Introduction to myself, my portfolio and my situation

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Midnight Rider
Posts: 4
Joined: Wed Jan 04, 2017 6:38 am

Introduction to myself, my portfolio and my situation

Post by Midnight Rider » Tue Nov 14, 2017 8:12 am

All,

Thank you for being participants in an extremely useful, informative forum. I feel very lucky to have access to the collective brainpower here. I have attempted to structure this intro in the recommended fashion.

Emergency funds: I have plenty of emergency funds. I am 8.5% in cash and cash equivalents.
Debt: I have a mortgage (about 110K, Condo value around 160K) with Condo fee of $1800 a month and a car payment of $400 (both mandatory payments are a bit less but I am paying at a slightly accelerated rate.

Tax Filing Status: (Single, No Dependents)
Tax Rate: 15% Federal, 7% State ( Both a bit speculative, but close)
State of Residence: MD (but may be moving to NV..no taxes)
Age: 61
Desired Asset allocation: Not sure—I will be comfortable having a larger equity position than is generally desirable at my age. I am currently at 80% plus in equities.
Desired International allocation: Not sure but am tolerant of a significant portion being in there.

At this point I will get to the meat of the story. I have around 1 million dollars invested. 73% of that money is with a local, respectable firm that charges me slightly more than 1% a year in fees. (All of this money is in equities, mostly individual stocks. I will give a further breakdown below). 8.5 % is in cash that I control. I also have a TD Ameritrade account that I control and a T Rowe Price that I control (about 16%). Most of this is in equities too. I will break this down further below. I also have two 401-K’s from previous jobs, maybe 25K or 2.5% or so.

I am not working now for health reasons but pretty sure I will be able to do some work in the future. For reasons I won’t go into, I do not think I will make it to my life expectancy of 78. Maybe not even 70. At this point, I am not asking for help in ascertaining if I have enough assets to retire…just restructuring the portfolio and joining in the discourse.

My immediate plan is to pull the money back from the money management firm to my control and then restructure into all index funds. I may not be able to do this “overnight” because of the capital gains but will do it over time.


Current assets

Controlled by me:

Cash:
88,000 in cash (8.5%)

Taxable:
15,000-Capital One Preferred Stock
32,500 -NUVBX—Nuveen Municipal Bond Fund (ER=.49)
23,000 –AGTHX—American Funds-The Growth Fund of America (ER=.64)
23,500-ANWPX- American Funds New Perspective (ER=.77)
24,000- SLMCX---Seligman Communications (lot of NASDAQ type tech stuff) (ER=1.27)
45,000-PRGFX—T Rowe Price Growth Fund (runs similar to SP500) (ER=.68)

401-K:
25,000- Two 401 K’s - I think they are in “Retirement 2020” funds or something like that. I have not followed these closely and the amounts are relatively insignificant.

TOTAL: 276,000

Controlled by Investment firm charging 1%

Taxable:
324,000 (100@ equities that they trade…very lightly) Current 57K in LT Gains, 8K in ST Gains.

IRA and Roth:
385,000 in Traditional IRA (100% equities)
46,000 in Roth (they move these funds around in Vanguard ETF’s)

TOTAL: 755,000 (Annual fee from them is around 7K or so per year)

TOTAL PORTFOLIO: 1,031,000 (or so)

DEBT:

110,000 left on mortgage (Payment with condo fee around 1800/mo)
12,000 on car (Payment is 338.000 but paying 400.00)

Contributions

No new contributions ever

Social Security

Eligible at 62 YO in July of 2018. 1546.00 month. If I wait until 66 and 4 months, I would get 2096.00 month. See comments above on life expectancy and question 4 below.

Available funds

Not sure what this means.


Questions:
1. I am really looking for portfolio suggestions. Also, I wanted to start a discussion because this could be a long process due to Capital Gains taxes and other considerations.

2. Bond Funds: Oh boy! Am I confused on this decision? I am sure this has been discussed at length somewhere on the forum and believe I have read a few threads on it. Buying bonds now does not seem like the smartest thing to do, or maybe it is.

3. I need suggestions on how to structure the portfolio and what I should place in my IRA and Roth. That would be my first step in this process since I could liquidate the entire IRA and ROTH portions with no tax implications at all. Please advise If I am not right on this.

4. Perhaps as a side issue you could help me with this. If I take SS at 62 I will get 1546./mo…if I take it at 66 and 4 months (due to my birth year) I will get 2096./mo. I have calculated my “loss point” (when I start losing) if I take at 62 but I am curious to know what others come up with.

Okay, I could go on forever, but I think it is time to submit this. Again, I am very happy to have the ears of so many and to open up a dialogue. Thanks!

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dwickenh
Posts: 790
Joined: Sun Jan 04, 2015 9:45 pm
Location: Illinois

Re: Introduction to myself, my portfolio and my situation

Post by dwickenh » Tue Nov 14, 2017 11:27 am

Questions:
1. I am really looking for portfolio suggestions. Also, I wanted to start a discussion because this could be a long process due to Capital Gains taxes and other considerations.

I don't see a major hit on capital gains as most of your money is tax sheltered accounts, and your current income is low enough to stay in the 0% capital gains tax brkt.

2. Bond Funds: Oh boy! Am I confused on this decision? I am sure this has been discussed at length somewhere on the forum and believe I have read a few threads on it. Buying bonds now does not seem like the smartest thing to do, or maybe it is.

You buy bonds for safety and to help your overall portfolio if stocks decline for more than a month or two.

3. I need suggestions on how to structure the portfolio and what I should place in my IRA and Roth. That would be my first step in this process since I could liquidate the entire IRA and ROTH portions with no tax implications at all. Please advise If I am not right on this.

There would be no tax consequence if you transfer your Roth and IRA to a brokerage account that you direct. Make sure you do a trustee to trustee transfer instead of "cashing out".

4. Perhaps as a side issue you could help me with this. If I take SS at 62 I will get 1546./mo…if I take it at 66 and 4 months (due to my birth year) I will get 2096./mo. I have calculated my “loss point” (when I start losing) if I take at 62 but I am curious to know what others come up with.

You may be surprised with how long we all will live. Your question is based on an unknown future. If you need the money at 62 to retire, then the decision is easy. If you don't need it at 62 to make ends meet, you may want to delay for other reasons(roth conversions/increased base income/ACA subsidies)

I suggest you start reading the information on the WIKI and educate yourself before making any big moves.
There are some experts here that will give you more detailed information.

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

Best wishes for your retirement and health,

Dan
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett

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David Jay
Posts: 3995
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Introduction to myself, my portfolio and my situation

Post by David Jay » Tue Nov 14, 2017 12:17 pm

Welcome to the forum. You are less than a year older than me and I intend to retire at age 62. So I have done some thinking about these issues.

First, retirement is completely an EXPENSES issue. You can reasonably take out 5% of your current portfolio every year if there is no expectation of living more than, say, 20 years. Add that to Social Security and compare to your living expenses, if expenses are covered then you are in good shape. This also shows the relative importance of a 1% portfolio fee - 20% less spending if financial advisers are taking 1%.

Social security benefits are calculated to the MONTH that you begin receiving them, so every month you delay (past 62) means a larger check. Be careful not to focus on specific dates (like 66 years 4 months - the same as my spouse's FRA by the way). There are 2 ways to view SS and the way you view SS affects the decision:

The first is ROI. Because life is uncertain, those who what to "get the best return" tend to file early - because they can't guarantee being around to collect a future, higher income stream. The second way to view it is as protecting lifestyle. These folks tend to spend portfolio to delay filing for SS in order to have a higher payment in the out years.

The Wiki is quite complete and well done. At minimum read the entire "Getting started" section at the link that Dan posted above. It shows some recommended portfolios that can be used as a starting point.

All the best,
David
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

gips
Posts: 272
Joined: Mon May 13, 2013 5:42 pm

Re: Introduction to myself, my portfolio and my situation

Post by gips » Tue Nov 14, 2017 12:23 pm

- on ss, I think you'll have to make your best guess around life expectancy and plan from there
- what is your mortgage and car loan rates? If high, you may want to consider paying them off
- your exposure to equities is higher than I'd choose for myself or most people recommend at your age. think about what happens to your portfolio if the stock market were to lose 25-50% of its value. If you're comfortable with that, rock on.
- have you calculated your cap gains tax? as Dan indicates, it might not be too painful
- as far as portfolio construction, I use a three fund portfolio which is described in the wiki. again, as dan suggests, there are a lot of portfolios described in the wiki. Most people suggest fi in your tax-advantaged space.
- I don't think this is a great time to purchase bond funds, you might look at CDs as an alternative but it's hard to go too far wrong purchasing the vangaurd total bond fund index in you retirement space.

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Duckie
Posts: 5088
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Re: Introduction to myself, my portfolio and my situation

Post by Duckie » Tue Nov 14, 2017 6:57 pm

Midnight Rider wrote:I need suggestions on how to structure the portfolio and what I should place in my IRA and Roth. That would be my first step in this process since I could liquidate the entire IRA and ROTH portions with no tax implications at all.
Leaving aside the $88K in cash that appears to be part of your emergency fund you have:
  • Taxable #1 -- $163K
    Taxable #2 -- $324K
  • 401k #1 & #2 -- $25K
  • Traditional IRA -- $385K
    Roth IRA -- $46K
I would liquidate your TIRA and Roth IRA accounts and transfer them to Vanguard. (Fidelity is also good or you could choose to move them to TDAmeritrade. Pick just one place and get all the accounts moved there.) Once the IRAs are open and funded I would roll the two 401k plans over to the TIRA.

In taxable make sure all automatic dividend reinvestment is turned off. You don't want to buy more of something you're planning to sell. You can transfer your taxable assets "in kind" without a tax issue as long as the new brokerage can take the asset. Whichever brokerage you end up in you will need to check and make sure they can take everything from the old brokerage. At Vanguard, for example, they have a page where you can look up each asset to see if they'll take it. If the new brokerage can take it just transfer it "in kind". If the new brokerage can't take it you'll need to sell it at the old brokerage and move cash.

Before moving anything from a taxable account you need to make sure you have all the cost basis information for each asset. You will need this when you get around to selling and once you've left a company they may not be inclined to assist you, so get it first.

You will eventually have:
  • Taxable -- $487K -- 52%
    Traditional IRA -- $410 -- 43%
    Roth IRA -- $46K -- 5%
You're currently 80% equities. For the following example I'm using 60% stocks, 40% bonds, with 30% of stocks in international. That breaks down to 42% US stocks, 18% international stocks, and 40% bonds. Using Vanguard for the example brokerage, to start you could have:

Taxable at Vanguard -- $487K -- 52%
52% Various US stocks and ETFs

Traditional IRA at Vanguard -- $410K -- 43%
3% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.11%)
40% (VBTLX) Vanguard Total Bond Market Index Fund Admiral Shares (0.05%)

Roth IRA at Vanguard -- $46K -- 5%
5% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.11%)

And after a few years of selling taxable assets eventually you could have:

Taxable at Vanguard -- $487K -- 52%
42% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.04%)
10% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.11%)

Traditional IRA at Vanguard -- $410K -- 43%
3% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.11%)
40% (VBTLX) Vanguard Total Bond Market Index Fund Admiral Shares (0.05%)

Roth IRA at Vanguard -- $46K -- 5%
5% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.11%)

Just some possibilities.

Midnight Rider
Posts: 4
Joined: Wed Jan 04, 2017 6:38 am

Re: Introduction to myself, my portfolio and my situation

Post by Midnight Rider » Wed Nov 15, 2017 8:56 am

To all that have responded: Thanks! I have not digested all of this yet but I am grateful for input and suggestions.

To all others: Keep them coming...

JOhn

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Sandtrap
Posts: 2421
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii😀 Northern AZ.😳

Re: Introduction to myself, my portfolio and my situation

Post by Sandtrap » Wed Nov 15, 2017 9:20 am

At a comprehensive level, what I have done at a similar age going into retirement:
0 Took complete control over my finances via trusts, etc.
1 Simplify and consolidate to low cost index funds being careful about fund overlap.
2 Pay down or reduce debt drastically. (entered retirement with zero debt and minimal monthly expenses).
3 Created multiple income streams where possible.
4 My allocation at 65 is roughly 35/65 with 5x+ expenses in EF and reserves.
j

Some helpful links:
Bogle Philosophy
https://www.bogleheads.org/wiki/Bogleh ... hilosophy
Here are links to the wiki's "Getting Started" and "Investing Startup Kit" pages:
https://www.bogleheads.org/wiki/Getting_started
https://www.bogleheads.org/wiki/Bogleh ... rt-up_kit
Define General Investment Goals and Objectives
https://www.bogleheads.org/wiki/Invest ... statement
Outline of Investing
https://www.bogleheads.org/wiki/Outline_of_investing
Suggested Reading List
https://www.bogleheads.org/RecommendedReading.php
What the experts say about investing
https://www.bogleheads.org/wiki/What_ ... investing
Asking Portfolio Questions
https://www.bogleheads.org/forum/viewt ... =1&t=6212

Midnight Rider
Posts: 4
Joined: Wed Jan 04, 2017 6:38 am

Re: Introduction to myself, my portfolio and my situation

Post by Midnight Rider » Wed Nov 15, 2017 6:03 pm

Again, thanks to all. One thing that I did not mention was the fact that all of my holdings except TRowe and the two 401-K's are held in TD Ameritrade accounts. The three that are managed for me are in TD Institutional and I have another account that I control with TD. It sounds to me (from Duckie, I believe) that TD is a good place to hold the money and the option will be there to form a diversified Index fund portfolio. Or would it be better to move everything to Vanguard? Just curious what other's experience has been.

John

bhough
Posts: 42
Joined: Wed Feb 15, 2017 6:53 pm

Re: Introduction to myself, my portfolio and my situation

Post by bhough » Thu Nov 16, 2017 5:28 pm

Dear John,

I think you are paying too much in expenses, both for the funds and for your financial advisor. If you are concerned that moving from actively managed funds to index funds is going to trigger a large capital gains tax liability, I would advise you to spend some time and look at the actual numbers--what you bought and when and how much it has gone up. If you have some funds that have gone down, you can sell them during the same year that you sold your winners and can offset your tax bill. (tax loss harvesting, or what they abbreviate on this board as TLH).

From my vantage point, it seems like you are living sensibly and don't have alot of extravagant expenses. It might be useful if you figured out your yearly expenses and see what percent you'd need from your investments to supplement your social security. For instance, if you are living on $3,000/month and SS is going to get you $1500 after tax and medicare, you'll need $1500 from your investments and/or a part time job.

I think low cost bonds would be a great addition/change to your portfolio. There are several ways to get there. One is with a bond fund. Another is with I bonds or TIPS, both government products that are pretty safe and stable. If I were in your shoes, I would have the majority of my savings in bonds, perhaps 70% bonds, 30% stocks. I would also advice a stock index funds, rather than a NASDAQ tech type fund. I think you know this already. You can pick a total US index fund, or a total world fund, but buy the one that is indexed and cheap. Fidelity's funds have the name spartan in them.

It is probably a mistake to own individual stocks.

With regards to your IRA and Roth question, that really gets to when you will need the money and when you want to pay taxes on it. Since you have alot of money in your taxable fund, you have the ability to do a Roth conversion as your income is low/non-existent. Good for you for your saving and planning. Now this will pay off for you.

The quesiton about when you should take your SS really has to do with your life expectancy and current expenses.

Take that $7000/year back from your financial advisors. They aren't doing a very good job for you. Make your portfolio boring with 70% bond fund/30% stock fund at either Vanguard or Fidelity and live off of your taxable account while you do a ROTH conversion. Consider paying off your car and condo too as it will reduce your anxiety about money (maybe not yours, but most peoples). Don't forget to buy health insurance and enough car insurance to protect your assets. Make a will, get a yearly physical and eat an apple a day!
b

Midnight Rider
Posts: 4
Joined: Wed Jan 04, 2017 6:38 am

Re: Introduction to myself, my portfolio and my situation

Post by Midnight Rider » Fri Nov 17, 2017 9:41 am

All,

Again, thanks for all your help. I am going to delve into the Wiki's more. So much to learn but stimulating doing it.

John

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