About to retire.Seeking advice for setting up IRA

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Topic Author
Moonpie
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Joined: Sat Sep 10, 2016 2:30 pm

About to retire.Seeking advice for setting up IRA

Post by Moonpie »

Thank you in advance for any advice. I am retiring next month and cannot decide what to do with my 401K/pension. I have just read about all of the problems people are having with Vanguard. A friend has been using a group of advisors for 15 years and he is very pleased with them. They say they are fee only advisors and their cost is 1%. They invest in individual stocks through Schwab. I would do this on my own if I knew which stocks to invest in.
My 401k is with Fidelity, so another option is let Fidelity handle it.

Emergency Funds and c.d.s: Enough for 4 or 5 years
Debt: 0 Own home
Tax Filing Single No dependents
Current Tax rate Fed 25% State 6%
State:GA Age:60

Roth Ira:
$21,090.58
Buy Sell Exchange
VFIIX Vanguard GNMA Fund Investor Shares 0.21% 845.495 $10.83 – $0.03 – 0.28%
$9,156.71
Buy Sell Exchange
VMMXX Vanguard Prime Money Market Fund 0.16% 6,432.440 $1.00 — —
$6,432.44
Buy Sell Exchange
VGTSX Vanguard Total International Stock Index Fund Investor Shares 0.19% 185.176 $15.11 – $0.31 – 2.01%
$2,798.01
Buy Sell Exchange
VWINX Vanguard Wellesley® Income Fund Investor Shares 0.23% 650.311 $26.12 – $0.31 – 1.17%
$16,986.12
Buy Sell Exchange
VWELX Vanguard Wellington Fund Investor Shares 0.26% 264.061 $38.64 – $0.62 – 1.58%
$10,203.32
Buy Sell Exchange
ETFs
VIG VANGUARD DIVIDEND APPRECIATION ETF 0.09% 114.510 $82.880 – $2.12 – 2.49%
$9,490.59
Buy Sell
Total $76,158.14

401k and pension should be about 1.2M to transfer to IRA I didn't list the funds as the account will soon be closed.

Taxable account TDAmeritrade: Copy paste not allowed.
$20096
CVS, EVTMX- Eaton Vance Dividend Builder, FBALX Fidelity Balanced Fund, MDLOX Black Rock Global allocation Fund, TGIGX
TCW relative value dividend appreciation fund

Going forward there will be no money added to any accounts.
I do not feel comfortable handling the investment for the Ira and I do not know who I could trust to do it for me.
Another question is, are the funds in the Roth and taxable accounts good choices, or should there be changes?
Please let me know if more information is needed.
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CAsage
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Re: About to retire.Seeking advice for setting up IRA

Post by CAsage »

Congratulations on getting to a secure retirement! One thing I would suggest, is carefully reading the Wiki on investment planning on this website, it's a great introduction to investing. One thing I would avoid at all costs is putting your money under ANY financial adviser that charges 1% on an ongoing basis - they will end up with a sizable chunk of all your future investment earnings. Like this: If bonds are earning 2%, and they get 1%, then you only get 1%. Bad. One suggestion for very simple investment planning is a Target date fund, kind of one stop shopping, and the fund is then managed for you with asset allocation by age.
And I don't think there is really anything to worry about with Vanguard. I've been with them for ages, and never had an issue, especially with a straightforward mutual fund investment. If you are more comfortable with Fidelity, then go with them. The MOST important thing is to choose with a Target date fund, or a simple portfolio with 2 or 3 index funds (mix of total stock and total bond), and watch the expenses. Expenses should be around 0.10%, not 1% per year.
For your Roth and Taxable accounts... I would consolidate each account to one fund. Which fund would depend on your chosen asset allocation. With a lower taxable income in retirement, you could put all your taxable money in a Bond fund, and your Roth in Stock for long term growth.
If you truly want someone to walk you through it, Vanguard offers Personal Advisory Service for 0.3%. Do that for one year, then go on your own.
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.
LeeMKE
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Re: About to retire.Seeking advice for setting up IRA

Post by LeeMKE »

No way would I hand over my nest egg to some group of nice guys to stock pick for me. Unless you don't need this to live on, that idea is just plain dangerous.

Spend $12,000 worth of your time reading through the wiki from the beginning so you have a thorough understanding of why we are Bogleheads, and what that means, or rollover to a Fidelity IRA and get their advice to handle this for the same 1%, but appropriately balanced for risk.

Bogleheads aren't keen on spending money on commissions, fees and management, because the best way to manage our portfolios is actually very simple. And costs matter ALOT. This is why so many folks who have saved for years will not enjoy the prosperity they thought they'd earned because someone will help them(selves) by charging commissions, fees and management.
The mightiest Oak is just a nut who stayed the course.
jfave33
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Re: About to retire.Seeking advice for setting up IRA

Post by jfave33 »

Your accounts are relatively straightforward since you mainly have a roth ira and a 401k. The main issue with vanguard seems to be with people with significant taxable accounts and more complicated portfolios. You should be good at vanguard. If I was you I would stay clear of advisors and help from brokers like fidelity - too easy to be taken advantage of.

If I was you I'd
1. Pick the asset allocation between stocks and bonds I was comfortable with.
2. Choose a vanguard lifestrategy fund that matches. Sell everything in your 401k and roth and invest in this one fund. Sit back and relax. Say lifestrategy moderate growth 60stocks:40 bondd VSMGX or lifestrategy conservative growth 40:60 VSCGX. Wellington and wellesley are also reasonable choices which you already own in your roth.
3. You can sort out your taxable account as well but it is a little more complicated and small in size anyway. Probably best to just liquidate and keep as cash. You have a lot of tax inefficient funds in there.

If you want further hand holding consider vanguard personal advisor services which come with a 0.3% fee and will not take advantage of you.

If you are unfamiliar with anything I've said then reading the wiki is the best place to start - it is pretty easy stuff to learn.
delamer
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Re: About to retire.Seeking advice for setting up IRA

Post by delamer »

Read the Boglehaed wiki, which I think will dissuade you from paying 1% to an advisor to invest in individual stocks for you. The problem when a friend is "very pleased" with an advisor is that your friend probably has not done any kind of comparison to determine if s/he could have done better with other investments. Someone can be happy with a 5% return, but it could be that with another option they could have been making 7%.

I am in the process of transferring an inheritance from a trust department where it is currently held to a taxable account at Vanguard. All has gone well; I have a specific staffer that I have been dealing with who has been very helpful.

You will have no problem with getting good service from Vanguard to arrange for transferring all your assets if you choose to use them. They have Flagship service available to those with $1 million or more assets that you can find out more about on their website.

If you aren't comfortable with handling the transfer on the phone or online, there have been good reports on this forum from people with accounts at Charles Schwab and Fidelity which have branches in many areas. You can still have the kind of portfolios recommended in the wiki with either company, with the advantage of a local person to help you with the process.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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Watty
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Re: About to retire.Seeking advice for setting up IRA

Post by Watty »

Moonpie wrote:They say they are fee only advisors and their cost is 1%.
There have been academic studies that show that historically when you retire you can start out with about a 4% safe withdrawal rate.

https://www.bogleheads.org/wiki/Safe_withdrawal_rates

There are of course all sorts of details and some differences of opinions, some people even think it should be lower because interest rates are so low right now.

The problem with that is if you can only spend 4% of your money and you are paying them 1% then that is 25% of your spendable income each year. That would mean that you would need to substantially cut back on your retirement lifestyle to be able to afford that.

Many financial advisors tend to use higher cost mutual funds that might add another 1% or more to your overall costs. A bad one will figure out ways to take a lot more out of the portfolio than that.

The idea that they will be able to pick out superior stocks is bogus. If they could do that then they would be earning a seven figure+ income working on Wall Street. What they often do is make bets with their clients money and if they win then they look like a genus. If they loose then they still get their 1%+ fee. If you do decide that you need to use an advisor then it is fine to tell them to limit the investments to just low cost index funds.

Here are some links to check out. '

https://www.bogleheads.org/wiki/Getting_started

The Boglehead books are ready good and readable.

https://www.amazon.com/s/?search-alias= ... Bogleheads

Even if you choose to use an advisor learning more is necessary since you need to be able to ask the right questions and understand what they are doing.

If I was going to use and advisor I would talk with maybe a half dozen of them to select one that I feel comfortable with. One problem with using an advisor that people often overlook is that eventually that advisor will retire, die, or change jobs. Your account will then be assigned to a different advisor and that could be very difficult for you to really keep on top of if you are less capable a decade or two from now. The advisor who gets assigned your account may be selected by the firm because they are very good at generating revenue from their clients. The situation is somewhat like if you have a trusted mechanic that does good work and only the work that is necessary. If you go into the shop one day and find out that he has retired and someone else bought his business then you could get taken advantage of.

Your situation is pretty straight forward since almost all your funds are in retirement accounts so there are not a lot of tax considerations with changing your investments.

A very reasonable choice would be to put all your retirement account money into a Target Date 2015 fund. I retired last year at 59 with a somewhat similar situation. I am mainly using Target Date 2015 funds since almost all my money is in retirement accounts too.

The investments in the taxable account are a small percentage of your overall portfolio so you could just leave them where they are at for. One thing to do though would be to change the mutual funds in the taxable account to not automatically reinvest the dividends and capital gains distributions. That will make figuring out your taxes a lot simpler.

I have accounts at both Vanguard and Fidelity for historical reasons and if you manage it yourself you can do fine at Fidelity without paying for an advisor. Even without an advisor you can walk into a Fidelity office in most large cities and have them walk you through the process of transferring the accounts to them. They might try to sell you annuities or steer you towards higher expense funds so you do need to watch out for that. One particular thing to watch out for is that Fidelity has both a Target Date 2015 fund and a Target Date Index 2015 fund. They may try to steer you towards the none index version since it has much higher fees but you want to use the Index version.
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Steelersfan
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Re: About to retire.Seeking advice for setting up IRA

Post by Steelersfan »

Vanguard has millions of clients. A few of them will have issues. Many, but not all, will be Vanguard's fault. They will tend to be with complicated portfolios or unusual situations. You'll have none of that if you keep your portfolio simple, per Boglehead philosophy.

I've had both my taxable and IRA (converted from a 401k when I retired) accounts at Vanguard for over a decade with nary a single issue.

Spend a month or so reading and getting informed. Its not as complicated as it seems, and if you keep it simple, you won't make any big mistakes.
pkcrafter
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Re: About to retire.Seeking advice for setting up IRA

Post by pkcrafter »

Moonpie:
They invest in individual stocks through Schwab. I would do this on my own if I knew which stocks to invest in.
Well, the advisors are doing it and they don't know either. :happy
401k and pension should be about 1.2M to transfer to IRA I didn't list the funds as the account will soon be closed.
You mean transferred. Don't close out, use a custodian to custodian transfer. Use Fidelity, they have all the needed low cost index funds Vanguard does.

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.
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Watty
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Re: About to retire.Seeking advice for setting up IRA

Post by Watty »

pkcrafter wrote:You mean transferred. Don't close out, use a custodian to custodian transfer. Use Fidelity, they have all the needed low cost index funds Vanguard does.
This is important. There are several ways to move an account but the best way is to let the new company walk you through the process and have them deal with the old company.
Topic Author
Moonpie
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Joined: Sat Sep 10, 2016 2:30 pm

Re: About to retire.Seeking advice for setting up IRA

Post by Moonpie »

Thank you all so much for taking the time to reply to my concerns. You have definitely steered me away from the money grabbers. I will read what has been recommended. And I like the idea of getting advice from Vanguard in the beginning.
I should have said transfer the 401k not close out. Thank you all again! :D
gerntz
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Re: About to retire.Seeking advice for setting up IRA

Post by gerntz »

Moonpie wrote:T

401k and pension should be about 1.2M to transfer to IRA I didn't list the funds as the account will soon be closed.
Unless I'm missing something, how do you transfer a pension to an IRA?
Topic Author
Moonpie
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Re: About to retire.Seeking advice for setting up IRA

Post by Moonpie »

The pension would have to be a lump sum. And you must specify with the holder of the pension where you want it transferred.
gerntz
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Re: About to retire.Seeking advice for setting up IRA

Post by gerntz »

Thanks, Mp.
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BL
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Re: About to retire.Seeking advice for setting up IRA

Post by BL »

I think you can get great advice from Vanguard with your large amount to put in an IRA. Give them a call, perhaps not on a Monday as my guess is that is their busiest day of the week. They will act in your best interest, not try to sell you expensive funds (they don't even have much of that!). They will walk you through getting the transfer done. If you want them to do it all, then try their Personal Advisory Service for a year or forever, which you can read about on their website. That would be a cost of 0.3%/year, much cheaper than any "advisor" you might find on your own.

Even though you are not really a new investor, I think this little booklet has really good points and is worth skimming through, maybe skipping through some of the advice:
https://www.etf.com/docs/IfYouCan.pdf
Especially note Hurdle # 5
noco-hawkeye
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Re: About to retire.Seeking advice for setting up IRA

Post by noco-hawkeye »

If you have read about people having problems with Vanguard, I would like to chime in as well -

I have had various experiences with ETrade, AGEdwards, EdwardJones, Fidelity, and Thrivent. Vanguard is not the fastest or most aggressive brokerage on the block, but I do trust them and like how they work. I think you will hear people gripe about the website not working as well as people would like, or some forms they receive maybe aren't as timely or nicely formatted as people might like, or maybe a trade takes a bit longer than people want.

The thing you want out of a brokerage is confidence that they will not eat you alive with fees and help you find good diversification to match your risk appetite. Your 1% team is way out of line, in my book.

In short - I'd give vanguard a call, and at least give them a try / intro call to see how you feel. I like them quite a bit, and I would think they would be a decent fit.
Topic Author
Moonpie
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Re: About to retire.Seeking advice for setting up IRA

Post by Moonpie »

Thank you. The resounding consensus is Vanguard. And I have never had a problem with my Vanguard Roth. If I use their personal advisor service starting out, can anyone recommend a specific agent to ask for, or do you have a choice?
epictetus
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Re: About to retire.Seeking advice for setting up IRA

Post by epictetus »

the Vanguard Personal Advisory Service should be perfect for you for now.
they can help you get your investments set up correctly.
over time can decide whether to continue with the service or manage your investments yourself at Vanguard.
you may decide that letting them manage it for you is worth their small fee over time.
Focus on what you can control
delamer
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Re: About to retire.Seeking advice for setting up IRA

Post by delamer »

Moonpie wrote:Thank you. The resounding consensus is Vanguard. And I have never had a problem with my Vanguard Roth. If I use their personal advisor service starting out, can anyone recommend a specific agent to ask for, or do you have a choice?
Remember you will be eligible for Flagship services, and will have an assigned representative. Check it out on the website.

Once you call Vanguard, they will give you someone in their asset transfer group to walk you through the process.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
Topic Author
Moonpie
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Re: About to retire.Seeking advice for setting up IRA

Post by Moonpie »

Thank you delamer. I was just looking at that. Please correct me if I am wrong, It appears that with Flagship I would not have to pay the .03% for advice.
Also regarding the target date funds. The ER is .14%. Would it make more sense to go with the admiral funds within those target funds for a lower fee?
And I am not sure how important Morningstar ratings are, but the Target date funds are 5 star, and the total stock and bond funds are 4 and 3 star.
delamer
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Re: About to retire.Seeking advice for setting up IRA

Post by delamer »

Moonpie wrote:Thank you delamer. I was just looking at that. Please correct me if I am wrong, It appears that with Flagship I would not have to pay the .03% for advice.
Also regarding the target date funds. The ER is .14%. Would it make more sense to go with the admiral funds within those target funds for a lower fee?
And I am not sure how important Morningstar ratings are, but the Target date funds are 5 star, and the total stock and bond funds are 4 and 3 star.

That is my interpretation too regarding the .3%, but I am not certain. I'd contact the Flagship group and get your questions answered.

If you want a set-it-and-forget-it option, then the target funds are a good, cheap option. If you are willing to be more active with rebalancing, then the Admiral funds are a good and even cheaper option.

I don't think Morningstar is worth taking into account when you are using inexpensive index funds.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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Steelersfan
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Re: About to retire.Seeking advice for setting up IRA

Post by Steelersfan »

Flagship does not charge .3%. It's a free service offered to those with assets of $1 million or greater at Vanguard.

It gives you a dedicated, experienced person at Vanguard who can assist you but does not manage your portfolio for you. As far as I can tell, they're entirely reactive to your requests for service and advice.

https://investor.vanguard.com/investing ... s/flagship
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