Schwab retirement quote on 4 mil. Advice??? Can I do better?

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Sandtrap
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Joined: Sat Nov 26, 2016 6:32 pm

Schwab retirement quote on 4 mil. Advice??? Can I do better?

Postby Sandtrap » Wed Dec 07, 2016 11:04 pm

Schwab gave me a retirement portfolio quote on 4 million in cash.
It was a printout from an adviser that I have been talking to.
Contained this:

Age 62 (now - 2016) to 2044
Est. Rate of return- 5.1%
Monthly distribution - $12,500
Annual Distribution (now) approx. $152,000
increasing yearly until $224,000 in 2044. or about $19,000/mo.
Ending projected portfolio balance: approx. 2 mil.
It did not include S/S kicking in at 70 for my wife and I.
The Schwab person quoted .7% as their annual management "fee".

Here's my corrected info and query per fellow "Boglehead" suggestion for format:
I'm new to this.

Okay. This is the suggested format. Hope this helps.

Emergency funds: N/A
Debt: 0
Tax Filing Status: Married Filing Jointly
Tax Rate: pend. Just retired.
State of Residence: AZ
Degree: Finance.
Retired from self employed R/E investment and income properties.

Age: 62 (also spouse).

Current Retirement Assets:

4 million cash, after tax. (liquidation of R/E income holdings built up over decades).

3 rental properties, aprox. 30k/year income.

Will wait till 70 to file for S/S.

Assets under “Credit Shelter Grantor Trust”.

Goals:

1. Modest retirement income: Perhaps 120k/year net.

2. Modest portfolio growth. Secure. Safe.

3. Risk tolerance: Zero.


Questions:
1. Portfolio desired Asset Allocation: unknown (help?)

2. Have opened brokerage trust accounts at Schwab, Vanguard, TdAmeritrade.

3. What is the next step?

Thanks everyone for your help.


Couldn't I do better with a self-managed portfolio at ie: Vanguard, Schwab, TDAmeritrade, etc.
For example:
40% mix of "Vanguard Index s/p fund" or "Vanguard Total Stock Market Fund", (suggestions)?????

60% mix of "Vanguard Total Bond Market Fund" and/or TIPS (suggestions) ????

What about Vanguard Target Retirement or Life Strategy or other???

Portfolio A/A suggestions????

Are there portfolio strategies that give better tax advantages??

Help?

thanks everyone for your help.
Last edited by Sandtrap on Fri Dec 09, 2016 6:16 pm, edited 1 time in total.

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CAsage
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Re: Schwab retirement quote on 4 mil. Advice??? Can I do better?

Postby CAsage » Thu Dec 08, 2016 12:03 am

Sounds like fun! Time to do some homework. Yes, they would LOVE to help you, and take a big bite of your long term return in exchange. If you are unfamiliar with investing, I would suggest you spend some time reading the really good articles on the Bogleheads Wiki on asset allocation, and also the tax consideration ones. You did not say whether that was IRA funds, or outside of a tax-sheltered account, but there are investments (depending on your tax bracket and other assets) that can minimize taxes. You gotta pay the man one way or another, but you can try and minimize it. Also, if you want hand holding, Vanguard offers a Personal Advisor for 0.3% of assets (and you can drop them later...). As a wild approximation, you can withdraw about 4% of your assets annually, so their $152k was reasonable... and there are lots of threads on "safe withdrawal rates". No one can guarantee you a steady return.... You could do worse than just a straight 50/50 Total Stock/Total Bond, but you should read up and decide.

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

https://www.bogleheads.org/wiki/Outline ... _investors

mhalley
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Re: Schwab retirement quote on 4 mil. Advice??? Can I do better?

Postby mhalley » Thu Dec 08, 2016 12:59 am

Most bogleheads feel they don't need the handholding plus expense of an advisor. If you feel you need one, get one that is less than .7%. Vanguard pas, fidelity go, schwab intelligent portfolio all are much cheaper. As to taxes, how much is in tax deferred vs taxable? do you really need 150k a year? Would some Roth conversions prior to rmd be helpful?
I guess if schwab told you their orposed portfolio, the you could do it yourself without paying them the .7%. :beer
A 60/40-50/50 stock/bond portfolio consisting of the 3 fund portfolio would be fine in your situation.

22twain
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Re: Schwab retirement quote on 4 mil. Advice??? Can I do better?

Postby 22twain » Thu Dec 08, 2016 7:04 am

ChuangTzu wrote:Est. Rate of return- 5.1%

In one conversation the Schwab person quoted .7% as their annual management "fee".


Assuming for the sake of argument that the 5.1% return is correct (it's at least a plausible long-run figure), that fee would be about 14% of your returns. How happy would you be if Uncle Sam raised your tax rate by 14%? :twisted:

And you have to pay that .7% every year, even if your return happens to be negative for that year!

Sandtrap
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Joined: Sat Nov 26, 2016 6:32 pm

Re: Schwab retirement quote on 4 mil. Advice??? Can I do better?

Postby Sandtrap » Thu Dec 08, 2016 8:59 am

CAsage wrote:Sounds like fun! Time to do some homework. Yes, they would LOVE to help you, and take a big bite of your long term return in exchange. If you are unfamiliar with investing, I would suggest you spend some time reading the really good articles on the Bogleheads Wiki on asset allocation, and also the tax consideration ones. You did not say whether that was IRA funds, or outside of a tax-sheltered account, but there are investments (depending on your tax bracket and other assets) that can minimize taxes. You gotta pay the man one way or another, but you can try and minimize it. Also, if you want hand holding, Vanguard offers a Personal Advisor for 0.3% of assets (and you can drop them later...). As a wild approximation, you can withdraw about 4% of your assets annually, so their $152k was reasonable... and there are lots of threads on "safe withdrawal rates". No one can guarantee you a steady return.... You could do worse than just a straight 50/50 Total Stock/Total Bond, but you should read up and decide.

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

https://www.bogleheads.org/wiki/Outline ... _investors


Thanks "CAsage"

Yes. I've been fully immersed in "homework" and the "bogle" approach is the most sensible to me so far.
Immersion into the world of portfolio asset allocation seems to have become my new career. :shock:

All my funds are cash from liquidated properties from the real estate income properties I've accumulated over decades. Taxes and capital gains paid. 4 mil cash remains.

Now what?? :confused

Sandtrap
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Re: Schwab retirement quote on 4 mil. Advice??? Can I do better?

Postby Sandtrap » Thu Dec 08, 2016 9:11 am

mhalley wrote:Most bogleheads feel they don't need the handholding plus expense of an advisor. If you feel you need one, get one that is less than .7%. Vanguard pas, fidelity go, schwab intelligent portfolio all are much cheaper. As to taxes, how much is in tax deferred vs taxable? do you really need 150k a year? Would some Roth conversions prior to rmd be helpful?
I guess if schwab told you their orposed portfolio, the you could do it yourself without paying them the .7%. :beer
A 60/40-50/50 stock/bond portfolio consisting of the 3 fund portfolio would be fine in your situation.


Thanks "Mhalley",

YES! I've built up and now sold an apartment building business over decades without using prop. mgt. companies (skim) or resident managers (big skim). Portfolio management "professionals" taking a percentage annually with a huge performance disclaimer also feels like "skim", as long as I could learn to do it myself as I have in R/E. The earlier advice of lst going with a Vanguard adviser for .3 to get me off the ground at least temporarily is a good one.

I've been studying the various 3 fund portfolios and they make sense. But the combinations and sub combinations seem endless. (OCD :confused )

Schwab quoted an annual return of 150k/year rising to 240k or so when I'm in my 90's. My wife and I are frugal, no loans, and don't need much to be content. I can't see getting that much yearly, and at 90 I won't care.
I'd be more used to withdrawing only what I need every year, much as I've done in my R/E company all these years. My wife and I have always only spent what we needed to and no more and saved the rest of our R/E rental income since forever. It wouldn't make sense to withdraw more than we needed to or for Schwab to "handout" more if we are going to save what we don't use anyway.

Is it possible to request the portfolio composition from folks like Schwab, Northern Trust, etc, when they make a portfolio proposal???
Or is it rude to ask?? :|

Sandtrap
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Re: Schwab retirement quote on 4 mil. Advice??? Can I do better?

Postby Sandtrap » Thu Dec 08, 2016 9:15 am

22twain wrote:
ChuangTzu wrote:Est. Rate of return- 5.1%

In one conversation the Schwab person quoted .7% as their annual management "fee".


Assuming for the sake of argument that the 5.1% return is correct (it's at least a plausible long-run figure), that fee would be about 14% of your returns. How happy would you be if Uncle Sam raised your tax rate by 14%? :twisted:

And you have to pay that .7% every year, even if your return happens to be negative for that year!


Thanks "22twain".

Absolutely!!!

The thought of paying a "professional" .7 percent annually with absolutely no accountability or consequence for failure to perform on their part is unnerving. That would be akin to hiring an employee and have to pay them even if they did nothing, even if they costed you money for poor performance. That does not make sense. :(

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hand
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Re: Schwab retirement quote on 4 mil. Advice??? Can I do better?

Postby hand » Thu Dec 08, 2016 9:21 am

ChuangTzu wrote:In one conversation the Schwab person quoted .7% as their annual management "fee".
But it was not quoted in the proposal.

Is it normal that there are no specifics as to portfolio fund composition and details?


Seems normal for a high fee "advisor" whose interests aren't aligned with yours, but sure doesn't seem right! I'd suspect that portfolio specifics weren't provided to test your sophistication and sensitivity to fees.
My bet is that if you moved forward with Schwab, the 0.7% management fee would end up being added on top of the fees for whatever high cost funds they could push you into - I'd be surprised if your total fees ended up less than 1%.

You can absolutely do better:
1) Pick a reasonable asset allocation (60/40 bonds/stocks is a reasonable start),
2) Pick a reasonable and sustainable withdrawal rate (4% is widely quoted, but there are many who are more comfortable slightly lower)
3) Source low cost funds from the likes of Vanguard or Fidelity (costs could very well be in the 0.1% range vs 1% for Schwab If you fully embrace low cost index investing).
4) Implement the plan by either slowly moving funds to desired investments (lower risk approach, likely appropriate for retiree) or all at once (higher risk, but higher expected value due to slightly longer time in market).


Note: On $4M, annual cost difference between 0.1% ($4k) and 1% ($40k) costs on $4M is $36k - a pretty good return for a couple of hours of work a year to educate yourself and oversee your investments and take responsibility for your decisions.

mhalley
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Re: Schwab retirement quote on 4 mil. Advice??? Can I do better?

Postby mhalley » Thu Dec 08, 2016 3:56 pm

I don't think it is rude to ask someone you are thinking of doing business to the tune of 4 million what they would do with the money. Whether they would tell you, I dunno.
Here is a suggestion: go to the fidelity go site and put in your info. You can go to the link tell us more after you put in your initial data, and they will let you put in a monthly withdrawal. Looks like they don't put any increases though. They will let you see what they would recommend for your investments, then you could just buy that yourself and not pay them their fee!
https://dpcs.fidelity.com/prgw/dpcs/dma ... th-profile
Note that fidelity go would cost $1247 a month. That is less than half what schwab would charge you.
Vanguard would basically put you in the same funds you would get with their target retirement fund.
Depending on your answers to their ? You come up with something like:
Domestic Stock 35% |$1,400,000.00
Foreign Stock 15% |$600,000.00
Bonds 40% |$1,600,000.00
Short-Term 10% |$400,000.00

CanyonCitySteve
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Re: Schwab retirement quote on 4 mil. Advice??? Can I do better?

Postby CanyonCitySteve » Thu Dec 08, 2016 11:32 pm

Please provide more details of what they proposed.

Having dealt with Schwab in the past, I am sure there is a misunderstanding here. There have multiple programs to manage your money, but none are opaque.

For instances, they have "Intelligent Portfolios" for which there is no advisory fee. But of course they DO tell you what you are getting.

Apparently you got a quote on a different program, but I am (again) sure there is some misunderstanding here.

Please clarify.
It is in the uncompromisingness with which dogma is held and not in the dogma or want of dogma that the danger lies. | --Samuel Butler

jane1
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Re: Schwab retirement quote on 4 mil. Advice??? Can I do better?

Postby jane1 » Fri Dec 09, 2016 12:18 am

If you handled real estate investment business yourself, this would definitely be doable. And since it is all in a taxable account, it makes it simpler, not having to optimize allocation and withdrawal from IRA, Roth, taxable, etc.
Choose a simple 3-fund portfolio. Make minor adjustments for the fact that it will all be in a taxable account. Annual dividends on $4M will be taxable and capital gains would be taxed upon withdrawal. If you learn the TLH game, you can reduce taxes.

You also have the option of only starting with 100K portfolio with Vanguard PErsonal advisory services or other services. It doesn't have to be the full 4M

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Watty
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Re: Schwab retirement quote on 4 mil. Advice??? Can I do better?

Postby Watty » Fri Dec 09, 2016 12:50 am

22twain wrote:Assuming for the sake of argument that the 5.1% return is correct (it's at least a plausible long-run figure), that fee would be about 14% of your returns. How happy would you be if Uncle Sam raised your tax rate by 14%?


That 5.1% is likely the investment return but the safe withdrawal rate would less because there might be some bad years early on or a series of bad years. Probably a bit less then 4% but that is before taxes. You can crunch the numbers a lot of ways but the .07% is a lot of your after tax spendable money each year.

ChuangTzu wrote:Portfolio A/A suggestions????


If you post your more of your details in this suggested format you will likely get some good suggestions.

viewtopic.php?f=1&t=6212

A generic vanilla starting point would be a three fund portfolio with tax efficient fund placement.

https://www.bogleheads.org/wiki/Three-fund_portfolio

https://www.bogleheads.org/wiki/Tax-eff ... _placement

Sandtrap
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Re: Schwab retirement quote on 4 mil. Advice??? Can I do better?

Postby Sandtrap » Fri Dec 09, 2016 4:17 pm

jane1 wrote:If you handled real estate investment business yourself, this would definitely be doable. And since it is all in a taxable account, it makes it simpler, not having to optimize allocation and withdrawal from IRA, Roth, taxable, etc.
Choose a simple 3-fund portfolio. Make minor adjustments for the fact that it will all be in a taxable account. Annual dividends on $4M will be taxable and capital gains would be taxed upon withdrawal. If you learn the TLH game, you can reduce taxes.

You also have the option of only starting with 100K portfolio with Vanguard PErsonal advisory services or other services. It doesn't have to be the full 4M


Thank you "jane1" for the simplification.

TLH game?? :confused

smackboy1
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Re: Schwab retirement quote on 4 mil. Advice??? Can I do better?

Postby smackboy1 » Fri Dec 09, 2016 5:06 pm

ChuangTzu wrote:Schwab gave me a retirement portfolio quote on 4 million in cash. . .

In one conversation the Schwab person quoted .7% as their annual management "fee".


That's $28K for just the first year. Seems a bit much if all you want is 2-3 fund portfolio.

If you are looking for simple and straightforward indexing you could do a lot better than that on an AUM basis because the assets are sizeable.

Vanguard has it's own advisor services which is a lot less than that.

There are fee based advisors that do not charge AUM e.g. Cardiff Park, Evanson Asset Management

Allan Roth is also a good choice if you are looking for hourly fee advice but not necessarily ongoing management.

http://daretobedull.com/
Disclaimer: nothing written here should be taken as legal advice, but I did stay at a Holiday Inn Express last night.

NotWhoYouThink
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Re: Schwab retirement quote on 4 mil. Advice??? Can I do better?

Postby NotWhoYouThink » Fri Dec 09, 2016 5:56 pm

What you got from Schwab sounds more like a projection than a proposal- like they are showing you an example of what might be, not promising to deliver that exact result.

What did you ask for? What do you want? i.e., an income stream, a management plan, a transfer of your risk to their risk?

Do you want someone to manage your money and send you a check every month and you don't have to think about it? Do you want to maximize enjoyment of your assets during your lifetime, or leave a legacy, or minimize investing cost?

It's hard to get what you want if you haven't thought through what it is you want.

Sandtrap
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Re: Schwab retirement quote on 4 mil. Advice??? Can I do better?

Postby Sandtrap » Fri Dec 09, 2016 6:13 pm

Okay. This is the suggested format. Hope this helps. (newbie alert :| )

Emergency funds: N/A
Debt: 0
Tax Filing Status: Married Filing Jointly
Tax Rate: pend. Just retired.
State of Residence: AZ
Degree: Finance.
Retired from self employed R/E investment and income properties.

Age: 62 (also spouse).

Current Retirement Assets:

4 million cash, after tax. (liquidation of R/E income holdings built up over decades).

3 rental properties, aprox. 30k/year income.

Will wait till 70 to file for S/S.

Assets under “Credit Shelter Grantor Trust”.

Goals:

1. Modest retirement income: Perhaps 120k/year net.

2. Modest portfolio growth. Secure. Safe.

3. Risk tolerance: Zero.


Questions:
1. Portfolio desired Asset Allocation: unknown (help?)

2. Have opened brokerage trust accounts at Schwab, Vanguard, TdAmeritrade.

3. I prefer to manage my own investments as I have done in R/E in the past. Now, a steep learning curve for an investment portfolio without R/E.

3. What is the next step?

Thanks everyone for your help.

Sandtrap
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Joined: Sat Nov 26, 2016 6:32 pm

Re: Schwab retirement quote on 4 mil. Advice??? Can I do better?

Postby Sandtrap » Fri Dec 09, 2016 6:57 pm

smackboy1 wrote:
ChuangTzu wrote:Schwab gave me a retirement portfolio quote on 4 million in cash. . .

In one conversation the Schwab person quoted .7% as their annual management "fee".


That's $28K for just the first year. Seems a bit much if all you want is 2-3 fund portfolio.

If you are looking for simple and straightforward indexing you could do a lot better than that on an AUM basis because the assets are sizeable.

Vanguard has it's own advisor services which is a lot less than that.

There are fee based advisors that do not charge AUM e.g. Cardiff Park, Evanson Asset Management

Allan Roth is also a good choice if you are looking for hourly fee advice but not necessarily ongoing management.

http://daretobedull.com/


Thanks so much for help.
$28k/year for something that is simple to experts on this forum does seem like a lot to me.

AUM??

Will look up Allan Roth as you suggest.

Sandtrap
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Re: Schwab retirement quote on 4 mil. Advice??? Can I do better?

Postby Sandtrap » Fri Dec 09, 2016 6:59 pm

NotWhoYouThink wrote:What you got from Schwab sounds more like a projection than a proposal- like they are showing you an example of what might be, not promising to deliver that exact result.

What did you ask for? What do you want? i.e., an income stream, a management plan, a transfer of your risk to their risk?

Do you want someone to manage your money and send you a check every month and you don't have to think about it? Do you want to maximize enjoyment of your assets during your lifetime, or leave a legacy, or minimize investing cost?

It's hard to get what you want if you haven't thought through what it is you want.


True True.
Thanks for your help.
I did ask for a projection of income and "projected" portfolio balances over time.

I'd like to actively manage my own funds as I have my business' in the past. Minimize cost. Live frugaly.

Thanks again. :happy

Sandtrap
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Re: Schwab retirement quote on 4 mil. Advice??? Can I do better?

Postby Sandtrap » Fri Dec 09, 2016 7:02 pm

Watty wrote:
22twain wrote:Assuming for the sake of argument that the 5.1% return is correct (it's at least a plausible long-run figure), that fee would be about 14% of your returns. How happy would you be if Uncle Sam raised your tax rate by 14%?


That 5.1% is likely the investment return but the safe withdrawal rate would less because there might be some bad years early on or a series of bad years. Probably a bit less then 4% but that is before taxes. You can crunch the numbers a lot of ways but the .07% is a lot of your after tax spendable money each year.

ChuangTzu wrote:Portfolio A/A suggestions????


If you post your more of your details in this suggested format you will likely get some good suggestions.

viewtopic.php?f=1&t=6212

A generic vanilla starting point would be a three fund portfolio with tax efficient fund placement.

https://www.bogleheads.org/wiki/Three-fund_portfolio

https://www.bogleheads.org/wiki/Tax-eff ... _placement


Thanks for the help and homework "Watty".

I'll get right on it.

Thanks again. :)

btenny
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Re: Schwab retirement quote on 4 mil. Advice??? Can I do better?

Postby btenny » Fri Dec 09, 2016 7:23 pm

Since you want to retire and take zero risk I recommend going to 2-3 local nation wide banks and buying $100K FDIC limit CDs in 1,3, and 5 years denominations. Spread out the money into 3 time CDs and three banks. Shop around for the best rates. This will use up $900K and has almost zero risk. Make sure all the CDs allow early withdrawal if some small interest penalty is paid. I would also put about $100K in all three banks as pure savings accounts for now only. Later you may want to move some of this money or make it work harder. But until you are smarter and more "stock market investing savvy" I suggest moving slowly and very carefully. So this uses up $1.2M total in banks CDs but gives you lots of control and very low risk. But this money gives you a floor of $$$ that is super safe and easy to access if you need spending money and the stock market is going down.

Then go to the local Fidelity and Wells Fargo (internet version only) and Scottrade offices and discuss opening a internet brokerage account. All three of these companies have good customer service and lots of local branches and good internet stock market brokerage services. They are have do-it-your self brokerages. Make sure they understand you want to do self directed stock accounts. You will have to tell them you want the do it your self accounts. They are all very low cost versus the Schwab broker. They all allow you to buy and sell tons of mutual funds and ETfs and lots of Vanguard funds and everything that is bought and sold on the stock exchange. Many of us here use these companies as brokers and we all hold mostly Vanguard funds. But I (and others as well) like the idea of a good bricks and mortar local branch office. Vanguard also provides brokerage services but everything has to be done by phone and fax. So there are tradeoffs. I prefer the local branches. Go to two or three of these places and ask for the $25 tour and detail explanation. You will get lots of data. Pick the ones you like.

In my case I have money at two brokerages, Wells Fargo and Scottrade, for security reasons. So I would put a part of your money into two different accounts. Then let it set and don't buy anything but Treasures funds (VFIUX) and Muni funds (VWIUX) and Total Bond funds (VBTLX) for a while. These are all low risk bond funds that will make a little money while you get educated and they may even lose a little money due to interest rate changes. But they are low risk and easy and safe. Maybe leave a bundle in cash in the money market fund VMSXX.

Then later sometime next year move into stock funds slowly. Maybe buy some Total Stock market index (VTSAX) or the SP500 index (VFIAX) and maybe some International (VFWAX). But do not buy anything until you have learned what you are buying and why. Sort of like property inspections. You need to dig and understand what is what.

Good Luck.

Sandtrap
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Re: Schwab retirement quote on 4 mil. Advice??? Can I do better?

Postby Sandtrap » Fri Dec 09, 2016 10:02 pm

btenny wrote:Since you want to retire and take zero risk I recommend going to 2-3 local nation wide banks and buying $100K FDIC limit CDs in 1,3, and 5 years denominations. Spread out the money into 3 time CDs and three banks. Shop around for the best rates. This will use up $900K and has almost zero risk. Make sure all the CDs allow early withdrawal if some small interest penalty is paid. I would also put about $100K in all three banks as pure savings accounts for now only. Later you may want to move some of this money or make it work harder. But until you are smarter and more "stock market investing savvy" I suggest moving slowly and very carefully. So this uses up $1.2M total in banks CDs but gives you lots of control and very low risk. But this money gives you a floor of $$$ that is super safe and easy to access if you need spending money and the stock market is going down.

Then go to the local Fidelity and Wells Fargo (internet version only) and Scottrade offices and discuss opening a internet brokerage account. All three of these companies have good customer service and lots of local branches and good internet stock market brokerage services. They are have do-it-your self brokerages. Make sure they understand you want to do self directed stock accounts. You will have to tell them you want the do it your self accounts. They are all very low cost versus the Schwab broker. They all allow you to buy and sell tons of mutual funds and ETfs and lots of Vanguard funds and everything that is bought and sold on the stock exchange. Many of us here use these companies as brokers and we all hold mostly Vanguard funds. But I (and others as well) like the idea of a good bricks and mortar local branch office. Vanguard also provides brokerage services but everything has to be done by phone and fax. So there are tradeoffs. I prefer the local branches. Go to two or three of these places and ask for the $25 tour and detail explanation. You will get lots of data. Pick the ones you like.

In my case I have money at two brokerages, Wells Fargo and Scottrade, for security reasons. So I would put a part of your money into two different accounts. Then let it set and don't buy anything but Treasures funds (VFIUX) and Muni funds (VWIUX) and Total Bond funds (VBTLX) for a while. These are all low risk bond funds that will make a little money while you get educated and they may even lose a little money due to interest rate changes. But they are low risk and easy and safe. Maybe leave a bundle in cash in the money market fund VMSXX.

Then later sometime next year move into stock funds slowly. Maybe buy some Total Stock market index (VTSAX) or the SP500 index (VFIAX) and maybe some International (VFWAX). But do not buy anything until you have learned what you are buying and why. Sort of like property inspections. You need to dig and understand what is what.

Good Luck.


Terrific advice. I'll look into it right away.

You mention Wells Fargo and Scottrade.

Any thoughts on Schwab as an alternative (self brokerage acct) to those two? (advantages/disadvantages) ???

Thanks.

Nearly A Moose
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Re: Schwab retirement quote on 4 mil. Advice??? Can I do better?

Postby Nearly A Moose » Fri Dec 09, 2016 10:19 pm

I believe plenty of people on this forum use Schwab, and the wiki has recommendations for basic portfolios using Schwab funds. I have Schwab bank and brokerage accounts and am very happy with the customer service. I currently have my taxable investments with vanguard because I like their funds best and there's no cost to move around, but I'm sure I could have been happy as a clam with Schwab.

You say you have zero risk tolerance but you used to own rental real estate??? Most here would call that a pretty high-risk activity. Have you decided you've "won the game" and are going to stop playing? You could easily throw everything into a single life strategy fund and be fine or just do basic 50/50 stock/bond or even 40/60 stock bond portfolio. Conventional wisdom is to be prepared to lose half your stock allocation's value during a market crash (but if you stay the course and don't sell, it will recover after a year or two). So, if you're at 40/60, at the next crash, your $4M portfolio drops to $3.2M or so, you keep living off your withdrawals, and in a year or two, it will probably be right back up to $4M.

Disclaimer: I tend not to give my thoughts on how others should invest, as I'm still new here and others are much more knowledgeable than me, but sometimes I find it helps to pull back and look at the bigger picture.

mike127
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Re: Schwab retirement quote on 4 mil. Advice??? Can I do better?

Postby mike127 » Sat Dec 10, 2016 6:06 am

ChuangTzu wrote:Any thoughts on Schwab as an alternative (self brokerage acct) to those two? (advantages/disadvantages) ???


Congratulations on asking a lot of good questions and taking a critical approach to understanding what's happening with your money. I was in your shoes a few years ago and dramatically improved my knowledge and investment situation with help from this group.

I follow a Boglehead approach to investing and have the majority of my invested assets at Schwab. I actually used Vanguard first and switched to Schwab after a series of customer service problems, concerning data security practices, and other issues -- and Schwab has been excellent.

The issue with Schwab is that, unlike Vanguard, they cater to many different types of investors -- including people who prefer to pay higher fees to have everything managed for them -- so you have to be specific in what you're asking for. The two things that you should look at with Schwab are:
[*] their low-fee index ETFs (see the table on Schwab ETFs at https://www.bogleheads.org/wiki/Charles_Schwab for more info)

[*] their Intelligent Portfolios product, which has modestly higher fees but a computer manages everything for you

I've avoided the Intelligent Portfolios product because I like to have more control over things (not all of my assets are at Schwab) and I worry about tax consequences, but you may have a different preference.

I generally don't need to contact Schwab for anything, but when I have reached out they've been incredibly helpful and on top of things, even when I call at 2am (which seems to be my preferred time for investment management!). If you use their low-fee products, investing at Schwab costs as little as Vanguard but you get (in my own experience, anyway) a much better level of service. Once I went into their branch to get something notarized and it was a nice convenience.

Other than proactively offering me a different customer service tier because of my asset level, they have never contacted me to sell me things that I haven't first asked about, and although they sell higher-fee products they know when looking at my accounts that I use index funds and don't even mention those products when I speak to them.

I also used to have an account with Wells Fargo and there were many sales pitches, efforts to push me into higher-cost funds with a front-end fee, and other things. Like all brokerages they do offer the ability to invest in low cost ETFs and mutual funds, but my experience was their fees to do anything were much higher, and when I closed my account I had to pay something like $50 an account to close -- which I was happy to do just to be done with it. Many others on this forum have had good experiences with Wells Fargo (especially internet-only accounts) but my experience was that I didn't know a lot about investing and they profited from that.

I've never used ScotTrade so no opinions there.

Happy to answer any more specific questions if you have them too.

Sandtrap
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Re: Schwab retirement quote on 4 mil. Advice??? Can I do better?

Postby Sandtrap » Sat Dec 10, 2016 8:55 am

mike127 wrote:
ChuangTzu wrote:Any thoughts on Schwab as an alternative (self brokerage acct) to those two? (advantages/disadvantages) ???


Congratulations on asking a lot of good questions and taking a critical approach to understanding what's happening with your money. I was in your shoes a few years ago and dramatically improved my knowledge and investment situation with help from this group.

I follow a Boglehead approach to investing and have the majority of my invested assets at Schwab. I actually used Vanguard first and switched to Schwab after a series of customer service problems, concerning data security practices, and other issues -- and Schwab has been excellent.

The issue with Schwab is that, unlike Vanguard, they cater to many different types of investors -- including people who prefer to pay higher fees to have everything managed for them -- so you have to be specific in what you're asking for. The two things that you should look at with Schwab are:
[*] their low-fee index ETFs (see the table on Schwab ETFs at https://www.bogleheads.org/wiki/Charles_Schwab for more info)

[*] their Intelligent Portfolios product, which has modestly higher fees but a computer manages everything for you

I've avoided the Intelligent Portfolios product because I like to have more control over things (not all of my assets are at Schwab) and I worry about tax consequences, but you may have a different preference.

I generally don't need to contact Schwab for anything, but when I have reached out they've been incredibly helpful and on top of things, even when I call at 2am (which seems to be my preferred time for investment management!). If you use their low-fee products, investing at Schwab costs as little as Vanguard but you get (in my own experience, anyway) a much better level of service. Once I went into their branch to get something notarized and it was a nice convenience.

Other than proactively offering me a different customer service tier because of my asset level, they have never contacted me to sell me things that I haven't first asked about, and although they sell higher-fee products they know when looking at my accounts that I use index funds and don't even mention those products when I speak to them.

I also used to have an account with Wells Fargo and there were many sales pitches, efforts to push me into higher-cost funds with a front-end fee, and other things. Like all brokerages they do offer the ability to invest in low cost ETFs and mutual funds, but my experience was their fees to do anything were much higher, and when I closed my account I had to pay something like $50 an account to close -- which I was happy to do just to be done with it. Many others on this forum have had good experiences with Wells Fargo (especially internet-only accounts) but my experience was that I didn't know a lot about investing and they profited from that.

I've never used ScotTrade so no opinions there.

Happy to answer any more specific questions if you have them too.


Awesome advice! Thanks "Mike127" :)

You're right. I am uncomfortable with something that is purely online. Maybe age but my wife is the same. We started with one tiny cheap condo and rented it out and bought the one next door. Repeat forever. Decades later we had several buildings. Degree in Finance and a General Contractor's License. We scraped and saved every dime doing everything ourselves from painting to toilets to screening tenants to investment analysis. Never leveraged nor delegated (skim) to a management company. So we were able to make and save even in economic downturns. I'm tempted to return to the "comfort?" level of R/E again but realize I have neither the physical ability nor the "gung ho" to do it again. Thus, total liquidation (huge step) and starting in this new "portfolio A/A investment" thing. However, in my experience, no financial adviser, banker, or property manager, or employee, is going to have the same personal/vested interest, accountability, and attention to detail, that I will. (easy to risk when it's not your money). So, I can't see myself doing a managed portfolio or delegating the survivability of my life savings to anyone or company that is not going to be personally liable for it.

Advice welcome :D

The local Schwab branch and reps in Scottsdale have been terrific and very patient with me. Some "glass tower" companies give me the "used car salesman" sales treatment as soon as they find out how much I have to work with. To me, it's many decades of hard work and sweat, to them, it seems, fees/commisions/profitablity disguised in a new suit offering free gourmet lunches in the "client room". (reminds me of "time share sales").

With intense study (my new 24/7 career :shock: ) , I'm quickly learning from Bogleheads here (thanks!) as well as all the suggested books and links. And, bit by bit, I'm able to know when I'm getting a sales pitch from a financial institution (even online).

As for asset allocation. I realize now (with everyone's help. . . thanks!) that one option would be to take 1.5 mil. and buy a small apartment building and, given the right purchase price (in cash), run it with at least an 8 percent CAP. This would bring in at least 120k/yr in steady income. Good tax breaks and appreciative value. It would be within my comfort zone. Then take the 2.5 mil. remaining funds and invest in a portfolio I have yet to construct or create (help? :confused ).

However, I realize that over time I may end up creating another R/E monster that my heirs will not be able to sustain profitably. Also, I will not be able to sustain as I get older. It has been suggested to balance the portfolio with R/E then sell, again. However, profitable R/E income property is usually a very poor short term (5-10 year) investment if liquidated that early since the appreciative value goes up so slowly (usually). Which I now see is the value of portfolio investing.

In my experience over many decades, R/E rental income, if bought and run wisely, is reliable and predictable, and always increases. And the value of the building and property (similar to the "principal" investment) if purchased wisely, will never go down. So therein lies the tough transition from hard assets, R/E, to portfolio investments for me. As wisely suggested here by others with more investment savy, I think I need to learn more and step very very carefully into this side of investing for income and long term profitability. I have always had absolute control over the things in my company that I could control, from screws to screening tenants to money.

I hope this long missive helps paint a better picture of my situation and how others here might offer advice to this newbie portfolio investor :confused :confused

Thanks everyone. I'm printing everything out and considering it "homework" :wink: .

SGM
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Re: Schwab retirement quote on 4 mil. Advice??? Can I do better?

Postby SGM » Sat Dec 10, 2016 9:44 am

There are no investments that are zero risk. You do have the ability to take some risk, but if you have too much fear you are liable to make some serious mistakes. If you are too risk averse you will be less likely to the stay the course with your investments and sell when the market has an inevitable decline. There is the risk of inflation and not keeping up with it if you do not have some riskier assets. Tips are supposed to protect against unexpected inflation. A conservative AA with maybe 50% bonds or cash equivalents may be appropriate for you.

I would plan on conversions to a Roth while your income is lower to avoid high RMDs if you have a lot in traditional IRAs and 401ks. A longevity annuity or a ladder of SPIAs starting at age 70 would be advisable. Be careful not to buy the type of annuity insurance salesmen want you to commit to. You want a certain base of income to cover your expenses. You may want to keep aside some cash or cash equivalents to cover a few years expenses.

Paying 0.7% for advice is way too expensive. If you wanted to meet with a financial advisor who does not charge for AUM such as Alan Roth that would be appropriate. Vanguard would give you a free plan if you were to deposit over a million with them.

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patrick013
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Re: Schwab retirement quote on 4 mil. Advice??? Can I do better?

Postby patrick013 » Sat Dec 10, 2016 2:29 pm

ChuangTzu wrote:Goals:

1. Modest retirement income: Perhaps 120k/year net.

2. Modest portfolio growth. Secure. Safe.

3. Risk tolerance: Zero.


Questions:
1. Portfolio desired Asset Allocation: unknown (help?)

2. Have opened brokerage trust accounts at Schwab, Vanguard, TdAmeritrade.

3. What is the next step?

Thanks everyone for your help.



I think at Schwab you need to know what you want. When I ask for a robo-
advisor from them I get 8-10 funds and half of them aren't investment grade.

A 10 year new issue Agency bond at par and coupon 3% is currently being sold.
The coupon will probably go up next year (4% ?), no rush to buy anything. Pair that
with some allocation to the Total Stock Market Index (allocation your choice of risk)
of 25-50% and you should have over $120k/yr taxable income and a little more.
Simple but effective.
age in bonds, buy-and-hold, 10 year business cycle

heyyou
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Re: Schwab retirement quote on 4 mil. Advice??? Can I do better?

Postby heyyou » Sat Dec 10, 2016 4:38 pm

TLH: tax loss harvest
You have probably done this with your RE (real estate) holdings. When the value of your stock mutual funds drop, you can sell some of one, and buy that amount of a similar one, and claim the loss on your taxes. If your loss claim is more than the allowed annual limit, you can carry the remaining loss into future tax years to repeat the deduction. The second fund needs to be slightly different than the original fund to meet the IRS guidelines, but you choose one that has similar stock holding so you will get the same gain when both funds do go up in value.

AUM: assets under management
Some financial advisors (often the greedy ones) charge an annual fee of a small percentage of the value of your account held by them, that is the "assets under management" fee. Since retirees can safely draw a small annual percentage from their accounts, that small looking fee can amount to a sizable fraction of your annual withdrawal. .7% AUM fee on 3.5% annual withdrawal (WD) is a fifth of your annual retirement income and you have paid taxes on it before the advisor gets it. Do it yourself (DIY) by following advice here at Bogleheads, or pay hourly for advice from a different financial advisor who coaches you, or pay one of the flat rate advisors who charge $2-3 thousand dollars a year regardless of your portfolio size. Set up automatic deductions or choose the flat rate one when you are fading away but your wife is still in good health.

With your business background, you can easily learn to DIY, but it will take some time. You are right about portfolio management being your new hobby. It is about selecting assets that have attractive attributes, with enough return but not too much risk, and watching expenses, all of which you have done in real estate. Not selling everything and going to cash when the market drops is most important. Jack Bogle named that "Staying the course" and you will read it often here.

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Reb Tevye
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Re: Schwab retirement quote on 4 mil. Advice??? Can I do better?

Postby Reb Tevye » Sat Dec 10, 2016 7:26 pm

Hi ChuangTzu,

I've been reading this forum and various Boglehead-ish books for a few years and here are a couple recommendations and thoughts for you.

Rick Ferri outlines several key elements to successful investing (for the individual): Philosophy, Stratregy, and Displine. And I would add "Execution" between Strategy and Discipline. I am fully bought into the foundational role that Philosophy plays, and without understanding your own true-to-you philosophy all strategies and discipline are susceptible to flail in the wind. Whether you get a plan for free from here, or pay for it from Schwab.

https://portfoliosolutions.com/latest-l ... s-strategy
http://www.morningstar.com/cover/videoc ... ?id=575446

You really must write your own IPS. I have refined mine annually over the past 3 years. Here is mine.
Philosophy: I'm not smarter than the market.
Strategy: LBYM. Start by choosing my level of risk. Pay Market Price & then accept Market return. Minimize tracking error and behavioral errors. Only bear needed risk.
Execution:
*Total US or SP500.
*Total Int'l w/EM. Ratio range = 1:2 to 1:4 w/US.
*Investment Grade bonds only, Intermediate duration or shorter, CDs, Stable Value Fund.
*Use SS + Pension+ TIPS + I-Bonds for safe inflation-protected bare minimum spending floor in retired years.
*Use low cost index funds. Tax efficient funds and placement. Defer SS. Defer taxes, then Roth Conv to reduce RMDs and filing-single bracket risk. Rebalance through contrib and w/d, and then annually or longer.


Read William Bernstein's "Four Pillars of Investing."
The four pillars are Theory, History, Behavioral and Business. I like his admonition that you cannot know enough about the history of markets.
It's not too deep or complicated. This quick survey of critical investment topics will help you choose a rock-solid philosophy that is right for you.
I also really like Bernstein's "Deep Risks", "Rational Expectations" and "If You Can"
And then read them all again 6 months later.

And I'll re-iterate what an earlier poster said. Relative to your RE career where your success came from what You Did Do, much of the success (as framed by Bogleheads) in investing comes from what You Do Not Do.

Most folks here are entered the stock market incrementally, over decades usually. And most have "made mistakes" and learned from them. I imagine that your career in RE has been similar. So you should not be rushed. For your age and wealth, you can afford to take your time, and make a plan that fits you. Do not take on too much risk that you don't fully understand too soon - you don't need to. Read with Wiki entry on Windfalls, much of that applies to you in the sense that you can and (probably) should take measured steps into something you are apprehensive about. But life is all about trade-offs, and this is no different.

From what you've written, it seems to me that you should enter the stock and bonds markets gradually, perhaps over several years starting with the safest investments. And you need to decide if you are willing to spend down some of your money - this may be a mindset change that your "balance" goes down for decade until SS. maybe through spending (greater than income), or by buying low-risk, low-return bonds, or by buying longevity insurance (e.g. SPIA).

Good luck.
"So, what would have been so terrible if I had a small fortune?"

HurdyGurdy
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Re: Schwab retirement quote on 4 mil. Advice??? Can I do better?

Postby HurdyGurdy » Sat Dec 10, 2016 7:51 pm


I'd like to actively manage my own funds as I have my business' in the past. Minimize cost. Live frugaly.
My wife and I are frugal, no loans, and don't need much to be content.
[...]
Monthly distribution - $12,500
Annual Distribution (now) approx. $152,000


:confused

Sandtrap
Posts: 1174
Joined: Sat Nov 26, 2016 6:32 pm

Re: Schwab retirement quote on 4 mil. Advice??? Can I do better?

Postby Sandtrap » Sun Dec 11, 2016 9:49 am

HurdyGurdy wrote:

I'd like to actively manage my own funds as I have my business' in the past. Minimize cost. Live frugaly.
My wife and I are frugal, no loans, and don't need much to be content.
[...]
Monthly distribution - $12,500
Annual Distribution (now) approx. $152,000


:confused


Sorry. Newbie alert. :confused


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