Consolidate 2 or 3-fund to single fund in taxable

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wassabi
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Consolidate 2 or 3-fund to single fund in taxable

Post by wassabi » Sun Feb 15, 2015 8:48 am

I've been slowly building a 2-fund portfolio in my taxable comprised of Total Stock (VTSAX) and Intermediate Bond (VBILX) at my chosen AA.

I still have 25+ years until retirement, but have been thinking that if something happens to me, I don't want my (soon to be) wife to have to worry about keeping the accounts balanced at a certain AA (she doesn't understand any of it).

For my retirement accounts, she can simply sell everything and purchase the Vanguard Balanced Index Fund and be done with it. For my taxable account, however, please correct me if I'm wrong, but if she sells everything to convert to a simple fund she will incur a tax bill for the capital gains (assuming there are gains)?

Is there a strategy I should put in place to convert from a 2 or 3 fund Boglehead portfolio to one of the Lifestrategy, Targeted Retirement, or the Balanced Index fund? Or is it as simple as selling everything and buying the one fund?

Thanks!!

livesoft
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Re: Consolidate 2 or 3-fund to single fund in taxable

Post by livesoft » Sun Feb 15, 2015 8:56 am

My spouse is much better at investing than I am.

If you die, in many states the investments in a taxable account get a step-up basis, so no capital gains and no taxes incurred. In some states, only half of the assets get a step-up basis, so taxes are minimized.

Also it is surprising how little rebalancing really ever needs to be done.

Thus for several reasons, I think you are worrying too soon about all this.

OTOH, I would not have VBILX in my taxable account because it would cause me to pay taxes that I could easily avoid if I held VBILX in my IRA.
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wassabi
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Re: Consolidate 2 or 3-fund to single fund in taxable

Post by wassabi » Sun Feb 15, 2015 9:04 am

livesoft wrote:My spouse is much better at investing than I am.

If you die, in many states the investments in a taxable account get a step-up basis, so no capital gains and no taxes incurred. In some states, only half of the assets get a step-up basis, so taxes are minimized.


Good points, I'll look into it.
Also it is surprising how little rebalancing really ever needs to be done.
My AA is higher than I would want for her, should something happen to me.
Thus for several reasons, I think you are worrying too soon about all this.
Hopefully you're right!! :happy
But, I want to have a plan in place in case something unexpectedly happens.

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TheGreyingDuke
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Re: Consolidate 2 or 3-fund to single fund in taxable

Post by TheGreyingDuke » Sun Feb 15, 2015 9:04 am

I agree with livesoft, re-balancing is, not that big a deal. I am not convinced that it makes all that much a difference (not wanting t get int a debate, I know there is another side to the story) and if necessary and desirable, a call to a Vanguard rep once a year can give her the figure she would need to make the necessary re-balancing transaction.

I do a slice and dice, my spouse has ZERO interest in knowing what is there and she will need to depend on the kindness of strangers (Vanguard rep) to figure it all out when I depart.
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midareff
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Re: Consolidate 2 or 3-fund to single fund in taxable

Post by midareff » Sun Feb 15, 2015 9:13 am

VWIUX might make an interesting substitute for VBILX in taxable.

jnet2000
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Re: Consolidate 2 or 3-fund to single fund in taxable

Post by jnet2000 » Sun Feb 15, 2015 10:45 am

If I die, I told her to go with https://investor.vanguard.com/advice/personal-advisor. I trust Vanguard to be a fiduciary and I know she is not interested in managing our finances.
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epictetus
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Re: Consolidate 2 or 3-fund to single fund in taxable

Post by epictetus » Sun Feb 15, 2015 2:36 pm

have you considered the Balanced Index Fund or the Tax-Managed Balanced Index Fund as one-fund solutions for your taxable account?
Focus on what you can control

lack_ey
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Re: Consolidate 2 or 3-fund to single fund in taxable

Post by lack_ey » Sun Feb 15, 2015 2:50 pm

I think instructions for what to do would be sufficient.

"From now on put all money in ________ and withdraw from everything else as necessary" has got to be simple enough. You can make it as simple or fancy as you want. Confer with her for the appropriate level of complexity. Or directing her to use the advisory service for 0.3% / year isn't the end of the world. No need to actually consolidate.

Balancing total stock versus total international arbitrarily or not at all is not going to lead to financial ruin anyway. Yes, even 100% international.

If you're that worried, up your term life insurance coverage.

chaz
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Re: Consolidate 2 or 3-fund to single fund in taxable

Post by chaz » Sun Feb 15, 2015 2:54 pm

I like the Balanced Index Fund - easy for DH when I pass.
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wassabi
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Re: Consolidate 2 or 3-fund to single fund in taxable

Post by wassabi » Sun Feb 15, 2015 3:11 pm

epictetus wrote:have you considered the Balanced Index Fund or the Tax-Managed Balanced Index Fund as one-fund solutions for your taxable account?

I sure did. The only problem I have is that my AA right now is a lot higher than the 60/40 offered in the Balanced Index fund. For her though, it would be a nightmare having to decide whether to put additional money into Total Stock or Total Bond. One fund is the only option I want to leave her with (if I leave first!).

wassabi
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Re: Consolidate 2 or 3-fund to single fund in taxable

Post by wassabi » Sun Feb 15, 2015 3:13 pm

midareff wrote:VWIUX might make an interesting substitute for VBILX in taxable.

Thanks for that suggestion. I struggled with it a month ago and decided on VBILX. I'm not fully invested in VBILX yet, so VWIUX is still an option. I still have a significant amount in CDs that will be maturing over the next year so I have some time to decide on where the bulk of my "safety net" money goes.
Cheers!

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