In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

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lhwerdyt*1791c
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In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by lhwerdyt*1791c » Mon Nov 27, 2017 1:39 am

Hello,

I'm new to the forum.

I’m writing on behalf of my childhood friend who became suddenly disabled a few years ago. She is effectively in retirement and age 63, single with no dependents or heirs to plan for. She lives independently and has no significant medical expenses at this point. Her life expectancy is unknown due to the type of injury.

She receives a monthly income in SSDI (Social Security Disability Insurance) benefits plus a little from a rental investment that she may sell soon. The income covers her living expenses. Both her residence and rental are paid-off

Here is her dilemma.

She is considering rolling over her 401K and SEP-IRA to lower cost index funds at Schwab and/or Fidelity. Their in-person customer services will better accommodate her disability; she has no computer and do access her information on her phone.

Per the Vanguard risk questionnaire, her risk tolerance is 60/40, bonds/stocks. Let’s assume that same 60/40 split even though I don’t think some of the questions applied to her retirement status.

Assets by type: Assume her total assets are about $740K total and include the following, but do not include her resident home (est. $80K value) or rental property (est. $130K value):

1. 401-K (48% of total): 55% bonds with most in company Stable Fund; 40% in S&P Index Fund; 5% International.

2. SEP-IRA (14% of total): S-Funds including S&P 500 Index Fund (38%); GNMA Fund (30%); Mid Cap Value Fund (27%); World Dividend Fund (5%)

3. tIRA and Roth IRAs (3% of total)

4. Limited pension (10% of total) at age 65 as a lump sum or monthly until it runs out,

5. Cash in MM and Savings accounts (25%) of total. She knows she has too much in cash and plans to start a CD ladder soon for some of it, and add the rest to the 60/40 mix when she opens at Schwab or Fidelity.


Here are some of her questions:

- Question 1a: In deciding Schwab vs. Fidelity, for example, we read that it’s advisable to go with a company that also offers tax harvesting. Do you agree? We don’t think Fidelity offers it, but Schwab does.

- Question 1b: The tax-harvesting advice seems to recommend withdrawal of tIRA first, including 401K and SEP-IRA, and next withdraw Roth IRA and/or to convert tIRA to Roth. Is this the idea?

- Question 2: What do you think of the following strategy she’s considering in the next month or so?
o Strategy: Cash-in soon on the bull gains while they are still there, given she is in-retirement.
o Move (sell) 100% of 401k and SEP-IRA funds and transfer all of it to money market (MM) fund or the next most conservative fund offered by the current 401k and SEP-IRA.
o Next, roll over 100% of tax-deferred accounts to Schwab and/or Fidelity to an IRA or the next most conservative fund. And, say, bi-monthly for period of 12 to 24 months, move it to total bond/stock (60/40?) index funds via dollar cost averaging.
o FYI: She is aware that she could be out of the market for up to two years with so much sitting in the MM. She knows anything can happen with the market, but feels a correction may be coming (soon). She is concerned that when/if a correction comes, it will reduce her current bull gains and she may have to wait years in-retirement before a bull returns. And she doesn’t know when she may need to start taking withdrawals but knows she needs some growth via stocks.

- Question 3: Which funds do you recommend? She plans to hold.

- Question 4: There is one withdrawal scenario that she will consider: Delay SS benefits from age 67 to 70.
o Explanation: At full-retirement age 67, SSDI benefits convert to regular Social Security Retirement benefits (non-disability).
o This means that she can delay such benefits for each year up to age 70, and each delay year she will increase her benefits by 8%.
o If she opts to delay, she knows she will need to withdraw approximately $30K per every year she delays from age 67 up to 70 or potentially 4 years of withdrawal @ $30K per year = $120,000.
o But, if the Social Security Administration (SSA) reduces the 8% increase, she will look at the delay option at that time.

- Questions 5: Her local bank offers a free financial planning service with a CFP, no obligations. I think she should take advantage of this to get another point of view on managing investments in-retirement. What do you think?


On behalf of my dearest friend, thank you in advance for any comments you may have.

Helper

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Earl Lemongrab
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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by Earl Lemongrab » Mon Nov 27, 2017 1:29 pm

What is the rate on the stable-value fund in the existing 401(k)? If it's a good rate, I would leave a substantial amount there.

DCA never makes any sense to me. What will you do if after a year of DCA the market is where it is now or more? Sell it all and start over? The desire for this to me signals an incorrect asset allocation.

As far as TLH, what is her income tax rate? Will she even paying any income tax in retirement? I can't see paying to have TLH done. Will she have investments in taxable? It sounds like that will all be CDs.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

cas
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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by cas » Mon Nov 27, 2017 4:48 pm

lhwerdyt*1791c wrote:
Mon Nov 27, 2017 1:39 am
- Questions 5: Her local bank offers a free financial planning service with a CFP, no obligations. I think she should take advantage of this to get another point of view on managing investments in-retirement. What do you think?
In my experience, "free" advisors at banks are most assuredly NOT free. They just manage to extract their fees through back doors, so that the client never writes a check and doesn't realize how much they are paying in fees (commissions, kickbacks from the mutual fund companies, etc.)

My mother in law didn't want to bother anyone, so went to the "free" CFP at her bank and was sold a rather vile, very expensive variable annuity, along with some high fee mutual funds. The whole deal was much better for the saleman's finances than for my MIL's finances.

Chadnudj
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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by Chadnudj » Mon Nov 27, 2017 4:55 pm

I may be completely wrong here (so someone correct me if I am), but I do not believe tax loss harvesting should play any role in regards to handling 401k/SEP IRA/tIRA/Roth IRA funds -- simply put, they grow tax free, and thus transactions within them (i.e. changing allocations between stocks/bonds) do not incur any tax losses (or capital gains, for that matter). If she wants to change her asset allocations within her 401k/IRAs or roll them over to another provider (which she should do as a direct rollover to avoid penalties/tax liabilities), she can do so, but tax loss-harvesting/tax gain harvesting should play no role in that decision whatsoever.

retiredjg
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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by retiredjg » Mon Nov 27, 2017 5:35 pm

You have lots of questions here. I'll only address one right now.
lhwerdyt*1791c wrote:
Mon Nov 27, 2017 1:39 am
- Question 2: What do you think of the following strategy she’s considering in the next month or so?....And, say, bi-monthly for period of 12 to 24 months, move it to total bond/stock (60/40?) index funds via dollar cost averaging.
No. Not only no, but HECK NO! :happy

If she has decided that 40% stocks and 60% bonds is the right number for her, she should move the money into that allocation immediately. This is not a situation where dollar cost averaging is an appropriate strategy.

Dollar cost averaging is a strategy for getting money into the market. Her money is already in the market. What she is doing is either a lateral move or a move to a lower stock allocation (I didn't do the math). Dollar cost averaging is the wrong approach for either of those situations.

She just needs to transfer it to what she feels is an appropriate AA for her future, both the good times and the bad times. If that is not 40% stock and 60% bonds, she needs to figure out what that number is and immediately move the money there.

lhwerdyt*1791c
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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by lhwerdyt*1791c » Mon Nov 27, 2017 6:06 pm

Earl Lemongrab wrote:
Mon Nov 27, 2017 1:29 pm
What is the rate on the stable-value fund in the existing 401(k)? If it's a good rate, I would leave a substantial amount there.

Hello Earl! Being new here I'm still learning how to navigate the format, etc.

Thank you for your response!

I have more information as follows...

Here is more info re: her 401k:

Company Stable Value Fund (49% of holdings) -- NER .40%
Fixed Income - Domestic: Core Bond Enhanced index/PGIM Fund (4.9%) NER .18% - (The fund's name is changing to Core Plus Bond/PGIM Fund)
Large Cap Stock - Blend: Dryden S&P 500 Index Fund (40.81%). NER .62%
International Stock - Blend: Dodge & Cox International Stock (4.90%) NER .64%

FYI: Company announced new funds as of Dec 2017, all "Tier Three" and "non-lending" but we don't know what the significance of this is yet.
Norther Trust (NT) Aggregate Fond Index Fund
NT Collective Extended Equity Market Index Fund - DC
NT Collective ACWI ex-US Investable Market Index Fund - DC

DCA never makes any sense to me. What will you do if after a year of DCA the market is where it is now or more? Sell it all and start over? The desire for this to me signals an incorrect asset allocation.

We understand your point; virtually impossible to beat the market.

As far as TLH, what is her income tax rate? Will she even paying any income tax in retirement? I can't see paying to have TLH done. Will she have investments in taxable? It sounds like that will all be CDs.

Her income is about $30K (range $9,376 - $39,950); in the 15% rate. About $25K is from SSDI, and $5K is from her rental property income. Aside, I don't know how SSDI is taxed. But yes, the interest she earns annually from existing CDs is taxable; about $1,000 in earrings.

lhwerdyt*1791c
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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by lhwerdyt*1791c » Mon Nov 27, 2017 6:09 pm

cas wrote:
Mon Nov 27, 2017 4:48 pm
lhwerdyt*1791c wrote:
Mon Nov 27, 2017 1:39 am
- Questions 5: Her local bank offers a free financial planning service with a CFP, no obligations. I think she should take advantage of this to get another point of view on managing investments in-retirement. What do you think?
In my experience, "free" advisors at banks are most assuredly NOT free. They just manage to extract their fees through back doors, so that the client never writes a check and doesn't realize how much they are paying in fees (commissions, kickbacks from the mutual fund companies, etc.)

My mother in law didn't want to bother anyone, so went to the "free" CFP at her bank and was sold a rather vile, very expensive variable annuity, along with some high fee mutual funds. The whole deal was much better for the saleman's finances than for my MIL's finances.
Thank you for sharing this! I'm not at all surprised to hear it. The bank is Chase; a very accessible but expensive bank for some things.

lhwerdyt*1791c
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Joined: Sat Nov 25, 2017 12:04 am

Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by lhwerdyt*1791c » Mon Nov 27, 2017 6:13 pm

Earl Lemongrab wrote:
Mon Nov 27, 2017 1:29 pm
What is the rate on the stable-value fund in the existing 401(k)? If it's a good rate, I would leave a substantial amount there.

DCA never makes any sense to me. What will you do if after a year of DCA the market is where it is now or more? Sell it all and start over? The desire for this to me signals an incorrect asset allocation.

As far as TLH, what is her income tax rate? Will she even paying any income tax in retirement? I can't see paying to have TLH done. Will she have investments in taxable? It sounds like that will all be CDs.
Earl Lemongrab - Sorry I sent you a response in the wrong format. Here is my previous response in a better format:

***

Hello Earl! Being new here I'm still learning how to navigate the format, etc.

Thank you for your response!

I have more information as follows...

Here is more info re: her 401k:

Company Stable Value Fund (49% of holdings) -- NER .40%
Fixed Income - Domestic: Core Bond Enhanced index/PGIM Fund (4.9%) NER .18% - (The fund's name is changing to Core Plus Bond/PGIM Fund)
Large Cap Stock - Blend: Dryden S&P 500 Index Fund (40.81%). NER .62%
International Stock - Blend: Dodge & Cox International Stock (4.90%) NER .64%

FYI: Company announced new funds as of Dec 2017, all "Tier Three" and "non-lending" but we don't know what the significance of this is yet.
Norther Trust (NT) Aggregate Fond Index Fund
NT Collective Extended Equity Market Index Fund - DC
NT Collective ACWI ex-US Investable Market Index Fund - DC

You wrote: "DCA never makes any sense to me. What will you do if after a year of DCA the market is where it is now or more? Sell it all and start over? The desire for this to me signals an incorrect asset allocation."

Our response: We understand your point; virtually impossible to beat the market.

You also wrote: "As far as TLH, what is her income tax rate? Will she even paying any income tax in retirement? I can't see paying to have TLH done. Will she have investments in taxable? It sounds like that will all be CDs"

Our response: Her income is about $30K (range $9,376 - $39,950); in the 15% rate. About $25K is from SSDI, and $5K is from her rental property income. Aside, I don't know how SSDI is taxed. But yes, the interest she earns annually from existing CDs is taxable; about $1,000 in earrings.

lhwerdyt*1791c
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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by lhwerdyt*1791c » Mon Nov 27, 2017 6:16 pm

Chadnudj wrote:
Mon Nov 27, 2017 4:55 pm
I may be completely wrong here (so someone correct me if I am), but I do not believe tax loss harvesting should play any role in regards to handling 401k/SEP IRA/tIRA/Roth IRA funds -- simply put, they grow tax free, and thus transactions within them (i.e. changing allocations between stocks/bonds) do not incur any tax losses (or capital gains, for that matter). If she wants to change her asset allocations within her 401k/IRAs or roll them over to another provider (which she should do as a direct rollover to avoid penalties/tax liabilities), she can do so, but tax loss-harvesting/tax gain harvesting should play no role in that decision whatsoever.
Thank you, Chadnudj. We understand; at this point she has no taxable funds to speak of.

Jack FFR1846
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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by Jack FFR1846 » Mon Nov 27, 2017 6:20 pm

retiredjg wrote:
Mon Nov 27, 2017 5:35 pm
No. Not only no, but HECK NO! :happy

If she has decided that 40% stocks and 60% bonds is the right number for her, she should move the money into that allocation immediately. This is not a situation where dollar cost averaging is an appropriate strategy.
100% agree. Schwab and Fidelity are equally good for what she's doing. Is there a store of one or the other (or both) nearby? If not, phone is fine. I have accounts at both and the phone support is phenomenal 24/7.

Contact either of the above and ask them first for what bonus she can get for the transfer. I believe only Schwab presently has one. You want her to get what she can. Next, she finds what's needed and gets that (account statements from each). Then, they get transferred the best way (Ask Schwab....they will know and tell her). Then tell Schwab what funds or ETFs she wants and in what %. She sets up a similar tax advantaged account to what she has.

As has been mentioned, there's no fooling around with tax harvesting or money markets or DCA. The money is transferred, settles, buys what's matching the desired AA and she's done. It's simple, don't make it difficult with zigging and zagging for no reason.
Bogle: Smart Beta is stupid

lhwerdyt*1791c
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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by lhwerdyt*1791c » Mon Nov 27, 2017 6:37 pm

Jack FFR1846 wrote:
Mon Nov 27, 2017 6:20 pm
retiredjg wrote:
Mon Nov 27, 2017 5:35 pm
No. Not only no, but HECK NO! :happy

If she has decided that 40% stocks and 60% bonds is the right number for her, she should move the money into that allocation immediately. This is not a situation where dollar cost averaging is an appropriate strategy.
100% agree. Schwab and Fidelity are equally good for what she's doing. Is there a store of one or the other (or both) nearby? If not, phone is fine. I have accounts at both and the phone support is phenomenal 24/7.

Contact either of the above and ask them first for what bonus she can get for the transfer. I believe only Schwab presently has one. You want her to get what she can. Next, she finds what's needed and gets that (account statements from each). Then, they get transferred the best way (Ask Schwab....they will know and tell her). Then tell Schwab what funds or ETFs she wants and in what %. She sets up a similar tax advantaged account to what she has.

As has been mentioned, there's no fooling around with tax harvesting or money markets or DCA. The money is transferred, settles, buys what's matching the desired AA and she's done. It's simple, don't make it difficult with zigging and zagging for no reason.
Jack FFR1846 wrote:
Mon Nov 27, 2017 6:20 pm
retiredjg wrote:
Mon Nov 27, 2017 5:35 pm
No. Not only no, but HECK NO! :happy

If she has decided that 40% stocks and 60% bonds is the right number for her, she should move the money into that allocation immediately. This is not a situation where dollar cost averaging is an appropriate strategy.
100% agree. Schwab and Fidelity are equally good for what she's doing. Is there a store of one or the other (or both) nearby? If not, phone is fine. I have accounts at both and the phone support is phenomenal 24/7.

Contact either of the above and ask them first for what bonus she can get for the transfer. I believe only Schwab presently has one. You want her to get what she can. Next, she finds what's needed and gets that (account statements from each). Then, they get transferred the best way (Ask Schwab....they will know and tell her). Then tell Schwab what funds or ETFs she wants and in what %. She sets up a similar tax advantaged account to what she has.

As has been mentioned, there's no fooling around with tax harvesting or money markets or DCA. The money is transferred, settles, buys what's matching the desired AA and she's done. It's simple, don't make it difficult with zigging and zagging for no reason.
Very helpful, Jack. We forgot about asking about the bonus. I recall Schwab offering $100 for new account and Fidelity $600 but I'll have to verify. Phenomenal 24/7 phone support is a ringing endorsement. Schwab is a little closer than Fidelity to her but not if it comes down to a significant difference in bonus. My research for her supports your comments; both offer phone and in-person personal support.
retiredjg wrote:
Mon Nov 27, 2017 5:35 pm
You have lots of questions here. I'll only address one right now.
lhwerdyt*1791c wrote:
Mon Nov 27, 2017 1:39 am
- Question 2: What do you think of the following strategy she’s considering in the next month or so?....And, say, bi-monthly for period of 12 to 24 months, move it to total bond/stock (60/40?) index funds via dollar cost averaging.
No. Not only no, but HECK NO! :happy

If she has decided that 40% stocks and 60% bonds is the right number for her, she should move the money into that allocation immediately. This is not a situation where dollar cost averaging is an appropriate strategy.

Dollar cost averaging is a strategy for getting money into the market. Her money is already in the market. What she is doing is either a lateral move or a move to a lower stock allocation (I didn't do the math). Dollar cost averaging is the wrong approach for either of those situations.

She just needs to transfer it to what she feels is an appropriate AA for her future, both the good times and the bad times. If that is not 40% stock and 60% bonds, she needs to figure out what that number is and immediately move the money there.
Dear Retiredjg - We get it what you're saying. Her 401k is at Prudential, and SEP IRA is at Deutsche. How does she decide whether to move any of it (except for Stable Fund) vs. keeping it with these two investment companies? I'm assuming the answer comes down a comparison of NER of index funds? But doesn't she have to also consider performance?

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Earl Lemongrab
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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by Earl Lemongrab » Mon Nov 27, 2017 6:38 pm

Fidelity has a bonus, but only for one million+. I'm not sure if Schwab has anything beyond their $100 new client offer:

http://www.schwab.com/public/schwab/nn/ ... spect.html

Worth asking.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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Earl Lemongrab
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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by Earl Lemongrab » Mon Nov 27, 2017 6:39 pm

What is the rate on the stable-value?
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

lhwerdyt*1791c
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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by lhwerdyt*1791c » Mon Nov 27, 2017 6:51 pm

Earl Lemongrab wrote:
Mon Nov 27, 2017 6:39 pm
What is the rate on the stable-value?
3% with .40% net expense ratio if you need that, too. Thx.

lhwerdyt*1791c
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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by lhwerdyt*1791c » Mon Nov 27, 2017 6:52 pm

Earl Lemongrab wrote:
Mon Nov 27, 2017 6:38 pm
Fidelity has a bonus, but only for one million+. I'm not sure if Schwab has anything beyond their $100 new client offer:

http://www.schwab.com/public/schwab/nn/ ... spect.html

Worth asking.
We will check it out. Thanks again -

cas
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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by cas » Mon Nov 27, 2017 7:24 pm

lhwerdyt*1791c wrote:
Mon Nov 27, 2017 6:09 pm
cas wrote:
Mon Nov 27, 2017 4:48 pm
lhwerdyt*1791c wrote:
Mon Nov 27, 2017 1:39 am
- Questions 5: Her local bank offers a free financial planning service with a CFP, no obligations. I think she should take advantage of this to get another point of view on managing investments in-retirement. What do you think?
In my experience, "free" advisors at banks are most assuredly NOT free. They just manage to extract their fees through back doors, so that the client never writes a check and doesn't realize how much they are paying in fees (commissions, kickbacks from the mutual fund companies, etc.)

My mother in law didn't want to bother anyone, so went to the "free" CFP at her bank and was sold a rather vile, very expensive variable annuity, along with some high fee mutual funds. The whole deal was much better for the saleman's finances than for my MIL's finances.
Thank you for sharing this! I'm not at all surprised to hear it. The bank is Chase; a very accessible but expensive bank for some things.
JP Morgan Chase was fined $300 million dollars by the SEC in 2015 for breach of fiduciary duty to a subset of its wealth management clients. (The fine was just for clients where fiduciary duty was actually legally required. At that point in time, fiduciary duty wouldn't have been required for the vast majority of clients of the "free" CFP's in the branches, so I hate to think what was going on there.)

(Are you aware of what fiduciary duty is? Fiduciary duty is situations where the advisor is legally required to act in the "best interest" of the client. Many people are surprised to find out that in many situations, financial planners are not obligated to act in their "best interest" but only have to meet a lower bar of choosing investments that are "suitable" for the client ... leaving them plenty of room to choose investments that are even more "suitable" for the investment advisor.)
JPMorgan Chase is in trouble—to the tune of over $300 million for not adequately disclosing significant conflicts of interest to clients.

The company failed to call attention to the fact that two of its large wealth-management divisions favor investing in their own products, which are more expensive, Bloomberg reports. It also dabbled in third party hedge-funds that made payments back to JPMorgan. The degree of favoritism was high: The SEC said 47% of mutual fund assets and 35% of hedge fund assets were invested in its own products at one point in 2011.
Source: http://time.com/money/4155426/jpmorgan- ... ettlement/ (or for the official SEC news release: https://www.sec.gov/news/pressrelease/2015-283.html )

So ... you know ... let the buyer beware.

lhwerdyt*1791c
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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by lhwerdyt*1791c » Mon Nov 27, 2017 8:20 pm

My friend has a checking and savings account and credit card at Chase but nothing else. Thank you for good explanation of fiduciary duty for my friend, and for the source links. I have followed Glass-Stegal to Dodd-Frank to the current situation and have concerns about it.

retiredjg
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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by retiredjg » Tue Nov 28, 2017 8:24 am

lhwerdyt*1791c wrote:
Mon Nov 27, 2017 6:37 pm
Dear Retiredjg - We get it what you're saying. Her 401k is at Prudential, and SEP IRA is at Deutsche. How does she decide whether to move any of it (except for Stable Fund) vs. keeping it with these two investment companies? I'm assuming the answer comes down a comparison of NER of index funds? But doesn't she have to also consider performance?
The decision to move should be based on overall costs - expense ratios and whatever extra fees she may (or may not) be paying for account management.

All of the custodians mentioned (Vanguard, Fidelity, and Schwab) have very low cost funds. It is unlikely, but possible, that Prudential and Deutsche can match them. The way to find out is for you to list what she has - fund name, ticker if one exists within her plan, and expense ratio.

After cost comes convenience and whether she wants someone to actually manage her allocations. That would be something she would have to pay for and I'm not sure she has extra money for that.

I would put a potential transfer bonus very low on the list of things to consider. In fact, it is not worthy of consideration unless all other things are equal....which they rarely are.

As for the stable value fund, if it is paying 3% and it might be worth considering the idea of keeping the 401k. However, if she is paying an annual fee for the 401k, it might not be worth keeping.

I have not read your original post since yesterday and will take another look at it later today.

If you want a better answer for your questions, you need to post her information in the format we use for these types of decisions. See the link at the bottom of this message for how to do that. It's some work but very worthwhile.

retiredjg
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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by retiredjg » Tue Nov 28, 2017 8:52 am

She is considering rolling over her 401K and SEP-IRA to lower cost index funds at Schwab and/or Fidelity. Their in-person customer services will better accommodate her disability; she has no computer and do access her information on her phone.
Please expand on this. She has no computer or she does not use a computer? Does she drive?

Per the Vanguard risk questionnaire, her risk tolerance is 60/40, bonds/stocks. Let’s assume that same 60/40 split even though I don’t think some of the questions applied to her retirement status.
40% stock and 60% bonds is one of several allocations that are appropriate for her age and retired status. Unless she is uncomfortable with that number, it might be a good place to start. However, let's look at what she has now.

Taxable 25%
25% Cash in MM and Savings accounts

401k - 48%
19.2% S&P Index Fund
2.4% International
26.4% Stable Fund

SEP-IRA (14% of total)
5.3% stock funds S-Funds including S&P 500 Index
3.8% Mid Cap Value Fund
0.7% World Dividend Fund
4.2% GNMA Fund (bonds)

tIRA and Roth IRAs (3% of total)
unknown

Limited pension (10% of total)
4% stocks* (assumes she would invest this lump sum at 40/60)
6% bonds* (assumes she would invest this lump sum at 40/60)

What she has now breaks down to about 35% stocks and 62% bonds and 3% unknown (IRAs). This is not far from what she is considering based on the risk analysis. She can use how she feels about her current investments to help determine if 40% stocks and 60% bonds is "right" for her. It may be or it may not be.

I'll come back to the questions in another post.

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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by retiredjg » Tue Nov 28, 2017 9:04 am

lhwerdyt*1791c wrote:
Mon Nov 27, 2017 1:39 am
- Question 1a: In deciding Schwab vs. Fidelity, for example, we read that it’s advisable to go with a company that also offers tax harvesting. Do you agree? We don’t think Fidelity offers it, but Schwab does.
Tax loss harvesting is not relevant to her situation unless she puts her taxable account in stock funds. Even then, she can tax loss harvest herself if she wants.

- Question 1b: The tax-harvesting advice seems to recommend withdrawal of tIRA first, including 401K and SEP-IRA, and next withdraw Roth IRA and/or to convert tIRA to Roth. Is this the idea?
This question does not make sense to me. I wonder if you are confusing tax loss harvesting with Roth conversions. Limited Roth conversions (up to the top of the 15% bracket) might make sense in her situation. This does not determine who she uses for a custodian and can be looked at later.

- Question 2: What do you think of the following strategy she’s considering in the next month or so?.....
As already discussed, I believe dollar cost averaging would be TOTALLY inappropriate since she is currently in the market.

- Question 3: Which funds do you recommend? She plans to hold.
I'm thinking about a target fund at either Schwab or Fidelity for all her accounts. They both have very low cost funds but we might have to help you find them.

- Question 4: There is one withdrawal scenario that she will consider: Delay SS benefits from age 67 to 70.
o Explanation: At full-retirement age 67, SSDI benefits convert to regular Social Security Retirement benefits (non-disability).
o This means that she can delay such benefits for each year up to age 70, and each delay year she will increase her benefits by 8%.
o If she opts to delay, she knows she will need to withdraw approximately $30K per every year she delays from age 67 up to 70 or potentially 4 years of withdrawal @ $30K per year = $120,000.
o But, if the Social Security Administration (SSA) reduces the 8% increase, she will look at the delay option at that time.
Not enough information and this is a much larger question which needs to be discussed separately. However, since it is unknown (but possible) that her injury/disability might shorten her lifetime, I would not delay SS. Especially since she is single.

- Questions 5: Her local bank offers a free financial planning service with a CFP, no obligations. I think she should take advantage of this to get another point of view on managing investments in-retirement. What do you think?
I think it is a very bad idea. I don't recall ever hearing of a bank that gives advice that is not beneficial to the salesperson. It might happen, but that is not usually their business model.

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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by Earl Lemongrab » Tue Nov 28, 2017 10:59 am

lhwerdyt*1791c wrote:
Mon Nov 27, 2017 6:51 pm
Earl Lemongrab wrote:
Mon Nov 27, 2017 6:39 pm
What is the rate on the stable-value?
3% with .40% net expense ratio if you need that, too. Thx.
That's a good rate. Normally those are listed after expenses, so if that checks out it would a good fund to use.
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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by pkcrafter » Tue Nov 28, 2017 11:04 am

lhwerdyt*1791c,

Are you calculating the 740k in assets using a lump sum from the pension in 2 years? I ask because if she needs 30k/year, the withdrawal rate meets the safe withdrawal rate of 4% -- if the 740k is intact, and she will only need that until SS starts.

What is friend's current AA (asset allocation) now, not counting no. 4, pension, but counting the cash, no.5?

I would not suggest a 60/40 AA, it isn't necessary, in fact a bit risky and does not fit friend's comfort zone. Perhaps 40/60? If there is a market crash in the next year or two it might lower total available assets by 15-20% with 40/60 AA and I think she can handle that if she opts for SS at 67 and she even may be able to delay SS longer as well.

No to getting involved with a bank

Friend should contact the new custodian and have them set up a custodian to custodian Transfer, which is technically, and importantly, different than a rollover.

Reference

http://cnnfn.cnn.com/2000/05/24/pension ... ire_slott/

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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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by ThrustVectoring » Tue Nov 28, 2017 12:28 pm

pkcrafter wrote:
Tue Nov 28, 2017 11:04 am

I would not suggest a 60/40 AA, it isn't necessary, in fact a bit risky and does not fit friend's comfort zone. Perhaps 40/60? If there is a market crash in the next year or two it might lower total available assets by 15-20% with 40/60 AA and I think she can handle that if she opts for SS at 67 and she even may be able to delay SS longer as well.
The OP described a 40% equity portfolio as 60/40, confusing the regulars by swapping the order. But yeah, agreed, 40% equity is fine for this situation.

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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by pkcrafter » Tue Nov 28, 2017 2:46 pm

ThrustVectoring wrote:
Tue Nov 28, 2017 12:28 pm
pkcrafter wrote:
Tue Nov 28, 2017 11:04 am

I would not suggest a 60/40 AA, it isn't necessary, in fact a bit risky and does not fit friend's comfort zone. Perhaps 40/60? If there is a market crash in the next year or two it might lower total available assets by 15-20% with 40/60 AA and I think she can handle that if she opts for SS at 67 and she even may be able to delay SS longer as well.
The OP described a 40% equity portfolio as 60/40, confusing the regulars by swapping the order. But yeah, agreed, 40% equity is fine for this situation.
Yes, but Vanguard has apparently suggested 60/40, I think, or is that backwards too?? That's what I think is too high. I also think current portfolio is about 37-40% equity without adding in the pension, which she does not yet have. I'm also not sure if the cash is included in the AA, so double-checking.

Paul
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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by retiredjg » Tue Nov 28, 2017 6:24 pm

Per the Vanguard risk questionnaire, her risk tolerance is 60/40, bonds/stocks.
Yes, it is backwards from our usual way of expressing it.

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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by lhwerdyt*1791c » Tue Nov 28, 2017 7:27 pm

retiredjg wrote:
Tue Nov 28, 2017 8:24 am
lhwerdyt*1791c wrote:
Mon Nov 27, 2017 6:37 pm
Dear Retiredjg - We get it what you're saying. Her 401k is at Prudential, and SEP IRA is at Deutsche. How does she decide whether to move any of it (except for Stable Fund) vs. keeping it with these two investment companies? I'm assuming the answer comes down a comparison of NER of index funds? But doesn't she have to also consider performance?
The decision to move should be based on overall costs - expense ratios and whatever extra fees she may (or may not) be paying for account management.

All of the custodians mentioned (Vanguard, Fidelity, and Schwab) have very low cost funds. It is unlikely, but possible, that Prudential and Deutsche can match them. The way to find out is for you to list what she has - fund name, ticker if one exists within her plan, and expense ratio.

After cost comes convenience and whether she wants someone to actually manage her allocations. That would be something she would have to pay for and I'm not sure she has extra money for that.

I would put a potential transfer bonus very low on the list of things to consider. In fact, it is not worthy of consideration unless all other things are equal....which they rarely are.

As for the stable value fund, if it is paying 3% and it might be worth considering the idea of keeping the 401k. However, if she is paying an annual fee for the 401k, it might not be worth keeping.

I have not read your original post since yesterday and will take another look at it later today.

If you want a better answer for your questions, you need to post her information in the format we use for these types of decisions. See the link at the bottom of this message for how to do that. It's some work but very worthwhile.
Thank you for your further comments, Retiredjg. Overall costs (per above) and convenience. I will try to get the list of her fund names, ticker if any, and ER for the forum. Will find out more about the stable fund, too. I agree re potential transfer bonus.

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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by lhwerdyt*1791c » Tue Nov 28, 2017 7:47 pm

pkcrafter wrote:
Tue Nov 28, 2017 2:46 pm
ThrustVectoring wrote:
Tue Nov 28, 2017 12:28 pm
pkcrafter wrote:
Tue Nov 28, 2017 11:04 am

I would not suggest a 60/40 AA, it isn't necessary, in fact a bit risky and does not fit friend's comfort zone. Perhaps 40/60? If there is a market crash in the next year or two it might lower total available assets by 15-20% with 40/60 AA and I think she can handle that if she opts for SS at 67 and she even may be able to delay SS longer as well.
The OP described a 40% equity portfolio as 60/40, confusing the regulars by swapping the order. But yeah, agreed, 40% equity is fine for this situation.
Yes, but Vanguard has apparently suggested 60/40, I think, or is that backwards too?? That's what I think is too high. I also think current portfolio is about 37-40% equity without adding in the pension, which she does not yet have. I'm also not sure if the cash is included in the AA, so double-checking.

Paul
Good evening. Sorry to have confused, here.

Yes, the Vanguard survey suggested 60% bonds and 40% equity. Is this properly written as 60/40? But I was concerned about the Vanguard robo-recommendation because the questionnaire (if I recall accurately) doesn't ask if the person is in retirement. Therefore, 40% in equity may be too high for her.

The cash is not included in the AA.

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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by lhwerdyt*1791c » Tue Nov 28, 2017 7:48 pm

retiredjg wrote:
Tue Nov 28, 2017 6:24 pm
Per the Vanguard risk questionnaire, her risk tolerance is 60/40, bonds/stocks.
Yes, it is backwards from our usual way of expressing it.
So it should have been written as 40/60?

Are stocks always first in the order of writing it?

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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by gcinnh » Tue Nov 28, 2017 7:51 pm

Re: bonus. I think the big firms run their Best bonus offers end of year, early Q1 when folks are funding IRA’s, etc

Super competitive landscape right now. I would not be surprised to see some big bonus deals this winter😀

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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by retiredjg » Tue Nov 28, 2017 8:19 pm

lhwerdyt*1791c wrote:
Tue Nov 28, 2017 7:48 pm
retiredjg wrote:
Tue Nov 28, 2017 6:24 pm
Per the Vanguard risk questionnaire, her risk tolerance is 60/40, bonds/stocks.
Yes, it is backwards from our usual way of expressing it.
So it should have been written as 40/60?

Are stocks always first in the order of writing it?
I would not say that stocks are always first, but more often first than bonds. That is why it is good you specified which was which.

But to avoid more confusion, it might be helpful to say 40/60 and/or every time specify which is which. :D

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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by lhwerdyt*1791c » Tue Nov 28, 2017 8:24 pm

pkcrafter wrote:
Tue Nov 28, 2017 11:04 am
lhwerdyt*1791c,

Are you calculating the 740k in assets using a lump sum from the pension in 2 years? I ask because if she needs 30k/year, the withdrawal rate meets the safe withdrawal rate of 4% -- if the 740k is intact, and she will only need that until SS starts.

What is friend's current AA (asset allocation) now, not counting no. 4, pension, but counting the cash, no.5?

I would not suggest a 60/40 AA, it isn't necessary, in fact a bit risky and does not fit friend's comfort zone. Perhaps 40/60? If there is a market crash in the next year or two it might lower total available assets by 15-20% with 40/60 AA and I think she can handle that if she opts for SS at 67 and she even may be able to delay SS longer as well.

No to getting involved with a bank

Friend should contact the new custodian and have them set up a custodian to custodian Transfer, which is technically, and importantly, different than a rollover.

Reference

http://cnnfn.cnn.com/2000/05/24/pension ... ire_slott/

Paul
Dear Paul,

Here are my responses to your very helpful comments, etc.

Are you calculating the 740k in assets using a lump sum from the pension in 2 years? I ask because if she needs 30k/year, the withdrawal rate meets the safe withdrawal rate of 4% -- if the 740k is intact, and she will only need that until SS starts.

Yes to above.

What is friend's current AA (asset allocation) now, not counting no. 4, pension, but counting the cash, no.5?

401K - 53% of total in 55% bonds, 45% stocks.
SEP:IRA: 16% of total in 30% bonds, 70% stocks.
rIRAs - 3% of total in CDs
Cash: $175k of total in MM, Savings accounts


I would not suggest a 60/40 AA, it isn't necessary, in fact a bit risky and does not fit friend's comfort zone. Perhaps 40/60? If there is a market crash in the next year or two it might lower total available assets by 15-20% with 40/60 AA and I think she can handle that if she opts for SS at 67 and she even may be able to delay SS longer as well.

Ok

No to getting involved with a bank

Yes, I agree here too.

Friend should contact the new custodian and have them set up a custodian to custodian Transfer, which is technically, and importantly, different than a rollover.

I will look up how they differ, thx! (I'll also look at the link you included, below.)

Reference

http://cnnfn.cnn.com/2000/05/24/pension ... ire_slott/

Thanks for your comments/suggestions,
Werdy

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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by lhwerdyt*1791c » Tue Nov 28, 2017 8:28 pm

retiredjg wrote:
Tue Nov 28, 2017 8:19 pm
lhwerdyt*1791c wrote:
Tue Nov 28, 2017 7:48 pm
retiredjg wrote:
Tue Nov 28, 2017 6:24 pm
Per the Vanguard risk questionnaire, her risk tolerance is 60/40, bonds/stocks.
Yes, it is backwards from our usual way of expressing it.
So it should have been written as 40/60?

Are stocks always first in the order of writing it?
I would not say that stocks are always first, but more often first than bonds. OK That is why it is good you specified which was which.

But to avoid more confusion, it might be helpful to say 40/60 and/or every time specify which is which. :D
:) Specifying every time will also save me from my own confusion, too, so thx!

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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by lhwerdyt*1791c » Tue Nov 28, 2017 8:29 pm

gcinnh wrote:
Tue Nov 28, 2017 7:51 pm
Re: bonus. I think the big firms run their Best bonus offers end of year, early Q1 when folks are funding IRA’s, etc

Super competitive landscape right now. I would not be surprised to see some big bonus deals this winter😀
I'll keep my eyes open!

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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by Earl Lemongrab » Tue Nov 28, 2017 8:34 pm

Merrill Edge currently has their "best" offer running now through 12/15.

https://www.merrilledge.com/offers/1000 ... d=lvexpo17

It might get extended, they have done that in the past, but sometimes they don't.
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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by lhwerdyt*1791c » Tue Nov 28, 2017 8:50 pm

retiredjg wrote:
Tue Nov 28, 2017 9:04 am
lhwerdyt*1791c wrote:
Mon Nov 27, 2017 1:39 am
- Question 1a: In deciding Schwab vs. Fidelity, for example, we read that it’s advisable to go with a company that also offers tax harvesting. Do you agree? We don’t think Fidelity offers it, but Schwab does.
Tax loss harvesting is not relevant to her situation unless she puts her taxable account in stock funds. Even then, she can tax loss harvest herself if she wants.

Thx again for explaining.

- Question 1b: The tax-harvesting advice seems to recommend withdrawal of tIRA first, including 401K and SEP-IRA, and next withdraw Roth IRA and/or to convert tIRA to Roth. Is this the idea?
This question does not make sense to me. I wonder if you are confusing tax loss harvesting with Roth conversions. Limited Roth conversions (up to the top of the 15% bracket) might make sense in her situation. This does not determine who she uses for a custodian and can be looked at later.

Sorry, it is confusing! Based on my reading a week or so ago, written advice seemed to say withdraw your Roth IRA after any tIRAs because Roth principle and earning are not taxed. Yes, I thought that tIRAs to Roth conversions was one type of tax loss harvesting. I understand about limited Roth conversions up to the top of her tax bracket 15%. Seems I misunderstood as the common sense thing to do is to make a tax-deferred withdrawal that involves the least amount taxation and in respect to to one's tax bracket.

- Question 2: What do you think of the following strategy she’s considering in the next month or so?.....
As already discussed, I believe dollar cost averaging would be TOTALLY inappropriate since she is currently in the market.Yes--we tossed the DCA idea thx to you and others!

- Question 3: Which funds do you recommend? She plans to hold.
I'm thinking about a target fund at either Schwab or Fidelity for all her accounts. They both have very low cost funds but we might have to help you find them. That would be great!

- Question 4: There is one withdrawal scenario that she will consider: Delay SS benefits from age 67 to 70.
o Explanation: At full-retirement age 67, SSDI benefits convert to regular Social Security Retirement benefits (non-disability).
o This means that she can delay such benefits for each year up to age 70, and each delay year she will increase her benefits by 8%.
o If she opts to delay, she knows she will need to withdraw approximately $30K per every year she delays from age 67 up to 70 or potentially 4 years of withdrawal @ $30K per year = $120,000.
o But, if the Social Security Administration (SSA) reduces the 8% increase, she will look at the delay option at that time.
Not enough information and this is a much larger question which needs to be discussed separately. However, since it is unknown (but possible) that her injury/disability might shorten her lifetime, I would not delay SS. Especially since she is single. Something I thought of, too. We might know more when she gets to 67 about life expectancy.

- Questions 5: Her local bank offers a free financial planning service with a CFP, no obligations. I think she should take advantage of this to get another point of view on managing investments in-retirement. What do you think?
I think it is a very bad idea. I don't recall ever hearing of a bank that gives advice that is not beneficial to the salesperson. It might happen, but that is not usually their business model. We have tossed this idea, too, thx to you and others on the forum.

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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by lhwerdyt*1791c » Tue Nov 28, 2017 8:55 pm

Earl Lemongrab wrote:
Tue Nov 28, 2017 8:34 pm
Merrill Edge currently has their "best" offer running now through 12/15.

https://www.merrilledge.com/offers/1000 ... d=lvexpo17

It might get extended, they have done that in the past, but sometimes they don't.
Very good offer! But looking for excellent customer service, lower cost index funds, in-person assistance, and possible reasonable account management fees for her.

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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by lhwerdyt*1791c » Tue Nov 28, 2017 8:58 pm

Earl Lemongrab wrote:
Tue Nov 28, 2017 10:59 am
lhwerdyt*1791c wrote:
Mon Nov 27, 2017 6:51 pm
Earl Lemongrab wrote:
Mon Nov 27, 2017 6:39 pm
What is the rate on the stable-value?
3% with .40% net expense ratio if you need that, too. Thx.
That's a good rate. Normally those are listed after expenses, so if that checks out it would a good fund to use.
We will have to ask Prudential 401k if she can keep the Stable fund if she transfers the others.

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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by lhwerdyt*1791c » Tue Nov 28, 2017 9:07 pm

retiredjg wrote:
Tue Nov 28, 2017 8:52 am
She is considering rolling over her 401K and SEP-IRA to lower cost index funds at Schwab and/or Fidelity. Their in-person customer services will better accommodate her disability; she has no computer and do access her information on her phone.
Please expand on this. She has no computer or she does not use a computer? Does she drive?

Per the Vanguard risk questionnaire, her risk tolerance is 60/40, bonds/stocks. Let’s assume that same 60/40 split even though I don’t think some of the questions applied to her retirement status.
40% stock and 60% bonds is one of several allocations that are appropriate for her age and retired status. Unless she is uncomfortable with that number, it might be a good place to start. However, let's look at what she has now.

Taxable 25%
25% Cash in MM and Savings accounts

401k - 48%
19.2% S&P Index Fund
2.4% International
26.4% Stable Fund

SEP-IRA (14% of total)
5.3% stock funds S-Funds including S&P 500 Index
3.8% Mid Cap Value Fund
0.7% World Dividend Fund
4.2% GNMA Fund (bonds)

tIRA and Roth IRAs (3% of total)
unknown

Limited pension (10% of total)
4% stocks* (assumes she would invest this lump sum at 40/60)
6% bonds* (assumes she would invest this lump sum at 40/60)

What she has now breaks down to about 35% stocks and 62% bonds and 3% unknown (IRAs). This is not far from what she is considering based on the risk analysis. She can use how she feels about her current investments to help determine if 40% stocks and 60% bonds is "right" for her. It may be or it may not be.

I'll come back to the questions in another post.
I'll share this, too, thx.

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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by Earl Lemongrab » Wed Nov 29, 2017 12:21 am

lhwerdyt*1791c wrote:
Tue Nov 28, 2017 8:55 pm
Very good offer! But looking for excellent customer service, lower cost index funds, in-person assistance, and possible reasonable account management fees for her.
I'm not a big customer service user, but what I have experienced at Edge is fine. I think their account management runs like .5% or something, so pricier than some options. What do you need out of it?
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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by retiredjg » Wed Nov 29, 2017 8:00 am

lhwerdyt*1791c wrote:
Tue Nov 28, 2017 8:58 pm
Earl Lemongrab wrote:
Tue Nov 28, 2017 10:59 am
lhwerdyt*1791c wrote:
Mon Nov 27, 2017 6:51 pm
Earl Lemongrab wrote:
Mon Nov 27, 2017 6:39 pm
What is the rate on the stable-value?
3% with .40% net expense ratio if you need that, too. Thx.
That's a good rate. Normally those are listed after expenses, so if that checks out it would a good fund to use.
We will have to ask Prudential 401k if she can keep the Stable fund if she transfers the others.
Prudential may or may not allow her to do a partial withdrawal. If they do and she decides to keep some money in the stable value fund, this complicates her situation - two custodians instead of one. Some people would find that worth it and some would not.

One thing to find out for sure - does Prudential charge any annual fees for holding her account. This will also help decide if keeping the stable value fund is worth it.

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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by ruralavalon » Wed Nov 29, 2017 9:53 am

Either Schwab or Fidelity would be a good choice, of the two my choice would be Fidelity. My own personal preference is Vanguard. I would not base the decision on bonuses offered, free trades, credit cards, or any other marketing gimmick.

Do either Schwab or Fidelity have a customer service office in her area and accessible to her? Vanguard doesn't have local customer service offices.


1) Tax loss harvesting is not an issue since she has no taxable investments.

2) Going to cash and then reinvesting in stages over 1-2 years is a very bad idea.

3) A target date fund, or some other all-in-one balanced fund, might be a good very simple choice for all accounts. It depends a little on what fund firm is chosen because each has different balanced funds to offer.

4) If her medical/health issues significantly impact her life expectancy then delaying Social Security may be a poor choice.

5) Skip the bank's "free" advisor. Likely it's just a sales presentation for the banks own savings/investment products.
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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by lhwerdyt*1791c » Thu Nov 30, 2017 12:16 am

retiredjg wrote:
Wed Nov 29, 2017 8:00 am
lhwerdyt*1791c wrote:
Tue Nov 28, 2017 8:58 pm
Earl Lemongrab wrote:
Tue Nov 28, 2017 10:59 am
lhwerdyt*1791c wrote:
Mon Nov 27, 2017 6:51 pm
Earl Lemongrab wrote:
Mon Nov 27, 2017 6:39 pm
What is the rate on the stable-value?
3% with .40% net expense ratio if you need that, too. Thx.
That's a good rate. Normally those are listed after expenses, so if that checks out it would a good fund to use.
We will have to ask Prudential 401k if she can keep the Stable fund if she transfers the others.
Prudential may or may not allow her to do a partial withdrawal. If they do and she decides to keep some money in the stable value fund, this complicates her situation - two custodians instead of one. Some people would find that worth it and some would not.

One thing to find out for sure - does Prudential charge any annual fees for holding her account. This will also help decide if keeping the stable value fund is worth it.
Good questions. We will find out. Can you explain the difference between a roll over and a custodian account? It is on my list but I haven't checked yet. Thx so much.

lhwerdyt*1791c
Posts: 59
Joined: Sat Nov 25, 2017 12:04 am

Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by lhwerdyt*1791c » Thu Nov 30, 2017 12:38 am

retiredjg wrote:
Tue Nov 28, 2017 8:52 am
She is considering rolling over her 401K and SEP-IRA to lower cost index funds at Schwab and/or Fidelity. Their in-person customer services will better accommodate her disability; she has no computer and do access her information on her phone.
Please expand on this. She has no computer or she does not use a computer? Does she drive?

Sorry, I just noticed that I didn't reply to this question. Last I checked, she has a computer but does not use it and doesn't want to use it. She is very intelligent but hates computers. Correction to my above info: She has a smart phone but does -- not -- use it to access her financial info other than her checking account.

Per the Vanguard risk questionnaire, her risk tolerance is 60/40, bonds/stocks. Let’s assume that same 60/40 split even though I don’t think some of the questions applied to her retirement status.
40% stock and 60% bonds is one of several allocations that are appropriate for her age and retired status. Unless she is uncomfortable with that number, it might be a good place to start. However, let's look at what she has now.

Taxable 25%
25% Cash in MM and Savings accounts

401k - 48%
19.2% S&P Index Fund
2.4% International
26.4% Stable Fund

SEP-IRA (14% of total)
5.3% stock funds S-Funds including S&P 500 Index
3.8% Mid Cap Value Fund
0.7% World Dividend Fund
4.2% GNMA Fund (bonds)

tIRA and Roth IRAs (3% of total)
unknown

Limited pension (10% of total)
4% stocks* (assumes she would invest this lump sum at 40/60)
6% bonds* (assumes she would invest this lump sum at 40/60)

What she has now breaks down to about 35% stocks and 62% bonds and 3% unknown (IRAs). This is not far from what she is considering based on the risk analysis. She can use how she feels about her current investments to help determine if 40% stocks and 60% bonds is "right" for her. It may be or it may not be.

I'll come back to the questions in another post.

lhwerdyt*1791c
Posts: 59
Joined: Sat Nov 25, 2017 12:04 am

Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by lhwerdyt*1791c » Thu Nov 30, 2017 1:00 am

Earl Lemongrab wrote:
Wed Nov 29, 2017 12:21 am
lhwerdyt*1791c wrote:
Tue Nov 28, 2017 8:55 pm
Very good offer! But looking for excellent customer service, lower cost index funds, in-person assistance, and possible reasonable account management fees for her.
I'm not a big customer service user, but what I have experienced at Edge is fine. I think their account management runs like .5% or something, so pricier than some options. What do you need out of it?
Good question. I'm not sure yet but not "trading"; that would be too much for her. So I guess someone to discuss how her investments are going and advise accordingly. That said, the account management service may come at some later point; likely, she will first strongly consider suggestions offered on the forum and go from there. I'm in the process of getting more portfolio information from her so that the forum has more to look at and consider, etc. Thx!

retiredjg
Posts: 30851
Joined: Thu Jan 10, 2008 12:56 pm

Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by retiredjg » Thu Nov 30, 2017 6:15 am

lhwerdyt*1791c wrote:
Thu Nov 30, 2017 12:16 am
retiredjg wrote:
Wed Nov 29, 2017 8:00 am
lhwerdyt*1791c wrote:
Tue Nov 28, 2017 8:58 pm
Earl Lemongrab wrote:
Tue Nov 28, 2017 10:59 am
lhwerdyt*1791c wrote:
Mon Nov 27, 2017 6:51 pm

3% with .40% net expense ratio if you need that, too. Thx.
That's a good rate. Normally those are listed after expenses, so if that checks out it would a good fund to use.
We will have to ask Prudential 401k if she can keep the Stable fund if she transfers the others.
Prudential may or may not allow her to do a partial withdrawal. If they do and she decides to keep some money in the stable value fund, this complicates her situation - two custodians instead of one. Some people would find that worth it and some would not.

One thing to find out for sure - does Prudential charge any annual fees for holding her account. This will also help decide if keeping the stable value fund is worth it.
Good questions. We will find out. Can you explain the difference between a roll over and a custodian account? It is on my list but I haven't checked yet. Thx so much.
"Custodian" refers to the company that is holding the account for her. Prudential is one of her current custodians. She is considering Schwab and Fidelity as future custodians.

I think there is something called a "custodial account" but it has nothing to do with her situation

A "rollover" account would be the IRA that receives the money that was in her 401k or in her SEP IRA. It might be at a new custodian or it can sometimes be at the old custodian.

lhwerdyt*1791c
Posts: 59
Joined: Sat Nov 25, 2017 12:04 am

Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by lhwerdyt*1791c » Wed Dec 06, 2017 8:54 pm

retiredjg wrote:
Thu Nov 30, 2017 6:15 am
lhwerdyt*1791c wrote:
Thu Nov 30, 2017 12:16 am
retiredjg wrote:
Wed Nov 29, 2017 8:00 am
lhwerdyt*1791c wrote:
Tue Nov 28, 2017 8:58 pm
Earl Lemongrab wrote:
Tue Nov 28, 2017 10:59 am

That's a good rate. Normally those are listed after expenses, so if that checks out it would a good fund to use.
We will have to ask Prudential 401k if she can keep the Stable fund if she transfers the others.
Prudential may or may not allow her to do a partial withdrawal. If they do and she decides to keep some money in the stable value fund, this complicates her situation - two custodians instead of one. Some people would find that worth it and some would not.

One thing to find out for sure - does Prudential charge any annual fees for holding her account. This will also help decide if keeping the stable value fund is worth it.
Good questions. We will find out. Can you explain the difference between a roll over and a custodian account? It is on my list but I haven't checked yet. Thx so much.
"Custodian" refers to the company that is holding the account for her. Prudential is one of her current custodians. She is considering Schwab and Fidelity as future custodians.

I think there is something called a "custodial account" but it has nothing to do with her situation

A "rollover" account would be the IRA that receives the money that was in her 401k or in her SEP IRA. It might be at a new custodian or it can sometimes be at the old custodian.
Great explanation with context, thank you!

lhwerdyt*1791c
Posts: 59
Joined: Sat Nov 25, 2017 12:04 am

Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by lhwerdyt*1791c » Wed Dec 06, 2017 10:05 pm

FYI...still working on getting more info from my friend...name of funds with tickers, etc.

spammagnet
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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by spammagnet » Wed Dec 06, 2017 11:36 pm

lhwerdyt*1791c wrote:
Tue Nov 28, 2017 8:55 pm
Earl Lemongrab wrote:
Tue Nov 28, 2017 8:34 pm
Merrill Edge currently has their "best" offer running now through 12/15.

https://www.merrilledge.com/offers/1000 ... d=lvexpo17

It might get extended, they have done that in the past, but sometimes they don't.
Very good offer! But looking for excellent customer service, lower cost index funds, in-person assistance, and possible reasonable account management fees for her.
$1,000 bonus on $200,000 minimum transfer is 0.5% of the sum invested. That's not zero but considering that she doesn't use a computer, that hardly seems worth considering, in comparison to other factors. If she moves her portfolio to Merrill on that basis, the bonus is an even lower % of her assets.

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Earl Lemongrab
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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by Earl Lemongrab » Thu Dec 07, 2017 12:44 am

spammagnet wrote:
Wed Dec 06, 2017 11:36 pm
$1,000 bonus on $200,000 minimum transfer is 0.5% of the sum invested. That's not zero but considering that she doesn't use a computer, that hardly seems worth considering, in comparison to other factors. If she moves her portfolio to Merrill on that basis, the bonus is an even lower % of her assets.
In my opinion that's not a valid way to evaluate the bonuses. You need to look at the return on the amount of effort. Remember that your assets continue to earn their normal return. The bonus is in addition to that. You get the $1000 for a less than an hour of effort in most cases.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

spammagnet
Posts: 713
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Re: In-Retirement: Move 401k & SEP-IRA to MM, then to Index Funds via dollar cost averaging?

Post by spammagnet » Thu Dec 07, 2017 12:55 am

Earl Lemongrab wrote:
Thu Dec 07, 2017 12:44 am
In my opinion that's not a valid way to evaluate the bonuses. You need to look at the return on the amount of effort. Remember that your assets continue to earn their normal return. The bonus is in addition to that. You get the $1000 for a less than an hour of effort in most cases.
I don't disagree that it's a modest effort for you and many other Bogleheads readers, including me. That makes it worthy of consideration. The fact that the OP is a friend asking for help on behalf of someone who doesn't even use a computer says a lot. For her, I don't think it's worth considering the bonus unless Merrill meets all her needs as well as or better than other candidate custodians.

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