Is the Vanguard advisor service worth while for me?
Is the Vanguard advisor service worth while for me?
I talked to a guy at Vanguard, who answered my basic questions and set me up for a free consult with an adviser tomorrow.
The cost of the the service is 0.3% of assets under management. You can select just a portion of your portfolio for management. There is no long term commitment.
I have about $300K in my taxable account at Vanguard. Everything else is in IRAs or at other institutions. I am thinking about putting the $300K taxable account under their management in order to get them to do tax loss harvesting. That would cost me $900 for a year. The question is if this is likely to save me more than $900 in income taxes next year.
Turbo tax says my 2014 Adjusted gross income as $39K, taxable income $27K, total federal tax $4K. Effective tax rate 10.11%. I am in Georgia and pay not state income tax because of my age.
All of the income was from investments, most of it from real estate loans I make with my brother. Next year will be about the same.
I am 65 and retired. I spend more than $39K per year, but it is coming from a bank account where I parked some cash. I don't think I will be withdrawing anything from Vanguard for 3-4 years.
All the money in the taxable account is in stock index funds and ETFs. There are 11 different stock funds and ETFs in the taxable account. I know this is way to many. It ended up being 11 because over the years I changed my investing philosophy several times, and never sold an old fund but just bought new ones.
Is it likely the Vanguard adviser can save me $900 / year in taxes?
The cost of the the service is 0.3% of assets under management. You can select just a portion of your portfolio for management. There is no long term commitment.
I have about $300K in my taxable account at Vanguard. Everything else is in IRAs or at other institutions. I am thinking about putting the $300K taxable account under their management in order to get them to do tax loss harvesting. That would cost me $900 for a year. The question is if this is likely to save me more than $900 in income taxes next year.
Turbo tax says my 2014 Adjusted gross income as $39K, taxable income $27K, total federal tax $4K. Effective tax rate 10.11%. I am in Georgia and pay not state income tax because of my age.
All of the income was from investments, most of it from real estate loans I make with my brother. Next year will be about the same.
I am 65 and retired. I spend more than $39K per year, but it is coming from a bank account where I parked some cash. I don't think I will be withdrawing anything from Vanguard for 3-4 years.
All the money in the taxable account is in stock index funds and ETFs. There are 11 different stock funds and ETFs in the taxable account. I know this is way to many. It ended up being 11 because over the years I changed my investing philosophy several times, and never sold an old fund but just bought new ones.
Is it likely the Vanguard adviser can save me $900 / year in taxes?
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The most important thing you should know about me is that I am not an expert.
Re: Is the Vanguard advisor service worth while for me?
I think a better question is would you be willing to do Tax Loss Harvesting yourself if someone paid you $900 for it.
- Tim
- Tim
Re: Is the Vanguard advisor service worth while for me?
I don't know and I certainly hope you let us all in on what you learn tomorrow.
My concern with this plan is that whatever they TLH in taxable could inadvertently overlap and cause a wash sale with what you hold in your other accounts. I'd be interested in how they would plan to work around that.
My concern with this plan is that whatever they TLH in taxable could inadvertently overlap and cause a wash sale with what you hold in your other accounts. I'd be interested in how they would plan to work around that.
Link to Asking Portfolio Questions
Re: Is the Vanguard advisor service worth while for me?
You could use a robo service, like Betterment, which uses Vanguard ETFs (mostly). Their fees would be .15% for your account (plus the ETF fees). Just an idea - there are prior discussions regarding them on the forum.
Re: Is the Vanguard advisor service worth while for me?
I don't know. How long would it take me to learn to do it, and how much time would it take?I think a better question is would you be willing to do Tax Loss Harvesting yourself if someone paid you $900 for it.
Would that work with funds I already own at Vanguard?You could use a robo service, like Betterment, which uses Vanguard ETFs (mostly). Their fees would be .15% for your account (plus the ETF fees). Just an idea - there are prior discussions regarding them on the forum.
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The most important thing you should know about me is that I am not an expert.
Re: Is the Vanguard advisor service worth while for me?
You would transfer the funds to Betterment.
Re: Is the Vanguard advisor service worth while for me?
If you have a lot of unrealized gains, you are less likely to be able to TLH. Would the service overcome the $900 head winds? If the funds have a lot of unrealized gains, I doubt it since TLH does not occur too often and your marginal tax rate is low.
The other thing is TLH only takes about 2 minutes online. I would not pay someone $900/yr to do it on average probably once a year.
The other thing is TLH only takes about 2 minutes online. I would not pay someone $900/yr to do it on average probably once a year.
52% TSM, 23% TISM, 24.5% TBM, 0.5% cash
Re: Is the Vanguard advisor service worth while for me?
Do you have significant capital losses in your taxable accounts? Remember that if you want to tax loss harvest you must have some losses to harvest.
If the primary reason to use the advisor service is for tax loss harvesting I don't think it would be worth it IMO. You would have to make some assumptions and crunch the numbers in your specific case to see what it might save you. You might get a first year cost avoidance of $900 but I doubt it would continue.
As far as learning how to do it yourself I suggest you review the wiki and get some self education whether you plan to do it yourself or have an advisor do it.
If the primary reason to use the advisor service is for tax loss harvesting I don't think it would be worth it IMO. You would have to make some assumptions and crunch the numbers in your specific case to see what it might save you. You might get a first year cost avoidance of $900 but I doubt it would continue.
As far as learning how to do it yourself I suggest you review the wiki and get some self education whether you plan to do it yourself or have an advisor do it.
Bob
Re: Is the Vanguard advisor service worth while for me?
You pay $4,000 in Federal income taxes on $27,000 of taxable income? Wow!
Re: Is the Vanguard advisor service worth while for me?
Is that high or low? I just enter the numbers in Turbo Tax and do what it says. Almost all that income is from taxable interest on real estate loans.You pay $4,000 in Federal income taxes on $27,000 of taxable income? Wow!
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The most important thing you should know about me is that I am not an expert.
- House Blend
- Posts: 4878
- Joined: Fri May 04, 2007 1:02 pm
Re: Is the Vanguard advisor service worth while for me?
For 2014, $27K of taxable income with no qualified dividends or LTCG buys you a Federal tax liability of about $3600. So $4K sounds a bit high but in the ballpark.tc101 wrote:Is that high or low? I just enter the numbers in Turbo Tax and do what it says. Almost all that income is from taxable interest on real estate loans.You pay $4,000 in Federal income taxes on $27,000 of taxable income? Wow!
But this comment of yours doesn't quite jive with that: "All the money in the taxable account is in stock index funds and ETFs."
In that case, the dividends in your taxable account should be mostly qualified. At a 2% yield, you should have received about $6,000 worth of (mostly) qualified dividends. Was that included in your taxable income?
The tax on $27K with $6K QDI is the same as the tax on $21K taxable income with $0 QDI--about $2700.
Re: Is the Vanguard advisor service worth while for me?
The adviser can save you money when your investments lose some value, but then you can do the same thing. Not sure of your tax bracket, but the taxes on withdrawals now is probably 15%, same as your withdrawals from tax deferred. Could also be zero if you are married.Is it likely the Vanguard adviser can save me $900 / year in taxes?
Why not get the free consultation and see what he says.
Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
Re: Is the Vanguard advisor service worth while for me?
I was not clear enough. All the money in my VANGUARD taxable account is in stock index funds and ETFs. I have other money invested with my brother in high interest loans to a real estate developer. That is where the taxable interest income came from.But this comment of yours doesn't quite jive with that: "All the money in the taxable account is in stock index funds and ETFs."
In that case, the dividends in your taxable account should be mostly qualified.
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The most important thing you should know about me is that I am not an expert.
Re: Is the Vanguard advisor service worth while for me?
That is what I plan to do, and I will write about it here, after it happens at 2pm today.Why not get the free consultation and see what he says.
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The most important thing you should know about me is that I am not an expert.
Re: Is the Vanguard advisor service worth while for me?
I have been trusting Turbo Tax to do this right, but if they made a mistake that caused me to pay an extra $400 I want to know about it. I just took a look to see what they did. Here is what is on the Turbo Tax generated form.For 2014, $27K of taxable income with no qualified dividends or LTCG buys you a Federal tax liability of about $3600. So $4K sounds a bit high but in the ballpark.
Line 43 - Taxable income - 27,198
Line 44 - Tax - 2,940
Line 46 - Excess premium tax credit - 1,250 Here is the extra
Line 47 - Total - 4,190
So the actual tax was $2940, then I paid an extra $1250 because my payments to Obama Care were too low. That explains it.
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The most important thing you should know about me is that I am not an expert.
Re: Is the Vanguard advisor service worth while for me?
I just finished talking to the adviser at Vanguard. He was a friendly, likable, knowledgeable person. He was not pushy in any way. I enjoyed our conversation.
He looked over my portfolio. His main recommendation was simplification. He took the view that the total market makes more sense than slice and dice. This is the standard Vanguard view. He was pretty convincing.
We barely talked at all about the service you pay for. I can call in there for a portfolio check up for free, which is what we did today.
I am now 65. When I get older I may get someone to manage my portfolio, but for now there is not much point.
He actually taught me a little about tax loss harvesting, and pointed out the Cost Basis screen, which I had forgotten about. He agreed that I could easily do it all myself.
It was worthwhile talking to him for an hour.
He looked over my portfolio. His main recommendation was simplification. He took the view that the total market makes more sense than slice and dice. This is the standard Vanguard view. He was pretty convincing.
We barely talked at all about the service you pay for. I can call in there for a portfolio check up for free, which is what we did today.
I am now 65. When I get older I may get someone to manage my portfolio, but for now there is not much point.
He actually taught me a little about tax loss harvesting, and pointed out the Cost Basis screen, which I had forgotten about. He agreed that I could easily do it all myself.
It was worthwhile talking to him for an hour.
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The most important thing you should know about me is that I am not an expert.
- House Blend
- Posts: 4878
- Joined: Fri May 04, 2007 1:02 pm
Re: Is the Vanguard advisor service worth while for me?
Agreed. And it is clear that your taxable account is producing qualified dividends that are being taxed at 0%, as I surmised earlier.tc101 wrote:So the actual tax was $2940, then I paid an extra $1250 because my payments to Obama Care were too low. That explains it.
The good news is that you have some extra space available in the 15% bracket. That means you should be able to do some consolidation of the 11 funds in your taxable Vanguard account without generating any additional tax costs. Just be careful not to go past the top of the 15% bracket, and make sure that all gains realized are long term.
N.B.: The top of the 15% bracket for Singles in 2015 is Taxable Income = $37,450.
This brings up another topic that is relevant to your original post....
As long as
1) your income/spending/deductions stay in the current range (after adjusting for inflation)
2) the tax rates relevant for you do the same
Then it will be mathematically impossible for Vanguard or a robo-advisor to save you $900/year in taxes via tax loss harvesting. A theoretical upper bound would be $450/year, which would be achievable only if you are able to realize enough losses to sustain deductions of $3,000 per year. And no one can do this from scratch, robo or otherwise, unless the the markets cooperate.
(The point is that people in higher tax brackets also have to pay capital gains taxes, and so they "enjoy" a much higher theoretical bound on how much can be saved via TLH.)
On the other hand, the assumptions in 1) might fail when you start taking RMDs out, and/or start SS benefits.
Re: Is the Vanguard advisor service worth while for me?
Thank you House Blend and everyone else for taking the time to help me understand this.
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The most important thing you should know about me is that I am not an expert.
Re: Is the Vanguard advisor service worth while for me?
Good to hear you decided to save yourself 900.00.
You CAN do it yourself.
You CAN do it yourself.
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee