _Placement

3. My husband is concerned that the market will collapse. He would prefer to be invested no more than 25% in equities (he’s 76)for his tax-protected accts. I’m thinking perhaps 40% equities/60% bonds & CDs for my tax-protected and our taxable accts. Given our ages, would this be a good allocation:
45% Vanguard Total Stock Mkt ETF … or would the M.F. version be better?
15% Vanguard FTSE All-World ex-US Index Fund Investor Shares (VFWIX)
30% Vanguard Total Bond Market Index Fund (VBTLX)
10% CDs/Bonds??

Your risk level and asset allocation should be determined for the whole portfolio. You can certainly have different asset allocation in different accounts, but your actual asset allocation amounts to the total of the two -- something between 25/75 and 40/60. The question is in what way the concept of "his portion" and "your portion" is meaningful. Are there some agreements or restrictions on how those accounts can be used, for example, to be inherited by different people after yourselves, or something like that?

4. For our small Roth accounts and my small beneficial IRA, should we just make it easier and go with Vanguard Wellesley?

5. Rebalancing: Read a couple of articles and like the idea of rebalancing annually at beginning of year by withdrawing MRD and/or needed living expenses from the account(s) with the overage. Thoughts?

You will manage a long way with that. Still, the essence of rebalancing is to stay on target so that implies at least keeping track of how far out of balance you are and doing something if the situation is grossly out of hand.

6. I heard about the Boglehead conference in Philly on 10/16-18. Are there still spots available?

I’ve enjoyed poring through the threads: what a wealth of knowledgeable people! Thanks for your time in slogging through this post.

Thanks!
Topic Author
cjonblanchard
Posts: 78
Joined: Fri Jun 21, 2013 5:03 pm
Location: Chicago area

Re: 59 & 76 YO couple requesting alloc. & rebalancing input

Post by cjonblanchard »

Sorry, please ignore this box: newbie and still learning how to reply ... got it now!
Last edited by cjonblanchard on Sat Jun 22, 2013 4:33 pm, edited 2 times in total.
User avatar
steve roy
Posts: 1855
Joined: Thu May 13, 2010 5:16 pm

Re: 59 & 76 YO couple requesting alloc. & rebalancing input

Post by steve roy »

My vote would be a combined portfolio of 70 bonds 30 stocks. Maybe replace Wellesley with life strategy Conservative Growth (similar allocation, broader diversification) or put most of your tax sheltered holdings in VG Target Retirement Income for simplicity.

I agree that you have too many funds.
lhl12
Posts: 728
Joined: Mon May 27, 2013 8:24 am

Re: 59 & 76 YO couple requesting alloc. & rebalancing input

Post by lhl12 »

According to the Social Security website, you have a life expectancy of 27 more years while your husband has a life expectancy of 11 more years. Actuarially speaking, it is highly unlikely that you will pre-decease him.

You haven't said what will happen to his assets upon his death. Will it all go to you, or will his Will dispose of it elsewhere? I presume the former, but that is an important piece of information.

Assuming his assets will all go to you upon his death, I think you both ought to consider the question as if it were all your money, and you need to decide what the appropriate asset allocation is as if you were single. On that basis, I think 25% is far too conservative, and would encourage something closer to 50/50. You both need to ensure that your combined assets will provide for you for many years after he is gone.
thebogledude
Posts: 420
Joined: Thu Jun 09, 2011 12:40 am

Re: 59 & 76 YO couple requesting alloc. & rebalancing input

Post by thebogledude »

lhl12 wrote: Assuming his assets will all go to you upon his death, I think you both ought to consider the question as if it were all your money, and you need to decide what the appropriate asset allocation is as if you were single. On that basis, I think 25% is far too conservative, and would encourage something closer to 50/50. You both need to ensure that your combined assets will provide for you for many years after he is gone.
I agree with the 50/50 allocation, which is more aligned with your age.

Also Wellesley is a actively managed fund, you had mentioned you wanted to move forward with indexing.

Also you probably know this, one of the downsides of a portfolio with this many funds is overlap in allocation not to mention the extra fees.
Topic Author
cjonblanchard
Posts: 78
Joined: Fri Jun 21, 2013 5:03 pm
Location: Chicago area

Re: 59 & 76 YO couple requesting alloc. & rebalancing input

Post by cjonblanchard »

sometimesinvestor wrote:As you suggested the taxable account is the biggest problem possibly needing the biggest changes. In the tax defrred accounts changes are easier in that they have no tax consequences . Are you reinvesting dividends or spending them? Do you have large capital gains on any of the positions? What about losses? Without knowing its hard to make good suggestions.
We are not reinvesting dividends: they're put into a MM account where they sit, waiting to be reinvested or spent. No large capital gains on any of the positions. If I sold my Exelon stock in the utility stocks basket, there'd be a $9K LT loss ... other utility stocks in that basket comprise an approx. $6K gain.
Topic Author
cjonblanchard
Posts: 78
Joined: Fri Jun 21, 2013 5:03 pm
Location: Chicago area

Re: 59 & 76 YO couple requesting alloc. & rebalancing input

Post by cjonblanchard »

dbr wrote:
cjonblanchard wrote: 1. Our brokerage accounts are at Scottrade and Vanguard. I'm considering merging them solely into Vanguard. We’d then be “Flagship Services” clients. It bothers me a bit to put most of my eggs into one brokerage basket and I don’t know how others handle this. Thoughts?

I'm from the school that would just prefer not having all assets at the same custodian. In the end it seems that things just gravitated to two or three places anyway and significant manipulations would be required to consolidate everything. Vanguard is not among the companies that hold my assets.

Thanks: glad you feel the same way. Is there a reason why you don't hold any assets with Vanguard?

2. I now understand that equities should be held in taxable accounts and bonds/cash in tax-protected accounts. But we’re lop-sided on the tax-protected side. As to the taxable accounts, should I keep the savings and I bonds and invest the rest in equities? All CDs only have a 90-day penalty, which is why we went with 5 yr. mat. dates.

Not quite. The issue is overall tax cost/tax efficiency. This is a good read on the subject: http://www.bogleheads.org/wiki/Principl ... _Placement

Thanks: I'll check it out. I do have a much better understanding about tax efficiency after having a go-round in the 2008 downturn.

3. My husband is concerned that the market will collapse. He would prefer to be invested no more than 25% in equities (he’s 76)for his tax-protected accts. I’m thinking perhaps 40% equities/60% bonds & CDs for my tax-protected and our taxable accts. Given our ages, would this be a good allocation:
45% Vanguard Total Stock Mkt ETF … or would the M.F. version be better?
15% Vanguard FTSE All-World ex-US Index Fund Investor Shares (VFWIX)
30% Vanguard Total Bond Market Index Fund (VBTLX)
10% CDs/Bonds??

Your risk level and asset allocation should be determined for the whole portfolio. You can certainly have different asset allocation in different accounts, but your actual asset allocation amounts to the total of the two -- something between 25/75 and 40/60. The question is in what way the concept of "his portion" and "your portion" is meaningful. Are there some agreements or restrictions on how those accounts can be used, for example, to be inherited by different people after yourselves, or something like that?

I only meant "his portion" and "your [my] portion" in trying to keep with my understanding of the guidelines. His portion = his IRAS and Roths ... same thing with my portion. We have a Family Trust which states that after the first of us dies, 12% of our estate will go to his kids and the remainder to me. When the second of us dies, it will be split up among his kids and my siblings.

4. For our small Roth accounts and my small beneficial IRA, should we just make it easier and go with Vanguard Wellesley?

5. Rebalancing: Read a couple of articles and like the idea of rebalancing annually at beginning of year by withdrawing MRD and/or needed living expenses from the account(s) with the overage. Thoughts?

You will manage a long way with that. Still, the essence of rebalancing is to stay on target so that implies at least keeping track of how far out of balance you are and doing something if the situation is grossly out of hand.

Good point: hadn't thought of that. Thanks.

6. I heard about the Boglehead conference in Philly on 10/16-18. Are there still spots available?

I’ve enjoyed poring through the threads: what a wealth of knowledgeable people! Thanks for your time in slogging through this post.

Thanks!
Topic Author
cjonblanchard
Posts: 78
Joined: Fri Jun 21, 2013 5:03 pm
Location: Chicago area

Re: 59 & 76 YO couple requesting alloc. & rebalancing input

Post by cjonblanchard »

lhl12 wrote:According to the Social Security website, you have a life expectancy of 27 more years while your husband has a life expectancy of 11 more years. Actuarially speaking, it is highly unlikely that you will pre-decease him.

You haven't said what will happen to his assets upon his death. Will it all go to you, or will his Will dispose of it elsewhere? I presume the former, but that is an important piece of information.

Assuming his assets will all go to you upon his death, I think you both ought to consider the question as if it were all your money, and you need to decide what the appropriate asset allocation is as if you were single. On that basis, I think 25% is far too conservative, and would encourage something closer to 50/50. You both need to ensure that your combined assets will provide for you for many years after he is gone.
I'll insert the following within my original message, but want to reply to you, so will put it here, too: We have a Family Trust which states that after the first of us dies, 12% of our estate will go to his kids and the remainder to me. When the second of us dies, it will be split up among his kids and my siblings.

I'll share your thoughts and we'll kick it around. He has grave concerns about the market, but he's felt that way for over 10 years now and I really can't imagine the market "going out of business" so to speak. Maybe we can move in the direction of 40 or 45% equities and 55% or 60% bonds.
Last edited by cjonblanchard on Sun Jun 23, 2013 1:27 pm, edited 1 time in total.
lhl12
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Joined: Mon May 27, 2013 8:24 am

Re: 59 & 76 YO couple requesting alloc. & rebalancing input

Post by lhl12 »

Let's assume he pre-deceases you. If I understand your estate plan, his kids get 12% of his assets immediately and the remaining 88% of his assets gets held in trust for the remainder of your lifetime, then go to his kids.

Some rhetorical questions: Who determines the asset allocation of the 88% - you or his kids? Who determines how much of the 88% (and its return) can be paid out to you each year? If he dies in five or ten years, and you live to be 100, you might well need to spend every penny of his 88%. Does the Trust allow that? Would his kids allow that if he is gone?

It seems to me that you both need to be very careful and precise about his estate plan, since you will likely need to rely on those assets for many years. I would be careful about worrying too much about your joint asset allocation before ensuring that his Will leaves you with sufficient control over your Family Trust that you are actually able to implement whichever asset allocation conclusions you reach.
thebogledude
Posts: 420
Joined: Thu Jun 09, 2011 12:40 am

Re: 59 & 76 YO couple requesting alloc. & rebalancing input

Post by thebogledude »

lhl12 wrote: Some rhetorical questions: Who determines the asset allocation of the 88% - you or his kids? Who determines how much of the 88% (and its return) can be paid out to you each year? If he dies in five or ten years, and you live to be 100, you might well need to spend every penny of his 88%. Does the Trust allow that? Would his kids allow that if he is gone?
I would assume the OP would control the trust and therefore manage the trust.
Topic Author
cjonblanchard
Posts: 78
Joined: Fri Jun 21, 2013 5:03 pm
Location: Chicago area

Re: 59 & 76 YO couple requesting alloc. & rebalancing input

Post by cjonblanchard »

thebogledude wrote:
lhl12 wrote: Some rhetorical questions: Who determines the asset allocation of the 88% - you or his kids? Who determines how much of the 88% (and its return) can be paid out to you each year? If he dies in five or ten years, and you live to be 100, you might well need to spend every penny of his 88%. Does the Trust allow that? Would his kids allow that if he is gone?
I would assume the OP would control the trust and therefore manage the trust.
Thanks for your questions: My husband and I are the sole trustees, so we alone determine the asset allocation of the 88%. Similarly, I would determine how much of the 88%/its return is paid out each year. The kids know about the trust and how it is eventually to be distributed but have no knowledge as to the portfolio's administration. They are not investment-savvy at all but we're proud that they've come a LONG way in managing their budgets.
Last edited by cjonblanchard on Sun Jun 23, 2013 1:26 pm, edited 1 time in total.
lhl12
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Re: 59 & 76 YO couple requesting alloc. & rebalancing input

Post by lhl12 »

Ok. In that case, I would incorporate only 88% of his $ into your individual long term asset allocation. The question is which 88%.

If he is opposed to equities then you could consider the 12% as all coming from his fixed income when the time comes. So, for example, if he were 40% equities and 60% fixed income on a combined basis then you would be 40% equities and 48% fixed income on the portion that will end up in the Trust. That's a bit of smoke and mirrors thinking, though, because when he's gone you can then reallocate everything in the Trust to a much more equity-heavy allocation. So, it applies only during his lifetime.

Note that if your joint allocation is equity-light, the situation is even worse for his kids, who are much younger and who should be more heavily allocated to equities than 50/50. They too can reallocate whatever they inherit when the time comes, but the fact that 12% of his money is really ultimately theirs means that your combined overall allocation should be even more tilted to equities than it would be if you were both childless and 100% were going to you.
lhl12
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Joined: Mon May 27, 2013 8:24 am

Re: 59 & 76 YO couple requesting alloc. & rebalancing input

Post by lhl12 »

As an aside, after he's gone it might make sense to include his kids in the conversation a bit, to help them get used to investing as well as budgeting. If it appears likely that they are going to end up with a decent slug of money, only you will be in a position to help educate them about it since their father will be gone. That will be your call, though, and will depend a lot on the kids' circumstances and your relationship with them.
lhl12
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Re: 59 & 76 YO couple requesting alloc. & rebalancing input

Post by lhl12 »

I also agree that you should have everything at Vanguard.
2stepsbehind
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Re: 59 & 76 YO couple requesting alloc. & rebalancing input

Post by 2stepsbehind »

what happens if you predecease him?
lhl12
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Re: 59 & 76 YO couple requesting alloc. & rebalancing input

Post by lhl12 »

In that case, her assets go into trust for him, but actuarially he has a much shorter lifespan to worry about and she has no kids to provide for - just siblings. It's conceivable, of course, that she could die early and he could live to be 100, but that's MUCH less likely than the converse, given their ages, and in that scenario he would probaly have an easier time handling his own kids than she would.
Topic Author
cjonblanchard
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Location: Chicago area

Re: 59 & 76 YO couple requesting alloc. & rebalancing input

Post by cjonblanchard »

2stepsbehind wrote:what happens if you predecease him?
Yes that's right: the language is basically "first to die." So if I die first, his kids will get 12%, the Trust become irrevocable (at 1st person's death), and when he dies, our estate would get distributed to his kids/my siblings.
Last edited by cjonblanchard on Sun Jun 23, 2013 1:26 pm, edited 2 times in total.
Topic Author
cjonblanchard
Posts: 78
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Location: Chicago area

Re: 59 & 76 YO couple requesting alloc. & rebalancing input

Post by cjonblanchard »

lhl12 wrote:I also agree that you should have everything at Vanguard.
Thanks: I was wondering about that, as another commenter felt differently. The cons are that I like the idea of a local office, such as Ameritrade, Charles Schwab, Scottrade, Fidelity, etc., and in surveys Vanguard is rarely listed in the top 10 list of discount brokers. But the pros are that with the Flagship program, Vanguard offers some nice perks, it's client-owned, and I wouldn't have to pay to buy their funds (a very small piece in the scheme of things). I poked around the blogs and it appears that Taylor Larimore moved his holdings to Vanguard nearly 30 yrs. ago, which speaks well of the idea....
Topic Author
cjonblanchard
Posts: 78
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Location: Chicago area

Re: 59 & 76 YO couple requesting alloc. & rebalancing input

Post by cjonblanchard »

lhl12 wrote:Ok. In that case, I would incorporate only 88% of his $ into your individual long term asset allocation. The question is which 88%.

If he is opposed to equities then you could consider the 12% as all coming from his fixed income when the time comes. So, for example, if he were 40% equities and 60% fixed income on a combined basis then you would be 40% equities and 48% fixed income on the portion that will end up in the Trust. That's a bit of smoke and mirrors thinking, though, because when he's gone you can then reallocate everything in the Trust to a much more equity-heavy allocation. So, it applies only during his lifetime.

Note that if your joint allocation is equity-light, the situation is even worse for his kids, who are much younger and who should be more heavily allocated to equities than 50/50. They too can reallocate whatever they inherit when the time comes, but the fact that 12% of his money is really ultimately theirs means that your combined overall allocation should be even more tilted to equities than it would be if you were both childless and 100% were going to you.
How interesting! I never thought of it in that way. I plan to discuss the upshot of these comments with him. It is very helpful to have a different way of looking at the situation. Thanks.
Topic Author
cjonblanchard
Posts: 78
Joined: Fri Jun 21, 2013 5:03 pm
Location: Chicago area

Re: 59 & 76 YO couple requesting alloc. & rebalancing input

Post by cjonblanchard »

lhl12 wrote:As an aside, after he's gone it might make sense to include his kids in the conversation a bit, to help them get used to investing as well as budgeting. If it appears likely that they are going to end up with a decent slug of money, only you will be in a position to help educate them about it since their father will be gone. That will be your call, though, and will depend a lot on the kids' circumstances and your relationship with them.
I'm working slowly in that direction. We have a very good relationship, and I get particularly good kudos from them because I look after him well (I helped convince him to turn McDougall/Esselstyne oil-free vegan last year and as a result, his heart pumping increased 20% and he doesn't need to have a cardio defibrillator installed ... docs couldn't believe it). At any rate, I will get more on the ball about sharing investing info. The subject has come up, but only to a small degree.
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