brokerage account conversion

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
VT14850
Posts: 21
Joined: Tue Jan 02, 2018 11:57 am

brokerage account conversion

Post by VT14850 » Tue Jan 02, 2018 12:55 pm

I'm relatively new to the world of personal investing. My wife and I started a joint brokerage account (MFS GROWTH ALLOCATION FUND 1028 (A)) through MFS Financial a few years ago. We would like to consolidate our accounts with Vanguard and convert the MFS joint brokerage account from MFS to Vanguard. However, I'm just now realizing that to transfer these funds from our MFS account to a Vanguard account would require us to first sell the assets in the MFS account which would result in a taxable event - as I said, I'm new to this :) Are there any suggestions to avoid the taxable event and still successfully move the funds to Vanguard?

My wife and I both also have traditional IRAs through Vanguard as well as our employer sponsored retirement plans (hers through Vanguard and mine through Fidelity).

123
Posts: 3404
Joined: Fri Oct 12, 2012 3:55 pm

Re: brokerage account conversion

Post by 123 » Tue Jan 02, 2018 1:19 pm

If you've got the regular retail version of the fund you should be able to transfer-in-kind and move your MAGWX to another brokerage. Why not call Vanguard and ask them if they will accommodate it. MAGWX is a publicaly traded mutual fund so it should be accepted pretty much anywhere.

Edited to add:
So you could just move the MAGWX to Vanguard and let it sit if you wish. Likely you would want to turn off re-investments so you don't increase your share position of MAGWX. With lower expenses with Vanguard funds it could be a good idea to sell (over time) your MAGWX position and invest the proceeds in Vanguard funds. How fast to sell depends on the tax burden you want to handle.
The closest helping hand is at the end of your own arm.

User avatar
Duckie
Posts: 5736
Joined: Thu Mar 08, 2007 2:55 pm

Re: brokerage account conversion

Post by Duckie » Tue Jan 02, 2018 7:58 pm

VT14850, welcome to the forum.
VT14850 wrote:Are there any suggestions to avoid the taxable event and still successfully move the funds to Vanguard?
Here is what Vanguard has to say about MAGWX:
  • "This fund can be transferred to your Vanguard brokerage account but isn't available for purchase through FundAccess®."
    .
  • "Transaction Fee:
    Online: $0
    Associate Assistance: $0"
So yes, you can move it "in kind" to Vanguard and sell when fiscally prudent. Plus it looks like there will be no transaction fee when you sell.

VT14850
Posts: 21
Joined: Tue Jan 02, 2018 11:57 am

Re: brokerage account conversion

Post by VT14850 » Wed Jan 03, 2018 8:34 pm

Thank you both for the advice. Upon further review with our tax accountant, the gain on the account is minimal (only been active for 2.5 years at $500/mo contribution) and thus the corresponding taxable event is also minimal. Thus, we will liquidate now and move the funds over to Vanguard.

This leads me to my next more pressing question, once all funds have been transferred/rolled over to Vanguard (we also both had IRAs with MFS that we have already rolled over to Vanguard) we want to establish a portfolio with a 60/20/20 blend. I'm 38, my wife is 37, we have two kids (ages 3 and 1 years), no debt (house is paid off), and a combined annual income of around $300K. We both plan to work for the next 30 years. I've reviewed the website and videos and was considering the following approach:

*60% Vanguard Total Stock Market Index Fund (Admiral share class) - as our taxable account
*20% Vanguard Total International Stock Index Fund (admiral) - for both of our IRAs
*20% Bonds (1/2 TIPS and 1/2 Intermediate Term Bonds)
*Maintain Money Market Fund (6 months expenses)

Separately, my wife has two employer sponsored plans through Vanguard: a 403(B) 7 Annuity Plan and a 401a Qualified Retirement Plan. I have an employer sponsored 401K through Fidelity.

Specific advice on the 60/20/20 blend is welcomed! Thank you again for helping this novice investor out :)

User avatar
Duckie
Posts: 5736
Joined: Thu Mar 08, 2007 2:55 pm

Re: brokerage account conversion

Post by Duckie » Wed Jan 03, 2018 8:57 pm

VT14850 wrote:Upon further review with our tax accountant, the gain on the account is minimal (only been active for 2.5 years at $500/mo contribution) and thus the corresponding taxable event is also minimal. Thus, we will liquidate now and move the funds over to Vanguard.
Good. Problem solved.
This leads me to my next more pressing question, once all funds have been transferred/rolled over to Vanguard (we also both had IRAs with MFS that we have already rolled over to Vanguard) we want to establish a portfolio with a 60/20/20 blend. I'm 38, my wife is 37, we have two kids (ages 3 and 1 years), no debt (house is paid off), and a combined annual income of around $300K. We both plan to work for the next 30 years.
80/20 at your ages is a little aggressive. I'd be more inclined toward 70/30.
I've reviewed the website and videos and was considering the following approach:

*60% Vanguard Total Stock Market Index Fund (Admiral share class) - as our taxable account
*20% Vanguard Total International Stock Index Fund (admiral) - for both of our IRAs
*20% Bonds (1/2 TIPS and 1/2 Intermediate Term Bonds)
*Maintain Money Market Fund (6 months expenses)

Separately, my wife has two employer sponsored plans through Vanguard: a 403(B) 7 Annuity Plan and a 401a Qualified Retirement Plan. I have an employer sponsored 401K through Fidelity.
You have a taxable account, two IRAs (are they traditional or Roth IRAs?) and three employer plans. What do mean by "separately"? Are the 20% bonds going to be in your employer plans? You look at all accounts earmarked for retirement as one big portfolio. And you could skip the TIPS until you're older.
Specific advice on the 60/20/20 blend is welcomed!
What are your portfolio percentages (totaling 100%)?
  • Taxable at Vanguard -- ??%
    His 401k at Fidelity -- ??%
    Her 403b at Vanguard -- ??%
    Her 401a at Vanguard -- ??%
    His IRA at Vanguard -- ??%
    Her IRA at Vanguard -- ??%
What are the options (list fund names, ticker symbols, and plan expense ratios) in your employer plans?

VT14850
Posts: 21
Joined: Tue Jan 02, 2018 11:57 am

Re: brokerage account conversion

Post by VT14850 » Thu Jan 04, 2018 5:24 pm

Duckie, thanks for the advice. The 70/30 may be the direction we move toward giving our age.

Taxable at Vanguard -- Vanguard Admiral Share is what I'm considering but need to look carefully at the distribution, thoughts?
His 403b at Fidelity -- Fidelity Freedom 2045K Fund, FSNZX, 0.64% expense ratio for net and gross
His 401k at Fidelity -- (inactive as it was sponsored by previous employer and have not contributed to it for 4 years) currently in Fidelity Freedom 2045K Fund
This is actually with the Fidelity Freedom 2045K Trust II with an expense ratio of 0.08%
Her 403b at Vanguard -- Vanguard Target Retirement 2045 Fund, VTIVX, expense ratio 0.16% net
Her 401a at Vanguard -- Vanguard Target Retirement 2045 Fund, VTIVX, expense ratio 0.16% net
His IRA at Vanguard -- Working on conversion (in process from MFS and looking for recommendations here for a good Vanguard product to put the funds into) considering total international for both IRAs
Her IRA at Vanguard -- Same as above

Thank you for the additional advice.

User avatar
Duckie
Posts: 5736
Joined: Thu Mar 08, 2007 2:55 pm

Re: brokerage account conversion

Post by Duckie » Thu Jan 04, 2018 7:20 pm

VT14850 wrote:Taxable at Vanguard -- Vanguard Admiral Share is what I'm considering but need to look carefully at the distribution, thoughts?
For taxable the best options are either Total Stock Market or Total International Stock. It depends on your tax-sheltered options.

You showed what you own in the accounts. We need to know what you could own. List all the options.

Can he roll his old 401k into his current 403b?

We still need the portfolio percentages totaling 100%. The following is an example:
  • Taxable at Vanguard -- 10%
    His 403b at Fidelity -- 8%
    His old 401k at Fidelity -- 17%
    Her 403b at Vanguard -- 44%
    Her 401a at Vanguard -- 6%
    His IRA at Vanguard -- 6%
    Her IRA at Vanguard -- 9%
What are your numbers?

VT14850
Posts: 21
Joined: Tue Jan 02, 2018 11:57 am

Re: brokerage account conversion

Post by VT14850 » Thu Jan 04, 2018 8:09 pm

Taxable at Vanguard -- Vanguard Target Retirement 2045 Trust II -- 5% of total portfolio
His 403b at Fidelity -- Fidelity Freedom 2045K Fund -- 17% of total portfolio
His old 401k at Vanguard -- Vanguard Target Retirement 2045 Trust II - 9%
Her 403b at Vanguard -- Vanguard Target Retirement 2045 Fund 41%
Her 401a at Vanguard -- Vanguard Target Retirement 2045 Fund 16%
His Traditional IRA at Vanguard -- 7%
Her Traditional IRA at Vanguard -- 5%

Considerations that I'm grappling with that I would appreciate additional opinions on:
1) I could roll my Vanguard 401K (inactive) into my 403b or choose from 24 other alternative funds offered through employer without triggering a taxable event.
2) Should we have our traditional IRAs all in Total International? (i.e., if international stocks do badly and US stocks do well, we will lose in our IRAs but gain in our other accounts).
3) Should the employer sponsored tax advantaged accounts make up the roughly 20% bond distribution of the overall portfolio?

User avatar
Duckie
Posts: 5736
Joined: Thu Mar 08, 2007 2:55 pm

Re: brokerage account conversion

Post by Duckie » Fri Jan 05, 2018 5:31 pm

VT14850 wrote:Taxable at Vanguard -- Vanguard Target Retirement 2045 Trust II
This fund does not belong in a taxable account.
I could roll my Vanguard 401K (inactive) into my 403b or choose from 24 other alternative funds offered through employer without triggering a taxable event.
If you can roll the old 401k over and if the 403b has decent options, I would transfer. It's one less account to deal with.
Should we have our traditional IRAs all in Total International? (i.e., if international stocks do badly and US stocks do well, we will lose in our IRAs but gain in our other accounts).
What you put in your TIRAs depends on what you put in your employer plans and you haven't listed what you could put in those plans. I know you have TR2045 in them, but what are your other options?
Should the employer sponsored tax advantaged accounts make up the roughly 20% bond distribution of the overall portfolio?
I would put the entire 20% bond AA in the employer plans if there is a decent bond option there.

VT14850
Posts: 21
Joined: Tue Jan 02, 2018 11:57 am

Re: brokerage account conversion

Post by VT14850 » Thu Jan 11, 2018 2:19 pm

I've attempted to answer your clarifying questions below.
Let me know if you have additional thoughts and thanks again!

Taxable at Vanguard -- Vanguard Target Retirement 2045 Trust II
This fund does not belong in a taxable account.

Yes, this was a type-o - meant to write Vanguard Admiral Shares
I could roll my Vanguard 401K (inactive) into my 403b or choose from 24 other alternative funds offered through employer without triggering a taxable event.
If you can roll the old 401k over and if the 403b has decent options, I would transfer. It's one less account to deal with.

I did roll the 401K into the 403b to make it simpler to manage.
Should we have our traditional IRAs all in Total International? (i.e., if international stocks do badly and US stocks do well, we will lose in our IRAs but gain in our other accounts).
What you put in your TIRAs depends on what you put in your employer plans and you haven't listed what you could put in those plans. I know you have TR2045 in them, but what are your other options?

I've listed below for my 403b the current 24 mutual funds that are offered. I'm hoping I can use your advice here to help guide the same question for my wife's distribution at Vangaurd in her employer sponsored accounts. I've sorted these from lowest to highest expense ratio. Again, I'm currently in the Fidelity Freedom® 2045 Fund - Class K.

Compare
Name Asset
Class Morningstar
Category YTD #
(Daily) 1 Yr 3 Yr 5 Yr 10 Yr Expense Ratio Morningstar
Net† Gross‡
Overall

Fidelity® 500 Index Fund - Premium Class (FUSVX)
Stock
Large Blend
2.85% 21.79% 11.38% 15.74% 8.47% 0.035% 0.035%
4 out of 5 stars
1,217 Rated

iShares U.S. Aggregate Bond Index Fund Class K (WFBIX)
Bond
Intermediate-Term Bond
-0.59% 3.39% 2.09% 1.94% -- 0.05% 0.07%
3 out of 5 stars
847 Rated

Fidelity® Extended Market Index Fund - Premium Class (FSEVX)
Stock
Mid-Cap Blend
1.77% 18.18% 9.88% 14.58% 9.28% 0.07% 0.07%
3 out of 5 stars
359 Rated

Baird Core Plus Bond Fund Class Institutional (BCOIX)
Bond
Intermediate-Term Bond
-0.45% 4.65% 3.15% 2.91% 5.28% 0.3% 0.3%
5 out of 5 stars
847 Rated

Fidelity Freedom® Income Fund - Class K (FNSHX)
Blend
Target-Date Retirement
0.43% 8.14% 4.25% 4.23% 3.90% 0.42% 0.42%
--

Fidelity Freedom® 2005 Fund - Class K (FSNJX)
Blend
Target-Date 2000-2010
0.80% 10.45% 5.25% 5.64% 3.99% 0.44% 0.44%
--

Fidelity Freedom® 2010 Fund - Class K (FSNKX)
Blend
Target-Date 2000-2010
1.06% 12.52% 6.09% 6.82% 4.77% 0.47% 0.47%
--

Fidelity Freedom® 2015 Fund - Class K (FSNLX)
Blend
Target-Date 2015
1.35% 14.30% 6.83% 7.48% 4.93% 0.5% 0.5%
--

Fidelity Freedom® 2020 Fund - Class K (FSNOX)
Blend
Target-Date 2020
1.57% 15.71% 7.38% 8.11% 4.86% 0.54% 0.54%
--

Fidelity Freedom® 2025 Fund - Class K (FSNPX)
Blend
Target-Date 2025
1.81% 16.87% 7.84% 9.07% 5.26% 0.57% 0.57%
--

Fidelity Freedom® 2030 Fund - Class K (FSNQX)
Blend
Target-Date 2030
2.22% 19.86% 8.97% 10.06% 5.24% 0.61% 0.61%
--

Fidelity Freedom® 2035 Fund - Class K (FSNUX)
Blend
Target-Date 2035
2.63% 22.01% 9.77% 11.04% 5.59% 0.64% 0.64%
--

Fidelity Freedom® 2040 Fund - Class K (FSNVX)
Blend
Target-Date 2040
2.62% 22.38% 9.88% 11.17% 5.53% 0.64% 0.64%
--

Fidelity Freedom® 2045 Fund - Class K (FSNZX)
Blend
Target-Date 2045
2.64% 22.36% 9.87% 11.28% 5.54% 0.64% 0.64%
--

Fidelity Freedom® 2050 Fund - Class K (FNSBX)
Blend
Target-Date 2050
2.71% 22.33% 9.85% 11.31% 5.31% 0.64% 0.64%
--

Fidelity Freedom® 2055 Fund - Class K (FNSDX)
Blend
Target-Date 2055
2.70% 22.37% 9.86% 11.46% -- 0.64% 0.64%
--

John Hancock Funds Disciplined Value Fund Class R6 (JDVWX)
Stock
Large Value
2.88% 19.33% 9.02% 14.36% 8.46% 0.72% 0.72%
4 out of 5 stars
1,090 Rated

T. Rowe Price Blue Chip Growth Fund (TRBCX)
Stock
Large Growth
4.99% 36.55% 15.30% 18.85% 10.50% 0.72% 0.72%
5 out of 5 stars
1,216 Rated

Fidelity® Diversified International Fund - Class K (FDIKX)
Stock
Foreign Large Growth
2.60% 26.79% 8.06% 8.93% 2.35% 0.82% 0.82%
3 out of 5 stars
330 Rated

American Beacon Small Cap Value Fund Class Institutional (AVFIX)
Stock
Small Value
1.86% 8.67% 9.37% 13.92% 9.57% 0.84% 0.84%
4 out of 5 stars
346 Rated

Baron Small Cap Fund Institutional Class (BSFIX)
Stock
Small Growth
1.16% 27.45% 10.10% 13.45% 8.19% 1.06% 1.06%
3 out of 5 stars
609 Rated

Wells Fargo Emerging Markets Equity Fund - Class Inst (EMGNX)
Stock
Diversified Emerging Mkts
2.50% 34.88% 9.54% 4.13% 2.90% 1.19% 1.27%
3 out of 5 stars
647 Rated

Principal ® Guaranteed Interest Balance Contract
Bond
--
-- -- -- -- -- -- --
--
Should the employer sponsored tax advantaged accounts make up the roughly 20% bond distribution of the overall portfolio?
I would put the entire 20% bond AA in the employer plans if there is a decent bond option there.

I'll reference this move based on how your respond to the other potential options above.

User avatar
Duckie
Posts: 5736
Joined: Thu Mar 08, 2007 2:55 pm

Re: brokerage account conversion

Post by Duckie » Thu Jan 11, 2018 4:38 pm

VT14850 wrote:I did roll the 401K into the 403b to make it simpler to manage.
So now you have:
  • Taxable at Vanguard -- 5%
    His 403b at Fidelity (including old 401k) -- 26%
    Her 403b at Vanguard -- 41%
    Her 401a at Vanguard -- 16%
    His Traditional IRA at Vanguard -- 7%
    Her Traditional IRA at Vanguard -- 5%
I've listed below for my 403b the current 24 mutual funds that are offered.
The best options are:
  • Fidelity 500 Index (FUSVX) 0.035% -- Large caps, 80% of US stocks
  • Fidelity Extended Market Index (FSEVX) 0.07% -- Mid/small caps, 20% of US stocks
  • iShares U.S. Aggregate Bond Index (WFBIX) 0.07% -- US bonds
Your 403b international options are too expensive. Put international in other accounts.
I'm hoping I can use your advice here to help guide the same question for my wife's distribution at Vanguard in her employer sponsored accounts.
List her 403b and 401a options.

Since your income is around $300K you can't deduct TIRA contributions and can't contribute to Roth IRAs directly, but you can use the Backdoor Roth IRA method if you "hide" the two TIRAs by rolling them to your employer plans. Will his 403b and her 403b take incoming rollovers from IRAs?

Have you decided on an AA yet? Consider 70% stocks, 30% bonds, with 20% of stocks in international. That breaks down to 56% US stocks, 14% international stocks, and 30% bonds.

VT14850
Posts: 21
Joined: Tue Jan 02, 2018 11:57 am

Re: brokerage account conversion

Post by VT14850 » Thu Feb 01, 2018 8:07 pm

Duckie,

Thanks for the help on this.

As you know, currently my wife has the Target Retirement 2045 Fund through Vanguard for her 403b and 401a. Its been performing fairly well. Her Vanguard rep from work suggested that we put our TIRAs also into the 2045 Fund. Without taking into account the rest of our portfolio, its hard for me to understand how he could reach that conclusion. Very interested in your perspective on this. I've listed all of the options she has available to her via her employer below (as alternatives to the 2045 fund). Any thoughts you have on rounding out the portfolio with this added info would be wonderful. Thank you in advance.

Vanguard Target Retirement 2015
VTXVX
0303
$15.60—1.76%12.08%7.11%
Vanguard Target Retirement 2020
VTWNX
0682
$32.17$0.012.52%15.20%8.44%
Vanguard Target Retirement 2025
VTTVX
0304
$19.06$0.013.03%17.44%9.32%
Vanguard Target Retirement 2030
VTHRX
0695
$34.82$0.023.54%19.35%10.11%
Vanguard Target Retirement 2035
VTTHX
0305
$21.52$0.014.01%21.30%10.89%
Vanguard Target Retirement 2040
VFORX
0696
$37.38$0.014.50%23.25%11.51%
Vanguard Target Retirement 2045
VTIVX
0306
$23.57$0.014.76%24.17%11.73%
Vanguard Target Retirement 2050
VFIFX
0699
$37.93$0.024.78%24.17%11.73%
Vanguard Target Retirement 2055
VFFVX
1487
$41.10$0.024.77%24.18%11.70%
Vanguard Target Retirement 2060
VTTSX
1691
$36.29$0.014.79%24.18%11.71%
Vanguard Target Retirement 2065
VLXVX
1791
$22.73$0.014.75%——
Vanguard Target Retirement Income
VTINX
0308
$13.70$0.011.11%8.74%4.96%
Other options
SHORT-TERM RESERVES
Vanguard Federal Money Mkt Fund
VMFXX
0033
$1.00—0.11%0.88%0.26%
Vanguard Treasury Money Market
VUSXX
0011
$1.00—0.10%0.86%0.24%
BOND FUNDS
Vanguard GNMA Fund Investor Shares
VFIIX
0036
$10.32—-1.11%0.85%1.74%
Vanguard High-Yield Corp Fund Inv
VWEHX
0029
$5.91—0.21%6.19%5.01%
Vanguard I-T Investment-Grade Inv
VFICX
0071
$9.61—-1.19%2.47%2.62%
Vanguard Inflation-Protect Sec Inv
VIPSX
0119
$12.92$0.02-0.92%0.86%-0.09%
Vanguard Inter-Term Bond Index Inv
VBIIX
0314
$11.16—-1.54%1.76%2.02%
Vanguard Inter-Term Treasury Inv
VFITX
0035
$10.88-$0.01-1.56%-0.31%0.90%
Vanguard Long-Term Bond Index
VBLTX
0522
$14.08$0.07-2.06%7.81%4.43%
Vanguard Long-Term Invest-Gr Inv
VWESX
0028
$10.40$0.05-2.02%9.28%5.47%
Vanguard Long-Term Treasury Inv
VUSTX
0083
$11.96$0.06-3.40%4.21%3.32%
Vanguard S-T Investment-Grade Inv
VFSTX
0039
$10.57—-0.37%1.29%1.61%
Vanguard Short-Term Bond Index Inv
VBISX
0132
$10.31—-0.53%0.34%0.82%
Vanguard Short-Term Federal Inv
VSGBX
0049
$10.55-$0.01-0.54%-0.02%0.60%
Vanguard Short-Term Treasury Inv
VFISX
0032
$10.49—-0.44%-0.31%0.41%
Vanguard Tot Intl Bond Ix Investor
VTIBX
1231
$10.79-$0.01-0.56%2.80%—
Vanguard Total Bond Mkt Index Inv
VBMFX
0084
$10.61$0.01-1.09%2.02%1.83%
BALANCED FUNDS (STOCKS AND BONDS)
Vanguard Balanced Index Fund Inv
VBINX
0002
$35.66$0.012.71%15.39%9.88%
Vanguard Convertible Securities
VCVSX
0082
$13.67—1.71%9.17%6.39%
Vanguard LifeStrategy Consrv Grwth
VSCGX
0724
$20.28$0.021.60%11.55%6.50%
Vanguard LifeStrategy Growth Fund
VASGX
0122
$35.07$0.024.16%21.56%10.73%
Vanguard LifeStrategy Income Fund
VASIX
0723
$15.61$0.010.32%6.82%4.34%
Vanguard LifeStrategy Mod Growth
VSMGX
0914
$27.92$0.022.87%16.47%8.63%
Vanguard STAR Fund
VGSTX
0056
$27.75$0.033.54%19.99%9.86%
Vanguard Wellesley Income Fund Inv
VWINX
0027
$27.11—0.56%10.51%7.12%
Vanguard Wellington Fund Inv
VWELX
0021
$43.24-$0.022.88%16.95%10.73%
DOMESTIC STOCK FUNDS
Vanguard 500 Index Fund Inv
VFINX
0040
$260.92$0.135.71%26.24%15.74%
Vanguard Capital Opportunity Inv
VHCOX
0111
$71.01$0.076.78%32.94%19.77%
Vanguard Diversified Equity Inv
VDEQX
0608
$37.03$0.035.98%27.16%15.14%
Vanguard Dividend Apprec Idx Inv
VDAIX
0602
$42.85-$0.075.08%26.02%13.44%
Vanguard Dividend Growth Fund
VDIGX
0057
$27.85—4.90%23.65%14.05%
Vanguard Equity Income Fund Inv
VEIPX
0065
$38.61-$0.073.82%22.19%14.31%
Vanguard Explorer Fund Investor
VEXPX
0024
$99.55-$0.344.78%25.15%14.22%
Vanguard Extended Mkt Index Inv
VEXMX
0098
$87.64-$0.203.35%19.36%13.69%
Vanguard FTSE Social Index Inv
VFTSX
0213
$18.42—5.38%27.83%16.70%
Vanguard Growth and Income Inv
VQNPX
0093
$49.87$0.055.57%25.67%15.93%
Vanguard Growth Index Fund Inv
VIGRX
0009
$77.32$0.126.85%31.60%16.47%
Vanguard High Dividend Yld Idx Inv
VHDYX
0623
$35.30-$0.034.16%21.09%14.66%
Vanguard Large-Cap Index Fund Inv
VLACX
0307
$52.32$0.035.74%26.32%15.62%
Vanguard Mid-Cap Growth Fund
VMGRX
0301
$28.01-$0.026.06%26.08%12.83%
Vanguard Mid-Cap Growth Index Inv
VMGIX
0832
$52.72$0.085.00%23.03%13.62%
Vanguard Mid-Cap Index Fund Inv
VIMSX
0859
$44.06$0.014.33%20.69%14.35%
Vanguard Mid-Cap Value Index Inv
VMVIX
0835
$45.54-$0.033.76%18.70%14.86%
Vanguard Morgan Growth Fund Inv
VMRGX
0026
$31.60$0.088.00%35.14%17.22%
Vanguard PRIMECAP Core Fund
VPCCX
1220
$28.47-$0.035.84%29.73%18.33%
Vanguard PRIMECAP Fund Investor
VPMCX
0059
$137.69$0.206.83%34.19%19.52%
Vanguard Selected Value Fund
VASVX
0934
$32.28-$0.013.23%20.08%14.61%
Vanguard Small-Cap Growth Idx Inv
VISGX
0861
$47.00-$0.103.89%23.16%12.97%
Vanguard Small-Cap Index Fund Inv
NAESX
0048
$72.77-$0.212.84%17.55%13.53%
Vanguard Small-Cap Value Index
VISVX
0860
$32.45-$0.121.98%13.14%13.83%
Vanguard Strategic Equity Fund
VSEQX
0114
$35.53—4.59%17.41%15.84%
Vanguard Strategic Sm-Cap Equity
VSTCX
0615
$36.84-$0.113.40%13.62%14.39%
Vanguard Total Stock Mkt Idx Inv
VTSMX
0085
$70.24—5.31%25.09%15.38%
Vanguard U.S. Growth Fund Investor
VWUSX
0023
$39.58$0.218.38%37.58%17.41%
Vanguard U.S. Value Fund
VUVLX
0124
$19.86-$0.023.71%17.16%14.02%
Vanguard Value Index Fund Inv
VIVAX
0006
$43.39-$0.024.76%21.81%14.86%
Vanguard Windsor Fund Investor
VWNDX
0022
$24.51$0.014.65%22.61%14.08%
Vanguard Windsor II Fund Inv
VWNFX
0073
$39.79-$0.075.18%21.48%13.30%
INTERNATIONAL STOCK FUNDS
Vanguard Developed Markets Idx Inv
VDVIX
1397
$11.69-$0.014.75%27.67%—
Vanguard Emerging Mkts Stk Idx Inv
VEIEX
0533
$31.52$0.178.39%35.47%4.86%
Vanguard European Stock Index Inv
VEURX
0079
$33.53$0.035.51%30.02%7.59%
Vanguard FTSE All-World ex-US Inv
VFWIX
0770
$22.79$0.035.71%29.28%7.27%
Vanguard FTSE AW xUS Sm-Cp Idx Inv
VFSVX
1684
$47.54$0.044.83%30.89%8.81%
Vanguard Global Equity Fund
VHGEX
0129
$33.16$0.035.91%30.29%12.79%
Vanguard International Growth Inv
VWIGX
0081
$32.77$0.119.09%45.39%11.85%
Vanguard International Value Fund
VTRIX
0046
$41.96-$0.065.22%29.50%7.61%
Vanguard Internatl Explorer Fund
VINEX
0126
$22.38$0.035.12%39.71%13.40%
Vanguard Pacific Stock Index Inv
VPACX
0072
$14.52-$0.034.69%28.38%9.39%
Vanguard Total Intl Stock Ix Inv
VGTSX
0113
$19.26$0.025.59%29.51%7.49%
Vanguard Total World Stock Idx Inv
VTWSX
0628
$31.88$0.025.49%27.20%11.26%
SPECIALTY STOCK FUNDS
Vanguard Energy Fund Investor
VGENX
0051
$55.62$0.033.50%8.75%1.32%
Vanguard Health Care Fund Inv
VGHCX
0052
$215.95-$2.665.06%22.28%17.36%
Vanguard REIT Index Fund Inv
VGSIX
0123
$26.40$0.47-4.21%0.45%7.38%
https://www.vanguard.com/pdf/403BINVT.pdf

User avatar
Duckie
Posts: 5736
Joined: Thu Mar 08, 2007 2:55 pm

Re: brokerage account conversion

Post by Duckie » Thu Feb 01, 2018 9:03 pm

VT14850 wrote:I've listed all of the options she has available to her via her employer below (as alternatives to the 2045 fund). Any thoughts you have on rounding out the portfolio with this added info would be wonderful.
What are the plan expense ratios for the following:
  • VTSMX Vanguard Total Stock market Index
  • VGTSX Vanguard Total International Stock Index
  • VBMFX Vanguard Total Bond Market Index
If you want ~20% bonds you could have Target Retirement 2035 (not 2045) in all accounts except taxable where you'd have Vanguard Total Stock Market. If you use individual funds in all accounts and we go with your above AA of 60% US stocks, 20% international stocks, and 20% bonds, you could have:

Taxable at Vanguard -- 5%
5% (VTSMX) Vanguard Total Stock Market Index Fund Investor Shares (0.15%)

His 403b at Fidelity -- 26%
6% (FUSVX) Fidelity 500 Index Fund Premium Class (0.035%)
20% (WFBIX) iShares U.S. Aggregate Bond Index Fund Class K (0.07%)

Her 403b at Vanguard -- 41%
33% (VTSMX) Vanguard Total Stock Market Index Fund Investor Shares (0.15% ??)
8% (VGTSX) Vanguard Total International Stock Index Fund Investor Shares (0.18% ??)

Her 401a at Vanguard -- 16%
16% (VTSMX) Vanguard Total Stock Market Index Fund Investor Shares (0.15% ??)

His Traditional IRA at Vanguard -- 7%
7% (VGTSX) Vanguard Total International Stock Index Fund Investor Shares (0.18%)

Her Traditional IRA at Vanguard -- 5%
5% (VGTSX) Vanguard Total International Stock Index Fund Investor Shares (0.18%)

My comments/questions:
  • I don't know the value of your portfolio so I used Investor shares in the personal accounts. If you have enough assets you could use the cheaper Admiral shares.
  • Will his 403b and her 403b take incoming rollovers from IRAs? If you want to use the Backdoor Roth IRA method you need to "hide" the two TIRAs by rolling them to employer plans. Or if the amount is low enough you could just convert the two TIRAs to Roth IRAs.
  • I put different funds in her 403b and 401a. In some plans they have to be the same funds and percentages.
  • You need more than 20% bonds.
Just some possibilities.

VT14850
Posts: 21
Joined: Tue Jan 02, 2018 11:57 am

Re: brokerage account conversion

Post by VT14850 » Sun Feb 25, 2018 8:43 pm

Thanks Duckie.

This is very helpful toward our goal of creating a well-balanced a 3 fund portfolio. My wife wants to keep her employer sponsored 401a and 403b with Vanguard 2045 funds. Given this, I've tried to incorporate your suggestions into the remaining elements of the portfolio. We do not meet the income criteria to hold a ROTH. I'm interested your feedback on if my overall portfolio distribution is on the right track given the 60/20/20 goal. Thanks again.

TAXABLE ACCOUNT:
Vanguard Total Stock Market Admiral Share (we would have enough in the account to qualify for Admiral Share Class)

EMPLOYER SPONSORED:
MY 403b
Fidelity 500 Index (80%)
Fidelity Extended Market Index (20%)

MY WIFE's 401a and 403b
Vanguard Target Retirement 2045 Fund

IRAs
ME: Vanguard Total International Stock Index Fund
MY WIFE: Aaron's Vanguard Total International Stock Index Fund

VT14850
Posts: 21
Joined: Tue Jan 02, 2018 11:57 am

Re: brokerage account conversion

Post by VT14850 » Sun Feb 25, 2018 9:13 pm

I caught two mistakes in what I wrote and updated it here:

TAXABLE ACCOUNT:
Vanguard Total Stock Market Admiral Share (we would have enough in the account to qualify for Admiral Share Class)

EMPLOYER SPONSORED:
MY 403b
Fidelity 500 Index
Fidelity Extended Market Index
Fidelity US Bond Index

MY WIFE's 401a and 403b
Vanguard Target Retirement 2045 Fund

IRAs
ME: Vanguard Total International Stock Index Fund
MY WIFE: Vanguard Total International Stock Index Fund

User avatar
Duckie
Posts: 5736
Joined: Thu Mar 08, 2007 2:55 pm

Re: brokerage account conversion

Post by Duckie » Sun Feb 25, 2018 9:23 pm

VT14850 wrote:We do not meet the income criteria to hold a ROTH.
If your 403b plans can take incoming IRA rollovers you can contribute to Roth IRAs via the backdoor method.
I'm interested your feedback on if my overall portfolio distribution is on the right track given the 60/20/20 goal.
Your new plan has an AA of 62/32/6. (The TR2045 has a current AA of 54/36/10 and since it is about 57% of your portfolio that pro-rates to 31/20/6.) If you want 60/20/20 you need to add bonds to his 403b and make one or both of the TIRAs US stocks. It would help if she would consider TR2035 instead.

VT14850
Posts: 21
Joined: Tue Jan 02, 2018 11:57 am

Re: brokerage account conversion

Post by VT14850 » Wed Feb 28, 2018 3:52 pm

Duckie,

There doesn't seem to be a point in using the Target Retirement funds for part of our portfolio unless they are the whole portfolio. I think I've sufficiently convinced my wife of this. Therefore, we'd like to hold essentially the same funds that are already in her Vanguard target 2045 fund, but hold them as individual funds. Based on the options provided earlier in this thread, what would you recommend to get to us to desired 60/20/20 split?

VT14850
Posts: 21
Joined: Tue Jan 02, 2018 11:57 am

Re: brokerage account conversion

Post by VT14850 » Wed Feb 28, 2018 3:55 pm

Also, regarding the backdoor IRA, since we are over the limit for contributing directly to a Roth IRA, and we don't have any other IRAs (such as rollovers from other employers), you should use the backdoor Roth in preference to taxable investments. If we haven't contributed to IRAs for 2017 or 2018, couldn't we each contribute $5500 per year, which would take $22,000 out of our taxable account? What are the logistics for doing a backdoor IRA?

User avatar
Duckie
Posts: 5736
Joined: Thu Mar 08, 2007 2:55 pm

Re: brokerage account conversion

Post by Duckie » Thu Mar 01, 2018 6:15 pm

VT14850 wrote:Therefore, we'd like to hold essentially the same funds that are already in her Vanguard target 2045 fund, but hold them as individual funds. Based on the options provided earlier in this thread, what would you recommend to get to us to desired 60/20/20 split?
With an AA of 60/20/20 and assuming you can roll the TIRAs into your 403b plans you could have:

Taxable at Vanguard -- 5%
5% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.04%)

His 403b at Fidelity -- 33% (includes rollover from his TIRA)
10% (FUSVX) Fidelity 500 Index Fund Premium Class (0.035%)
3% (FSEVX) Fidelity Extended Market Index Fund Premium Class (0.07%) <-- This could be skipped.
20% (WFBIX) iShares U.S. Aggregate Bond Index Fund Class K (0.07%)

Her 403b at Vanguard -- 46% (includes rollover from her TIRA)
26% (VTSMX) Vanguard Total Stock Market Index Fund Investor Shares (0.15% ??)
20% (VGTSX) Vanguard Total International Stock Index Fund Investor Shares (0.18% ??)

Her 401a at Vanguard -- 16%
16% (VTSMX) Vanguard Total Stock Market Index Fund Investor Shares (0.15% ??)

His Roth IRA at Vanguard (via backdoor) -- 0%
0% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.11%)

Her Roth IRA at Vanguard (via backdoor) -- 0%
0% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.11%)
If we haven't contributed to IRAs for 2017 or 2018, couldn't we each contribute $5500 per year, which would take $22,000 out of our taxable account? What are the logistics for doing a backdoor IRA?
You each need to roll your TIRA assets into your 403b plan. This needs to be done before 12/31/18. If your 403b plan can't take incoming rollovers you will need to either convert the TIRA assets to a Roth IRA or reconsider the backdoor method. Assuming you are allowed to roll to your 403b plan you each need to:
  1. Make your 2017 contribution to the TIRA (possibly but not necessarily the one you have right now). You may be asked which year the contribution is for. Specify 2017. This will be a non-deductible contribution, but the IRA custodian doesn't need that information. You may want the TIRA to hold a money market fund to avoid market swings.
    .
  2. It takes a few days to settle so while you are waiting, open a Roth IRA at the same custodian (I am assuming Vanguard). Once the contribution posts and as soon as you're allowed, convert 100% of the assets to your Roth IRA. Don't use dollar amounts because account values shift, use 100%. If the custodian asks to withhold taxes, say NO. If, in a few weeks, a tiny amount from some dividends shows up in the TIRA, just convert that, too.
    .
  3. When you have enough for the 2018 contribution make it to the same TIRA. Then convert it in the same manner.
    .
  4. When you file your taxes for 2017 add IRS Form 8606 . Fill out Part I for the 2017 non-deductible contribution. If you use tax-software or an accountant make sure it/they know you made a TIRA contribution of $5500 for 2017 in 2018, that the contribution was non-deductible, and that you have no previous basis. Your Form 8606 should look something like this:
    • Part I
      Line 1 -- 5500
      Line 2 -- 0
      Line 3 -- 5500
      Line 14 -- 5500 (goes on line 2 next year)
    That should be it for 2017.
    .
  5. When you file your taxes for the year 2018 again add IRS Form 8606. Fill out Part I for the 2018 non-deductible contribution and Part II for all conversions. It's best to make both the contribution and conversion happen in and for the same year. As long as the TIRA is empty as of December 31st any taxes will be negligible. Your Form 8606 should look something like this:
    • Part I
      Line 1 -- 5500
      Line 2 -- 5500 (your basis from 2017)
      Line 3 -- 11,000
      Line 4 -- 0 or blank
      Line 5 -- 11,000
      Line 6 -- 0 (if not, you'll pay a lot of taxes on the conversion)
      Line 7 -- 0 or blank
      Line 8 -- 11,100 (I gave you $100 in earnings as an example)
      Line 9 -- 11,100
      Line 10 -- 0.99099099 (the more numbers the better)
      Line 11 -- 11,000
      Line 12 -- 0 or blank
      Line 13 -- 11,000
      Line 14 -- 0 (goes on line 2 next year)
      Line 15a -- 0 or blank
      Line 15b -- 0 or blank
      Line 15c -- 0 or blank
      Part II
      Line 16 -- 11,100
      Line 17 -- 11,000
      Line 18 -- 100 (taxable amount goes on your 1040 form)
  6. Do it again the next year. The TIRA should stay open for awhile even though empty so you should be able to use the same TIRA the next time. If not, just open another TIRA.
Last edited by Duckie on Mon Jun 25, 2018 11:39 pm, edited 1 time in total.

VT14850
Posts: 21
Joined: Tue Jan 02, 2018 11:57 am

Re: brokerage account conversion

Post by VT14850 » Mon Apr 16, 2018 3:41 pm

Duckie, thanks so much! Super helpful. I will now (1) open a Roth with $0 balance (2) contribute $5,500 for tax year 2017 and '18 to my existing TIRA with Vanguard, (3) wait for it to post and then transfer it to the Roth (currently with a $0 balance) (4) follow the tax instructions below when working with my accountant (5) repeat again each year before 4/15 (6) wait until I'm 59 1/2. If you have a second, please let me know this is the correct strategy moving forth.

User avatar
Duckie
Posts: 5736
Joined: Thu Mar 08, 2007 2:55 pm

Re: brokerage account conversion

Post by Duckie » Mon Apr 16, 2018 3:59 pm

VT14850 wrote:I will now (1) open a Roth with $0 balance (2) contribute $5,500 for tax year 2017 and '18 to my existing TIRA with Vanguard, (3) wait for it to post and then transfer it to the Roth (currently with a $0 balance) (4) follow the tax instructions below when working with my accountant (5) repeat again each year before 4/15 (6) wait until I'm 59 1/2. If you have a second, please let me know this is the correct strategy moving forth.
That's all correct. Time-wise the most important thing is to make the 2017 contribution to your TIRA. Everything else can wait. Have you confirmed that your 403b will take incoming IRA rollovers?

VT14850
Posts: 21
Joined: Tue Jan 02, 2018 11:57 am

Re: brokerage account conversion

Post by VT14850 » Tue Apr 17, 2018 8:54 am

Duckie, our 403b do take roll overs. Is it best to roll the $5,500 from the TIRA to our 403b or into a Roth? Which would provide greater advantage?

User avatar
Duckie
Posts: 5736
Joined: Thu Mar 08, 2007 2:55 pm

Re: brokerage account conversion

Post by Duckie » Tue Apr 17, 2018 5:09 pm

VT14850 wrote:Duckie, our 403b do take roll overs. Is it best to roll the $5,500 from the TIRA to our 403b or into a Roth? Which would provide greater advantage?
Because you are using the backdoor Roth IRA method, you need to roll all pre-tax TIRA assets to the 403b plans before 12/31/2018 to avoid the pro-rata rule. However, the 2017 contribution is not pre-tax because you can't take a deduction for it. So that $5500 needs to be converted to the Roth IRA.

Did you make two $5500 contributions for 2017? One for you and one for you wife?

VT14850
Posts: 21
Joined: Tue Jan 02, 2018 11:57 am

Re: brokerage account conversion

Post by VT14850 » Wed May 16, 2018 8:10 pm

Duckie, Despite my best intention to do so, I have been procrastinating (unlike me) in dealing with our retirement restructuring. I've created a complex excel chart outlining taxable, employer sponsored, and IRA options but I'm getting hung up in the % allocation needed in each portion of the portfolio to achieve the desired blend. And then what is the desired blend for a family of our age (38yo parents of two kids 3 and 1 years respectively)? I've been told 60/20/20 should be modified to 70/30 Stocks/Bonds...

I'm taking this as a sign that perhaps we should just stick with our employer sponsored managed funds, each have a TIRA (we did backdoor Roth per your advice by the way) and then have a taxable account. How unwise would this approach be? Need a pep talk (response) from you :)

User avatar
Duckie
Posts: 5736
Joined: Thu Mar 08, 2007 2:55 pm

Re: brokerage account conversion

Post by Duckie » Wed May 16, 2018 9:47 pm

VT14850 wrote:I've created a complex excel chart outlining taxable, employer sponsored, and IRA options but I'm getting hung up in the % allocation needed in each portion of the portfolio to achieve the desired blend. And then what is the desired blend for a family of our age (38yo parents of two kids 3 and 1 years respectively)? I've been told 60/20/20 should be modified to 70/30 Stocks/Bonds...
I prefer 70/30 at your ages but if you prefer 80/20 go for it.
I'm taking this as a sign that perhaps we should just stick with our employer sponsored managed funds, each have a TIRA (we did backdoor Roth per your advice by the way) and then have a taxable account. How unwise would this approach be?
What exactly do you have right now? What accounts, what funds in the accounts, and what percentages in the accounts?

VT14850
Posts: 21
Joined: Tue Jan 02, 2018 11:57 am

Re: brokerage account conversion

Post by VT14850 » Thu May 17, 2018 7:06 pm

Current breakdown and plan:

Taxable:
Current: Nothing

Employer Sponsored:
HIS
Current: FSNZX (33% of total portfolio)
HERS
Current: VTIVX 403b (47% of total portfolio) & VTIVX 401a (18% of total portfolio)

IRA
Current: Nothing

We'd like to follow the plan you laid out below but are wondering if your suggestion would change based on the 70/30 split and if the fund recommendations would also change. Thank you!


Taxable at Vanguard -- 5%
5% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.04%)

His 403b at Fidelity -- 33% (includes rollover from his TIRA)
10% (FUSVX) Fidelity 500 Index Fund Premium Class (0.035%)
3% (FSEVX) Fidelity Extended Market Index Fund Premium Class (0.07%) <-- This could be skipped.
20% (WFBIX) iShares U.S. Aggregate Bond Index Fund Class K (0.07%)

Her 403b at Vanguard -- 46% (includes rollover from her TIRA)
26% (VTSMX) Vanguard Total Stock Market Index Fund Investor Shares (0.15% ??)
20% (VGTSX) Vanguard Total International Stock Index Fund Investor Shares (0.18% ??)

Her 401a at Vanguard -- 16%
16% (VTSMX) Vanguard Total Stock Market Index Fund Investor Shares (0.15% ??)

His Roth IRA at Vanguard (via backdoor) -- 0%
0% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.11%)

Her Roth IRA at Vanguard (via backdoor) -- 0%
0% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.11%)

User avatar
Duckie
Posts: 5736
Joined: Thu Mar 08, 2007 2:55 pm

Re: brokerage account conversion

Post by Duckie » Fri May 18, 2018 4:26 pm

VT14850 wrote:We'd like to follow the plan you laid out below but are wondering if your suggestion would change based on the 70/30 split and if the fund recommendations would also change.
If you change the AA from 80% stocks, 20% bonds, with 25% of stocks in international (60/20/20) to 70% stocks, 30% bonds, with 25% of stocks in international (52/18/30) there would be no change in my fund recommendations, just slight percentage changes. Here's the difference:

Taxable at Vanguard -- 5%
5% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.04%)

His 403b at Fidelity -- 33% (includes rollover from his TIRA)
3% (FUSVX) Fidelity 500 Index Fund Premium Class (0.035%)
30% (WFBIX) iShares U.S. Aggregate Bond Index Fund Class K (0.07%)

Her 403b at Vanguard -- 46% (includes rollover from her TIRA)
28% (VTSMX) Vanguard Total Stock Market Index Fund Investor Shares (0.15% ??)
18% (VGTSX) Vanguard Total International Stock Index Fund Investor Shares (0.18% ??)

Her 401a at Vanguard -- 16%
16% (VTSMX) Vanguard Total Stock Market Index Fund Investor Shares (0.15% ??)

His Roth IRA at Vanguard (via backdoor) -- 0%
0% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.11%)

Her Roth IRA at Vanguard (via backdoor) -- 0%
0% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.11%)

VT14850
Posts: 21
Joined: Tue Jan 02, 2018 11:57 am

Re: brokerage account conversion

Post by VT14850 » Sun May 20, 2018 2:40 pm

Thanks Duckie.

I have made updates to the excel chart to reflect these % allocations to achieve a 70/30 mix. Now time for the very naive questions (forgive me):

1) In the break down we've discussed above, where is the ROTH accounted for by % in the total portfolio? Between the two of us, we have about $50K in TRIAs right now. Should all of these funds be converted to the ROTH?
2) I plan to call Fidelity and Vanguard this week to move this plan forward. When calling, I plan to ask the rep to help me set the percent allocations for each fund - as a component of the total portfolio. Is this a request they could assist me with if they had the total portfolio value as of the day I call? Could they also help me in setting it at that % allocation for each fund (per above) for the remainder of the year?
3) When do you recommend I go back in to adjust the 70/30 split? I've heard every year on one's birthday is a good rule of thumb. As a 38yo, what would the percent change be when I turn 39 (e.g., 69%/31%...) and so forth every year for the next 30 years?

Many thanks in helping us set this plan up. Its been really appreciated.

User avatar
Duckie
Posts: 5736
Joined: Thu Mar 08, 2007 2:55 pm

Re: brokerage account conversion

Post by Duckie » Sun May 20, 2018 5:38 pm

VT14850 wrote:In the break down we've discussed above, where is the ROTH accounted for by % in the total portfolio?
Until you do the Backdoor Roth IRA method for 2018, the Roth IRAs are at 0%.
Between the two of us, we have about $50K in TRIAs right now. Should all of these funds be converted to the ROTH?
I included the TIRA accounts in this example, and later in this example they were rolled into your employer plans. That avoids taxes on conversions and clears the way for the backdoor method. If you decide to convert the TIRAs instead of rolling them, that changes the account percentages.
I plan to call Fidelity and Vanguard this week to move this plan forward. When calling, I plan to ask the rep to help me set the percent allocations for each fund - as a component of the total portfolio. Is this a request they could assist me with if they had the total portfolio value as of the day I call? Could they also help me in setting it at that % allocation for each fund (per above) for the remainder of the year?
Not really.
  1. Can't you do this online for all accounts? Do you have to talk to someone?
  2. In the taxable, 401a, and Roth IRA accounts you're only going to have one fund for quite awhile so allocation there is not an issue.
  3. In the two 403b plans, whether you do it online or on the phone it's your job to figure it out ahead of time. Using this updated example, 33% of your portfolio is in his 403b and you want that split 3/30. You could then exchange the current assets to 9% FUSVX and 91% WFBIX and set up ongoing contributions 10/90 for now. (You don't need to be too precise because everything's going to be off a little.) 46% of the portfolio is in her 403b and you want that split 28/18. Exchange to 61% VTSMX and 39% VGTSX and set up ongoing contributions 60/40 for now. Rebalance once or twice a year.
  4. Of course, by the time you do this the numbers will have changed slightly and if you haven't rolled the TIRAs into the employer plans the numbers will be way off.
When do you recommend I go back in to adjust the 70/30 split? I've heard every year on one's birthday is a good rule of thumb. As a 38yo, what would the percent change be when I turn 39 (e.g., 69%/31%...) and so forth every year for the next 30 years?
You can do it every year, but I would reevaluate and adjust every five years or so.

VT14850
Posts: 21
Joined: Tue Jan 02, 2018 11:57 am

Re: brokerage account conversion

Post by VT14850 » Mon Jun 04, 2018 8:24 am

Thank you Duckie,

Given the $18K annual limit on 403b and 401a contributions, while doubtful, I'm wondering if there is another way of increasing contributions to our employer sponsored plans. If not, we will not be able to achieve the recommended annual allocations for these accounts to maintain the desired balance. We have goal of investing around $140K into retirement next year - and every year moving forth - per this plan. Here is the current goal per the allocations you laid out. However, the $18K ceiling is a factor that I could use your guidance on. Thank you!

1) His 403b Fidelity 500 Index Premium FUSVX
2) His 403b iShares US Aggregate Bond Index K WFBIX
3) Her 403b Vanguard Total Intl Stock Index Admiral VTIAX
4) Her 403b Vanguard Total Stock Mkt Idx Adm VTSAX
5) Her 401a Vanguard Total Stock Mkt Idx Adm VTSAX

Monthly contribution; (% of portfolio); (annual allocation)
1) $329.32 3% $3,951.82
2) $3,293.18 30% $39,518.15
3) $3,073.63 28% $36,883.61
4) $1,975.91 18% $23,710.89
5) $1,756.36 16% $21,076.35

User avatar
Duckie
Posts: 5736
Joined: Thu Mar 08, 2007 2:55 pm

Re: brokerage account conversion

Post by Duckie » Mon Jun 04, 2018 3:12 pm

VT14850 wrote:Given the $18K annual limit on 403b and 401a contributions, while doubtful, I'm wondering if there is another way of increasing contributions to our employer sponsored plans.
First, the 403b limit is $18.5K for each of you. I'm not sure about the 401a limit. She needs to check that. If the 401a limit is really $18.5K on top of the 403b limit, the two of you can contribute $55.5K to your employer plans plus another $11K to your Roth IRAs via backdoor. That totals $66.5K in tax-sheltered contributions.

You should both check to see if your 403b plans offer an after-tax (not Roth) option. That would allow each of you to contribute up to $55K (including the $18.5K plus any matching or profit-sharing). This is best done when either in-plan or in-service rollovers can be done frequently. We call it the Mega Backdoor Roth.

Does either of your employers offer a Health Savings Account? That's another way to shelter income.
We have goal of investing around $140K into retirement next year - and every year moving forth - per this plan. Here is the current goal per the allocations you laid out. However, the $18K ceiling is a factor that I could use your guidance on.
Your contribution goals are impossible because of limits. If you plan to contribute $140K, anything that doesn't go into your tax-sheltered plans (401a, 403b, Roth IRA, HSA) will have to go into a taxable account. The best options in a taxable account for long-term purposes are a total US stock fund and a total international stock fund. If necessary (and it's not necessary yet) you could put a tax-exempt muni bond fund in taxable.

VT14850
Posts: 21
Joined: Tue Jan 02, 2018 11:57 am

Re: brokerage account conversion

Post by VT14850 » Fri Jun 08, 2018 11:48 am

Duckie,

We checked and the 401a is just a straight employer contribution account - based on a % of her net pay. Unfortunately, its not an account to which my wife can make additional contributions. That leaves us with the two 403b (hers and mine) ($37K annual max) plus another $11K in back door roths - for a total of $48K total in tax sheltered accounts annually. We are thinking about if we want to do an HSA.

We are checking with our 403b plans to see if they offer an after-tax (not Roth) option to increase this to $55K for each of us. Short of this being a possibility, and given our retirement goal of investing roughly 50% or $140K into our retirement annually, my big question is, how would the percent allocation between accounts change from what you previously suggested to still maintain the 70/30 split we're working to achieve?

Separately, later this year, we will be selling our home and would like invest the proceeds from this sale into the plan that you've helped us create. This will be around $600K in all - currently we have around $300K in the entire portfolio so the total after the cash from the home sale will be around $900K. I'm interested in your insight on how this factors into the plan as well (i.e., where to put the $600K to minimize tax burden).

Thank you so much for your guidance on all of this. We really appreciate your time.

User avatar
Duckie
Posts: 5736
Joined: Thu Mar 08, 2007 2:55 pm

Re: brokerage account conversion

Post by Duckie » Fri Jun 08, 2018 5:46 pm

VT14850 wrote:We checked and the 401a is just a straight employer contribution account - based on a % of her net pay. Unfortunately, its not an account to which my wife can make additional contributions. That leaves us with the two 403b (hers and mine) ($37K annual max) plus another $11K in back door roths - for a total of $48K total in tax sheltered accounts annually.
Since you want to contribute $140K for retirement annually and can at this point contribute $48K to your tax-sheltered accounts, you will end up with Total Stock and Total International Stock in taxable and mostly Total Bond in tax-sheltered.
We are thinking about if we want to do an HSA.
Do your employer plans offer high deductible health plans? Because if they don't you can't contribute to an HSA.
We are checking with our 403b plans to see if they offer an after-tax (not Roth) option to increase this to $55K for each of us. Short of this being a possibility, and given our retirement goal of investing roughly 50% or $140K into our retirement annually, my big question is, how would the percent allocation between accounts change from what you previously suggested to still maintain the 70/30 split we're working to achieve?
See below.
Separately, later this year, we will be selling our home and would like invest the proceeds from this sale into the plan that you've helped us create. This will be around $600K in all - currently we have around $300K in the entire portfolio so the total after the cash from the home sale will be around $900K. I'm interested in your insight on how this factors into the plan as well (i.e., where to put the $600K to minimize tax burden).
See below.

--------------------

The following portfolio example has an AA of 52/18/30. It includes the extra $600K house proceeds, the backdoor Roth IRA contributions, and guesstimate additions to employer plans and taxable. At the end of the year you could have something like:

Taxable at Vanguard -- $650K -- 67%
52% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.04%)
15% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.11%)

His 403b at Fidelity -- $110K -- 11%
11% (WFBIX) iShares U.S. Aggregate Bond Index Fund Class K (0.07%)

Her 403b at Vanguard -- $150K -- 15%
1% (VGTSX) Vanguard Total International Stock Index Fund Investor Shares (0.17% ??)
14% (VBMFX) Vanguard Total Bond Market Index Fund Investor Shares (0.15% ??)

Her 401a at Vanguard -- $55K -- 5%
5% (VBMFX) Vanguard Total Bond Market Index Fund Investor Shares (0.15% ??)

His Roth IRA at Vanguard (via backdoor) -- $5.5K -- 1%
1% (VGTSX) Vanguard Total International Stock Index Fund Investor Shares (0.17%)

Her Roth IRA at Vanguard (via backdoor) -- $5.5K -- 1%
1% (VGTSX) Vanguard Total International Stock Index Fund Investor Shares (0.17%)

My Reasoning:
The year-end figures are based on my March 1st post, your previous statement that your portfolio is currently around $300K, and guesstimates on additions.
  • Taxable starts with $15K (5% of $300K) and adds $600K house proceeds and $35K extra taxable.
  • His 403b starts with $99K (33% of $300K including rollover from his TIRA) and adds $11K.
  • Her 403b starts with $150K (46% of $300K including rollover from her TIRA) and adds $12K.
  • Her 401a starts with $48K (16% of $300K) and adds $7K.
  • The two backdoor Roth IRAs start with $0 and add $5.5K each.
What are the expense ratios in her 403b/401a plans? I've been using the retail rates but having actual numbers would be better.

Soon you're going to run out of room for bonds in your pre-tax accounts. At that point you will have to choose whether to use Total Bond in your Roth IRAs or a tax-exempt muni bond like (VWITX) Vanguard Intermediate-Term Tax-Exempt Fund Investor Shares (0.19%) in your taxable account.

VT14850
Posts: 21
Joined: Tue Jan 02, 2018 11:57 am

Re: brokerage account conversion

Post by VT14850 » Mon Jul 16, 2018 8:06 pm

Duckie,

Thanks again for the support here. Slowly but surely we are working toward the creation of a great plan and think we are almost there. Thank you so much for all of the time you have given us on this. We've done some additional inquiry and here are some updates:

1) My wife's employer just made updates to their sponsored plans and unfortunately VTIAX and VBTLX (admiral shares) are not amongst them - throwing a bit of wrench in the plan you've helped us craft. Only investor shares are available. The complete listing of the new employer sponsored options all through Vanguard is below (apologies for the long list) - I have not included the following in this list: all in one funds, short term reserves, balanced funds, and specialty stocks.
2) In addition, my wife double checked and she does not have the ability to contribute to her 401a (contrary to our previously understanding). Her employer provides $334 x 26 pay periods for a total of $8684 per year. This will also impact our/your previous calculations.
3) As previously discussed, we plan to close on the sale of our house next week and will net about $575K to add to our current combined portfolio of around $354K (bringing the total portfolio value to around $930K).

My questions for you:

1) What would you recommend choosing from the employer sponsored accounts below for my wife's 401a and 403b? VTSMX and VBMFX are amongst the offerings.
2) Given the current cap of $8684 on her 401a, how would our plan's percent allocations differ?

AVAILABLE BOND ACCOUNTS

Fund name, Fund Symbol

TIAA-CREF Bond Plus Inst 

TIBFX7442

Vanguard GNMA Fund Investor Shares 

VFIIX0036

Vanguard High-Yield Corp Fund Inv 

VWEHX0029

Vanguard I-T Investment-Grade Inv 

VFICX0071

Vanguard Inflation-Protect Sec Inv 

VIPSX0119

Vanguard Inter-Term Bond Index Inv 

VBIIX0314

Vanguard Inter-Term Treasury Inv 

VFITX0035

Vanguard Long-Term Bond Index 

VBLTX0522

Vanguard Long-Term Invest-Gr Inv 

VWESX0028

Vanguard Long-Term Treasury Inv 

VUSTX0083

Vanguard S-T Investment-Grade Inv 

VFSTX0039

Vanguard Short-Term Bond Index Inv 

VBISX0132

Vanguard Short-Term Federal Inv 

VSGBX0049

Vanguard Short-Term Treasury Inv 

VFISX0032

Vanguard Tot Intl Bond Ix Investor 

VTIBX1231

Vanguard Total Bond Mkt Index Inst 

VBTIX0222

Vanguard Total Bond Mkt Index Inv 

VBMFX0084



DOMESTIC STOCK FUNDS

Conestoga Small Cap Institutional 

CCALX6206

Nuveen Small Cap Value R6 

FSCWX7112

Vanguard 500 Index Fund Inv 

VFINX0040

Vanguard Capital Opportunity Inv 

VHCOX0111

Vanguard Diversified Equity Inv 

VDEQX0608

Vanguard Dividend Apprec Idx Inv 

VDAIX0602

Vanguard Dividend Growth Fund 

VDIGX0057

Vanguard Equity Income Fund Inv 

VEIPX0065

Vanguard Explorer Fund Investor 

VEXPX0024

Vanguard Extended Mkt Index Inv 

VEXMX0098

Vanguard FTSE Social Index Inv 

VFTSX0213

Vanguard Growth and Income Inv 

VQNPX0093

Vanguard Growth Index Fund Inv 

VIGRX0009
Vanguard High Dividend Yld Idx Inv 

VHDYX0623

Vanguard Large-Cap Index Fund Inv 

VLACX0307

Vanguard Mid-Cap Growth Fund 

VMGRX0301

Vanguard Mid-Cap Growth Index Inv 

VMGIX0832

Vanguard Mid-Cap Index Fund Inv 

VIMSX0859

Vanguard Mid-Cap Value Index Inv 

VMVIX0835

Vanguard Morgan Growth Fund Inv 

VMRGX0026
Vanguard PRIMECAP Core Fund 

VPCCX1220

Vanguard PRIMECAP Fund Admiral 

VPMAX0559

Vanguard PRIMECAP Fund Investor 

VPMCX0059

Vanguard Selected Value Fund 

VASVX0934

Vanguard Small-Cap Growth Idx Inv 

VISGX0861

Vanguard Small-Cap Index Fund Inv 

NAESX0048

Vanguard Small-Cap Value Index 

VISVX0860

Vanguard Strategic Equity Fund 

VSEQX0114

Vanguard Strategic Sm-Cap Equity 

VSTCX0615
Vanguard Total Stock Mkt Idx Inst 

VITSX0855
Vanguard Total Stock Mkt Idx Inv 

VTSMX0085
Vanguard U.S. Growth Fund Investor 

VWUSX0023

Vanguard U.S. Value Fund 

VUVLX0124

Vanguard Value Index Fund Inv 

VIVAX0006

Vanguard Windsor Fund Admiral 

VWNEX5022

Vanguard Windsor Fund Investor 

VWNDX0022

Vanguard Windsor II Fund Inv 

VWNFX0073



INTERNATIONAL STOCKS
DFA International Small Company I 

DFISX2187
Harding Loevner International Eq Instl 

HLMIX6869

Vanguard Developed Markets Idx Inv 

VDVIX1397

Vanguard Emerging Mkts Stk Idx Inv 

VEIEX0533

Vanguard European Stock Index Inv 

VEURX0079

Vanguard FTSE All-World ex-US Inv 

VFWIX0770

Vanguard FTSE AW xUS Sm-Cp Idx Inv 

VFSVX1684

Vanguard Global Equity Fund 

VHGEX0129

Vanguard International Growth Inv 

VWIGX0081
Vanguard International Value Fund 

VTRIX0046

Vanguard Internatl Explorer Fund 

VINEX0126

Vanguard Pacific Stock Index Inv 

VPACX0072
Vanguard Tot Intl Stock Ix Inst 

VTSNX1869

Vanguard Total Intl Stock Ix Inv 

VGTSX0113

Vanguard Total World Stock Idx Inv 

VTWSX0628

User avatar
Duckie
Posts: 5736
Joined: Thu Mar 08, 2007 2:55 pm

Re: brokerage account conversion

Post by Duckie » Tue Jul 17, 2018 4:02 pm

VT14850 wrote:What would you recommend choosing from the employer sponsored accounts below for my wife's 401a and 403b? VTSMX and VBMFX are amongst the offerings.
You don't have Admiral Shares but you do have Institutional Shares in addition to Investor Shares. The best options (although she'll end up using just bonds in those accounts) are:
  • (VITSX) Vanguard Total Stock Market Index Fund Institutional Shares (0.035%)
  • (VTSNX) Vanguard Total International Stock Index Fund Institutional Shares (0.09%)
  • (VBTIX) Vanguard Total Bond Market Index Fund Institutional Shares (0.04%)
The above expense ratios are retail rates. What are the plan rates? Are they the same?
Given the current cap of $8684 on her 401a, how would our plan's percent allocations differ?
In this post I estimated her 401a would be ~$55K at the end of 2018. Her new cap (new to me) doesn't change that estimate much.

Post Reply