Switched from Ameriprise to Fidelity, now what?

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NewlyMinted
Posts: 4
Joined: Wed Apr 19, 2017 9:22 pm

Switched from Ameriprise to Fidelity, now what?

Post by NewlyMinted » Wed Apr 19, 2017 9:52 pm

Better late than never, we finally transferred our Columbia funds from Ameriprise to Fidelity. Now we would like to transition to a 3-fund strategy, thanks to all the good advice on Bogleheads. We have some IRAs and TIAA-CREF and a 401K at work, which can also be re-allocated. I’ve been reading the wiki and forum posts, but a still pretty much a newbie.

Emergency funds: approximately 6 months of expenses
Debt: none, house paid off, worth about 250K
Tax Filing Status: Married Filing Jointly
Tax Rate: 25% Federal, 6% State
Age: Him 56, Her 57
Desired Asset allocation: 65% stocks / 35% bonds (age - 20)
Desired International allocation: 30% of stocks
Pension available: 42K/year, no COLA, available when I retire, perhaps at 60
Income: 140K, DW already “retired on me”
Size of Portfolio: roughly 1M
Taxable:
2.0% Fidelity AMVAX Columbia Small/Mid Cap Value (1.25%) Cost Basis -$4K
1.8% Fidelity AQEAX Columbia Disciplined Core (1.04%) Cost Basis -$17K
1.4% Fidelity COLTX Columbia Tax-exempt (0.72%) Cost Basis +$1K
1.3% Fidelity IMRFX Columbia Global Opportunities (1.21%) Cost Basis -$2K
0.7% Fidelity INDZX Columbia Diversified Equity Income (1.04%) Cost Basis -$1K
1.6% Fidelity INDZX Columbia Diversified Equity Income (1.04%) Cost Basis -$5K
1.1% Edward Jones USB US Bancorp stock (0.00%) Cost Basis -$11K
IRAs/401K:
1.2% Fidelity FBALX Fidelity Balanced (0.55%)
1.2% Fidelity FCNTX Fidelity Contrafund (0.71%)
1.6% Fidelity RFRAX Columbia Floating Rate (1.06%)
0.9% Fidelity AMVAX Columbia Small/Mid Cap Value (1.25%)
4.5% Fidelity INUTX Columbia Dividend Opportunity (1.01%)
1.2% Fidelity NMSAX Columbia Small Cap Index (0.45%)
2.1% Fidelity RFRAX Columbia Floating Rate (1.06%)
25.6% His work No ticker Bond Market Index (0.05%)
8.0% His work No ticker S&P 500 Index (0.05%)
8.8% His work No ticker International Index (0.12%)
8.2% His work No ticker Russell 2000 Index (0.05%)
4.2% TIAA CREF TLHIX T-C Lfcyle Idx 2030-Inst (0.21%)
3.4% TIAA CREF TLQIX T-C Lfcyle Idx 2025-Inst (0.22%)
Roth IRAs:
6.5% Fidelity AMVAX Columbia Small/Mid Cap Value (1.25%)
3.2% Fidelity CBSAX Columbia Mid Cap Growth (1.20%)
1.4% Fidelity CREAX Columbia Real Estate Equity (1.24%)
0.6% Fidelity FCNTX Fidelity Contrafund (0.71%)
1.5% Fidelity COAVX Columbia Overseas Value (1.25%)
0.6% Fidelity CREAX Columbia Real Estate Equity (1.24%)
0.5% Fidelity FBALX Fidelity Balanced (0.55%)
2.6% Fidelity INDZX Columbia Diversified Equity Income (1.04%)
2.0% Fidelity LAIAX Columbia Acorn International (1.24%)

New annual contributions:
$24K his 401k
$6500 his IRA/Roth IRA

Available funds: any funds a Fidelity, but looking at primarily these three:
Fidelity Total Market Index Premium Class (FSTVX) (0.05%)
Fidelity Total International Index Fund Premium Class (FTIPX) (0.11%)
Fidelity U. S. Bond Index Fund Premium Class (FSITX) (0.05%)

Here is my preliminary plan:
Convert (sell and buy) all Columbia IRA funds with bond fund (FSITX).
Convert all Roth funds (Columbia & Fidelity) to Total US Stock
Sell the Taxable funds with the least amount of appreciation AMVAX, COLTX, IMRFX, and INDZX(2). Most of this is long-term capital gains so should be taxed at 15%. Keep the two funds/stocks with the highest cost basis AQEAX, USB. Use these funds/stocks for charitable donations, instead of using new income.
Convert TIAA CREF TLQIX T-C Lfcyle Idx 2030 to 2025 since it more closely matches my desired bond allocation, and I can leave it alone without constant rebalancing.
Use the 401K to achieve the final target AA of 65/35.

Questions:
One of the taxable funds, COLTX, actually lost money based upon the cost basis (thank you Ameriprise). Can we do some tax harvesting? How do you do that?
Does donating the funds with a low cost basis for charity make sense? Perhaps a certain amount once per year.
Does it make sense to keep any of the Columbia funds except for the one with the low cost-basis? Our ex-Ameriprise advisor thought we should keep our Columbia funds since we already paid the load on them. :oops:

Any suggestions/comments appreciated. Thanks in advance.

mhalley
Posts: 4877
Joined: Tue Nov 20, 2007 6:02 am

Re: Switched from Ameriprise to Fidelity, now what?

Post by mhalley » Wed Apr 19, 2017 10:48 pm

The wiki has all the info you need to know. Basically, you sell the fund with a loss in order to postpone taxes. The main thing is that you don't want to create a wash sale. Since you are going from an active fund to an index fund, that won't be a problem.

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

I see no reason to keep the Columbia funds. You will still have a lower er.

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Tyler Aspect
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Re: Switched from Ameriprise to Fidelity, now what?

Post by Tyler Aspect » Wed Apr 19, 2017 11:16 pm

Hi, your plan looked reasonable to me. Appreciated stocks can be donated to save some taxes. Fidelity has a donor advised fund suitable for charities that cannot accept appreciated stocks. You can spread out the selling of funds across multiple years to lessen the effect of realizing capital gains.

I do see that your traditional 401k portion was significantly larger compared to the taxable portion. Maybe this is a time to stop contributing to traditional 401k unless there is company matching to be had. You can still contribute to Roth IRA if you are under the income limit.

I think you can hold AQEAX for now, since it has the most capital gains. Wait for a recession to sell it.
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NewlyMinted
Posts: 4
Joined: Wed Apr 19, 2017 9:22 pm

Re: Switched from Ameriprise to Fidelity, now what?

Post by NewlyMinted » Thu Apr 20, 2017 9:05 pm

Tyler Aspect wrote:Hi, your plan looked reasonable to me. Appreciated stocks can be donated to save some taxes. Fidelity has a donor advised fund suitable for charities that cannot accept appreciated stocks. You can spread out the selling of funds across multiple years to lessen the effect of realizing capital gains.

I do see that your traditional 401k portion was significantly larger compared to the taxable portion. Maybe this is a time to stop contributing to traditional 401k unless there is company matching to be had. You can still contribute to Roth IRA if you are under the income limit.

I think you can hold AQEAX for now, since it has the most capital gains. Wait for a recession to sell it.


I believe my church will accept appreciated stocks, and we can we can deduct the current value we donate from our taxes. Thus we probably will hang on the AQEAX and start donating it over time, a few shares at a time, since were going to donate anyway. It seems to make sense to do this versus using money earned this year. You mentioned waiting for a recession to sell the AQEAX, I'm curious to know, why that would be a good strategy?

Tyler Aspect wrote:I do see that your traditional 401k portion was significantly larger compared to the taxable portion. Maybe this is a time to stop contributing to traditional 401k unless there is company matching to be had. You can still contribute to Roth IRA if you are under the income limit.

There is a match 6% match, after an 8% contribution. I'm contributing more like 17% to try to hit the tax deferred limits. It does seem like our taxable funds are relatively small compared to the tax advantaged funds. We think we can start to build the taxable portion more now that we have the house paid off and eliminated some other expenses. Good point though.

Thanks for responding.

NewlyMinted
Posts: 4
Joined: Wed Apr 19, 2017 9:22 pm

Re: Switched from Ameriprise to Fidelity, now what?

Post by NewlyMinted » Thu Apr 20, 2017 9:18 pm

mhalley wrote:The wiki has all the info you need to know. Basically, you sell the fund with a loss in order to postpone taxes. The main thing is that you don't want to create a wash sale. Since you are going from an active fund to an index fund, that won't be a problem.

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

I see no reason to keep the Columbia funds. You will still have a lower er.


Thanks, good info, very detailed with good example Agree on ERs.

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